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Energy Basics duvivier 00 fmt.qxp 11/23/16 11:45 AM Page ii duvivier 00 fmt.qxp 11/23/16 11:45 AM Page iii

Energy Law Basics

K.K. DuVivier

Carolina Academic Press Durham, North Carolina duvivier 00 fmt.qxp 11/23/16 11:45 AM Page iv

Copyright © 2017 K.K. DuVivier All Rights Reserved

ISBN 978-0-76986-952-0 LCCN 2016960221

Carolina Academic Press, LLC 700 Kent Street Durham, NC 27701 Telephone (919) 489-7486 Fax (919) 493-5668 www.cap-press.com

Printed in the of America duvivier 00 fmt.qxp 11/23/16 11:45 AM Page v

To my children, their children, and all children as my effort to bestow on your world a better energy future. duvivier 00 fmt.qxp 11/23/16 11:45 AM Page vi duvivier 00 fmt.qxp 11/23/16 11:45 AM Page vii

Contents

Acknowledgments xxiii

Part I Context and Global Energy Issues 1

Chapter 1 · The of an Energy 3 A. Energy Practice 3 B. Staying on Top of Energy Practice 4 C. Reliable Information 6 D. Energy Basics 7

Chapter 2 · 11 Climate Change Timeline 11 A. Climate Science 13 B. Intergovernmental Panel on Climate Change (IPCC) 15 C. International Climate Change 16 1. United Nations Framework Convention on Climate Change 18 2. The 19 3. Beyond the Kyoto Protocol 23 D. U.S. Climate Change Law and 24 1. Regulating Climate Change under the Clean Air Act 24 2. Action 27 3. State Action 28 4. Non-State Actors 28 Recent Articles on Climate Change 29

Chapter 3 · Energy Justice 31 Energy Justice Timeline 31 Introduction 32 A. Defining Energy Justice 32

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B. Access to Energy 34 C. Access to 39 D. Indigenous Peoples 41 Recent Articles on Energy Justice 44

Part II Energy and Delivery 45

Chapter 4 · Electricity 47 Electricity Timeline 47 Introduction 49 A. U.S. Electric Structure 50 B. The History of Harnessing Electricity 52 C. Local 54 1. Free Market 54 2. Monopoly Regulation 56 D. Federal Involvement 60 1. Federal Regulation 60 2. Federal Support of Electricity Development 61 3. Deregulation 65 4. Mergers 66 5. Increased Federal Attention 68 Recent Articles on Electricity 69

Chapter 5 · Customer Demand and Efficiency 71 Customer Demand and Efficiency Timeline 71 Introduction 72 A. History 74 B. Consumption Patterns 78 C. Strategies for Improving Energy Efficiency 84 1. Buildings 85 2. Industry 89 3. Transportation 92 4. Appliances, Lighting, and Electronics 95 5. Military 97 Recent Articles on Energy Efficiency 98

Chapter 6 · Customer Generation and Storage 99 Customer Generation and Storage Timeline 99 A. Conventional Delivery of Electricity 100 B. Rate Design 100 C. Rates 105 D. Distributed Generation 110 1. Environmental 111 2. Reduced Costs 113 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page ix

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3. Consumer and Community Control 113 4. Security 115 E. Storage 116 Recent Articles on Customer Generation and Storage 121

Chapter 7 · Transportation 123 Transportation Timeline 123 A. Context 124 B. History 127 C. Motor Vehicles 131 1. Passenger Vehicles 131 2. Freight 133 D. Rail 136 1. Passenger 136 2. Freight 137 E. Air 141 1. Passenger 141 2. Freight 144 F. Marine 147 1. Passenger 147 2. Freight 148 Recent Articles on Transportation 150

Chapter 8 · 151 Infrastructure Timeline 151 Introduction 152 A. Waterways 152 B. Rail Lines 153 C. Pipelines 156 D. Highways 161 E. Emerging Infrastructure 164 1. Gas 164 2. Toll Roads 166 3. Driverless Cars 167 Recent Articles on Infrastructure 168

