Sheila Hollis: Energy Law Career

Sheila Slocum Hollis is chair of the Washington, D.C. office of Duane Morris LLP, and was the office's founding managing partner, as well as the founding practice group leader for the firm's Energy, Environment and Resources Practice Group. She was the first director of the Office of Enforcement of the Federal Energy Regulatory Commission, establishing the office and its policies and procedures, serving from 1977 to 1980. She began her energy law career as a trial lawyer at the Federal Power Commission from 1974 to 1975. Sheila is a professorial lecturer at George Washington University School of Law.

PUF's Pat McMurray: When did you get started in the energy business?

Sheila Hollis: I guess you could say I was born into it, because my mother was a draftsman and a nuclear weapons designer. I grew up out west where energy was omnipresent in various forms.

It was just part of the world we lived in. My mother was an electrical and geological draftsman. She was recruited to be a nuclear weapons designer in Hanford, Washington and Los Alamos, New Mexico.

From there she continued in various aspects of energy until she switched her calling. She became a medical artist and finally a heraldic artist at the Department of Defense Institute of Heraldry.

PUF: What made you decide to be an energy lawyer?

Hollis: It was the 1960s and I was a journalism major. I loved to travel and to talk. I was the only child of a very Irish mother. What with my father passing away when I was a young teenager, I had a lot of time to think about everything.

We always had a lot of energy people around us because of my mother's work. There were international scientists, geologists, physicists, engineers, and others. So, by osmosis, basic concepts in science and energy issues were known to me.

Also, consider the early 1970s, with the Arab oil embargo, the gasoline shortages, and energy issues omnipresent. In Colorado, you drove long distances as a matter of course, and were utterly and completely dependent on an automobile. The importance of energy was growing, as were environmental considerations.

I was initially hoping to become a priest, but the church never moved to make women priests, so that was an impediment. I decided to go to journalism school. I was exposed to a lot of energy-related issues at the University of Colorado and I worked at its newspaper. I also worked as a union printer and a stringer reporter for various Denver area papers. I had taken numerous undergrad honors classes, which involved emerging environmental concerns.

On a lark, I took the LSAT and ended up doing very well. My journalism professor encouraged me to go to law school. I was one of a handful of women admitted to law school during that time.

There was a batch of about five or six of us that embarked on their law journey at the University of Denver.

At the time, I had absolutely no intention of being an energy lawyer, but I was very interested in international law. I don't even think I knew there was such a thing as energy law. Luckily, I had a great professor at the University of Denver Law School, former Federal Power Commissioner John Carver, who taught administrative law and prepared me for a career path in it. I had not even heard of the Federal Power Commission until Professor Carver.

Then the assistant to the FPC chairman came out to interview possible candidates for legal positions. I had a great interview with this man. A little basic brochure on the FPC was available as you went into the interview. There were LNG tankers on the front, and I thought, "Wow, this is neat." The focus was on international issues and the beginnings of LNG importation into the U.S., due to the tremendous shortages of natural gas.

A job offer ensued. My basic thought was, "Wage price controls, energy crisis, this could be interesting for a year. I'll go for a year."

I read up on what the Federal Power Commission did, and I showed up the first day on the job. I'd never been to Washington before. I didn't know anyone there, except my former secretary in the Denver law firm that I'd clerked with. She let me sleep on her couch for about the first six weeks in the new job.

PUF: Where was the Federal Power Commission located?

Hollis: Close to where the [successor agency] Federal Energy Regulatory Commission is now, 825 North Capitol Street. It had just moved from the old GAO building on Fourth and Massachusetts Avenue, about Fourth and E Streets.

PUF: When did the Federal Power Commission become FERC?

Hollis: 1977. Under the DOE Organization Act of 1977. That was thanks to President Jimmy Carter, and a smart, active Congress. We were working on a national energy plan, including the Natural Gas Policy Act. Existing agencies were renamed, reshuffled, and jurisdictional powers shifted.

Energy was the number one national issue. Look back at President Carter sitting beside the fire in a sweater. In that major TV appearance, he said the energy crisis was the moral equivalent of war. I thought, "This is exciting!" Then, I thought, I'd go back to Colorado and speak about all things energy that go on in Washington.

PUF: What happened?

Hollis: As the new kid on the block, I didn't even have an office. I sat at a former secretarial desk.

