Environmental Alert
(by Julie Domike and Gina Falaschi)
On August 5, 2021, President Biden signed an Executive Order on Strengthening American Leadership in Clean Cars and Trucks[1] (Executive Order). The White House signing event included American automakers Ford, GM, and Stellantis, as well as the United Auto Workers (UAW), demonstrating support for the president’s Build Back Better agenda and investment in U.S. leadership in electric vehicles and batteries, manufacturing, and jobs. In conjunction with the signing of this Executive Order, the United States Environmental Protection Agency (USEPA) and United States Department of Transportation (USDOT) announced coordinated notices of proposed rulemaking that are intended to roll back the previous administration’s emissions and fuel economy regulations.
Executive Order
The Executive Order sets a new target to make half of all new vehicles sold in 2030 zero-emissions vehicles, including battery electric, plug-in hybrid electric, or fuel cell electric vehicles. The Executive Order also directs USEPA to initiate a rulemaking to establish new vehicle and engine emissions standards, including for greenhouse gas emissions. The Administration instructs the agency to set the following:
- New emissions standards, including for greenhouse gas emissions, for light- and medium-duty vehicles for model years (MY) 2027 through at least MY 2030, by no later than July 2024;
- New nitrogen oxides standards for heavy-duty engines and vehicles beginning with MY 2027 and extending through and including at least MY 2030, by no later than December 2022; and
- New greenhouse gas emissions standards for heavy-duty engines and vehicles to begin as soon as MY 2030, by no later than July 2024.
USEPA must also consider updating the existing greenhouse gas emissions standards for heavy-duty engines and vehicles beginning with MY 2027 and extending through and including at least MY 2029 to account for the role that zero-emission vehicles may have in emissions reductions.
The Administration instructs USDOT to establish new fuel economy standards, as follows:
- For passenger cars and light-duty trucks beginning with MY 2027 and extending through and including at least MY 2030, by no later than July 2024;
- For heavy-duty pickup trucks and vans beginning with MY 2028 and extending through and including at least MY 2030, by no later than July 2024; and
- For medium- and heavy-duty engines and vehicles to begin as soon as MY 2030, by no later than July 2024.
The two agencies must coordinate as appropriate in developing these rulemakings. They must also consult with the Departments of Commerce, Labor, and Energy to achieve the zero-emission vehicle target, accelerate innovation and manufacturing, strengthen the domestic supply chain for the automotive sector, and promote job growth. Pursuant to the Executive Order, USEPA must develop these rulemakings in coordination with the State of California, which has the authority to and does establish its own emissions standards pursuant to Section 209 of the Clean Air Act.
Proposed Rulemakings Announced
On August 5, USEPA and USDOT’s National Highway Traffic Safety Administration (NHTSA) also announced rulemaking to revise the previous administration’s rollbacks of fuel efficiency and emissions standards in accordance with the executive order President Biden signed on his first day in office, Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.[2] This January 20, 2021 executive order directed agencies to review the Trump administration’s final rule “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021–2026 Passenger Cars and Light Trucks.”[3] The 2020 SAFE rule made near-term fuel efficiency and emission standards less stringent than those previously set for the applicable model years.
The agencies are revising the 2020 rule to increase the stringency of fuel economy and emissions standards through MY 2026. NHTSA’s proposed rule starts in MY 2024 and would achieve a fleet average almost 9 miles per gallon higher than the SAFE rule by 2026. USEPA’s proposed 2023-2026 MY light-duty standards would achieve 10 percent greater emissions improvement than the SAFE rule standards for MY 2023 vehicles and then 5 percent greater emissions improvement each following year.
USEPA also announced a new rule to reduce air pollutants, including GHGs, from heavy-duty trucks. The rule, to be finalized next year, will apply to heavy-duty vehicles starting in MY 2027. It will set new standards for criteria pollutants for the entire sector as well as targeted upgrades to the current GHG emissions standards for MY 2027. A second rule will set GHG emission standards for new heavy-duty vehicles for MY 2030 and beyond.
If you have any questions or would like further information regarding the current or proposed federal regulations, please contact Julie R. Domike at 202-853-3453 or jdomike@babstcalland.com or Gina N. Falaschi at 202-853-3483 or gfalaschi@babstcalland.com.
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[3] “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021–2026 Passenger Cars and Light Trucks,” 85 Fed. Reg. 24174 (April 30, 2020).
Pipeline Safety Alert
(by Keith Coyle and Ashleigh Krick)
On July 15, 2021, the Pennsylvania Public Utilities Commission (PA PUC) issued a Notice of Proposed Rulemaking Order (NOPR) proposing to change the regulations applicable to public utilities that transport petroleum products and other hazardous liquids in Pennsylvania. The NOPR follows an Advanced Notice of Proposed Rulemaking (ANOPR) that the PA PUC published on June 29, 2019, seeking comments on an expanded regulatory framework for hazardous liquid public utilities. The proposed regulations go beyond the minimum federal pipeline safety regulations in 49 C.F.R. Part 195 and would impose significant new requirements on public utilities in Pennsylvania.
Below is a summary of the significant items from the proposed regulations. Public utilities in Pennsylvania that transport hazardous liquids should carefully review the proposed regulations, the potential impact to their operations, and provide comments to the PA PUC accordingly. Comments will be due 60 days from the date the NOPR is published in the Pennsylvania Bulletin.
Reporting (§ 59.133-59.134)
- Proposes to require that an operator provide an unredacted failure analysis report based on laboratory testing and root cause analysis to the PA PUC within 120 days of a reportable accident or within 10 days of report completion, whichever comes first. If the reports are not completed within those timeframes, the public utility must provide updates to the PA PUC every 14 days. The analyses must be conducted by a PA PUC-approved independent third-party lab and consultant.
- In addition to the requirements in 49 C.F.R. Part 195, Subpart B, the PA PUC proposes to require notification of the following:
- Proposed major construction, major reconstruction, or major maintenance involving an expenditure of more than $300,000 or 10% of the cost of the pipe in service, whichever is less, 45 days prior to commencement.
- Maintenance, verification digs, and assessments involving an expenditure in excess of $50,000, and the unearthing of suspected leaks, dents, pipe ovality features, cracks, gouges, or corrosion anomalies, or other suspected metal losses, 10 days prior to commencement.
- Any variations from a public utility’s established construction methodologies 30 days prior to commencement.
- The introduction of a hazardous liquid 30 days prior to such introduction.
- Immediate notification of excavation damages, washouts, or unplanned replacement of any pipeline section or cut out.
Design and Construction (§ 59.135 – 59.138)
- Section 59.135 proposes to require that public utilities account for anticipated external loads from landslides, sinkholes, subsidence, and other geotechnical hazards in the design of pipeline facilities.
- For new pipelines, and any converted, relocated, replaced, or otherwise changed existing pipelines, § 59.136 proposes to:
- Prohibit a pipeline from being constructed under a private dwelling, industrial buildings, and places of public assembly.
- Provide that miter joints are not permitted.
- Require that all girth welds must be nondestructively tested.
- Require that a public utility specify intervals for verifying and maintaining the depth of cover for all pipe, except that depth of cover for pipe under active commercial farms must be verified every three years.
- Require that a minimum of 12 inches of clearance be maintained between any pipe and other underground structures (no exceptions including between a public utility’s own structures).
- Include specific emergency flow restricting device (EFRD) installation requirements on pipelines transporting highly volatile liquids (HVLs).
- Require public utilities to develop and maintain risk-based plan for valve spacing.
- Require installation of barriers to protect against large vehicles at above ground valve stations adjacent to roadways.
