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September 19, 2017

Feds in sync with industry on autonomous cars

Automotive News  By: Eric Kulisch WASHINGTON — From a regulatory standpoint, September has been a good month so far for U.S. automakers and tech companies racing to develop autonomous vehicles. The House of Representatives passed the SELF DRIVE Act, the Senate Commerce Committee floated a draft bill that soon will become an official proposal, and the Department of Transportation issued revised industry guidance on how the federal government will treat safety compliance in the brave new world of driverless cars. The three efforts reflect the politically conservative tendencies of the Trump administration and Congress in projecting a hands-off approach to establishing a legal and regulatory framework for self-driving vehicles, and they promise to deliver much of the regulatory certainty and consistency sought by the industry. Safety groups complain that the proposals give the industry too much leeway to ignore risks, but some experts say the government approach recognizes that private-sector competition will drive safety improvements faster than regulators who might overlook potential solutions when prescribing rules. “You’re seeing a light regulatory touch to encourage innovation and prevent the government from picking winners and losers,” said Tim Goodman, a transportation safety attorney at Babst Calland. He also was assistant chief counsel for enforcement at the National Highway Traffic Safety Administration until April 2016. “Pursuing a market-based approach allows companies to take advantage of efficiencies” and promote safety, he added. For the full article, click here.

Federal court directs FERC to evaluate downstream climate change impacts

Federal agencies tasked with reviewing energy projects will likely take a harder look at climate change following a recent decision by the U.S. Court of Appeals for the District of Columbia Circuit. In a 2-1 ruling issued August 22, a D.C. Circuit panel vacated a decision by the Federal Energy Regulatory Commission (FERC) to approve a major interstate pipeline project, holding that FERC failed to adequately consider the greenhouse gas emissions that will result from burning the natural gas being carried by the pipelines. See Sierra Club v. FERC, D.C. Cir., No. 16-1329. The court faulted FERC’s project review under the National Environmental Policy Act of 1969 (NEPA) in a decision that has the potential to delay pipeline development across the country. What NEPA requires As the first major environmental law in the United States, NEPA established a broad national framework for protecting the environment. NEPA requires federal agencies to evaluate the environmental and related social and economic impacts of proposed actions prior to making decisions. It requires agencies to follow certain procedures, gather public input and take a “hard look” at various factors, but it does not require a particular outcome. NEPA can apply to a wide range of federal actions, including but not limited to permit approvals. Private companies frequently become involved in the NEPA process when they need a permit issued by a federal agency, such as FERC or the U.S. Army Corps of Engineers. Depending on the circumstances of a project, the reviewing agency may be required to prepare a decision document known as an environmental impact statement (EIS). NEPA requires preparation of an EIS for each “major Federal action[] significantly affecting the quality of the human environment.” See 42 U.S.C. § 4332(2)(C). Decades of case law have developed around the meaning of this statutory obligation. It…

September 13, 2017

Report indicates market upturn while regulatory environment remains in flux

PA Business Central  A recent report indicates that the natural gas industry should expect continued economic gains despite remaining disapproval from local community and regulatory organizations. Written by multiple energy and natural resource attorneys from law firm Babst Calland, the report is entitled “Upstream, Midstream and Downstream: Resurgence of the Appalachian Shale Industry; Legal and Regulatory Perspective for Producers and Midstream Operators” and focuses “on issues, challenges, opportunities and recent developments in the Appalachian Basin and beyond relevant to producers and operators,” according to a press release from the firm. The report is split up into six sections: Business issues, the changing regulatory landscape, pipeline safety legislative and regulatory developments, litigation trends, challenges and debate spawned by local laws and regulations and downstream opportunities. “This year’s Babst Calland Report is published at an exciting time for energy in the northeastern United States. The Appalachian Basin has re-emerged to become a leading producer, prices have stabilized, pipeline projects are coming online, and the future of downstream markets is beginning to come into view. Yet, dynamism remains a big part of the story with significant acreage and assets changing hands, new entrants to the upstream and midstream markets, the evolution of energy markets and fuel mixes, and the seemingly never-ending new requirements from the federal, state and local levels of government,” said Kathryn Z. Klaber, The Klaber Group, in her preface to the report. Production and prices Although natural gas producers saw record low prices in 2016, the end of the year indicated a positive trend upwards that has continued into 2017.

 The report predicts that “modest price stability may be achieved given the prospect of both increased pipeline capacity out of producing regions like Appalachia, as well as some national export capacity. However, it appears that relatively low prices are likely to persist for some period…