Chapter 9 · Transmission 169 Transmission Timeline 169 Introduction 170 A. Context 171 B. History 173 C. FERC Regulation of Transmission 174 1. 174 a. Interstate Sales 174 b. Ratemaking 175 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page x

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c. other Powers 176 2. PURPA 177 3. Act of 1992 178 4. Energy Policy Act of 2005 182 D. Reliability 184 E. Siting and Cost Allocation 187 1. Siting 187 2. Cost Allocation 188 Recent Articles on Transmission 191

Part III Energy Production 193

Chapter 10 · 199 Petroleum Timeline 199 Introduction 202 A. Context 202 1. What Is Petroleum? 202 2. Petroleum Production 203 B. History 205 C. Petroleum Rights under the 208 1. origins of ownership 208 a. Ferae Naturae 210 b. Ad Coelum Doctrine 210 2. The and Severance 210 3. The Accommodation Doctrine 212 D. Local and State Regulation of Petroleum 212 1. Prorationing 213 2. Conservation Commissions 213 3. Pooling and Unitization 214 4. Environmental 214 E. Federal Influences on Private Petroleum Production 214 1. Responses to Shortages 215 2. Deregulation and Regulation 216 3. oil Pollution Liability 216 4. Environmental 217 5. oil Exports 218 F. oil and Gas 218 1. Private 218 a. oil and Gas Leases 218 b. Farmout Agreements 223 c. Joint-operating Agreements 223 2. Federal Leasing. 223 a. on 223 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xi

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b. Federal offshore Leasing 225 c. Statutory Framework 226 d. State Limitations on offshore Exploration 228 e. Subsistence Rights 230 G. Spills 232 Recent Articles on Petroleum 234

Chapter 11 · Alternative Fuels 235 Alternative Fuels Timeline 235 Introduction 237 A. Fuel Additives 237 B. 239 1. First-Generation Biofuels 241 a. Ethanol 241 i. Corn ethanol 241 ii. Ethanol 242 c. 242 2. Second-Generation Biofuels 246 3. Third-Generation Biofuels 248 4. Diversification of Sources 248 C. Alternative Fuels 252 1. Propane 253 2. 253 3. Electricity and Hybrids 254 4. Hydrogen 256 D. Regulation of Alternative Fuels 256 1. 256 2. 263 Recent Articles on Biofuels 265

Chapter 12 · Natural Gas 267 Natural Gas Timeline 267 Introduction 269 A. Context 269 1. What Is Natural Gas? 269 2. Consumption 271 B. History 272 C. Conventional Versus Unconventional oil and Natural Gas Deposits 273 1. Conventional 273 2. Unconventional 274 D. oil and Gas Development 278 1. Upstream Development 278 a. Drilling a Well 278 b. 280 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xii

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2. Midstream Development 283 3. Downstream Development 283 E. The Legal and Regulation of Natural Gas 285 1. Case Law 285 2. Regulation 287 F. Flaring 290 Recent Articles on Natural Gas 292

Chapter 13 · 293 Coal Timeline 293 A. Understanding the 295 B. History of Coal as Fuel 296 C. Coal ownership 298 1. Private 298 a. Split Estates 299 b. Leasing 299 i. What does “coal” mean? 300 ii.What does “” mean? 301 a. When should strict liability apply? 302 2. Public Lands 302 D. Coal Extraction 305 1. Mine Safety 305 2. Underground Mining 307 Keystone Bituminous Coal Association v. DeBenedictis 309 3. 311 4. Reclamation 312 E. Regulation of Coal Use 315 1. Clean Air 315 a. The Proposed Clean Power Plan 318 2. Clean Act 320 3. RCRA 321 Recent Articles on Coal 322

Chapter 14 · Nuclear 323 Nuclear Timeline 323 Introduction 325 A. origins of Nuclear Energy 326 B. Post-War Nuclear Energy 329 C. Safety 333 D. Waste Disposal 337 E. Additional Considerations 340 Recent Articles about Nuclear Energy 344

Chapter 15 · 345 Hydropower Timeline 345 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xiii

