September 16, 2016
Ohio Supreme Court Decides Cases Interpreting the Ohio Dormant Mineral Act
On September 15, 2016, the Ohio Supreme Court issued three opinions and dispensed with 10 other related cases regarding the interpretation of the application of the Ohio Dormant Mineral Act (O.R.C. § 5301.56) (ODMA). The issues surrounding the ODMA resulted in all-or-nothing litigation regarding ownership of dormant mineral interests between surface owners and mineral owners, and oil and gas lessees claiming through both sides.
The Ohio Supreme Court determined that the 1989 version of the ODMA (1989 Act) was not self-executing in that title to abandoned mineral interests did not vest in surface owners automatically by operation of law, but that surface owners claiming that mineral interests were abandoned were required to seek a judicial determination as to abandonment by filing a quiet title action. Therefore, any surface owner claiming title to abandoned minerals under the 1989 Act was required to obtain a court order confirming that the interests were abandoned and vested in the surface owner under the law. The Court also determined that the 2006 version of the ODMA (2006 Act) displaced the 1989 Act, and that any surface owner claiming title to abandoned minerals after the enactment of the 2006 Act must follow the notice and recording procedures set forth in the 2006 Act. Finally, the Court held that the payment of delay rentals under an oil and gas lease are insufficient savings events under the ODMA.
The lead case of Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No, 2016-Ohio-5796, was an appeal from the United States District Court for the Southern District of Ohio, Eastern Division, which certified two questions to the Supreme Court: (1) whether the 2006 Act or the 1989 Act applies to claims asserted after 2006 alleging that oil and gas rights vested in the surface owner, and (2) whether the payment of delay rentals under an oil and gas lease constitutes a “title transaction” and therefore a “savings event” under the…
September 12, 2016
FAA Issues Performance-Based Standards for Applicants Seeking a Waiver of the Small Unmanned Aircraft Rules
Pipeline Saftey Alert
The Federal Aviation Administration (FAA) recently issued its Performance-Based Standards
highlighting information that an applicant must include in order to seek a waiver of Part 107, the rules that apply to the operation of a small unmanned aircraft system (small UAS or drones). (See
previous Babst Calland pipeline safety alerts for more information on the Small UAS Final Rule
and the waiver process
Applicants may seek a waiver from many of the Part 107 regulations. However, the line-of-sight restriction (14 C.F.R. § 107.31) is of particular interest to the energy industry who may want to use a small UAS to conduct inspections of linear infrastructure. Applicants seeking a waiver of the line-of-sight requirement must demonstrate the method or means by which it will be able to:
• continuously know and determine the position, altitude, attitude, and movement of the small UAS to ensure the aircraft remains in the area of intended operation;
• avoid other aircraft, people on the ground, and ground-based structures and obstacles at all times;
• increase the visibility of the small UAS in order to be seen at a distance of three statute miles unless a system is in place that can avoid all non-participating aircraft;
• be alerted of any malfunction affecting the operation of the small UAS; and
• ensure that all persons participating in the operation have relevant knowledge of all aspects of operating a small UAS that is not within the visual line of sight of the remote pilot.
Since the effective date of the small UAS Final Rule, the FAA has granted 76 waivers of various sections of Part 107. The majority of these applications sought a waiver of the daytime operation limitation but at least two waivers were focused on line of sight. The FAA granted
an application from a railroad company allowing a waiver of the line-of- sight requirements as long as the company does…
August 31, 2016
FAA Releases Application and Instructions for Small Drone Waivers
Pipeline Safety Alert
On August 29, 2016, the Federal Aviation Administration (FAA) released the form
on how to apply for a waiver from certain requirements included in the “Operation and Certification of Small Unmanned Aircraft Systems”
Final Rule. This final rule went into effect on August 29, 2016, and permits the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. See Babst Calland’s previous Pipeline Safety Alert
on small drones for more information. This new waiver process will be of interest to the energy industry.
The FAA will allow operators of small drones to apply for a waiver from the following requirements:
- Operation from a moving vehicle or aircraft (§ 107.25)
- Daylight operation (§ 107.29)
- Visual line of sight aircraft operation (§ 107.31)
- Visual observer (§ 107.33)
- Operation of multiple small unmanned aircraft systems (§ 107.35)
- Yielding the right of way (§ 107.37(a))
- Operation over people (§ 107.39)
- Operation in certain airspace (§ 107.41)
- Operating limitations for small unmanned aircraft (§ 107.51)
The FAA will not consider waivers for the carriage of property of another by aircraft for compensation or hire. An applicant must describe the risks of the waivered operation and identify appropriate risk-mitigation strategies to ensure that the proposed operation can be safely conducted.