- For public utilities using horizontal directional drilling (HDD), trenchless technology (TT), or direct buried methodologies, § 59.137 proposes to include requirements for the following:
- 30-day and 24-hour notice to the PA PUC and affected public before beginning HDD, TT, or direct buried activities.
- Require that, for certain installations, utilities consider geological and environmental impacts and comply with the Department of Environmental Protection’s (DEP) Trenchless Technology Technical Guidance and all relevant DEP regulations related to water wells and supplies. Also, require that geotechnical evaluations and sampling be conducted under certain conditions, and provided to the PA PUC upon request.
- Sets forth certain compliance, notification, and corrective action requirements if HDD, TT, or direct buried methodologies will result in adverse impacts to a private or public water supply source.
- Section 59.138 proposes to require that pipelines installed prior to 1970 must be hydrostatically tested every 10 years and inspected using in-line inspection tools at least every 2 years. Pipelines installed after 1970 must be hydrostatically tested every 3 years. For pipelines that have been placed back in service after a leak, a utility must assess using in-line inspection tools every year until 6 years has passed without another leak. Further, the PA PUC proposes to require that a utility notify it at least 5 days prior to starting a pressure test.
Operations and Maintenance (§ 59.139)
- Section 59.139 proposes several new operations and maintenance requirements, including for emergency response procedures, liaison activities with emergency responders and school administers, public awareness communications, line markers, inspections of rights-of-way, leak detection and odorization.
- Emergency Response: The PA PUC proposes several additional requirements with respect to emergency response, including that:
- Public utilities consult with emergency responders in developing and updating emergency response procedures.
- Emergency response manuals address: (1) steps for informing emergency responders of the procedures for requesting information regarding a pipeline, (2) development of a continuing education program, and (3) performance of table-top drills twice a year and an annual response drill that simulates a pipeline emergency.
- Public utilities hold in-person liaison activities with emergency responders twice per year; however, if the utility’s efforts to arrange in-person meetings are unsuccessful there are alternative measures provided. Also proposes to establish liaison requirements with school administrators.
- Public Awareness: Proposes additional requirements beyond those in API RP 1162 by requiring public utilities to provide baseline messages to the affected public and emergency responders at least twice a year and to public officials annually. Also, the PA PUC proposes to require that public utilities hold regular, open meetings with the affected public, emergency responders, and public officials. The proposed regulations define affected public as “residents and places of congregation (businesses, schools, etc.) along the pipeline and the associated right-of-way within 1,000 feet, or within the lower flammability limit (LFL), of a pipeline or pipeline facility, whichever is greater.”
- Line Markers: Proposes additional requirements for the placement of line markers.
- Right-of-Way Inspection: Proposes to require ground patrol of pipelines in non-high consequence areas (HCAs) twice a year and ground patrols in HCAs at least 4 times a year. The ground patrol path cannot exceed a lateral distance of 25 feet from the center of the right-of-way. The PA PUC proposes to define ground patrol as “a method of non-aerial patrol that includes walking, driving, using a low-flying drone with sufficient optical resolution operated by a qualified drone operator with an altitude of 25 feet or other like non-aerial means of traversing a pipeline right-of-way.”
- Leak detection: Proposes to require leak detection systems that are Real Time Transient Models under API RP 1130. Public utilities would be required to odorize HVL pipelines if the requirements for leak detection systems are not met in 5 years.
Integrity Management (§ 59.139)
- The PA PUC proposes to require that utilities consult public officials in determining the need for remote controlled EFRDs in all HCAs, and that determining the need for EFRDS be based on limiting the LFL to 660 feet on either side of the pipeline.
Operator Qualification (§ 59.140)
- Proposes to define covered task as “the term as defined in 49 CFR 195.501 (relating to scope) but modifying that term to also include a construction task identified by a hazardous liquid public utility.” Including construction tasks as a covered task would significantly expand an operator’s Operator Qualification (OQ) program.
- Proposes to require a utility’s OQ Plan to include: (1) written qualification program for construction tasks, (2) process for training all individuals qualified to identify and react to facility specific Abnormal Operating Conditions (AOCs), and (3) requalification intervals for each covered task.
Corrosion Control (§ 59.142)
- Proposes to require written procedures for the design, installation, operation, and maintenance of cathodic protection systems, including determining the average and worse case corrosion rate experienced for each pipeline segment. And, proposes to require inspections to determine the adequacy of cathodic protection be conducted on more frequent intervals. Further, the PA PUC proposes to require that public utilities initiate remedial actions within 14 days of discovering any deficiencies.
- Proposes to require public utilities to conduct close interval surveys every three years in accordance with NACE 0207-2007.
Land Agents (§ 59.141)
- Proposes to require land agents to hold valid Pennsylvania professional licenses as an attorney, real estate salesperson, real estate broker, professional engineer, professional land surveyor, or professional geologist during the performance of land agent work or services.
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Environmental Alert
(by Robert Stonestreet and Kip Power)
Environmental interest groups are continuing litigation that appears ultimately aimed at challenging the sufficiency of West Virginia’s bonding program for coal mine operations. On May 17, 2021, three environmental interest groups filed a lawsuit against the United States Department of Interior’s Office of Surface Mining (OSM). The suit alleges that OSM has failed to determine whether changes to West Virginia’s bonding program are needed after OSM received notice from the West Virginia Department of Environmental Protection (WVDEP) regarding the financial circumstances surrounding certain operators in the coal industry. This case is related to a prior suit originally filed on July 9, 2020 against WVDEP concerning the bonding program. As noted in our July 14, 2020 Environmental Alert, the July 9, 2020 suit alleged that WVDEP had failed to properly notify OSM of the financial insolvency of certain coal operators and the purported inability of West Virginia’s Special Reclamation Fund to cover the costs required to complete required reclamation work at mine sites formerly operated by one of those entities, ERP Environmental Fund. The Special Reclamation Fund receives revenue from a tax on coal production. When the amount of a forfeited bond associated with a revoked mining permit is insufficient to cover the costs of completing the required reclamation, the Special Reclamation Fund provides additional funding for use by WVDEP to perform the reclamation work. (For a more detailed explanation of the bonding system and the claims made by the plaintiffs in these lawsuits, see our May 18, 2020 Environmental Alert, West Virginia DEP Receives Notice of Intent to Sue Under SMCRA Based on Deficiencies in Mine Reclamation Fund.)
WVDEP moved to dismiss the previous civil action on various grounds, including the argument that OSM was already aware of the insolvencies of certain operators and the circumstances surrounding ERP Environmental Fund. After the court denied WVDEP’s motion to dismiss, WVDEP sent a formal notice to OSM dated December 30, 2020 specifically identifying the circumstances described in the suit. In a response letter dated January 29, 2021, OSM noted the “complexity” surrounding a solvency evaluation of the Special Reclamation Fund, and the need for additional analysis to determine whether a change to WVDEP’s bonding program is necessary in light of the circumstances. OSM also pledged to coordinate with WVDEP to develop a detailed joint plan to outline goals and objectives along with a timeline for making such a determination.
The May 17, 2021 suit alleges that OSM was required to render a decision on the need for changes to WVDEP’s bonding program within 30 days of receiving WVDEP’s December 30, 2020 letter, and OSM has failed to do so. The suit does not seek a court ruling that changes to the bonding program are necessary. Rather, the suit only asserts a “procedural claim” – i.e. that OSM has failed to perform its duty to make the determination within 30 days as required by the applicable statutes and regulations. Based on the allegations set forth in the complaint concerning the sufficiency of the Special Reclamation Fund, it seems likely that these groups will pursue further litigation in the event OSM determines that a change to WVDEP’s bonding program is not necessary, or if the groups believe any necessary changes identified by OSM are inadequate to ensure the long-term solvency of the Special Reclamation Fund.