September 8, 2017

Pennsylvania Ruling Brings Ambiguity

The American Oil & Gas Reporter HARRISBURG, PA.–The Pennsylvania Supreme Court’s decision in Pennsylvania Environmental Defense Foundation (PEDF) v. Commonwealth has upended a longstanding interpretation of an environmental provision in the state’s constitution, but oil and gas representatives indicate no one is certain yet of the implications of the June 20 ruling, particularly regarding development of privately-held oil and gas resources. The Pennsylvania Independent Oil & Gas Association reports that another pending Supreme Court case, Gorsline v. Board of Supervisors of Fairfield Township, ultimately may give a clearer sense of the court’s intentions. In the meantime, though, the new construal of the constitution already is being employed to challenge oil and gas activity, PIOGA warns. ERA Interpretation At issue in the PEDF case was Pennsylvania’s Oil and Gas Lease Fund, which holds all rents and royalties from oil and gas leases on state-owned land. By law, the fund is to be used by the Department of Conservation and Natural Resources exclusively for conservation, recreation, dams or flood control, Babst Calland attorneys Kevin Garber and Blaine Lucas explain in PIOGA’s newsletter. Beginning in 2009 as part of the state budget process, the Pennsylvania General Assembly made changes to Sections 1602-E and 1603-E of the Pennsylvania Fiscal Code, transferring control over royalties from oil and gas leases from DCNR to the legislature and requiring that there could be no expenditures of royalties from the lease fund unless the general assembly transferred that money to the general fund. In 2012, the attorneys recount, PEDF filed a challenge in Pennsylvania Commonwealth Court to § 1602-E and 1603-E and the appropriation of money from the leases, among other things. The basis of the legal action was the Pennsylvania Supreme Court’s December 2013 plurality opinion in Robinson Township v. Commonwealth, particularly its reading of Article I, § 27 of the Pennsylvania…

August 21, 2017

Amended Lien Law and Energy Infrastructure Construction Projects

The Legal Intelligencer The Pennsylvania Mechanics’ Lien Law, 49 P.S. Section 1101 et seq. (the Lien Law), provides contractors a powerful legal hammer for the recovery of payment owed for work performed on a construction project; they can impose a lien against the property on which their work was performed, clouding the owner’s title, until payment is received. In December 2016, as a result of last year’s Act 142 (the act) amendments to the Lien Law, the Department of General Services launched the online State Construction Notices Directory (the directory). Prior to the creation of the directory, there was no streamlined system for owners and general contractors to track subcontractors and suppliers on a project site. Now, the directory provides greater certainty with respect to who may have lien rights, and helps owners and general contractors track work performed by subcontractors, sub-subcontractors and suppliers with whom they otherwise do not have a contractual relationship. In light of the updates to the Lien Law, owners, general contractors, and subcontractors involved with the ever-increasing energy infrastructure projects within the commonwealth would be prudent to evaluate their business practices to ensure compliance with—and to take full advantage of their rights under–the amended Lien Law.

Applicability to Energy Infrastructure Construction Contracts

Although the case law in Pennsylvania is not completely settled, it appears from the text of the Lien Law, and the case law developed from it, that many well pad and pipeline construction projects are subject to the Lien Law. For example, a Pennsylvania appellate court held that a “well for the production of gas, oil or other volatile or mineral substance” falls within the definition of a “structure or other improvement” governed by the Lien Law, so long as the well involves “the erection or construction of a permanent improvement.” See Yellow Run…

August 15, 2017

Federal and state permitting of underground injection wells in Pennsylvania

The PIOGA Press  The oil and gas industry in Pennsylvania has made significant strides in recycling water in recent years. Since 2010, wastewater recycling has increased from 4.6 million barrels to more than 7.8 million barrels per year, according to a 2015 Pennsylvania Department of Environmental Protection, Bureau of Waste Management presentation on water recycling and oil and gas waste. Given fluctuating market conditions, alternatives to recycling and reuse are also necessary. These alternatives include treatment and disposal both within and outside Pennsylvania. The wastewater disposal options in Pennsylvania have been limited in recent years by a variety of state and federal factors. DEP asked unconventional operators to voluntarily stop sending wastewater to publicly owned treatment works (POTW) in 2010. EPA finalized a new regulation in 2016 banning unconventional oil and gas operators from sending wastewater to POTWs, a practice the federal Environmental Protection Agency noted as “current” industry practice. Historically, there have been few injection wells constructed and permitted in Pennsylvania, and some operators have sent wastewater to Ohio and other states where injection wells are more common. Under the Safe Drinking Water Act, EPA issues the federal Underground Injection Control (UIC) permits in Pennsylvania, and then DEP issues a well permit under the Oil and Gas Act to construct a new well or alter an existing well for injection. The Common – wealth has not taken primacy over the federal UIC program. DEP, however, has recently revised its permitting process for the state permit needed to construct and operate UIC wells, revisions made in the midst of legal challenges in both state and federal courts. EPA identified 15 UIC disposal wells in Pennsylvania, including plugged and abandoned wells and two wells pending permit approval, in its 2016 UIC well inventory. DEP’s 2016 annual oil and gas report listed eight active UIC disposal…