The ability to seek a waiver is particularly important to the energy industry which may choose to use small drones for inspections of infrastructure. For example, a waiver of the line-of-sight requirements may make the use of small drones for pipeline right-of-way patrols more practical.
The FAA is encouraging applicants to submit waiver requests at least 90 days prior to the desired commencement of the drone operation. The agency hopes to respond to each waiver request within 90 days but notes it could take longer depending on the complexity of the application or if…
August 29, 2016
Nonconforming Use Certificates Cannot Extinguish a Nonconforming Use
The Legal Intelligencer
On July 14, the Commonwealth Court rendered a decision in Hunterstown Ruritan Club v. Straban Township Zoning Hearing Board, 2016 Pa. Commw. LEXIS 327 (Pa. Commw. Ct. 2016), confirming that a property owner’s failure to register a nonconforming use with a municipality and obtain a nonconforming use certificate is not fatal to the continuance of the use.
The law in Pennsylvania regulating legal, nonconforming uses is well settled. A nonconforming use is a use that predates a prohibitory zoning regulation; it constitutes a vested, constitutional property right that may be continued unless the use is a nuisance, abandoned, or extinguished by eminent domain, as in Hafner v. Zoning Hearing Board of Allen Township, 974 A.2d 1204, 1210 (Pa. Commw. Ct. 2009). For example, an existing legal auto body shop does not have to move upon the adoption of a zoning ordinance that prohibits the shop in its present location. Rather, the shop can continue to operate as a nonconforming use.
The burden of proving the existence of a nonconforming use falls upon the property owner. In order to establish a nonconforming use, a property owner must present objective evidence that the subject property was devoted to such use at the time the prohibitory zoning regulation was enacted, as in Appeal of Lester M. Prange, 647 A.2d 279, 281 (Pa. Commw. Ct. 1994). Finally, property owners with a legal, nonconforming use have a constitutionally protected right to expand the use, notwithstanding its status as nonconforming, as in Lench v. Zoning Board of Adjustment of the City of Pittsburgh, 852 A.2d 442, 444 (Pa. Commw. Ct. 2005). This right of natural expansion is not, however, unlimited. Pennsylvania courts have consistently concluded that while a property owner may increase the intensity of a nonconforming use (e.g., an increase in the number of…
August 23, 2016
How Many Employees Do You Have (for Purposes of the FLSA)?
PA Law Weekly
Earlier this summer, our firm reminded you about major changes that take effect on Dec. 1, 2016, when the salary threshold required for employees to qualify for the executive, professional, or administrative exemptions allowed by the Fair Labor Standards Act (FLSA) is doubled. While certainly significant, the updated overtime regulations were not unexpected as the salary threshold has not been increased since 2004.
This sweeping change is not however, the only recent wage-and-hour development of which employers must be aware. There are other, far less distinct trends that have been taking shape over the past year. The Wage and Hour Division of the United States Department of Labor (DOL) and the National Labor Relations Board (NLRB) have announced new rules and cases that could increase employers’ head counts and expand the concept of joint employment. In short, for purposes of the FLSA, some employers may actually have more employees than their payrolls indicate.
In response to the trend of increasing employee misclassification investigations and private wage-and-hour lawsuits, last summer the DOL issued a 15-page interpretative memorandum with an aim to provide “additional guidance” for determining who is an employee and who is an independent contractor under the FLSA. Although classification as an independent contractor can be advantageous (or even preferable) for workers and businesses alike, improperly classified workers do not receive certain workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. Improper classification also frequently results in lower tax revenues for the government and an unfair advantage against those employers that do properly classify their workers.
The FLSA broadly defines the word “employ” as “to suffer or permit to work.” According to the U.S Supreme Court in United States v. Rosenwasser, 323 U.S. 360 (1945), and as acknowledged in the DOL’s interpretive memorandum, the “suffer or permit” standard is the broadest definition that has ever been included in any one act, and it was designed to ensure as broad a scope of statutory coverage as possible.
The economic realities test determines whether an individual is an employee or an independent contractor. It involves a balancing of several factors including: whether the potential joint employer controls the supposed independent contractor and the employment conditions;…
August 17, 2016
EPA bans unconventional wastewater discharges to POTWs
The PIOGA Press
On June 28, the U.S. Environmental Protection Agency (EPA) published the rule “Effluent Limitation Guidelines and Standards for the Oil and Gas Extraction Point Source Category” in the Federal Register. The final rulemaking, which takes effect August 29, prohibits the discharge of unconventional wastewater pollutants from production, field exploration, drilling, well completion or well treatment to publicly owned treatment works (POTWs).