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A. Brief History of Hydropower 347 B. How Hydropower Works 350 C. Conventional Dams — Construction 351 1. Early Hydropower and the Mill Acts 351 2. Federal Power Act 353 3. Alternative Regulation Schemes 354 D. Conventional Dams 356 1. Relicensing 356 2. Decommissioning 356 E. New Hydropower Sources and Small Hydro 359 F. Hydrokinetics 361 Recent Articles on Hydropower 362

Chapter 16 · Wind 363 Wind Timeline 363 A. Introduction 365 B. History 368 C. Benefits and Drawbacks of Wind Energy 373 D. Wind and 375 1. The Migratory Bird Act 378 2. The Bald and Golden Eagle Protection Act 380 3. The Act of 1973 382 E. other Concerns 384 1. ownership Rights and Wake Issues 384 2. Delivery and Grid Integration 385 F. Federal Land Wind 386 G. offshore Wind 387 Recent Articles on Wind Energy 389

Chapter 17 · Solar 391 Solar Timeline 391 A. Context 394 B. The Science of 397 1. Solar Fuel 397 2. Solar Technologies 397 C. Solar under the Common Law 402 D. Solar Legislation 404 1. Federal Incentives 404 2. Solar Development on Federal Lands 408 3. State and Local Regulation 409 Recent Articles on 412

Chapter 18 · 413 Biomass Timeline 413 Introduction 414 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xiv

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A. Sources 416 1. Solid and Cellulosic Biomass 416 2. Wet Biomass 418 B. Regulation 420 1. State 420 2. Federal 423 C. Concerns 427 1. Pollution 427 2. Conversion and Resource Conservation 429 3. GHG Emissions 429 4. Energy Return on Energy Invested (ERoI) 431 5. Applying Biomass Sustainability Standards 433 Recent Articles on Biomass 436

Chapter 19 · Geothermal 437 Geothermal Timeline 437 A. Context 439 B. Technology 442 1. Geothermal Direct Use 442 2. Geothermal Electricity Production 443 3. Hot Dry Rock 445 C. Regulation 445 1. State Regulation 445 2. Federal Regulation 448 D. Developing on Federal Land 452 E. other Concerns 455 F. Groundsource Heat Pumps 458 Recent Articles on 458

Part IV Fundamental Skill s 459

Exercise 1 · Critical Research and Reading 461 Exercise 2 · Professional Identity 471 Exercise 3 · Rate Design 483 Exercise 4 · Agency 485 Exercise 5 · Lease Interpretation 487 Exercise 6 · Policy Drivers 489 Exercise 7 · Informal Dealings with Government 491 Exercise 8 · Drafting —Power Purchase Agreements 493 Exercise 9 · Compliance —NEPA 497

Additional Sources and 499 Chapter 2 499 Chapter 3 506 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xv

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Chapter 4 508 Chapter 5 516 Chapter 6 518 Chapter 7 520 Chapter 8 524 Chapter 9 525 Chapter 10 527 Chapter 11 534 Chapter 12 536 Chapter 13 537 Chapter 14 541 Chapter 15 545 Chapter 16 547 Chapter 17 557 Chapter 18 561 Chapter 19 563

Index 565 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xvi duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xvii

List of Figures

Figure 1.1. Production Credits and U.S. Annual Installed Wind Capacity 5 Figure 1.2. U.S. Shale Gas Production 6 Figure 1.3. Electrical Power Generation Capacities 8 Figure 1.4 U.S. Electricity Nameplate Capacity and Generation 9 Figure 2.1. Greenhouse Gas Emission Sources 14 Figure 2.2. Ten Indicators of a Warming World 16 Figure 2.3. Global Atmospheric Greenhouse Gas Concentrations 20 Figure 2.4a. U.S. Greenhouse Gas Emissions by Gas 21 Figure 2.4b. Temperatures Worldwide 21 Figure 2.4c. Average Global Sea Surface Temperature 22 Figure 2.4d. Global Average Absolute Sea Level Change 22 Figure 2.5. Extreme Weather Comes at a Cost 26 Figure 3.1. Total Energy Consumption per Capita 2011 33