August 10, 2017

Tune Up FMLA Compliance With Top 10 Dos and Don’ts

The Legal Intelligencer Under the Family and Medical Leave Act (FMLA), employees may take an unpaid, job-protected leave of absence for certain family and medical reasons. Employers often find it challenging to keep track of their obligations under the FMLA. This article will help employers to avoid common problems by reviewing 10 of the top dos and don’ts. • Do provide employees with proper notice of their rights. The FMLA applies to “covered employers.” Private companies meet this definition if they have at least 50 employees, in at least 20 weeks during the current or previous calendar year. Public agencies, elementary schools and secondary schools are also covered employers. Covered employers are required to notify employees of their FMLA rights in two ways. First, employers should post a notice explaining the FMLA’s provisions and how to file a complaint. This posting can be electronic. Second, employers should provide written FMLA information to new employees. This information can be included in an employee handbook. Employers also may distribute this information electronically. The Department of Labor has a sample poster and notice on its website. (29 Code Fed. Regs. Section 825.300(a)). • Don’t create new forms from scratch. The Department of Labor publishes sample FMLA forms on its website. While these forms are optional, the regulations establish a “safe harbor” for employers that choose to use them. (See 29 Code Fed. Regs. Section 825.310(d).) • Do confirm when a rehired employee becomes eligible. FMLA leave is available to “eligible employees,” meaning employees who: work for a covered employer; have been employed for at least 12 months; have worked at least 1,250 hours within the past 12 months; and work at a location where the employer has at least 50 employees within 75 miles. Rehired employees may combine multiple periods of service to satisfy the 12-month minimum. For…

July 17, 2017

Firms Take DIY Approach to Tech, but With Limits

The Legal Intelligencer Immigration services firm Fragomen recently announced that it’s opening a new center in Pittsburgh, staffed with up to 50 employees, where it will develop or redevelop much of its software and cybersecurity technology in-house. Fragomen’s aggressive do-it-yourself approach to technology sets it apart in the industry. But leaders at several Pennsylvania-born law firms insisted it isn’t all that different from what they’re doing themselves—even if their firms only plan to tackle so much tech innovation on their own. “What Fragomen is attempting to do, we have it,” said David Pulice, manager of practice innovation at Reed Smith. “That’s pretty common among law firms.” Reed Smith has created multiple apps with specific applications. Most recently, the firm launched Breach RespondeRS, which walks clients through the basic steps to take following a cyberbreach. If the problem seems complicated, the app suggests they seek legal counsel. Duane Morris trademarked its original analytics software last year. The firm created the tool several years ago, and updates it continually to include new case data. Blank Rome said it creates about 40 percent of its software in-house, including client-facing portals and internal applications, like a matter-tracking tool for the consumer finance group and a database for accessing information on any other platform. Morgan, Lewis & Bockius has developed more than 50 custom applications, according to chief information officer Michael Shea, and holds a competition in which teams can suggest new technical solutions to client problems. And K&L Gates has several proofs of concept in the works to apply technology such as blockchain and artificial intelligence, said CIO Neeraj Rajpal. Dechert; Buchanan Ingersoll & Rooney; and Fox Rothschild also have developers working on various applications. And it’s not just large firms getting creative with technology. Babst Calland has been in the game for more than 15 years, through its…

July 14, 2017

A Duty to Reimburse Defense Costs When Accepting a Defense as an Additional Insured in Pennsylvania-Practical Considerations

The Critical Path  Insurance coverage issues on commercial construction projects are complex. Add in the contractual requirement of providing additional insured status and problems can arise when tendering and accepting a defense. This article discusses a unique insurance coverage issue which may arise in a multi-defendant property damage action involving additional insured requirements among contractors. It is common in a property damage action for a carrier to provide a defense and later file a declaratory judgment when evidence discerned in discovery establishes that no coverage existed. In these situations, the policy language and jurisdiction determines whether the insured owes defense costs to the carrier. But what is the duty of an additional insured to reimburse the carrier for defense costs when it is subsequently determined that coverage did not exist? The additional insured has no written contract with the carrier. Moreover, what if the additional insured was provided a defense from its own carrier, only to have the defense tendered to a different carrier based upon additional insured status? What is the obligation of the primary insurer? Let’s address this through a factual example. The Owner hires Contractor to construct a mixed-use building and the Contractor subsequently hires a Subcontractor. The contract between Contractor and Subcontractor calls for Subcontractor to add and recognize Contractor as an additional insured to its policy. Substantial completion is achieved and the Owner takes possession of the building despite a payment dispute between Contractor and Owner. The Contractor files suit against the Owner. The Owner claims major structural issues with the building. The Owner then files a Counterclaim for breach of contract and negligence against the Contractor and joins the Subcontractor under a negligence theory. Contractor and Subcontractor each turn the claims over to their respective carriers, and each provide a defense under a reservation of rights. Contractor’s carrier recognizes its…

D.C. Circuit Strips Portions of EPA’s 2015 Definition of Solid Waste Rule, Relaxing Standards for Industry