The rule amends the effluent limitation guidelines (ELGs) found in 40 CFR Part 435, which set the effluent limitations and guidelines for oil and gas extraction under the Clean Water Act. Subchapter C of Part 435, which applies to onshore production of oil and gas, already prohibits the discharge of wastewater pollutants into navigable waters from any source associated with production, field exploration, drilling, well completion or well treatment. The final rulemaking extends the Subchapter C prohibition to include the indirect discharge of unconventional wastewater pollutants through POTWs.
EPA defines unconventional wastewater pollutants, in part, to include drilling muds, drill cuttings, produced sand and produced water. EPA defines “unconventional oil and gas” as “crude oil and natural gas produced by a well drilled into a shale and/or tight formation (including, but not limited to, shale gas, oil, tight gas, and tight oil).” In the accompanying “Technical Development Document for the Effluent Limitations Guidelines and Standards for the Oil and Gas Extraction Point Source Category,” EPA notes that its final definition of unconventional oil and gas is “generally consistent with those in other readily available sources,” including the Pennsylvania Code.
EPA states in the preamble that the final rule is not projected to affect current industry practice or to result in incremental compliance costs because “the data reviewed by EPA show that the extraction industry is not currently managing wastewaters by sending them to POTWs.” Nonetheless,…
August 15, 2016
No Legal Windfall Yet From Rising Pa. Natural Gas Production
The Legal Intelligencer
While Pennsylvania’s natural gas production is on the rise, energy lawyers in the state said that will not have an immediate impact on their practices. But, they said, the numbers forecast a bright future for multidisciplinary energy practices in Pennsylvania, as well as the overall state economy.
The Pennsylvania Department of Environmental Protection published its annual Oil and Gas Report earlier this month, which said Pennsylvania’s natural gas production rate increased to a record high, despite a nationwide downturn in oil and gas drilling activities.
“It reaffirms the idea that we have a stable and productive amount of natural gas,” said Joseph Reinhart, co-chair of Babst Calland’s energy and natural resources practice group. “That means good things for the economy including the lawyers.”
Lawyers said the production statistics will draw industry to Pennsylvania. But the positive consequences, particularly in the legal industry, may not be immediate, as infrastructure remains lacking and the industry overall is still experiencing a downturn.
“It’s going to take a few years for things to play out,” northeast Pennsylvania energy lawyer Stephen Saunders said. When it does, “people that are really committed to keeping up to the developments in the industry, they’re going to have work to do.”
According to the DEP report, more than 4.6 trillion cubic feet of natural gas was produced in Pennsylvania last year, up from about 4.1 trillion in 2014 despite a reduction in the number of natural gas wells being drilled.
Last week, acting DEP Secretary Patrick McDonnell said Pennsylvania’s Marcellus Shale natural gas wells are the most productive in the United States, according to a report in the Observer-Reporter, a southwestern Pennsylvania newspaper.
Reinhart noted that the annual report is not even up to date, since it is based on 2015 numbers. He said production rates have likely increased, and operators are indicating…
August 4, 2016
The Fair Labor Standards Act in the 21st Century: Mitigating the Risks of Wage and Hour Litigation
Webinar and Presentation
With an exponential increase in wage and hour class action lawsuits, prosecutions of federal and state minimum wage and overtime law violations, as well as Department of Labor (DOL) audits and investigations, employers need to stay informed about these developments. Babst Calland employment and labor attorneys outline some of the wage and hour litigation trends, provide practical guidance on the red flag issues that can lead to litigation, and provide practical tips on proactive ways to mitigate legal risk and exposure.
To view the presentation slides, click here.
If you would like to speak with a Babst Calland attorney regarding these matters or arrange for a presentation, please contact John A. McCreary, Jr.
, Mychal S. Schultz
, or Stephen A. Antonelli
of the Employment & Labor Practice Group.
July 19, 2016
Governor Wolf signs Act 52 of 2016, erasing Chapter 78 revisions
The PIOGA Press
On June 23, Governor Tom Wolf signed Act 52 of 2016, the Pennsylvania Grade Crude Development Act, formally Senate Bill 279. Act 52 abrogates the Environmental Quality Board’s (EQB) revisions to the Chapter 78 regulations concerning conventional oil and natural gas wells and creates the Pennsylvania Grade Crude Development Advisory Council.