The assistant general counsel had to give me something to do, and in an offhand way, he presented me with an SEC S-1 Registration Statement. That registration statement was for the Pennzoil-United spinoff, which turned out to be an enormous corporate raid.

The assistant general counsel said: "See if you can find anything here for us. See if there's any jurisdictional context."

This was during the Nixon administration. We didn't have computer capability at all, so I turned to the library and began researching. I pulled out the statute that controls the natural gas business, and I came upon Section Twelve: "Thou shalt not issue a dividend out of a capital account." Then, Section 7 of the statute stated: "Thou shalt not abandon facilities or service without FPC approval."

Well, guess what? They'd issued a dividend out of a capital account. A hundred-million-dollar preferred stock dividend straight up to Pennzoil. And they had abandoned certain aspects of United's services.

That was the beginning, and I wrote a memorandum, more journalistic than legal language, but still very proper. There were enough cites to the law in it to give a fig leaf of legal expertise to the discussion.

I presented it to the assistant general counsel who said, "It's kind of an interesting theory." He put it in his briefcase and went home for the weekend. He was a great assistant general counsel. If you were a young lawyer starting out, he was ideal, ready to go, ready to fight for the people, a very consumer-oriented guy.

He came back on Monday and said, "That was really an interesting memo." I said, "Oh, good. I'm glad you liked it." I didn't hear that much about it. He said, "I'm going to look at it some more." It didn't look like anything was going to happen.

I was back at my desk working late on some other small project, and the phone rang at about eight p.m. There was a very rough voice on the line. He said, "Is this Sheila Hollis?" I said, "Yes, it is. Who are you?"

He said, "Well this is so-and-so from the New York Times and I'm holding your memorandum in my hand." The next thing you know, Jack Anderson, the famous columnist, got in on it.

The Commission had to meet with the assistant general counsel. They assembled a team of all the FPC's top people, not just in legal, but also throughout the Commission before responding.

I was assigned the case. We had big hearings before the chief administrative law judge with top energy lawyers from around the country at the counsel tables. One of the first witnesses I ever cross-examined was the CEO of Pennzoil. And then the general counsel of Pennzoil, and the new CEO of United Gas Pipeline. It was the beginning of a whole different ride.

PUF: Who was at fault?

Hollis: Pennzoil was the acquirer of United and sought to spin it off, without many of its valuable assets. United had been a cash-rich, big, heavily regulated utility; Pennzoil was not regulated by the FPC.

United was a key element of national infrastructure because the pipeline and the gas supply flowed to serve much of the eastern U.S. They owned the gas back in those days.

It was not separate and was not structured like it is today. The United Gas Pipeline owned not only the pipeline, but the production. It impacted homeowners, businesses, local distribution companies and electric utilities, pretty much everyone east of the Mississippi River.

Ultimately, a lengthy settlement discussion ensued and Pennzoil paid back the hundred-million-dollar dividend to United. Pennzoil entered into a long-term gas supply agreement, which provided gas supply to the pipeline during curtailment.

There was also a restructuring of the corporate management. The name of the CEO of Pennzoil was J. Hugh Liedtke. I looked at the name of the United Gas Pipeline CEO, the new one, and his name was J. Hugh Roff. You know, J. Hugh is not a very common name. I talked to some of the experts, and they said, "Yeah, you ought to look into that." Well, he was the nephew of J. Hugh Liedtke. So, it was all family.

It was amazing because it was such a major corporation. They were represented by smart, extremely brilliant lawyers, but so were the customers, states and others impacted by the transaction.

The relationships, the dividend and other factors led to this notion that there was an "incestuous relationship." That was the term that I used in my memo that got picked up by the press.

PUF: After this, you became the head of the Enforcement Office at FERC?

Hollis: I was the first woman director of an office at the FPC/FERC when the Office of Enforcement was created in 1977. That was after a stint in the private arena when I worked with Richard Solomon. He was a former general counsel of the FPC and a leader in communications law. He was also the former head of the Antitrust Appellate Division of the Justice Department. He focused on consumer advocacy.

I was his sole associate during the curtailment period of the gas shortages. He represented the State of New York. That put me right up front in the mix of many of the most significant players in the natural gas business and the utility and production world. As well as the various state regulatory agencies, industrial users, consumer groups and other major players.