Should you have questions about the WVDEP coal mine regulatory program or other environmental permitting matters, please contact Robert M. Stonestreet at 681.265.1364 or rstonestreet@babstcalland.com, or Christopher B. “Kip” Power at 681.265.1362 or cpower@babstcalland.com.
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Environmental Alert
(by Lisa Bruderly)
On May 12, 2021, the Baltimore, Philadelphia and Pittsburgh Districts of the U.S. Army Corps of Engineers (the Corps) jointly issued a 15-day Public Notice (SPN 21-26), requesting comments on whether to reinstate certain 2017 and 2021 Nationwide Permits (NWPs) that are suspended in parts of Pennsylvania. The comment period closes on May 27, 2021.
The reinstatement has been proposed in case the new Pennsylvania State Programmatic General Permit (PASPGP-6) is not finalized and issued prior to the expiration of Pennsylvania’s current state programmatic general permit (PASPGP-5) on June 30, 2021. At present, if PASPGP-6 is not issued before July 1, 2021, most projects in Pennsylvania impacting federally regulated waters would be required to obtain individual Section 404 permits. Obtaining an individual permit is typically a more lengthy and complicated process than obtaining coverage under a programmatic general permit or NWP.
State Programmatic General Permit
The PASPGP is the mechanism that the Pennsylvania Department of Environmental Protection (PADEP) and the Corps rely upon to permit most projects in Pennsylvania that impact federally regulated waters, but do not require an individual Section 404 permit. PASPGP-6 allows applicants to obtain both federal Section 404 permits and state water obstruction and encroachment permits for projects impacting federal and state-regulated waters.
PASPGP-6 has not yet been finalized. The draft PASPGP-6 was published for public comment on September 4, 2020 (SPN 20-57), and the public comment period closed on October 4, 2020. On February 12, 2021, PADEP issued a conditional state water quality certification (SWQC) under Section 401 of the Clean Water Act, which certifies that activities authorized by PASPGP-6 would comply with the Commonwealth’s water quality standards if the applicant complies with the following conditions and “constructs, operates and maintains the project in compliance with the terms and conditions of State permits obtained to meet these SWQC conditions:”
- Prior to beginning any activity authorized by the Corps under PASPGP-6, the applicant must obtain all necessary environmental permits or approvals and submit PADEP environmental assessments and other information necessary to obtain the permits and approvals, as required under state law.
- Fill material may not contain any wastes as defined in the Solid Waste Management Act.
- Applicants and projects must obtain all state permits and/or approvals necessary to ensure that the project meets the State’s applicable water quality standards, including a project-specific SWQC.
Proposed NWP Reinstatement
With the availability of the state programmatic general permit, many NWPs have typically been suspended in Pennsylvania, except for projects in certain Section 10 waters and, for certain NWPs, when the regulated activity or indirect impact extends across state boundaries. On January 6, 2017, the Corps reissued 54 NWPs, which were effective March 19, 2017. Of these 54 NWPs, 31 NWPs were suspended in Pennsylvania to eliminate redundancy with the PASPGP permitting mechanism or due to lack of applicability. If PASPGP-6 is not issued before PASPGP-5 expires, the Corps is proposing to reinstate 24 of the NWPs suspended in 2017, including NWP7 (Outfall Structures and Associated Intake Structures), NWP14 (Linear Transportation Projects) and NWP18 (Minor Discharges).
On January 13, 2021, the Corps reissued 12 existing NWPs and issued four new NWPs. The 16 reissued/issued NWPs were effective on March 15, 2021. Of those 16 NWPs, nine were suspended in Pennsylvania, except in “areas within Pittsburgh District’s area of responsibility in the Commonwealth of Pennsylvania.” If PASPGP-6 is not issued before PASPGP-5 expires, the Corps’ proposal would reinstate the nine suspended 2021 NWPs, including NWP12 (Oil and Natural Gas Pipelines) and NWP39 (Commercial and Institutional Developments) for the entire state.
If any or all of the NWPs are reinstated, those NWPs would be subject to the applicable 2017 or 2021 regional conditions for Pennsylvania.
Conclusion
If the PASPGP-6 is not finalized before PASPGP-5 expires (i.e., by June 30, 2021), the reinstatement of certain, currently suspended NWPs will provide flexibility to permit a project impacting regulated waters, without pursuing an often lengthy and complicated individual Section 404 permit. However, the prospective permittee must ensure that the project meets the applicability criteria, general conditions and regional conditions of the selected NWP. These criteria are not the same as under the PASPGP-5, and in some instances, a portion of the project may need to be redesigned to meet NWP requirements.
Should you have questions regarding Clean Water Act Section 404 permitting and how these reinstated Nationwide Permits (NWPs) may affect your operations and/or plans for development, please contact Lisa M. Bruderly at (724) 910-1117 or lbruderly@babstcalland.com.
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Energy Alert
(by Mark Dausch and Cary Snyder )
In two recent opinions in which Babst Calland represented oil and gas operators, Pennsylvania federal and state trial courts ruled that the term “at the wellhead” in natural gas leases must be interpreted to allow operators to deduct post-production costs when calculating royalty payments. Coastal Forest Res. Co. v. Chevron U.S.A., Inc., et al., No. 2:20-cv-1119, 2021 WL 1894596 (W.D. Pa. May 11, 2021); Dressler Family, LP v. PennEnergy Res., LLC, A.D. No. 2017019357 (Butler Cty. C.P. Apr. 28, 2021). In doing so, the trial courts held that the Pennsylvania Supreme Court’s interpretation of the term “at the wellhead” in Kilmer v. Elexco Land Servs., Inc., 990 A.2d 1147 (Pa. 2010) is not confined to issues of statutory interpretation, but also applies to leases.
In Kilmer, the Pennsylvania Supreme Court ruled that, among other things, the use of the net-back method to calculate royalties did not violate the Guaranteed Minimum Royalty Act (GMRA), 58 P.S. § 33,[1] which required leases to guarantee the lessor at least a one-eighth royalty of all gas recovered from the property. When calculating royalties, the net-back method provides a mechanism for determining allowable deductions for post-production expenses associated with bringing the oil or gas from the “wellhead” to the market where it is sold. In reaching its conclusion, the Court in Kilmer relied on a variety of sources specific to the oil and gas industry that stated a royalty is generally not payable from the operator’s gross profit, but from the net amount remaining after the deduction of post-production costs. 990 A.2d at 1157-58.
In the decade since Kilmer, disputes have arisen as to the scope of its holding. In particular, many lessors and operators have disagreed whether Kilmer should be confined to issues of statutory interpretation or applied more broadly to breach of contract claims. Within the span of a few weeks, two trial courts relied on Kilmer to dismiss breach of contract claims against operators accused of wrongfully deducting a royalty interest owner’s share of post-production costs from their royalty payments.
In Coastal Forest, the court held that a lease providing for royalties to be calculated from the “gross sales price received . . . at the wellhead” unquestionably permits use of the net-back method to calculate royalties. In granting Chevron’s motion to dismiss, the court stated that “[u]nder Kilmer, ‘at the wellhead’ language means that the net-back method may be used for calculation. This is the only conclusion consistent with Pennsylvania law and industry custom.” 2021 WL 1894596, at *6.