In February, the EQB approved the Chapter 78 (conventional wells) and Chapter 78a (unconventional wells) Subchapter C revisions by a vote of 15-4. The Chapter 78 revisions would have altered or created new obligations for permit applications and renewals, water supply replacement, predrilling surveys and reviews, erosion and sediment control, emergency response plans, wastewater management, disposal of drill cuttings, site restorations, spills and releases, and production reporting. The revisions also included 31 different requirements for electronic applications, notifications and submittals.
Act 52 applies only to the conventional regulations. The Chapter 78a unconventional regulations are currently undergoing review at the Pennsylvania Office of Attorney General and are expected to be published in late summer.
In addition to abrogating the pending revisions to Chapter 78, Act 52 specifies that any future rulemaking concerning conventional wells must be undertaken separately and independently of unconventional wells and other subjects. Future rulemakings concerning conventional wells must include a regulatory analysis form submitted to the Independent Regulatory Review Commission (IRRC) that is restricted to the subject of conventional wells.
Act 52 addresses the primary criticism of PIOGA and other trade associations and the Department of Environmental Protection’s Conventional Oil and Gas Advisory Committee (COGAC) regarding EQB’s Chapter 78 revisions. Specifically, Act 126 of 2014 required EQB to promulgate proposed regulations relating to conventional wells separately from proposed regulations relating to unconventional wells, which should have removed pending revisions applicable to conventional operations proposed in 2013. Any regulatory revisions for conventional operations following Act 126 were required…
July 15, 2016
Congress and the FAA Ease the Way for Use of Drones by the Energy Industry
Pipeline Safety Alert
The Federal Aviation Administration (FAA) recently issued regulations permitting the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. On July 13, 2016, Congress passed several provisions specific to drone use by the energy industry as part of the reauthorization bill for the FAA.
On July 13, 2016, Congress passed the “FAA Extension, Safety, and Security Act of 2016 (the Bill)”. The Bill, which authorizes a short-term extension of the funding for the FAA, includes several provisions covering the operation of unmanned aircraft systems (i.e., drones). Of particular interest to the energy industry, Congress–
• Amends section 331 of the FAA Modernization and Reform Act of 2012. This particular statute previously defined “small unmanned aircraft” as weighing less than 55 pounds. The Bill amends this definition to clarify that the 55-pound limit “includ everything that is on board or otherwise attached to the aircraft. ”
• Requires the Secretary of Transportation to establish a process within 180 days to allow applicants to petition the FAA to prohibit or restrict the operation of an unmanned aircraft “in close proximity to a fixed site facility.” A “fixed site facility” includes energy production, transmission, and distribution facilities and equipment, oil refineries, and chemical facilities.
• Requires the FAA to allow a person to apply to operate an unmanned aircraft system during the day or at night beyond the visual line of sight of the individual operating the aircraft as long as the operator is conducting the unmanned aircraft operation to ensure compliance with (1) federal or state regulatory requirements including surveys associated with permit applications for new pipelines; (2) the pipeline safety regulations (49 C.F.R. Parts 192 and 195); or (3) the requirement of any federal, state, or local regulatory body or industry standard related to…
July 6, 2016
New OSHA Injury Reporting Rule Will Preclude Automatic Post-Incident Drug Screens
Many employers have implemented policies mandating employees involved in an accident at the workplace to undergo drug and alcohol screening. Effective August 10, 2016 such blanket, automatic policies will likely run afoul of the injury reporting requirements of the Occupational Safety and Health Act (Act).
On May 12, 2016, the Occupational Safety and Health Administration (OSHA) issued its Final Rule amending employers’ obligations to report and record injuries, and clarifying its interpretation of the injury reporting requirements of the Act. 29 CFR §1904.35(b)(1)(i) requires the employer to establish a “reasonable procedure for employees to report work-related injuries and illnesses ….” OSHA “clarified” this requirement by adding the following: “A procedure is not reasonable if it would deter or discourage a reasonable employee from accurately reporting a workplace injury or illness …”
In the comments accompanying the Final Rule, OSHA noted that many commenters to the proposed rule complained that employer policies requiring automatic post-injury drug and alcohol testing were a form of adverse action that discouraged reporting. The comments state that:
Although drug testing of employees may be a reasonable workplace policy in some situations, it is often perceived as an invasion of privacy, so if an injury or illness is very unlikely to have been caused by employee drug use, or if the method of drug testing does not identify impairment but only use at some time in the recent past, requiring the employee to be drug tested may inappropriately deter reporting.