All the distribution companies up and down the east coast, all the way down to the Gulf Coast, everything on that old United Gas Pipeline system were caught up in that arena. The other pipelines, Tennessee Gas Pipeline, and Texas Eastern Pipeline, served the utilities in New York for residential, commercial, industrial, generation and other uses. There were huge electric utilities involved also.

I was given an unbelievable opportunity, after being suddenly launched out of Colorado, to learn so much about the whole energy business in the country. Without personal or political connections or familiarity with the ways of Washington. It was a rapid-fire education. The natural gas shortage was desperate, the problems enormous and the solutions very big.

When they turned off the gas in New York under curtailments in the winter of 1976-77, two hundred and fifty thousand people were suddenly put out of work. We had to make sure that the immediate needs of homeowners, small businesses, prisons, hospitals, and universities were met. That left the whole world of industrial consumers and electrical generation that was dependent on natural gas, too. We negotiated a deal, approved by the FPC, for Canadian gas to flow to the area and later to provide pay-back in New York power. I had a fast, total immersion into the world of energy law and its influence on the economy and society.

PUF: What were a few of the big cases you worked on at the Federal Energy Regulatory Commission?

Hollis: We did the investigation that led to the first criminal referral under the Natural Gas Act and under FERC law in the history of the FPC or of FERC. We obtained the first major penalties for violations of the Natural Gas Act. We began enforcing environmental and pipeline certificate violations and safety as well. There had been no Office of Enforcement under the Federal Power Commission. Traditionally, the FPC enforced compliance with hydroelectric licenses and compliance with rate orders in gas and electric matters.

PUF: How did the enforcement office get started?

Hollis: There was deregulation of gas, and the needs for enforcement were great in oil (under DOE jurisdiction) and gas and other FERC jurisdictional areas. Over time, the merger of the inter- and intra-state markets, complex pricing and other restrictions ensued.

The Natural Gas Policy Act grabbed all the intrastate market, that is, all the production that had only moved in intrastate commerce versus interstate. The new law regulated literally thousands of new producers who had never been regulated by the Federal Power Commission or the FERC. The Public Utility Regulatory Policies Act, the Power Plant and Industrial Fuel Use Act, and oil price regulations were also in effect, involving the whole complex of issues associated with availability of oil and oil price controls.

The formation of the Office of Enforcement, making that thing fly, getting the regulations in place, defending its honor, all the rest, was a major effort. We went from zero staff to sixty-five staff when I left in mid-1980.

The team I assembled for the office attracted FERC, SEC, FTC, Justice Department, DOE and other high-quality lawyers and other experts. Many of them continued in energy law and consulting. We built the foundation of the modern, enormously expanded enforcement program at FERC.

PUF: What are the major changes you've seen in the energy world during your career?

Hollis: First is the escalation of our utter and complete dependency on energy to run the world as we know it today. The development of the computer/digital universe, the essential nature of that need, and the need for a reliable energy supply. The blackout of 2003 and then cyber-attacks on the grid have underscored that dependency.

Number two is the development of massive amounts of renewables and the need for modification of the grid for those resources.

Third is the issue of climate change. And the recognition that we need to rein in pollutants and encourage cleaner, more efficient ways to address the needs of the planet for food, water, energy and a better environment. Environmental law, in one form or another, has always been ultimately tied to energy issues.

We have restructured the way we develop and receive power. The role that power plays in our lives, as big as it was a hundred years ago or twenty years ago, is ten times bigger now. Energy is viewed as a human right.

I have had the privilege of working worldwide on these critical issues from Ethiopia to Romania to Mexico to China. I'm packing to travel to The Hague as an ABA delegate to the World Justice Forum. I'll present proposed environmental standards to determine the quality of justice throughout the world.

The intensity of the demand for reliable, affordable energy going forward, is huge. Despite the development in efficiency and renewables. We would be unable to survive as a planet without other forms of energy. The world as we know it today would stop on its axis.

If there were a severe energy supply shortage worldwide, there would be chaos. What with the number of people on earth now, and the interconnectedness of global communications, politics, and the military. It would be like not having an air supply. It would be right up there with that. Or not having food. Energy is in that category now. We need it, and finding a way to provide it appropriately is the challenge ahead.