Figure 3.2. Estimated Cumulative Co 2 Emissions 33 Figure 3.3. Rural Access to Electricity 35 Figure 3.4. Delhi, India — Power Lines in the old City 38 Figure 3.5. Renewable options for Indian Lands with High Incidences of Indian Households Without Electricity 42 Figure II.1. U.S. Primary Energy Consumption by Sector, 2014 45 Figure 4.1. Sales of Electricity to Ultimate Customers and Electricity Company Customers by Class 50 Figure 4.2. Number of Electricity Providers and Number of Retail Customers 51 Figure 4.3. Cutaway Electric Generator at the Smithsonian Institution 53 Figure 4.4. The Rankin Steam Cycle 55 Figure 4.5. Vertical and Horizontal Integration 59 Figure 4.6. U.S. Electricity Generation Capacity by Fuel/Energy Source 63 Figure 4.7. Nested Logit Structure for the Electricity Market 67 Figure 5.1. Average Retail Electricity Rates, 2013 73

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Figure 5.2. Per Capita Electricity Consumption vs. Per Capita Gross Domestic Product 75 Figure 5.3. Energy Consumption in Homes by End Uses 79 Figure 5.4. Load Slices in the Electricity Market 81 Figure 5.5. Roles Concerning Energy Codes 87 Figure 5.6. U.S. Energy Consumption by Sector 90 Figure 5.7. Program Strategies to Drive Customer Adoption of Energy Efficiency 92 Figure 5.8. U.S. Department of Defense Energy Usage 97 Figure 6.1. Conventional Electricity Generation and Delivery System 101 Figure 6.2. Traditional “Cost-of-Service” Ratemaking Formula 102 Figure 6.3. Flat and Block Rate Pricing Structures 106 Figure 6.4. Electricity Demand Profile for a Typical U.S. Service Area on a Hot Summer Day 117 Figure 6.5. The Duck Chart 117 Figure 6.6. Pumped Hydro 118 Figure 6.7. Compressed Air Energy Storage 119 Figure 6.8. Flywheel Storage 120 Figure 6.9. System Ratings 121 Figure 7.1. U.S. Primary Energy Consumption by Source and Sector, 2015 125 Figure 7.2. Energy-Related Carbon Dioxide Emissions by Sector 126 Figure 7.3. Delivered Energy Consumption by Transportation Mode 130 Figure 7.4. U.S. Vehicle Miles Travelled, Annualized , 132 Figure 7.5. Mode Share of Freight Value by Distance Band 134 Figure 7.6. Energy Intensity of Light Rail Transit Systems 137 Figure 7.7. Productivity in Selected Transportation Industries 138 Figure 7.8. Freight Flows by Highway, Railroad, and Waterway 140 Figure 7.9. Value of U.S. Merchandise Trade by Coasts and Borders 145 Figure 8.1. North America LNG Import/Export Terminals — Existing 154 Figure 8.2. U.S. Natural Gas Transportation System 158 Figure 8.3. PHMSA Reported Pipeline Incidents 160 Figure 8.4. Crude oil Pipelines and Petroleum Product Pipelines 161 Figure 8.5. Renewable and Alternative Fueling Stations by State 168 Figure 9.1. Wind Energy Curtailment Events under the BPA DSo 216 Program 170 Figure 9.2. U.S. Electric Transmission Lines (≥ 345 kV) 173 Figure 9.3. Regional Transmission organizations 180 Figure 9.4. NERC Regions 185 Figure III.1. U.S. Energy Production and Consumption 194 Figure III.2. U.S. Electricity Generating Capacity Additions and Retirements 195 Figure III.3. Cumulative U.S. Renewable Electricity Nameplate Capacity (MW) and Annual Percent Change 196 Figure 10.1. U.S. Crude oil and Liquid Fuels Production 203 Figure 10.2. Import/Export Balance 203 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xix