Administrative Watch  The U.S. Court of Appeals for the District of Columbia Circuit (“the Court”) has vacated parts of the U.S. Environmental Protection Agency (EPA) Definition of Solid Waste Rule (“the Rule”) under the Resource Conservation and Recovery Act (RCRA). The decision will have a significant impact on generators of hazardous secondary materials (HSMs) and facilities that store or recycle them. Although the Court’s decision relaxed some of the requirements of the Rule, facilities still will need to carefully evaluate how to handle and manage HSMs both onsite and offsite. Background In 2015, EPA revised the Rule governing the recycling of certain HSMs (e.g., spent materials, listed by-products, listed sludges) in an effort to cut down on “sham recycling.” The rulemaking required generators of HSMs that were destined for recycling to demonstrate that the recycling of such material is legitimate pursuant to certain “Legitimacy Criteria.” The 2015 rulemaking also required generators that shipped HSMs offsite for recycling to send such materials to RCRA-permitted facilities or to EPA- or state agency-approved “verified recyclers” pursuant to the so-called “Verified Recycler Exclusion.” This exclusion allowed certain HSMs to be considered “reclaimed” and thus not subject to solid waste regulation. Industry and environmental groups filed petitions challenging the 2015 rulemaking. On July 7, 2017, in a 2-1 decision, the Court in American Petroleum Institute, et al. v. EPA, ruled largely in favor of industry groups as it vacated parts of the Legitimacy Criteria and the Verified Recycler Exclusion. Legitimacy Criteria EPA’s 2015 rulemaking required companies to meet four (4) factors (the Legitimacy Criteria) to distinguish legitimate recycling of HSMs from sham recycling:

  1. The HSM must provide a useful contribution to the recycling process or to a product or intermediate of the recycling process;
  2. The recycling process must produce a valuable product or intermediate;
  3. The HSM must be handled as a valuable…

July 12, 2017

Supreme Court reexamines the Environmental Rights Amendment

The PIOGA Press The Pennsylvania Supreme Court has rejected the long-standing test for analyzing claims brought under Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA). In its June 20, decision in Pennsylvania Environmental Defense Foundation (PEDF) v. Commonwealth, the Supreme Court set aside the test from Payne v. Kassab that has been used since 1973, and held that the Commonwealth’s oil and gas rights are “public natural resources” under the ERA and that any revenues derived from the sale of those resources must be held in trust and expended only to conserve and maintain public natural resources. The Supreme Court’s opinion in PEDF is an important step in the ongoing judicial reexamination of the ERA. However, the impact of the court’s decision on environmental and land use issues beyond the relatively narrow facts of this case remains unclear. Factual background A statutory special fund in Pennsylvania known as the Oil and Gas Lease Fund holds all rents and royalties from oil and gas leases of Common wealth land. The lease fund was originally required by statute to be used “exclusively used for conservation, recreation, dams, or flood control.” In 1995, the Pennsylvania Department of Natural Resources (DCNR) became the entity responsible for making appropriations from the lease fund for projects. Between 2009 and 2015, the Pennsylvania General Assembly made a number of budgetary decisions related to the lease fund, including the enactment of Sections 1602-E and 1603-E of the Fiscal Code, which transferred control over the royalties from oil and gas leases from the DCNR to the General Assembly and required that there could be no expenditures of money in the lease fund from royalties unless that money was transferred to the General Fund by the General Assembly. PEDF brought claims challenging Sections 1602-E, 1603-E, and…

July 10, 2017

Former U.S. Department of Transportation and NHTSA Safety Attorney Tim Goodman Joins Babst Calland’s Washington, D.C. Office in Transportation Safety Group

Babst Calland announced that Timothy H. Goodman has joined the firm as shareholder in the Transportation Safety Group in the Firm’s Washington, D.C. office. Goodman brings to clients a current and detailed understanding of the federal government’s approach to transportation safety regulation (particularly motor vehicles), including its programs and personnel as a former Federal Senior Executive (key positions just below top Presidential appointees).  Goodman spent nearly a decade at the U.S. Department of Transportation (USDOT), where he served in various capacities, including at the National Highway Traffic Safety Administration (NHTSA) and in the Secretary of Transportation’s Office of the General Counsel. As NHTSA’s Assistant Chief Counsel for Litigation and Enforcement, Goodman was the chief legal officer for the litigation and enforcement matters of the 600-plus employee federal agency. He also served as a senior trial attorney in the Secretary of Transportation’s Office of the General Counsel, where he led teams in matters throughout USDOT and across multiple transportation modes, including pipeline safety, hazardous materials, federal environmental, urban transit, motor carrier, aviation economic regulatory, and maritime matters. Goodman is the fourth former USDOT regulatory attorney during the past 18 months to join Babst Calland’s Washington, D.C. office where former colleagues and energy attorneys from the USDOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) maintain a national Pipeline and HazMat Safety practice.  He joins us from a prominent global law firm where he focused on transportation regulatory and litigation matters. At the DOT, Goodman was recognized for effectively working with corporate executives, senior officials and engineers to achieve practical and efficient results in high profile enforcement actions, landmark consent orders, litigations and rulemakings. He collaboratively led some of the largest civil enforcement actions and recalls in the history of NHTSA – including the largest and most complex safety recall in…