Similarly, in Dressler Family, the court held that a lease providing for royalties to be calculated from the “gross proceeds received from the sale of same at the prevailing price for gas sold at the well” likewise unambiguously allows for the deduction of post-production costs via the net-back method. In granting summary judgment to PennEnergy, the court found there was “no ambiguity within the four corners of the document” and that the lease was “subject to only one reasonable construction,” which is to calculate royalties based on the market value of the gas “at the well.” Slip Op. at 16-17. Since gas is not actually sold at the wellhead, post-production costs had to be deducted to establish that price. Id., at 17. The court rejected the plaintiff’s proposal to base the royalty on the gross price at the point of sale because doing so would disregard the phrase “at the well” and use the downstream price instead. Id.
Lawsuits between lessors and oil and natural gas operators as to whether post-production costs may be deduced when calculating royalties are common. Babst Calland actively tracks these cases in Pennsylvania and other states in the Appalachian Basin. If you have any questions about these disputes, please contact Mark K. Dausch at mdausch@babstcalland.com or 412-394-5655 or Cary M. Snyder at cmsnyder@babstcalland.com or 412-394-5672.
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[1] This statutory minimum is now located in the Oil and Gas Lease Act, 58 P.S. § 33.3 (2013).
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Closely-Held Business Perspective
(by Kevin Douglass)
Business owners faced with extraordinary operational and financial challenges caused by the COVID-19 pandemic may also be managing special demands and concerns posed by their owners. There is never a good time for an internal ownership squabble to bubble up to the surface, but owner conflicts or differences can be particularly troublesome when the business is already under duress.
Disruption Can Create Conflict
There is no question that the pandemic has impacted many businesses’ finances and strategy, as well as relationships between co-owners. The warning signs of an owner disagreement should never be ignored. If left unchecked, these misunderstandings can cause real damage to a company’s health and vitality including negative impacts on the bottom line, employee morale, and even relationships with creditors, customers and suppliers. A company can be particularly vulnerable at critical moments when its owners may already be dealing with the pandemic ramifications or other financial and operational challenges. Do not wait for the perfect time to deal with owner disagreements because that time will never come. The stability of a company’s day-to-day operations and future financial success are often dependent upon resolution of these multi-faceted disagreements between owners.
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Environmental Alert
(by Casey Snyder and Robert Stonestreet)
In a unanimous opinion, the federal Second Circuit Court of Appeals ruled that state law “climate tort” claims asserted by the City of New York (the “City”) against five oil companies are preempted by the federal Clean Air Act (CAA). City of New York v. Chevron Corporation et al., No. 18-2188, 2021 WL 1216541 (2nd Cir. 2021). In doing so, the Second Circuit became the first federal appellate court to address the merits of climate change tort suits asserted under state law and filed in federal court.
The City filed the lawsuit in 2018 in federal district court alleging state law claims of public nuisance, private nuisance, and trespass under New York law. The City argued that the companies’ production, promotion, and sale of fossil fuels has caused, and will cause, the City to expend significant resources in response to climate change impacts, and the companies should bear these costs instead of the City’s taxpayers.
The district court granted the companies’ motions to dismiss the complaint. In its opinion, the Second Circuit affirmed the dismissal for largely the same reasons as the district court:
- federal common law, rather than New York law, applied to City’s claims;
- the CAA displaced claims under federal common law;
- the CAA regulates only domestic, not foreign, emissions; and
- foreign policy precluded recognition of a federal common law cause of action targeting greenhouse gas emissions emanating from beyond country’s national borders.
Given the global nature of greenhouse gas emissions, the court determined that such claims were beyond the scope of state law, despite the City’s pleadings alleging only state law claims. In so holding, the court could apply settled precedent from the Supreme Court holding that the CAA preempts federal common law claims concerning domestic emissions.
The Second Circuit made clear in its opinion that the case was procedurally unique to the much larger number of recent district and appellate court opinions remanding similar cases to state court after the companies being sued removed the cases to federal court based on their preemption defense raising a question under federal law. In this case, the City filed the case in federal district court, so the district court and Second Circuit were free to consider the merits of the companies’ federal preemption defense. However, in the cases originally filed in state court, the scope of review is much narrower. Generally, a defense based on federal law is insufficient to create a “federal question” that supports removal of case to federal court. The Supreme Court heard oral arguments on one of these cases from the Fourth Circuit in January 2021, and an opinion could come as early as this spring or summer.
Despite the procedural differences, companies defending against other climate change cases filed in state court were quick to rely on City of New York v. Chevron as a source of authority that the state lawsuits belong in federal court. Those companies identified the Second Circuit’s opinion as supplemental authority in a lawsuit brought by the District of Columbia under its Consumer Protection Procedures Act claiming the defendants misled the public on their products’ alleged contribution to climate change. The companies argue that the Second Circuit decision supports their arguments that allegations under the D.C. Consumer Protection Procedures Act necessarily arise under federal law, not state law, because of significant federalism concerns and global nature of climate change.
The larger effect of the Second Circuit’s opinion on the other climate litigation remains is uncertain due to the procedural differences between this case and the other climate cases filed in state courts across the country. New York could appeal the case to the United States Supreme Court, although it would likely face an uphill battle to overturn the Second Circuit’s opinion in the high court.
More recently, on April 22, 2021, the City filed a new lawsuit against six energy companies and the American Petroleum Institute alleging violations of the City’s Consumer Protection Law. This time, the City filed the case in state court rather than federal court. The City’s new complaint alleges that the defendants’ promotion of their products as helping to address climate change are false and misleading because the products actually contribute to climate change. The City also alleges that the defendants falsely present themselves as environmentally responsible companies leading the fight against climate change. Several similar lawsuits are pending in other state courts across the country.
Babst Calland is actively tracking this case and dozens of other climate change cases throughout the country. If you have any questions about this case, or other climate change lawsuits, please contact Casey J. Snyder at csnyder@babstcalland.com or 412-394-5438, or Robert M. Stonestreet at rstonestreet@babstcalland.com or 681-265-136.
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Emerging Technologies Profile
What do you do? As a member of the Firm’s Emerging Technologies practice, I support the needs of clients on regulatory, intellectual property, and data privacy and security matters. With the enactment and up-tick in enforcement of the EU’s General Data Privacy Regulation and the California Consumer Privacy Act, I have been assisting a wide range of clients in complying with these laws. I am also a member of the Transportation Safety Group, where I work with clients on pipeline, hazardous materials, and motor vehicle safety matters. I am also active in the autonomous mobility and renewables industries, where I advise clients on a myriad of topics as they work to develop and commercialize these technologies.
Why do you do what you do? In high school, I took an environmental science class that piqued my interest in environmental and energy law given that energy plays such an important role in our society. I found the vast array of resources and technologies available to produce energy intriguing and exciting. I interned with the Federal Regulatory Energy Commission out of law school and that led to a position with the Firm in the environmental, transportation and pipeline safety practice groups. I am also part of the Firm’s new Renewables practice group. There are so many more energy technologies being developed today than when I was in high school, and it’s exciting to be a part of that industry.
Describe a client project that you are proud of. I assisted in developing a strategy for an autonomous vehicle company to deploy a Level 5 (fully autonomous) vehicle. This six-month project involved a complete review of federal statutory and regulatory structures, which were developed in a time where autonomous vehicles were not even contemplated. It was an interesting learning experience to engage with the client during the beginning stages of a revolutionary technology and provide a practical business strategy under the current law. I continue to work with autonomous vehicle companies as they navigate federal and state regulations pertaining to testing and deployment.