OSHA concluded that “the evidence in the rulemaking record shows that blanket post-injury drug testing policies deter proper reporting.” OSHA did not ban all post-incident reporting, but the comments set forth the agency’s view that it should be severely limited:
his final rule does not ban drug testing of employees. However, the final rule does prohibit employers from using drug testing (or the threat of drug testing) as a form of adverse action against employees who report injuries or illnesses….
June 29, 2016
Final Rule Alters Salary Threshold for Overtime Pay
The Legal Intelligencer
The Rolling Stones said it best: “Time is on my side, yes it is.” This has never been more accurate after the publication of the much-anticipated final rule updating overtime regulations, as an estimated 4.2 million workers who were previously exempt from receiving overtime pay may be eligible for overtime starting Dec. 1, 2016.
On May 18, President Obama and Department of Labor Secretary Thomas E. Perez announced the publication of the Department of Labor’s Final Rule titled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees.” The final rule updated overtime regulations, including an update on the salary and compensation levels needed for employees to be considered exempt, (29 CFR Part 541).
The Fair Labor Standards Act
Pursuant to the Fair Labor Standards Act (FLSA), an employee is entitled to overtime of one and one-half times the employee’s regular rate of pay for hours worked over 40 in a workweek. However, certain executive, administrative, and professional employees are exempt from this rule. These employees are commonly referred to as “exempt employees.” To be considered exempt, three tests must be met: The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (salary basis test); the amount of salary paid must meet a minimum specified amount (salary level test); and the employee’s job duties must primarily involve executive, administrative or professional duties as defined by the regulations (duties test).
Combination of ‘Long’ and ‘Short’ Duties Test
Prior to 2004, the regulations implemented both a “long” and “short” duties test. The long test paired a lower salary requirement with a more stringent duties test—meaning that to qualify a worker could perform no more than 20 percent of their time on nonexecutive, administrative,…
What Constitutes a Zoning Map Change for Notice Requirements
The Legal Intelligencer
On March 2, the Commonwealth Court rendered a decision in Embreeville Redevelopment v. Board. of Supervisors of West Bradford Township
, 134 A.3d 1122 (Pa. Commw. Ct. 2016), which clarified when a zoning ordinance amendment, although solely textual on its face, constitutes a zoning map change and triggers the additional notice requirements under Section 609(b) of the Municipalities Planning Code, 53 P.S. Section 10609(b).
The Municipalities Planning Code, 53 P.S. Section 10101 et seq., (MPC), which establishes the framework for zoning and land use regulation in Pennsylvania, sets forth the detailed procedure a municipality must follow when adopting or amending a zoning ordinance. In pertinent part, a municipality intending to amend its zoning ordinance, regardless of whether the proposed amendment is a text amendment or a zoning map change, must: transmit a copy of the proposed amendment to the county planning agency (if one has been created) for review and comment; transmit a copy of the proposed amendment to the municipality’s planning commission for review and comment (if the planning commission did not prepare the amendment); hold a public hearing on the proposed amendment; and publish notice of the public hearing on the proposed amendment twice, in two successive weeks, in a newspaper of general circulation in the municipality no more than 30 and no less than seven days before the public hearing, (see MPC Sections 304(a)(3) and 609; 53 P.S. Sections 304(a)(3) and 609). In addition to the foregoing requirements, if a proposed amendment involves a zoning map change, Section 609(b) of the MPC requires that a municipality also conspicuously post notice of the public hearing on the properties affected by the proposed map change; and mail notice of the public hearing to the owners of property affected by the proposed map change. The MPC…
June 23, 2016
EPA Issues Technical Guidance For Assessing Environmental Justice In Regulatory Analysis
The United States Environmental Protection Agency’s (“EPA’s”) latest publication demonstrates that issues relating to environmental justice will have a significant impact on regulatory actions in the near future and will be an important topic during the public comment period for proposed rules. On June 7, 2016, EPA issued the publication Technical Guidance for Assessing Environmental Justice in Regulatory Analysis (“Guidance”), which recommends technical approaches that EPA analysts can use to incorporate environmental justice concerns during the rulemaking process.
EPA defines “environmental justice” as “the fair and meaningful treatment of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” When evaluating proposed regulatory actions, EPA recommends analysts conduct an initial screening of environmental justice concerns to determine the appropriate level of analysis through the rulemaking process. Specific consideration should be given to “proximity of sources to low-income populations, minority populations, and/or indigenous peoples, unique exposure pathways, and a history of environmental justice concerns associated with the pollutant being regulated.”