July 6, 2017

Managing an Environmental Crisis

Best Lawyers The call never seems to come at an ideal time. It is usually late in the workday or over a weekend, and it often starts with a question from an unusually tense client who asks, “Hey, we have a problem. Do you have a few minutes to talk?” Perhaps none of my prior cases have been as notable or newsworthy as the January 2014 Freedom Industries, Inc., (Freedom) spill into the Elk River in Charleston, West Virginia.1  The Freedom chemical storage and distribution facility was located in Charleston on the banks of the Elk River. On the morning of January 9, 2014, inspectors from the West Virginia Department of Environmental Protection arrived at the facility in response to complaints about a chemical odor. It subsequently was determined that as much as 10,000 gallons of a mixture of crude methylcyclohexanemethanol (MCHM) and polyglycol ethers (PPH, stripped) leaked from an aboveground storage tank at the facility and that some portion of the leaked chemicals flowed into the Elk River. The facility was located approximately 1.5 miles upstream of the intake for the West Virginia American Water drinking water treatment facility. The MCHM/PPH mixture was drawn into the West Virginia American Water intake on the Elk River, thereby contaminating the drinking water system. Later, on the evening of January 9, West Virginia American Water issued a “do not use” order for 93,000 customer accounts (approximately 300,000 residents) across portions of nine counties in West Virginia. After the spill, hospitals reported a noted increase in patient visits, with complaints of a number of symptoms including nausea, rashes, vomiting, abdominal pain, and diarrhea following exposure to the water through inhalation, ingestion, and/or skin contact. Residents affected by the “do not use” order were further advised to restrict their usage of tap water for drinking, cooking, and bathing for up to nine days.

  • The spill created…

July 5, 2017

EPA methane rule back in effect after ruling, but agency still plans 2-year stay

SNL Even though a court struck down the U.S. Environmental Protection Agency’s attempted 90-day pause on oil and gas industry methane regulations, the EPA may still be able to carry out plans for a longer regulatory suspension. The 90-day stay, which went into effect June 2 but was vacated July 3, was not the only suspension in the works for the EPA rule designed to limit methane from new and modified oil and gas sources. The agency on June 16 proposed a two-year stay on the regulation’s requirements on fugitive emissions, pneumatic pumps and professional engineer certification. For the longer stay, the agency is taking 30 days of comment from the public on the hold. Importantly, that process uses different statutory authority with different legal standards than the ones at play for the shorter, recently reversed stay, according to Whit Swift, a partner with Bracewell LLP. “I don’t think that is fatal to the longer stay that is presumably just citing the broader authority of the EPA administrator to promulgate rules as deemed necessary,” Swift said in a July 5 interview. “If you think of that as the authority for this longer stay, the court doesn’t determine the fate of the longer stay. But it does create … the confusing situation they were trying to avoid. … Now you’ve got these elements of the methane rule springing back into effect until EPA, assuming it moves forward, does stay the rule following notice and comment.” For the 90-day stay attempt, EPA Administrator Scott Pruitt moved to put a hold on parts of the agency’s rule limiting methane emissions, saying stakeholders had not had enough time to discuss certain aspects of the final 2016 regulation. The rule’s supporters fired back soon after, countering that those issues were already “extensively deliberated” during the regulation’s comment period. Two out of three judges…

June 28, 2017

Appalachian Consolidation Makes Sense for Efficiency Focused E&Ps, Law Firm Says

Natural Gas Intelligence Consolidation will continue to make sense for producers in the Appalachian Basin as those companies that made it through the recent downturn focus on efficiency, according to a recent report from Pittsburgh-based law firm Babst Calland. In its annual report on the state of the Marcellus and Utica shale producing region, Babst Calland highlighted the impact low commodity prices have had on the industry over the past year. Recently the Appalachian Basin has seen consolidation through merger and acquisition (M&A) activity, the firm said, pointing to recent activity by Rice Energy Inc. and EQT Corp., among others. “With efficiency of operations in mind, natural gas producers continue to focus on consolidating their activities geographically,” the firm said. “The oil and gas industry faced significant financial stress over the past year, and 2016 will go down as one of the more dramatic years in the United States’ oil and gas history.” Babst Calland said 2016 saw 70 North American exploration and production (E&P) companies file for bankruptcy. Last week, EQT announced an estimated $8 billion takeover of Appalachian neighbor Rice Energy, a deal that would create the largest U.S. natural gas producer. Management for EQT said the synergies from the transaction would be focused in Southwest Pennsylvania, where the combination of the acreage positions would allow increased lateral lengths and reduced operational costs. While companies with “sufficient financial strength and operational ability” may be able to take advantage of opportunities for “large-scale consolidation,” others in the basin may seek joint ventures to keep costs low, according to Babst Calland. “Where acreage positions are complementary, natural gas producers may also seek to joint venture on a unit-by-unit basis with other producers who are able to operate at a lower cost, with higher productivity, or with a more intense focus in a particular area,” the firm…

June 27, 2017

State and federal governments remain active in a changing regulatory landscape—air regulatory updates

