Joseph Krist

Publisher

CLIMATE LITIGATION

The Supreme Court heard arguments in connection with more than 40 lawsuits filed by Louisiana officials seeking to hold energy companies liable for environmental damage linked to oil and gas production. In April, a jury awarded Plaquemines Parish near New Orleans, the state’s southernmost parish, $745 million in one of those cases. The Trump administration has joined the case in support of the oil companies and will argue alongside them before the court. Only eight of the nine justices will be weighing the matter.

Justice Samuel A. Alito Jr. recused himself, citing his financial interest in ConocoPhillips, the parent corporation of Burlington Resources Oil and Gas Company. The justices could also announce whether they will hear a challenge to a Colorado Supreme Court decision allowing a case brought by Boulder to continue in state court. That suit was first filed in 2018. In May, the State Supreme Court ruled 5 to 2, that the plaintiffs’ claims were not pre-empted by federal law, striking down a central argument that the companies have employed in their defense.

The case before the court is a narrow, technical point. The oil companies have claimed that the disputes should be heard in federal court because of a law known as the federal officer removal statute. That law allows federal officers and those acting on their behalf to remove legal disputes that involve their official duties from state court to federal court. The industry has fought to establish its view as to federal jurisdiction as it believes that their issues would be litigated more favorably in federal venues.

Congress has expanded the statute over the years, including with a 2011 amendment that allowed such cases to be transferred to federal court if the dispute involved actions “related to” official duties. A federal trial court judge rejected that argument, finding that the oil companies had failed to show that they extracted the oil under the order of a federal officer. The judge also concluded that the companies hadn’t shown a link between the federal contracts and the oil production at issue in the case.

In separate legal actions, the U.S. government sued California on Wednesday over its law banning fossil fuel development activities within 3,200 feet of homes, schools and other sensitive areas, saying the state law is preempted by federal law since it infringes on the U.S. government’s authority to manage federal lands and mineral resources. It’s an extension of the arguments being advanced by the oil companies in their litigation.

HOSPITAL CONUNDRUMS

The increasingly cloudy funding outlook in the near-term for the overall healthcare sector is having its impact. This week shone a light the nature of different responses to the potential negative impacts of policy changes and funding on hospitals. The first example is the strike by nurses against three of the major hospital systems in the City of New York. The nurses hope to force hospitals to ensure minimum staffing ratios. They are also demanding higher wages and more security at hospitals to reduce violent episodes and shootings.

At the same time, a different path is being taken in California. Alameda Health Care District was formed in 2002 as a local healthcare district and political subdivision of the State of California. The district is coterminous with the boundaries of the City of Alameda, serving an estimated population of 78,000. The district owns, but does not operate, Alameda Hospital, a 101-bed general acute care hospital, and Southshore Convalescent, a 26-bed skilled nursing facility. The district leases Park Ridge Rehabilitation and Wellness Center, a 120-bed skilled nursing facility.

Alameda Health System officials said the estimates it will lose more than $100 million annually by 2030 as a result of the Medicaid cuts. (See California budget above) In a statement, AHS confirmed it will eliminate 247 positions across all departments. 

CALIFORNIA BUDGET

Governor Newsom kicked off the budget process this week. The Governor’s proposal outlines a $348.9 billion balanced budget for the 2026-27 fiscal year. The plan reflects more than $42 billion in additional General Fund revenue over the three-year budget window (2024-25 through 2026-27) compared to last year’s enacted budget. California enters the 2026-27 fiscal year with $23 billion in total reserves, including $14.4 billion in California’s Rainy Day Fund. The budget proposes rebuilding reserves – totaling $23 billion – including a $3 billion deposit into the Rainy Day Fund.

The Budget forecast reflects General Fund revenues that are higher by more than $42 billion over the budget window, from 2024-25 through 2026-27, than projected at the 2025 Budget Act—an increase driven by higher cash receipts, higher stock market levels, and an improved economic outlook. While the Budget is balanced in the 2026-27 fiscal year, with a discretionary reserve of $4.5 billion, it projects a deficit of roughly $22 billion in the 2027-28 fiscal year and shortfalls in the two years following.

The proposal highlights the structural risks inherent in the State’s revenue structure. While the significant revenue increase since the 2025 Budget Act is encouraging, it is important to recognize that much of this surge is attributable to a relatively small number of technology companies that have experienced a substantial increase in their share prices due to investor enthusiasm in artificial intelligence. number of technology companies that have experienced a substantial increase in their share prices due to investor enthusiasm in artificial intelligence. The dominant risk to the Budget is stock market and asset price declines—shocks that disproportionately impact high-income earners.