When you are not at work, you can be found … Outdoors. I love hiking, biking, snowboarding (a recent hobby) and just walking around on the trails in my neighborhood. When I’m not getting fresh air, I’m likely cooking up a storm or knitting…or tending to my
39 houseplants. All perfect activities for surviving the global pandemic!
Tell us something about yourself that most people wouldn’t know or guess. My father was a “roadie” who ran sound boards for rock bands as his first career, and met my mother on the road. Yes, my parents may have been cooler than me. They travelled together for a while until they settled down with a family, and he got a job with IBM. My mom is now a travel nurse fighting COVID-19 across the country. I couldn’t be prouder of the long hours she puts in giving people the care they need to survive (albeit sometimes worried for her own health).
If you weren’t practicing law, what would you be doing? Definitely a National Park Ranger at any National Park. Out of the ones I’ve been to, Acadia and Zion are my favorite. I’m hoping to get to Yellowstone and Grand Teton National Parks this year.
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The pandemic and the recession have had an unwelcome impact on the market value of many types of commercial real estate. In particular, properties used for entertainment, hospitality, retail, restaurants, office complexes, nursing homes and assisted living facilities may have assessments that are higher than the actual current market value of the real estate.
March 31, 2021 is the deadline to assert an annual real estate tax assessment appeal in the state of Ohio and in Allegheny County, Pennsylvania. The deadlines for the rest of Pennsylvania’s 67 counties fall between August 1st and October 4th.
If you believe that your property may be over-assessed, it is worthwhile evaluating whether a tax assessment appeal is warranted. Babst Calland has a strong track record of assisting commercial property owners with real estate tax assessment appeals. We would be happy to discuss your property’s performance, review the current assessment, and give you our thoughts as to whether an appeal may be warranted.
For more information, please contact Peter Schnore at pschnore@babstcalland.com or Meghan Moran at mmoran@babstcalland.com.
Environmental Alert
(by Matthew Wood)
On December 18, 2020, the U.S. Environmental Protection Agency (EPA) released for public comment interim guidance on the destruction and disposal of per- and polyfluoroalkyl substances (PFAS) and materials containing PFAS (Interim Guidance; available for download here). PFAS are a large group of manmade chemicals that have been used in wide-ranging consumer, commercial, and industrial applications since the 1940s and more recently have been discovered in various environmental media (e.g., drinking water sources), plants, animals, and humans. Because PFAS do not tend to break down naturally, and evidence suggests that exposure to PFAS chemicals can lead to adverse health effects, developing methods to treat, dispose of, and destroy PFAS has been viewed by stakeholders as a necessary step to address PFAS in the environment.
The Interim Guidance, which EPA was statutorily obligated to publish within one year of the enactment of the National Defense Authorization Act for Fiscal Year 2020 (FY20 NDAA), discusses certain treatment and disposal technologies that may be effective in destroying or disposing of PFAS and PFAS-containing materials. More broadly, it represents another formal step EPA has taken to address PFAS in the environment, coming nearly two years after EPA released its PFAS Action Plan.
In addition to providing a background on PFAS, the Interim Guidance generally covers four topics: (1) the PFAS and PFAS-containing materials to which it applies; (2) the applicable destruction/disposal technologies; (3) considerations for potentially vulnerable populations living near destruction/disposal sites; and (4) ongoing and planned research and development. The Interim Guidance is based on currently available research and science, which is limited. As such, EPA has identified knowledge gaps, uncertainties, and research areas that, if resolved, would inform future recommendations. As EPA continues to conduct research and accumulate information, the regulated community can expect the agency to revise the Interim Guidance (which must be done at least every three years in accordance with the FY20 NDAA).
To What PFAS Does the Interim Guidance Apply?
The scope of the Interim Guidance is limited to certain types of PFAS and PFAS-containing materials, all of which were required to be included by the FY20 NDAA. They are: aqueous film-forming foam (AFFF); soils and biosolids; textiles treated with PFAS (non-consumer goods); spent filters, membranes, resins, granular carbon, and other water treatment waste; landfill leachate containing PFAS; and solid, liquid, or gas waste streams containing PFAS from facilities manufacturing or using PFAS. Despite the limited scope, EPA says that the discussed technologies may be effective against other types of PFAS. Notably, the Interim Guidance is not intended to address the disposal or destruction of PFAS-containing consumer products (e.g., non-stick cookware), but EPA has not indicated whether such materials will be covered by future revisions (or separate guidance).
What PFAS Destruction/Disposal Methods Does the Interim Guidance Identify?
The Interim Guidance discusses and divides currently available destruction and disposal technologies according to the PFAS’s physical phase: solid (e.g., biosolids, spent treatment materials, contaminated soils, and textiles); liquid (e.g., landfill leachate, AFFF, and solvents); and gas (e.g., landfill gas and emissions from manufacture, use, or destruction). EPA has determined that thermal treatment may be effective for all three physical phases, while landfill disposal and underground injection may be effective disposal technologies for solid phase PFAS and liquid phase PFAS, respectively.
Thermal Destruction: EPA indicates that PFAS-containing waste may be destroyed by various hazardous waste thermal treatment devices and processes, including in commercial incinerators, cement kilns, and lightweight aggregate kilns (LWAKS). These technologies are subject to RCRA and Clean Air Act permitting and oversight, as well as other operating requirements, and are used to effectively destroy other constituents, such as organic chemicals. The primary outstanding question is whether they can achieve the same efficacy for PFAS. Other potentially effective destruction technologies listed in the Interim Guidance include carbon reactivation units, non-hazardous waste combustion sources (e.g., sewage sludge incinerators), and thermal oxidizers.
Uncertainties common to these technologies include their ability to completely destroy PFAS (and byproducts from incomplete destruction), releases of PFAS or byproducts via emissions or secondary waste streams (e.g., scrubber water or bottom/fly ash), and testing monitoring limitations. Potentially adding further complications, EPA admits that the efficacy of a treatment process may vary even for sources within the same category. From these and other uncertainties, EPA concluded that it requires additional research to better understand these technologies and make more refined recommendations.
Landfill Disposal: The Interim Guidance also targets landfilling as a potential method of disposal of solid phase PFAS and PFAS-containing materials, recognizing that due to PFAS’s ubiquity, the chemicals are already being disposed of in regular waste management pathways. EPA identifies both hazardous waste landfills and municipal solid waste (MSW) landfills as probable disposal options, but (like thermal destruction) highlights potential differences between the two. Namely, while permitted hazardous waste landfills generally are equipped with extensive environmental controls (e.g., double-liners, leak detection, gas and leachate management, etc.) and employ related practices such as detailed record keeping, MSW landfills (especially older landfills) may not. Accordingly, EPA believes hazardous waste landfills are probably most effective at managing PFAS, while the effectiveness of other landfills likely turns on their respective control technologies and management systems.
Like its evaluation of thermal destruction, there is a dearth of specific analysis concerning how PFAS behave in landfills. EPA seeks to better understand, among other things, PFAS’s effect on landfill liner integrity, the presence of PFAS in landfill gaseous emissions, PFAS concentrations in landfill leachate and possible treatment of same (which may implicate other destruction/disposal methods), and how PFAS interact with other constituents. These uncertainties are driving EPA’s further evaluation of the efficacy of landfilling PFAS and PFAS-containing wastes.