The PIOGA Press This article is an excerpt of The 2017 Babst Calland Report, a report which represents the collective legal perspective of Babst Calland’s energy, environmental and pipeline safety attorneys addressing the most current business and regulatory issues facing the oil and natural gas industry. A full copy is available by writing info@babstcalland.com. The second half of 2016 was marked by several significant federal air program developments as the Environmental Protection Agency (EPA) raced to implement President Barack Obama’s Climate Action Plan before the change in administration. The final New Source Performance Standards (NSPS) for oil and natural gas production, processing, transmission and storage activities, which established first-time methane requirements, went into effect on August 2. By then, lawsuits were already well underway to challenge the 2016 NSPS and EPA’s authority to regulate methane emissions. In October, EPA finalized the “Control Techniques Guide – lines” (CTG) directing state and local air agencies to reduce volatile organic compound (VOC) emissions from existing oil and natural gas industry sources in areas with ozone problems (including all of Pennsylvania). It is anticipated that Pennsylvania will adopt regulations to implement the CTG in the Commonwealth within the next few years. In November, EPA issued a final Information Collection Request (ICR) to gather information for the agency to develop a federal rule to limit methane emissions from existing sources. The final ICR set in motion a flurry of activity as more than 15,000 owners and operators were tasked with submitting extensive information to EPA in a short timeframe. For many companies, the ICR presented an enormous challenge due to its broad scope, complex EPA reporting forms and significant compliance costs. Also in November, EPA finalized additional revisions to the Petroleum and Natural Gas Systems source category of its Greenhouse Gas Reporting Rule. The Trump administration acted quickly to reverse course…

June 23, 2017

The Pennsylvania Supreme Court Reexamines the Environmental Rights Amendment

Administrative Watch  The Pennsylvania Supreme Court has rejected the long-standing test for analyzing claims brought under Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA). In its June 20, 2017 decision in Pennsylvania Environmental Defense Foundation (PEDF) v. Commonwealth, the Supreme Court set aside the test from Payne v. Kassab that has been used since 1973, and held that the Commonwealth’s oil and gas rights are “public natural resources” under the ERA and that any revenues derived from the sale of those resources must be held in trust and only expended to conserve and maintain public natural resources. The Supreme Court’s opinion in PEDF is an important step in the ongoing judicial re-examination of the ERA. However, the impact of the Court’s decision on environmental and land use issues beyond the relatively narrow facts of this case remains unclear. Factual Background A statutory special fund in Pennsylvania, known as the Oil and Gas Lease Fund (Lease Fund), holds all rents and royalties from oil and gas leases of Commonwealth land. The Lease Fund was originally required, by statute, to be used “exclusively used for conservation, recreation, dams, or flood control.” In 1995, the Pennsylvania Department of Natural Resources (DCNR) became the entity responsible for making appropriations from the Lease Fund for projects. Between 2009 and 2015, the Pennsylvania General Assembly made a number of budgetary decisions related to the Lease Fund, including the enactment of Sections 1602-E and 1603-E of the Fiscal Code, which transferred control over the royalties from oil and gas leases from the DCNR to the General Assembly and required that there could be no expenditures of money in the Lease Fund from royalties unless that money was transferred to the General Fund by the General Assembly. PEDF brought claims challenging Sections 1602-E, 1603-E,…

June 22, 2017

Stormwater Management Ordinance Not Land Use Ordinance Under MPC

The Legal Intelligencer The Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq., authorizes municipalities to engage in land use planning and implement land use controls through a number of mechanisms, including comprehensive plans, official maps, zoning ordinances, subdivision and land development ordinances and planned residential developments. On May 9, the Commonwealth Court rendered a decision in Delchester Developers v. Zoning Hearing Board, 2017 Pa. Commw. Ct. LEXIS 192 (Pa. Commw. Ct. 2017), concluding, among other things, that stormwater management ordinances are not land use ordinances governed by the MPC. In Delchester Developers, Delchester Developers L.P. submitted a preliminary land development plan application to the township of London Grove seeking approval to develop commercially two lots located within the township’s Groundwater Protection Overlay District. The overlay district encompasses a threatened geological formation in the township that allows water to move quickly through it. In recognition of the threat to and challenges posed by the geological formation, the township board of supervisors adopted stringent stormwater management regulations applicable in the overlay district to ensure recharge, prevent sinkhole formation and protect the groundwater from contamination. In order to effectuate its plans, Delchester sought several variances and special exceptions from the township’s zoning hearing board, and brought challenges to the substantive validity of various township ordinances, including the township’s stormwater management ordinance (SWMO). The township zoning hearing board denied all of Delchester’s requests. The zoning hearing board rejected Delchester’s substantive validity challenge to the SWMO, concluding that because the SWMO is not a land use ordinance under the MPC, the zoning hearing board lacked jurisdiction over the challenge. The trial court affirmed. Section 909.1(a)(1) of the MPC confers upon a zoning hearing board exclusive jurisdiction to hear and render final adjudications on “substantive challenges to the validity of any land use ordinance,” 53 P.S. Section…