The impacts of the big, beautiful bill (H.R.1) included significant federal policy changes for Health and Human Services programs that are projected to result in costs of $1.4 billion General Fund in 2026-27. Of this amount, $1.1 billion in additional costs are in Medi-Cal—California’s Medicaid program that provides health care services for more than 14 million low-income Californians. In addition, H.R. 1 will add nearly $300 million in costs to CalFresh—the state’s Supplemental Nutrition Assistance Program providing food purchase assistance for adequate nutrition to more than 3 million California households.

A California initiative was put forward by a state health care union to offset federal budget cuts that threaten California’s health care system. It calls for California residents worth more than $1 billion to be taxed the equivalent of 5 percent of their assets, and would apply retroactively to anyone who lived in the state as of Jan. 1.

First, though, it needs to obtain nearly 900,000 signatures to get on the state ballot in November. The measure is opposed by Gov. Gavin Newsom, a Democrat, who has called it bad policy and argued that it would lead billionaires to move out of state.

WATER AND AI

In 2023, U.S. data centers consumed an estimated 17 billion gallons of water, according to federal and industry analyses compiled by the Energy Department and the Lawrence Berkeley National Laboratory. Hyperscale facilities alone are projected to consume between 16 billion and 33 billion gallons annually by 2028. A single large data center can require roughly 300,000 gallons of water per day depending on cooling technology, climate, and workload intensity.

In many states, data‑center operators are not required to disclose site‑level water consumption or forward‑looking demand projections.  U.S. data centers now make up about 4.4% of electricity consumption nationwide. This is an increase from some 1.9% in 2018. It has been predicted that this could rise to 12% by 2028.

ARIZONA WATER

Arizona’s Attorney General has entered an agreement with Riverview LLP, a Minnesota-based dairy company that moved into one area in SE AZ over the last decade. It quickly accelerated to become a major driver of the Willcox groundwater basin’s decline. Under the agreement, the company is agreeing to reduce its groundwater usage by fallowing 2,000 acres of land and maintaining best practices to conserve water. The company also agreed to deliver $11 million to residents affected by the company’s overpumping that will pay to redrill wells, haul water and ensure the community has access to the critical resource. 

State data shows more than 100,000 acre feet of water is pumped out of the aquifer than is replenished by rain or other sources and that the groundwater has been drawn down so low that it’s beneath the average well depth of the community. It’s just the latest iteration of an all too familiar pattern. A previous agreement was reached with an agriculture company owned by the Saudis that drew down well water to grow alfalfa in the desert.

COLORADO SPRINGS WANTS ITS COAL PLANT

Colorado Springs Utilities is working with local legislators on a bill that would allow the Ray Nixon coal power plant to be exempted from state laws which require it be closed in 2029 and be replaced by cleaner electricity. The Trump administration is challenging the state law under which the plant would close. Colorado officials said they were confident state laws dictating the closure of six remaining coal plants would survive the EPA challenge.

As a municipally owned utility, CSU does not need approval of an extension from the state Public Utilities Commission at least according to CSU. So, it’s not clear why they need an exemption specific to CSU from the state legislature. CSU has been seen as a laggard in efforts to plan for generation with less or no fossil fuels. It doesn’t come as a surprise given the general political environment in Colorado’s most conservative city.

IOWA CARBON CAPTURE

The efforts to regulate carbon capture pipeline development moved along two tracks this week. The U.S. Supreme Court denied a request from Story and Shelby counties requesting a review of a lower court’s ruling that county ordinances pertaining to a carbon sequestration pipeline were preempted by federal pipeline regulations. The adjudication of this case paused similar lawsuits from other counties from progressing. The court did not offer an explanation for the denial. 

The Iowa Legislature has begun another new step in the effort to take up the issue of eminent domain and regulation around carbon sequestration pipelines during the current session. An Iowa House Judiciary subcommittee took up House Study Bill 507, which bans the use of eminent domain for carbon pipelines. It advanced the bill to the full committee. The House passed a similar bill in 2025 to ban the use of eminent domain by carbon capture pipelines, but the Senate did not take up the bill. 

Senate leadership has also indicated it has plans to file a bill that would address the property rights issue by allowing pipeline operators to deviate from their state-approved routes in order to find willing landowners. The Senate has been the continuing barrier to enactment of changes to Iowa’s eminent domain rules. 

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