With respect to evaluating the environmental justice issues in Human Health Risk Assessments that are conducted to support a regulatory action, EPA’s new Guidance provides factors to consider when designing various assessments during the planning, scoping, and problem formulation portions of the rulemaking process. These assessments stress the importance of considering disproportionate impacts on certain population groups or demographics due to a potential for increased vulnerability and susceptibility to environmental stressors.
This Guidance complements EPA’s existing Environmental Justice Action Development Process Guide and is a significant component of “EJ 2020,” which is a broader strategy to advance and address issues of environmental justice by the year 2020. EPA is currently seeking comments until July 7, 2016 on its draft EJ 2020 Action Agenda, which proposes integrating environmental justice concerns to all EPA actions, including the rulemaking considerations found in the Guidance, as well as permitting and enforcement actions.
Babst Calland attorneys…
Babst Calland Regulatory Update for Drillers & Midstreamers
Marcellus Drilling News
The legal beagles of top energy law firm Babst Calland recently released their sixth annual energy industry report called, “The 2016 Babst Calland Report – An Unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead; Legal and Regulatory Perspective for Producers and Midstream Operators.” This annual review of energy and natural resources development activity acknowledges the continuing evolution of this industry in the face of economic, regulatory, legal and local government challenges. In an MDN exclusive, we have the first six pages of the 68-page report (see below), along with details on how you can request a full copy. Worth the read!…
The Aliso Canyon Effect: Underground Gas Storage Incident Influences Pipeline Safety Reauthorization
Pipeline Safety Alert
On June 22, 2016, President Obama signed into law the “Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016” (PIPES Act, S.2276). The PIPES Act reauthorizes the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) federal pipeline safety program through fiscal year 2019, provides PHMSA with significant new authority, and requires the agency to prioritize the completion of outstanding mandates from the previous reauthorization in 2011. Of note, the PIPES Act requires PHMSA to develop underground gas storage standards, provides PHMSA with significant new authority to issue industry-wide emergency orders, and requires PHMSA to update its regulations for Liquefied Natural Gas (LNG) facilities. Babst Calland’s Pipeline and HazMat Safety team provides the following observations on these key provisions.
Click here for PDF.
June 21, 2016
Understanding rights, opportunities as a creditor or asset purchaser in bankruptcy proceedings
The PIOGA Press
This article is an excerpt of the 2016 Babst Calland Report – “An unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead. Legal and Regulatory Perspective for Producers and Midstream Operators.
In 2015, 42 North American oil and gas exploration and production companies filed for bankruptcy protection. At least another 29 have filed in 2016, and continuing price pressure may result in more bankruptcy filings. Given this state of affairs, companies operating in the oil and gas sector should understand how their rights and obligations are affected when their contractual counterparties become bankruptcy debtors, and how to take advantage of business opportunities presented through the bankruptcy process.
Assumption or Rejection of Contracts
One of the main purposes of the Bankruptcy Code is to afford a commercial debtor the opportunity to rehabilitate and reenter the stream of commerce as a productive enterprise. One tool afforded to debtors is the right under Section 365 of the Bankruptcy Code to determine which of its “executory contracts” dating from prior to the bankruptcy filing are beneficial, and which are burdensome, and to reject those that are burdensome, thereby relieving the debtor of the obligation to perform burdensome contracts going forward. The Bankruptcy Code does not define the term “executory contract,” but the term is generally understood to encompass those contracts where the obligations of both parties are unperformed to the degree that the failure of either party to complete performance would constitute a material breach. Section 365 also permits a debtor to reject its unexpired leases.
The question of whether a debtor can reject particular sorts of contracts can hinge on issues determined under state law. More specifically, the treatment of oil and gas leases, gathering agreements and transportation agreements can vary, depending on the treatment of those agreements under…
Federal Regulatory Eyes New Rules for Gas Gathering Lines
Pipeline & Gas Journal
The department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency charged with administering the nation’s pipeline safety program, published a long-awaited notice of proposed rulemaking (NPRM) for gas transmission and gathering pipelines
Under development for more than four years, the NPRM proposes significant changes to PHMSA’s safety standards for gas pipeline facilities in 49 C.F.R., Part 192. Of particular importance to the upstream and midstream sectors, the NPRM includes a proposal to modify the federal safety standards for onshore gas gathering lines in four significant ways.