June 21, 2017

O&G industry rebounds, but challenges remain: Babst Calland

Kallanish Energy The oil and gas industry rebounded during the past year through efficiency measures, consolidation and a resurgence of business opportunities related to shale gas development and its impact on upstream, midstream and downstream companies, according to a just-released study by Pittsburgh-based law firm Babst Calland. As a result, many new opportunities and approaches to regulation, asset optimization and infrastructure are underway, The 2017 Babst Calland Report – Upstream, Midstream and Downstream: Resurgence of the Appalachian Shale Industry; Legal and Regulatory Perspective for Producers and Midstream Operators, found. “This report provides perspective on the challenges and opportunities of a resurging shale gas industry in the Appalachian Basin, including: the divergence of federal and state policy that creates more uncertainty for industry; increased special interest opposition groups on new issues and forums despite their lack of success in the courts; and the expansion from drilling to midstream development and now to downstream manufacturing that demonstrates the emergence of a more diverse energy economy,” according to Joseph K. Reinhart, co-chair of Babst Calland’s Energy and Natural Resources Group. Shale gas continues to provide Pennsylvania, Ohio and West Virginia with “significant economic opportunities through employment and related revenue from the development of well sites, building of pipelines necessary to transport gas to market, and new downstream opportunities being created for manufacturing industries due to the volume of natural gas and natural gas liquids produced in the Appalachian Basin.” Shell’s progress from a year ago to construct an ethane cracker plant in Beaver County, Pa., represents just one example of the expanding downstream market for natural gas, according to the law firm, Kallanish Energy finds. Many other manufacturing firms are expected to enter the region and establish businesses drawn by the energy and raw materials associated with natural gas and natural gas liquids from the Marcellus and…

June 20, 2017

The 2017 Babst Calland Report – Upstream, Midstream and Downstream: Resurgence of the Appalachian Shale Industry; Legal and Regulatory Perspective for Producers and Midstream Operators

Babst Calland released its seventh annual energy industry report entitled The 2017 Babst Calland Report – Upstream, Midstream and Downstream: Resurgence of the Appalachian Shale Industry; Legal and Regulatory Perspective for Producers and Midstream OperatorsThis annual review of shale gas development activity acknowledges the continuing evolution of this industry in the face of economic, regulatory, legal and local government challenges. To request a copy of the Report, contact info@babstcalland.com. In this Report, Babst Calland attorneys provide perspective on issues, challenges, opportunities and recent developments in the Appalachian Basin and beyond relevant to producers and operators . In general, the oil and gas industry has rebounded during the past year through efficiency measures, consolidation and a resurgence of business opportunities related to shale gas development and its impact on upstream, midstream and downstream industries. As a result, many new opportunities and approaches to regulation, asset optimization and infrastructure are underway. Increased spending during the past year has led to a significantly higher rig count in the Appalachian Basin enabling growth in the domestic production of oil and gas as other shale plays across the country experience reductions. The shale gas industry continues to provide the tri-state region with significant economic opportunities through employment and related revenue from the development of well sites, building of pipelines necessary to transport gas to market, and new downstream opportunities being created for manufacturing industries due to the volume of natural gas and natural gas liquids produced in the Appalachian Basin. Shell’s progress from a year ago to construct an ethane cracker plant in Beaver County, Pennsylvania represents just one example of the expanding downstream market for natural gas. Many other manufacturing firms are expected to enter the region and establish businesses drawn by the energy and raw materials associated with natural gas and natural gas liquids from the…

June 19, 2017

Enforcement of Philadelphia’s Wage History Prohibition on Hold

PA Law Weekly Job interviews are tough and they can be full of awkward questions. One of the awkward questions many applicants face is a potential employer’s request for an applicant’s compensation history. Not only is that question awkward, but some have theorized that basing starting compensation on an applicant’s historical compensation perpetuates the gender and minority wage gap. As a result, a percentage increase of the current salary of an applicant who is impacted by the wage gap could result in an even wider wage gap when compared to an applicant who is not negatively impacted by the wage gap. Accordingly, there has been a recent trend in several cities and states to propose and even pass legislation banning a new employer from seeking salary history information from an applicant or basing a starting salary on an applicant’s prior salary. In 2016, Massachusetts became the first state to pass a law prohibiting employers from asking potential candidates about their salary histories prior to making a job offer. Massachusetts Gov. Charlie Baker signed “The Act to Establish Pay Equity” on Aug. 1, 2016, with an effective date of July 1, 2018. Under this law, among other things, it is unlawful for an employer to “seek the wage or salary history of a prospective employee from the prospective employee or a current or former employer or to require that a prospective employee’s prior wage or salary history meet certain criteria,” Section 105A(c)(2). Salary history bills have also been introduced in other states such as California, New Jersey and Washington. Cities are also getting in on the action, passing ordinances prohibiting the salary history question. On May 4, Mayor Bill De Blasio of New York City signed a bill into law prohibiting employers from asking applicants about their salary histories or relying on the…