Underground Injection: The Interim Guidance identifies underground injection (UI) as a viable option to dispose of liquid PFAS and PFAS-containing materials, noting that like landfill disposal, this practice is already occurring (applicable to myriad constituents, including PFAS). Generally, this process involves injecting the liquid wastes into a deep well (known as a Class I well) below the lowermost underground sources of drinking water and into a confined geologic formation. EPA has found Class I wells categorized for hazardous wastes well suited for PFAS because they are constructed, permitted, operated, and monitored to protect drinking water sources. Nevertheless, whether a specific Class I well is suitable depends on site-specific factors such as local geology.
The primary uncertainty identified by EPA regarding UI of PFAS waste is understanding the long-term fate and transport of the wastes. Such understanding is not only limited by a lack of applicable studies, but also the wide-ranging chemical properties of specific PFAS chemicals, how they may interact with co-contaminants, and the makeup of the applicable geological formations. EPA indicates that researching and understanding these uncertainties could support future UI permits for PFAS wastes.
Storage: EPA does not consider storage of PFAS and PFAS-containing materials a viable disposal or destruction technology. The agency recognizes, however, that storage may be an appropriate, temporary strategy in cases where uncertainties regarding the discussed technologies preclude immediate disposal or destruction of the PFAS.
How Does the Interim Guidance Address Potentially Vulnerable Populations?
As required by the FY20 NDAA, the Interim Guidance also considers the potential for PFAS releases during destruction or disposal and the impacts on potentially vulnerable populations living near destruction and disposal sites. It does this by identifying potential releases and exposure pathways (e.g., through conceptual site models), defining potentially vulnerable populations (e.g., through risk assessments), and considering community engagement (which may be required in certain circumstances). Specifically, EPA recognizes that intrinsic (i.e., biological) risks and extrinsic (i.e., external) factors may combine to create environmental justice concerns, “which encompass the disproportionate exposure and impacts associated with environmental releases” on minority populations, low-income populations, and/or indigenous populations.
The Interim Guidance primarily refers stakeholders, including the public, to other guidance and tools that may more specifically inform their evaluation and decision-making. Some of these resources address topics and considerations such as assessing environmental justice (e.g., the disproportionately high and adverse human health or environmental effects of actions on minority and low-income populations), risks to children, and risks to tribal and indigenous lifeways.
What is EPA Researching Now and What Does it Plan to Research in the Future?
EPA concludes the Interim Guidance by detailing its current informational needs, which broadly consist of research to: (1) better characterize the multi-media PFAS-containing materials targeted for destruction or disposal; and (2) measure and assess existing methods, improve existing methods, and/or develop new methods for PFAS destruction/disposal. One of EPA’ near-term goals (1-2 years), is focusing on developing additional sampling and analysis methods for PFAS in various media (e.g., air emissions, wastes, water, and solids).
Long-term (3+ years) initiatives include developing monitoring technologies and modeling to measure and predict PFAS fate, transport, and deposition in the air. Further, EPA desires to partner with (or continue to partner with) other government agencies, industry, and academia to coordinate research and develop innovative technologies. EPA tracks the status of its research and development on its website. Completing these goals should inform future revisions of the Interim Guidance, which, as noted, must occur at least every three years. EPA is accepting comments on the Interim Guidance through February 22, 2021.
Publication of the Interim Guidance is just one of the PFAS-related actions EPA took in the weeks prior to President Joe Biden taking office. With the change in administration and agency personnel, it remains to be seen how EPA will further address these and other actions. Regardless, Babst Calland’s environmental attorneys will continue to track the Interim Guidance’s progress and are available to assist you with preparing comments or with other PFAS-related matters. For more information, please contact Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, or any of our other remediation attorneys.
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Environmental Alert
(by Julie Domike and Gina Falaschi)
On January 15, 2020, the California Air Resources Board (CARB) announced the opening of the reporting system for the Large Entity One-Time Reporting Requirement for vehicle fleet owners. This reporting requirement was passed by CARB as part of its June 2020 adoption of the Clean Trucks Rule. As the California Office of Administrative Law (OAL) has not yet approved the regulation, businesses may voluntarily provide information at this time if they wish to begin the reporting process ahead of the April 1, 2021 deadline.
The Large Entity One-Time Reporting Requirement seeks to gather information about how medium- and heavy-duty vehicles are being operated by individual fleets and entities in order for CARB to: (1) determine where zero-emission vehicles may now be suitable; (2) identify the barriers to adoption of zero-emission vehicles; and (3) define necessary vehicle characteristics to meet different fleet needs.
Many businesses, organizations, and government entities must comply with this requirement on or before April 1. An entity must report if it operates a facility in California and: (1) had more than $50 million in revenues in 2019 from all related subsidiaries, subdivisions, or branches, and has at least one vehicle; (2) owns 50 or more vehicles; (3) dispatches 50 or more vehicles into or throughout California; or (4) is a government agency (federal, state, local, and municipalities) that has at least one vehicle. This reporting requirement applies to owners of on-road vehicles with a manufacturer gross vehicle weight rating (GVWR) greater than 8,500 pounds; light-duty vehicles, such as cars and small pick-ups, are not covered by this requirement.
The report must contain general information about the entity and its operations, as well as information about the vehicles it owns and operates. This includes basic information about the vehicles (including off-road yard trucks), home-base locations for vehicles, and how the vehicles are operated. Vehicle operation information includes vehicle body types, daily miles traveled, where vehicles are refueled, and other usage characteristics.
If you have any questions or need assistance determining whether your business must complete this filing, please contact Julie R. Domike at 202-853-3453 or jdomike@babstcalland.com or Gina N. Falaschi at 202-853-3483 or gfalaschi@babstcalland.com.
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Pipeline Safety Alert
(by Keith Coyle and Ashleigh Krick)
On January 11, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Final Rule amending the gas pipeline safety regulations at 49 C.F.R. Parts 191 and 192. Adopted as part of the Trump administration’s efforts to reduce or eliminate unnecessary regulatory burdens, PHMSA estimates that the Final Rule will result in approximately $130 million in annualized cost savings for pipeline operators. Although the effective date of the Final Rule is March 12, 2021, the Agency provided a deferred compliance date of October 1, 2021, for the new amendments.
Additional information about the Final Rule is provided below.
Distribution Integrity Management Program Exemptions and Farm Taps
- Consistent with the policy announced in PHMSA’s March 2019 Exercise of Enforcement Discretion, the Final Rule provides operators with the option to maintain pressure regulating devices on farm taps under either the distribution integrity management program (DIMP) requirements or 49 C.F.R. § 192.740. The Final Rule exempts farm taps originating from unregulated production and gathering pipelines from the DIMP requirements, the overpressure protection inspection requirements in § 192.740, and the annual reporting requirements in Part 191.
- The Final Rule does not amend PHMSA’s regulations to provide additional clarity in determining what qualifies as a farm tap or where production, gathering, or transmission piping ends and distribution service line piping begins in farm tap configurations. The Agency stated that these definitional issues will be addressed in a guidance document that remains under development or in a future rulemaking proceeding. In the preamble to the Final Rule, PHMSA emphasized that any portion of a farm tap originating from an unregulated pipeline that meets the definition of service line must still comply with all applicable Part 191 and 192 requirements.
- The Final Rule also exempts master meter operators from the DIMP requirements. PHMSA noted that it would evaluate separately whether to extend the exception to small LPG operators or all distribution operators with fewer than 100 customers.
Corrosion Control
- The Final Rule allows operators to remotely monitor cathodic protection rectifier stations, codifying the position the Agency had already taken in a 2019 interpretation. If operators remotely monitor rectifiers, operators are required to conduct a physical inspection of the rectifier annually. PHMSA also confirmed that the regulations and related interpretations do not specify a particular technology.