Managing Our Production Potential
West Virginia Executive
Located in the heart of the Appalachian Basin, at the crossroads of the Marcellus and Utica shales, West Virginia sits atop one of the world’s most prolific deposits of hydrocarbons. Recent technological advances, particularly the emergence of horizontal drilling and hydraulic fracturing, have left the oil and gas industry well positioned to develop these resources for decades to come. However, the use of advanced drilling techniques is only the first step in the commercial development of these energy products. A safe and efficient transportation network is necessary to move hydrocarbons from production areas to end users.
Data compiled by the U.S. Department of Transportation and the results of several studies confirm that pipelines are generally the safest and most effective means of transporting the country’s energy products, particularly when compared to other modes of transport. According to the American Gas Association, the natural gas industry spends more than $20 billion annually to ensure the safety of the more than 2.5 million miles of gas pipelines located in the United States. The American Petroleum Institute and Association of Oil Pipe Lines report that the liquids pipeline industry spends at a similar rate—more than $2 billion annually— to maintain the integrity of the nation’s nearly 200,000 miles of pipeline that transport crude oil, natural gas liquids (NGLs) and other petroleum products.
Recognizing that safety is a shared responsibility, the pipeline industry works closely with the Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency that regulates the safety of this vast and growing network of pipelines. The PHMSA’s primary charge is to establish and enforce minimum federal safety standards for pipeline facilities. It also administers a certification program that allows state authorities to regulate certain kinds of pipelines within their jurisdictions. Participating states receive federal grant funding to offset the costs of implementing these pipeline safety programs.
In West Virginia, pipeline safety is regulated by the Public Service Commission of West Virginia. The commission’s Gas Pipeline Safety Division oversees nearly 14,000 miles of gas pipeline in the state, as well as almost 200…
June 17, 2016
South Fayette battles over ordinance despite low demand for gas rights
No one wants to drill for oil and gas in South Fayette anymore.
That’s not part of a new settlement that aims to put to bed a years-long conflict between the township and a group of landowners who felt South Fayette was trying to exclude drilling from its borders.
But it’s a loud unsaid.
The low price of natural gas has likely dampened the appetite of Range Resources, the Texas-based shale operator that once leased land from the Kosky family and their business interests, and of the landowners who continue to spend hundreds of thousands of dollars fighting the township.
June 9, 2016
Your Company’s “TO DO” List for Chemical Substances Regulation and Compliance
Now that the House of Representatives has passed Toxic Substances Control Act (TSCA) reform legislation, which is the Frank R. Lautenberg Chemical Safety for the 21st Century Act (H.R. 2576), on May 24, 2016 followed by Senate passage on June 7, 2016, the reconciled legislation is finally on its way for President Barack Obama’s signature. The president is expected to quickly sign it. So what does this mean for your company? Although this is by no means complete, here is a “to do” list to frame your company’s TSCA reform efforts.
1. PROMOTE SOUND SCIENCE: Take advantage of public comment opportunities for your company and its scientific and legal advisors to weigh in on the USEPA’s Year 1 mandate to establish a risk-based chemical screening process and criteria for designating chemicals as low or high priority substances, as well as guidance for submitting risk assessments through the new chemical review PMN process. In preparing comments, look to USEPA’s 2014 TSCA Work Plan as an indicator of what USEPA’s work product is likely to look like and consider weaving in real world examples of sound and proven risk assessment methodologies. The TSCA Work Plan program is the USEPA’s current blueprint for conducting safety assessments, prioritizations, and risk management evaluations. So the USEPA is likely to build upon what it has already developed. Many non-rulemaking policies, procedures, and guidance must also be reviewed, revised as warranted or newly developed by the end of Year 2 so do not miss comment opportunities as they arise.
2. LOOK FOR DATA GAPS: Because all new and existing chemical substances actively being made, sold and/or distributed will ultimately be evaluated/re-evaluated by the USEPA under the risk evaluation standards that are developed, now is a good time for your company to look at the existing/available exposure data and develop new data for any information gaps.
3. FILE ROBUST PMNs AND SNUNs: With the lifting of the “least burdensome” requirement, the USEPA faces…
June 7, 2016
Roadblocks present for pertrochemical expansion in region
Pittsburgh Tribune Review
Attracting companies such as Royal Dutch Shell to build their petrochemical plants along the Ohio River was the easy part, as far as Keith Burdette is concerned.
The challenge will come in accommodating a related manufacturing complex that officials in three states hope to establish around ethane crackers, said Burdette, executive director of the West Virginia Development Office.