May 26, 2017

And the beat goes on: Municipal ordinances continue to face legal challenges

The PIOGA Press The oil and gas industry has enjoyed recent successes in two types of ordinance challenges in Pennsylvania. The first victory came in another in a growing line of zoning ordinance validity challenges, this one in Mount Pleasant Township, Washington County. The second victory came in a challenge to Grant Township, Indiana County’s prohibition on underground injection wells. Mount Pleasant Township As we reported last year for The PIOGA Press, five municipalities faced zoning ordinance validity challenges in 2015 and 2016. The cases were inspired largely by the Pennsylvania Supreme Court’s plurality opinion in Robinson Township v. Commonwealth, and essentially argued that the ordinances did not regulate oil and gas development stringently enough, that zoning ordinances cannot permit oil and gas uses in agricultural or residential districts, and that municipalities must engage in extensive environmental assessments when enacting regulations. In May 2016, while the Allegheny and Middlesex cases were pending on appeal before the Commonwealth Court and the Pulaski case was pending before the Lawrence County Court of Common Pleas, Citizens for Pennsylvania’s Future (PennFuture), with assistance from Fair Shake Environmental Legal Services (Fair Shake), challenged the Mount Pleasant Township, Washington County, zoning ordinance on similar Robinson Township-based grounds. Range Resources-Appalachia, LLC, MarkWest Energy Partners, L.P., and owners of a proposed well site intervened in the case. The Mount Pleasant Township Zoning Hearing Board took testimony through nine nights of hearings and ultimately decided, as did the zoning hearing boards in the previous challenges, to uphold the targeted ordinance. Critically, in the Mount Pleasant Township validity…

May 22, 2017

Trump Effect: How the Administration Could Reshape Pipeline Regulation

Pipeline & Gas Journal  A Conversation with Babst Calland Energy Attorney Keith Coyle. P&GJ: What are you hearing from the pipeline industry in terms of its expectations on anticipated federal regulatory reforms resulting from President Trump’s executive actions? What are the financial and safety stakes at hand? Coyle: The pipeline industry has been largely supportive of the actions taken by the new administration. The temporary regulatory freeze the White House imposed on Inauguration Day deferred several significant regulations that President Obama tried to issue at the end of his administration. President Trump’s approval of the Dakota Access and Keystone XL pipelines also fulfilled a key campaign promise and represented a sharp break from the policies pursued by his predecessor. The recent executive orders on regulatory reform should have a positive impact on federal oversight of the pipeline industry during his administration. If President Trump is able to implement these reforms, the pipeline industry will be operating in a more efficient and effective regulatory environment, which should reduce unnecessary costs and encourage additional investment and development. P&GJ: How could the Trump administration’s energy regulatory policies affect pipeline safety at the state level? Coyle: The state agencies that regulate pipeline safety must adopt the minimum federal safety standards established by the Pipeline and Hazardous Materials Safety Administration (PHMSA). PHMSA initiated two rulemaking proceedings during the Obama administration that proposed significant changes to the safety standards for hazardous liquid and natural gas pipelines. The new administration is going to have a lot of influence in determining whether and to what extent these regulatory changes become law in the near future. PHMSA is also required, under President Trump’s executive orders on regulatory reform, to identify obsolete or unnecessary regulations for revision or repeal. Both of these initiatives will have an impact on the federal pipeline safety regulations that state agencies…

May 16, 2017

Clean Water Act Squeeze Play: EPA Asks the Fourth Circuit Not to Force Work on New Water Quality Standards Pending Appeal in “Constructive Submission” TMDL Case

Administrative Watch  On May 2, 2017, the U.S. District Court for the Southern District of West Virginia (Chief Judge Robert C. Chambers) issued a Memorandum Opinion and Order denying a request by the Environmental Protection Agency (EPA) for a Stay of that court’s earlier decision on liability, in an important pending Clean Water Act case. Ohio Valley Environ. Coalition, et al. v. Pruitt (Civil Action No. 3:15-0271; S.D.W.Va.). At issue is a February 14, 2017 decision issued by Judge Chambers, granting summary judgment to the plaintiff groups (collectively, “OVEC”) against EPA. In that ruling, the court directed EPA to either approve or disapprove the “constructive submission” of “no TMDLs ” for all biologically impaired bodies of water within West Virginia, within 30 days. OVEC filed the underlying action based upon the listing by the West Virginia Department of Environmental Protection (WVDEP) of 573 streams as “biologically impaired” under the WVDEP’s narrative water quality standards, one of which prohibits “materials in concentrations which are harmful…to man, animal, or aquatic life.” This list (known as a Clean Water Act “303(d) List”) was started in the late 1990s and includes streams that were added as recently as 2010, using a tool known as the “West Virginia Stream Condition Index.” Ordinarily, when a stream is listed on a 303(d) List as impaired, the relevant state agency develops a TMDL for that stream (which is a formula or method for limiting the concentration of pollutants flowing into the stream and thereby returning it to compliance). In 2012, the West Virginia Legislature amended the West Virginia Water Pollution Control Act by directing the WVDEP to develop a new tool to assess the health of biological communities for purposes of determining compliance with the WVDEP’s biological water quality standard. Once that new methodology is finalized, an…

April 27, 2017

James Miller Selected by The Legal Intelligencer as a “2017 Lawyer on the Fast Track”

James D. Miller, a shareholder in the Litigation and Construction groups at law firm Babst Calland, was selected by The Legal Intelligencer as a “2017 Lawyer on the Fast Track” in Pennsylvania. The Legal Intelligencer asked the Pennsylvania legal community to submit nominations for the annual Lawyers on the Fast Track honors. After reviewing their results, a six-member judging panel composed of evaluators from all corners of the legal profession and the state selected 32 attorneys as the 2017 Lawyers on the Fast Track. This recognition is only given to attorneys under the age of 40 who have demonstrated excellence in four categories: development of the law; advocacy and community contributions; service to the bar; and peer and public recognition. For the full article, click here.