- The Final Rule extends the atmospheric corrosion control inspection interval for distribution service lines from 3 years to 5 years, not to exceed 63 months. If atmospheric corrosion is identified, the inspection interval reverts to the 3-year period. Going forward, if no atmospheric corrosion is identified in a subsequent inspection, then the operator could then return to the 5-year inspection interval.
- The Final Rule did not adopt proposals by commenters and the Gas Pipeline Advisory Committee to use remediation as an alternative to the 3-year inspection interval if atmospheric corrosion has been observed. PHMSA explained that the current regulations already require remediation of atmospheric corrosion and operators can use the 5-year inspection interval if no atmospheric corrosion is identified in subsequent inspections. PHMSA also clarified that operators must retain the records of the two most recent atmospheric corrosion inspections to use the 5-year inspection interval in order to support that atmospheric corrosion was not identified on the service line. Finally, PHMSA clarified that consideration of corrosion risks in a DIMP plan includes atmospheric corrosion.
Reporting and Information Collection
- The Final Rule adjusts the monetary property damage threshold in the definition of an “incident” from $50,000 to $122,000 to account for inflation. This threshold had not been updated since 1984 and includes losses to the operator and third parties, but not the cost of lost gas. PHMSA committed to updating the monetary damage threshold annually based on the formula provided in newly established Appendix A to Part 191. The Agency will post the updated monetary damage threshold to its website, with the new threshold becoming effective on July 1st each year.
- The Final Rule eliminates §§ 191.12 and 192.1009 (the requirement to submit mechanical fitting failure (MFF) reports). Operators are still required to file incident reports for MFFs that involve a failure of a mechanical joint. Operators also need to include a count of hazardous leaks involving a mechanical joint failure in its gas distribution annual reports.
Standards Incorporated by Reference for Plastic Pipe
- The Final Rule incorporates by reference the 2018a edition of ASTM D2513-18a, “Standard Specification for Polyethylene (PE) Gas Pressure Pipe, Tubing, and Fittings” and adopts corresponding amendments to the plastic pipe design standards to allow a design factor of 0.40 for pipe with a diameter of 24 inches or less.
- The Final Rule also incorporates by reference the 2019 edition of ASTM F2620, “Standard Practice for Heat Fusion Joining of Polyethylene Pipe and Fittings” and corresponding amendments to the requirements for joining procedures in §§ 192.281 and 192.283 to clarify that procedures that provide an equivalent or superior level of safety to ASTM F2620 are acceptable. PHMSA agreed with commenters that 0.099 is an acceptable minimum wall thickness for 1-inch CTS Pipe.
Test Factor for Pressure Vessels
- In response to a 2015 petition for reconsideration, PHMSA amended § 192.153(e) to allow pressure vessels that were tested in accordance with the 1.3 times MAOP test factor after July 14, 2004, to continue operating without retesting.
- Pre-fabricated units and pressure vessels meeting the 1.3 test factor installed after July 14, 2004, are not subject to the strength testing requirements of § 192.505(b) as long as the components were installed before October 1, 2021 (the compliance deadline for the Final Rule). Likewise, these same components are not subject to the duration requirements of § 192.505(c) and (d) as long as they have been tested for duration consistent with § 192.153(a) and (b).
- Pre-fabricated units and pressure vessels installed on or after October 1, 2021, must be tested for the duration specified in §§ 192.505(c), 192.505(d), 192.507(c), or 192.509, as applicable.
- PHMSA also adopted its proposal to accept pre-installation manufacturer pressure tests, with certain conditions, for newly manufactured pressure vessels installed after October 1, 2021. If the manufacturer pressure test is used, the operator must inspect the pressure vessel after it has been placed into service in accordance with the new requirements in § 192.153(e). In response to comments regarding pressure vessels temporarily used on a pipeline facility, PHMSA is also accepting pre-installation manufacturer pressure tests or a prior test so long as the component is promptly removed after the task is complete. The Agency also adopted requirements pertaining to the pressure vessels that are temporarily removed from a pipeline facility and reinstalled at that location or a different location.
Other Amendments
- The Final Rule adopted a change to § 192.229(b), which provides that welders may not weld with a welding process they have not engaged in within the last 6 months, by extending the time frame to 7 ½ months.
- The Final Rule extends the allowance for testing fabricated units and short segments of pipe prior to installation if a post-installation test is not practicable, which is currently permitted for steel pipelines that operate at a stress level greater than 30% SMYS, to steel pipelines that operate at a stress level less than 30% SMYS and at or above 100 psi. The Final Rule does not extend the pre-testing provisions to pipelines operating below 100 psi, service lines, or plastic pipelines. The Final Rule removes “hydrostatic” from the new § 192.507(d) to allow for the use of test mediums other than water.
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Pipeline Safety Alert
(by Keith Coyle and Brianne Kurdock)
On December 27, 2020, President Donald J. Trump signed the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (2020 PIPES Act) into law. Adopted as part of a broader federal spending and COVID-19 relief package, the signing of the 2020 PIPES Act represents the culmination of a multi-year effort to reauthorize the nation’s federal pipeline safety program. The prior reauthorization of the federal pipeline safety program, enacted in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (2016 PIPES Act), expired on September 30, 2019.
The 2020 PIPES Act authorizes general funding for the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) gas and hazardous liquid pipeline safety programs of $156.4 million for fiscal year (FY) 2021, $158.5 million for FY 2022, and $162.7 million for FY 2023, with additional amounts authorized in each of these FYs from the Oil Spill Liability Trust Fund for hazardous liquid pipeline safety and the user fee program for underground gas storage facilities. The 2020 PIPES Act also prescribes specific funding amounts that PHMSA must use for certain activities, including for recruitment and retention of federal pipeline safety personnel, operational expenses, and federal grant programs.
In addition to authorizing funding levels through FY 2023, the 2020 PIPES Act contains several amendments to the Federal Pipeline Safety Laws. Some of the key changes are highlighted below.
Title I of the 2020 PIPES Act:
- Establishes a new 3-year program for advancing pipeline safety technologies, testing, and operational practices.
- Adds an operator’s self-disclosure to the list of factors that PHMSA must consider in assessing administrative civil penalties.
- Recognizes additional due process protections for PHMSA enforcement proceedings, including that:
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- An operator be allowed to request that matters of fact and law be resolved in a consent agreement and consent order.
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- An operator and PHMSA be permitted to convene meetings for purposes of reaching a settlement or simplification or other disposition of issues.
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- The case file in an enforcement action include all pertinent agency records.
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- An operator be allowed to reply to PHMSA’s post-hearing submissions and request that a hearing be held on an expedited basis.
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- PHMSA carry the burden of proof, presentation, and persuasion in an enforcement proceeding.
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- PHMSA issue a post-hearing recommendation not later than 30 days after the deadline for any post-hearing submission of a respondent.
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- PHMSA issue an order within 120 days of the filing of a petition for reconsideration.
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- An operator be allowed to ask PHMSA to issue a declaratory order to resolve issues of controversy or uncertainty.
- Requires PHMSA to notify the public of an enforcement hearing and provides that the agency will make formal hearings, as defined in 49 C.F.R. § 190.3, open to the public. Currently, PHMSA’s enforcement cases with the exception of a hearing on an emergency order, are conducted informally and do not qualify as formal hearings.
- Directs PHMSA to post the charging and responsive documents related to an enforcement action along with the decision or order on its website. For the most part, PHMSA has already been posting these materials on its website.
- Requires PHMSA to issue a final rule within 2 years that clarifies the applicability of the pipeline safety regulations to idle pipelines, which are defined as pipelines that have ceased normal operations and will not resume service for at least 180 days, have been isolated and purged, or contain small, non-hazardous volumes of gas.