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Figure 10.3. Daily Highway Transportation Consumption by Mode 204 Figure 10.4. Top Sources and Amounts of U.S. Petroleum Imports (percent share of total), Respective Exports, and Net Imports 204 Figure 10.5. Density and Sulfur Content of Selected Crude 205 Figure 10.6. Crude oil Distillation Unit and Products 206 Figure 10.7. U.S. Field Production of Crude oil 207 Figure 10.8. Annual Motor Regular Grade Retail Price 215 Figure 10.9. U.S. Crude oil and Lease Condensate Proven Reserves 226 Figure 10.10. Gulf of Mexico Federal Administrative Boundaries 227 Figure 11.1. Nested Logit Structure for the Gasoline Market 240 Figure 11.2. Nested Logit Structure for the Diesel, Jet Fuel, and Bunker Fuel Markets 240 Figure 11.3. U.S. Corn Ethanol Production and Prices 242 Figure 11.4. Global Ethanol Production 243 Figure 11.5. 2009 Summary of Inputs to U.S. Biodiesel Production 244 Figure 11.6. U.S. Biodiesel Production and Price 245 Figure 11.7. Global Biodiesel Production 246 Figure 11.8. Ethanol from Biomass Process 247 Figure 11.9. Target Volumes for Renewable Fuels through 2022 249 Figure 11.10. U.S. Corn Ethanol Production Capacity 251 Figure 11.11. Renewable and Alternative Fueling Stations by Type 252 Figure 11.12. RFS2 Renewable Fuel Requirements 259 Figure 12.1. NGL Attribute Summary 270 Figure 12.2. Henry Hub Natural Gas Spot Price 271 Figure 12.3. U.S. Shale Production 271 Figure 12.4. Energy Production by Fuel 272 Figure 12.5. Natural Gas Production by Source 273 Figure 12.6. Natural Gas Production in Conventional Fields 274 Figure 12.7. The Geology of Conventional and Unconventional oil and Gas 275 Figure 12.8. Major Tight Gas Plays, Lower 48 States 276 Figure 12.9. Shale Plays, Lower 48 States 277 Figure 12.10. Coalbed Methane Fields 278 Figure 12.11. Anatomy of a Horizontal Well 281 Figure 12.12. Natural Gas Systems from Production to Distribution 284 Figure 12.13. U.S. Gross Refinery Inputs, Rolling Four-Week Average 284 Figure 12.14. Disposition of North Dakota Natural Gas Production 291 Figure 12.15. Natural Gas Flared in North Dakota 291 Figure 13.1. How Coal Was Formed 295 Figure 13.2. Share of Energy Consumption in the U.S., 1776–2014 298 Figure 13.3. Coal Production by Region 303 Figure 13.4. Average Number of Employees by Mine Type 308 Figure 13.5. Mining Methods 311 Figure 13.6. U.S. Coal Mine Starts and Total Production 315 Figure 14.1. United States Uranium , Districts, and Important Deposits 327 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xx