“We’re not trying to build a facility anymore. We’re trying to build an industry,” he told several hundred people Monday at a petrochemical conference in Downtown Pittsburgh. “Building an industry is a lot more complicated.”
As Shell prepares to start construction of a multibillion-dollar facility in Beaver County, and two other companies weigh building crackers in Ohio and West Virginia, officials at the conference said they must make sure the region has the infrastructure, workforce and real estate that the industry needs to expand.
“We have to work that much harder with respect to what our next steps are,” said Dennis Davin, secretary of Pennsylvania’s Department of Community and Economic Development.
Shell this month said it made the decision to go ahead with construction, nearly five years after it started looking in the region. The cracker, which will convert ethane liquids from Marcellus shale wells to the building blocks of plastics, is expected to attract manufacturers interested in using its products.
Davin said those companies will need a place to build.
“Our issue right now is that in Western Pennsylvania … we don’t have enough construction-ready sites for things that we know are going to happen in follow-on investment from this,” he said. “We know that there are going to be plastics manufacturers, fertilizer manufacturers … and downstream companies that are going to look for sites.”
As his boss, Gov. Tom Wolf, goes into another state budget deadline…
June 2, 2016
Court: Oil and Gas Operations Compatible with Agricultural Uses
The Legal Intelligencer
Editor’s note: The authors represented Cardinal before the township, trial court and Commonwealth Court.
On Jan. 7, the Pennsylvania Commonwealth Court rendered a decision in Kretschmann Farm v. Township of New Sewickley
, 2016 Pa. Commw. LEXIS 33 (Pa. Commw. 2016), which addressed the heated debate over the compatibility of oil and gas operations and agricultural uses.
In 2014, Cardinal PA Midstream, (Cardinal) applied to the board of supervisors of New Sewickley Township, Beaver County for conditional use approval to construct and operate a natural gas compressor station in the township’s A-1 agricultural district. Pursuant to the township’s zoning ordinance “compressor station” is permitted as a conditional use in the A-1 agricultural district, provided that the use meets certain express standards and criteria.
The township board of supervisors held a public hearing on Cardinal’s application, during which Cardinal presented testimony on: (1) its experience in the natural gas industry; (2) its operations; (3) compliance with the zoning ordinance’s express standards and conditions; (4) review and approval by the Pennsylvania Department of Environmental Protection of its erosion and sediment control plan and air permit; (5) incorporation of landscaping to block the site’s visibility from neighboring landowners and roads; (6) conformity to the township’s noise standards; (7) proposed driveway construction, traffic generation and road improvements.
Adjacent property owners, who operate an organic farm, and others opposed Cardinal’s application. During the public hearing, the property owners expressed concern over potential impacts of the compressor station on their produce, water and air, and the compatibility of natural gas drilling operations with agricultural uses. Township residents also expressed concern over the potential placement of pipelines in the township, light pollution from flares, the compatibility of compressor stations with uses in residential/agricultural areas, and the potential long-term effects of emissions generated by oil and gas…
June 1, 2016
U.S. Supreme Court Finds Clean Water Act Jurisdictional Determinations Reviewable
On May 31, 2016, the Supreme Court of the United States unanimously ruled in U.S. Army Corps of Engineers v. Hawkes Co. that approved jurisdictional determinations (JDs) issued by the U.S. Army Corps of Engineers (USACE) under the federal Clean Water Act are final agency actions subject to judicial review. Like the Court’s 2012 landmark opinion in Sackett v. EPA (finding that an Administrative Order to Comply is immediately appealable), the Hawkes decision effects a fundamental change in the framework for addressing jurisdictional disputes under the statute.
The Clean Water Act regulates the discharge of pollutants into “waters of the United States,” imposing substantial criminal and civil penalties for unpermitted discharges. Because it is often difficult for an owner to determine whether a specific parcel contains jurisdictional waters, the USACE issues two types of JDs on a case-by-case basis. “Preliminary” JDs are expressly non-binding, merely advising a property owner that jurisdictional waters may be present on a parcel. “Approved” JDs, on the other hand, convey the Corps’ definitive position as to the presence or absence of jurisdictional waters. Moreover, the USACE and the U.S. Environmental Protection Agency (USEPA) are parties to a Memorandum of Agreement (MOA) that makes Approved JDs binding on both agencies for five years.
In Hawkes, the plaintiffs received an Approved JD that found a peat wetland (that plaintiffs sought to mine) constituted jurisdictional waters because of its “significant…