- Directs PHMSA to issue a final rule within 3 years updating the federal safety standards for the operation and maintenance of large-scale liquefied natural gas facilities, other than peak shaving facilities.
- Following the submission of a report to Congress and subject to the appropriation of necessary funding, authorizes PHMSA to create the National Center of Excellence for Liquefied Natural Gas Safety.
- Requires PHMSA to issue a final rule within 90 days establishing new minimum federal safety standards for onshore gas gathering lines.
- Orders PHMSA to issue new leak detection and repair program rules within 1 year for operators of regulated gas gathering lines, gas transmission lines, and gas distribution lines.
- Requires each operator to amend its operation and maintenance plan within 1 year to meet the leak detection and repair program requirements of 49 U.S.C. § 60102(q).
- Directs PHMSA to review each operator’s operation and maintenance plan within 2 years of the Act and not less than five years thereafter. This review may be included as a part of a regularly scheduled inspection.
- Requires PHMSA to make a determination on whether to advance the rulemaking proceeding for updating the class location requirements.
- Directs PHMSA to enter into an agreement with the National Academy of Sciences to complete a study within 2 years relating to the installation of automatic or remote-controlled shut-off valves on existing gas transmission lines in high consequence areas and existing hazardous liquids pipelines in commercially navigable waterways or unusually sensitive areas.
- Defines the terms “certain coastal waters” and “coastal beach” and requires PHMSA to complete an outstanding rulemaking mandate for these areas from the 2016 PIPES Act within 90 days.
- Requires each hazardous liquid pipeline operator to implement procedures that assess potential impacts by maritime equipment or other vessels, including anchors, anchor chains, or any other attached equipment.
- Amends the reporting obligation for safety-related condition reports to require an operator to submit the report to the Secretary, the appropriate state authority, and the tribe where the subject of the report occurred. If there is no state authority, the operator must submit the report to the Governor of the relevant state.
Title II of the 2020 PIPES Act, also known as the Leonel Rondon Pipeline Safety Act, contains several amendments to the Federal Pipeline Safety Laws in response to a September 2018 gas distribution incident that occurred in the Merrimack Valley, Massachusetts. In particular, Title II of the 2020 PIPES Act:
- Requires PHMSA to issue regulations within 2 years amending the integrity management program, emergency response plan, operation and maintenance manual, and pressure control recordkeeping requirements for gas distribution operators.
- Directs PHMSA to submit a report to Congress within 3 years on the implementation of pipeline safety management systems within the gas distribution industry.
- Orders PHMSA to issue regulations within 180 days requiring that at least 1 qualified agent of a gas distribution operator be present at a district regulator station or other site to monitor and prevent overpressurization during certain construction projects, unless the district regulator station has a monitoring system and the capability for remote or automatic shutoff.
- Mandates that PHMSA issue regulations within 1 year that require gas distribution operators to assess and upgrade district regulator stations.
The product of an agreement reached in the waning days of the current session of Congress, the 2020 PIPES Act does not contain several amendments proposed during earlier phases of the legislative process. The 2020 PIPES Act does not eliminate PHMSA’s obligation to consider the costs and benefits of changes to the pipeline safety regulations or prohibit the use of direct assessments as part of a pipeline operator’s integrity management program. The Act does not change the mens rea (or mental state) requirement in the criminal statute or expand the list of prohibited activities covered under the criminal provision. Nor does the Act authorize the use of administrative law judges in PHMSA enforcement actions, increase the amount of civil penalties that can be imposed for violations of the pipeline safety laws or regulations, or authorize the filing of mandamus actions challenging PHMSA’s failure to perform non-discretionary duties.
The task of implementing the provisions in the 2020 PIPES Act will fall on the incoming administration of President-elect Joseph R. Biden. Having emphasized environmental issues during the 2020 campaign, including efforts to address climate change through reductions in greenhouse gas emissions, the Biden administration will have the opportunity to advance these commitments in addressing the rulemaking mandates in the 2020 PIPES Act, particularly the new leak detection and repair program requirements. The Biden administration’s policy preferences and appointees for key positions will influence the implementation of the 2020 PIPES Act as well. President-elect Biden has already announced that Pete Buttigieg, the former mayor of South Bend, Indiana, will be his nominee to serve as the next Secretary of the U.S. Department of Transportation, although a potential nominee for PHMSA Administrator may not be announced until later this year.
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Babst Calland recently named Ben Clapp, Alyssa E. Golfieri, and Gary E. Steinbauer as shareholders in the Firm.
Ben Clapp is a member of the Environmental, Energy and Natural Resources, and Emerging Technologies groups. Mr. Clapp advises clients on the environmental components of complex transactions, including identifying and analyzing significant environmental liability and compliance issues arising in connection with mergers and acquisitions, asset sales, securities offerings, project financings, and corporate restructurings, and works to resolve, manage, allocate or mitigate these environmental risks in the client’s best interest. Mr. Clapp assists buyers, sellers, financing sources, and underwriters in transactions taking place across a wide range of industries, including the upstream, midstream, and downstream oil and gas sectors, renewable energy, real estate, utilities, chemicals, manufacturing, mining, pharmaceuticals, pulp and paper, and food and beverage.
Mr. Clapp is a 2008 graduate, cum laude, of the American University Washington College of Law.
Alyssa E. Golfieri is a member of the Public Sector and Energy and Natural Resources groups. Ms. Golfieri’s practice focuses primarily on municipal and land use law, with an emphasis on zoning, subdivision, land development, and municipal ordinance enforcement. Ms. Golfieri represents the Firm’s municipal clients on a wide array of local government issues, including the preparation of zoning and land development ordinances pursuant to the Pennsylvania Municipalities Planning Code, the processing of land development applications, responses to record requests submitted under the Pennsylvania Right-to-Know Law, navigation of public bidding matters, abatement of property maintenance issues, defense of Notices of Violations before zoning hearing boards and magisterial district judges, and compliance with both the Pennsylvania Sunshine Act and the Pennsylvania Public Official and Employee Ethics Act. Ms. Golfieri has also served as assistant solicitor for several years, and is currently the solicitor for the Borough of Ford City.
Ms. Golfieri is a 2012 graduate, cum laude, of Duquesne University School of Law.
Gary E. Steinbauer is a member of the Environmental group. Mr. Steinbauer leverages his experience as a former lawyer for the U.S. EPA to help clients on a wide variety of matters arising under major federal and state environmental and regulatory programs. He provides strategic advice on permitting matters, day-to-day compliance needs, government investigations, and enforcement actions. Mr. Steinbauer regularly works with companies in the power generation and distribution, mining, metals, chemical, oil and gas, healthcare and other industrial sectors. He also represents municipalities, governmental, and non-governmental organizations. Mr. Steinbauer devotes a significant portion of his practice to water resources and wastewater management and permitting. He regularly advises clients on issues arising under the Clean Water Act and related state programs regulating wastewater and storm water discharges, and he handles NPDES permitting matters and appeals. He also assists clients as they navigate matters involving the Clean Air Act, Emergency Planning and Community Right-to-Know Act, Endangered Species Act, Resource Conservation and Recovery Act, Safe Drinking Water Act, and similar state laws.
Mr. Steinbauer is a 2006 graduate, magna cum laude, of the University of Toledo Law School.
Mr. Steinbauer is a 2006 graduate, magna cum laude, of the University of Toledo Law School.
Mr. Steinbauer is a 2006 graduate, magna cum laude, of the University of Toledo Law School.