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Figure 14.2. Spent Fuel Rods in a Proposed Disposal Canister 329 Figure 14.3. U.S. operating Commercial Reactors 332 Figure 14.4. ’s Net Electricity Generation by Fuel, 2000–2013 336 Figure 14.5. Electricity Net Generation and Nuclear Share 342 Figure 14.6. Energy Consumption in the United States 342 Figure 15.1. Micro-hydroelectric Turbine 348 Figure 15.2. U.S. Hydropower Electricity Capacity and Generation 349 Figure 15.3. States Leading Hydropower Electricity Installed Capacity 349 Figure 15.4. The Hydrologic Water Cycle 350 Figure 15.5. Components of a Hydroelectric Dam 351 Figure 15.6. Early Water Mill Technology 352 Figure 15.7. National Hydropower Map 357 Figure 15.8. Historical Comparison of Dam Completions and Removals 358 Figure 15.9. Mechanical Hydropower Driving a Center Pivot System without Electricity 361 Figure 15.10. Global Marine and Hydrokinetic Power 362 Figure 16.1. U.S. Renewable Electricity Generation by Technology 366 Figure 16.2. U.S. Renewable Electricity Generation as a Percentage of Total Generation 367 Figure 16.3. Windmill at Water Mill, Long Island, N.Y. 369 Figure 16.4. United States Wind Resource Map 372 Figure 16.5. States Leading Wind Electricity Development 373 Figure 16.6. older Generation, Tightly Spaced Wind Turbines in the San Gorgonio Region of California 377 Figure 16.7. Timing of Utility-Scale Electricity Generation Sources in Relationship to U.S. Environmental Statutes 379 Figure 16.8. History of Wind Severance Ban Statutes 384 Figure 16.9. Cumulative Wind Electricity Capacity 387 Figure 16.10. Regional offshore Wind 389 Figure 17.1. Cumulative Solar Electricity Capacity —Select Countries 394 Figure 17.2. U.S. PV Electricity Installed Capacity and Generation 396 Figure 17.3. U.S. CSP Electricity Installed Capacity and Generation 396 Figure 17.4. Photovoltaic Solar Resource 398 Figure 17.5. Depiction of Solar Skyspace 399 Figure 17.6. Solar Skyspace B 402 Figure 17.7. U.S. PV Annual Capacity Additions by Sector 407 Figure 17.8. States Leading Solar Electricity Development 408 Figure 18.1. U.S. Biopower Electricity Generation Sources 415 Figure 18.2. U.S. Renewable Electricity Generation as a Percentage of Total Generation 417 Figure 18.3. Biomass Feedstocks, Fuels, and Markets Represented in the BASE Model 418 Figure 18.4. Landfill Methane Capture 419 Figure 18.5. Potential County-Level Resources 424 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xxi

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Figure 18.6. States Leading Biopower Electricity Installed Capacity 424 Figure 18.7. Conceptual Diagram of the Potential Environmental Impacts of Feedstock Production 428 Figure 18.8. Generalized Map of Potential -Fed Feedstock Crop s 430 Figure 18.9. WTW and WTT Life Cycle GHG Emission Estimates Used in the BASE Model for 2020 432 Figure 18.10. U.S. Biopower Electricity Capacity and Generation 434 Figure 18.11. Biomass Resources of the United States 435 Figure 18.12. Survey of Insect and Disease Mortality and Pine Beetle Infestation in Colorado 435 Figure 19.1. Top Countries with Installed Renewable Electricity by Technology 441 Figure 19.2. U.S. Geothermal Electricity Capacity and Generation 442 Figure 19.3. Geothermal Systems 443 Figure 19.4. U.S. Geothermal Resources 446 Figure 19.5. Typical Binary 448 Figure 19.6. Cumulative State Geothermal Electricity Development 452 Figure 19.7. Some of the and Regulations at the Federal Level that Impact the Development of Geothermal Resources 455 Figure 19.8. Sample Groundsource Heat Pump Collection Field 458 duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xxii duvivier 00 fmt.qxp 11/23/16 11:45 AM Page xxiii

Acknowledgments

No one can possibly know everything about energy law. What makes it so fasci - nating is that it embraces so many different aspects of our and our planet and also that it is constantly changing. This book would not have been possible without the help of so many people. I would like to especially thank experts who reviewed my content for accuracy, all of my research assistants and students over the years who contributed, the invaluable support staff and librarians, and my dear family and friends who supported me throughout this endeavor, including those below. I apol - ogize for anyone I may have left out, rest assured if you contributed, I deeply appre - ciated it.

Sam Anderson Ryan Brand Diane Burkhardt Jackie Calicchio Claire Carroll Craig Carver Karina Condra Jaci Dake Micah Desaire Alice DuVivier Morgan K. Gengenbach Laura Heller Abby Jones Peter Kersten Julie Lundquist Katie McAuley Gary Nakarado Bob Noun Sam Peaslee Emmett Perl Mark Poplielarski

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Michael Rhodes Mark Safty Kelli Schermerhorn Maggie Stephenson Jack Stokan Levi Stubbs Chris Swigert Holly Taylor Patti Thwaites Eric Voorheis Rebecca Watson Lance Wright