Smart Business
(by Jayne Gest with Carl Ronald)
A trademark or service mark identifies a company as the source of a particular set of goods or services. It protects the association, in a consumer’s mind, between goods or services and the company that sells or produces them.
“We try to protect the goodwill a company has earned by registering and enforcing their trademarks to make sure no one obtains an unfair business advantage by trading off our clients’ goodwill in the marketplace,” says Carl Ronald, shareholder at Babst Calland.
Smart Business spoke with Ronald about adopting trademarks.
How long do trademarks last?
Theoretically, trademarks can last forever. Realistically, though, trademark protection lasts as long as you continue to use a name or logo in the marketplace. There are two types, registered and unregistered, and the latter is often called “common law” marks.
A registered trademark is a text or design mark that a company applies for with the United States Patent and Trademark Office. So long as the business continues to use the mark and appropriate maintenance procedures are complied with, the registration will be good for an unlimited number of renewable terms of 10 years each.
Common law marks, on the other hand, last as long as they continue to be used in commerce but convey less protection.
What’s the procedure for protecting a new product or business name?
First, identify the word or logo you wish to use with your product or service, and decide whether you’re likely to use it longer than a few years, in order to justify the cost. Is this a name for a core product, or a slogan that plays off a current event or product line that may change seasonally or annually?
Next, evaluate the strength of the mark. The strongest are made-up word(s) that don’t describe what you sell, like Xerox or Apple. Suggestive marks convey a characteristic of the goods or services being sold but don’t exactly describe them. An example of this slightly weaker mark is Netflix. Descriptive marks describe product features, such as Cold and Creamy for ice cream. It’s natural to want to use descriptive words in the name of a new product or business. Unfortunately, this tendency can lead to the adoption of trademarks that are weak source indicators.
After you’ve selected a mark, a clearance search can ensure your use of the mark won’t create confusion in the marketplace due to another pre-existing mark for similar goods. Assuming there are no conflicting marks, you’re free to begin using it in association with your products and services, while, ideally, filing a trademark application.
What if you expand into a new geography and someone’s already in that market?
This classic conflict is another reason to do a nationwide search and obtain a federal registration. If you’re an unregistered user of a mark, you’re likely out of luck. If you’re a registered user, you’re in a much better position if you registered before the other company began use of its identical or confusingly similar mark. You can likely compel them to stop using the mark. If they started using it first, your federal registration still provides some leverage. While you probably can’t force them to stop using the mark, you would have the power to keep them from expanding.
Where do businesses misstep with this?
Some companies confuse a corporate name with a trademark. The two overlap but aren’t identical. When adopting a new name, the exact name may not be taken, but that doesn’t mean a particular mark won’t infringe on the rights of another.
The question isn’t whether the marks are identical. The issue is whether adopting a mark in association with those particular goods or services is likely to cause confusion in the marketplace. Will consumers not understand the true source of those goods or services? Will they think there’s an affiliation or sponsorship between the two entities? A confusingly similar trademark can create just as many problems as an identical one.
What’s your takeaway for business owners?
When introducing a new product or service name or founding a new company, have a clearance search performed prior to adopting the new name. If the goods or services are offered on the internet or in more than one state, file a federal trademark application to protect your rights.
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For the PDF, click here.
Client Advisory
(by Jim Corbelli and Molly Meacham)
In the late afternoon of March 19, 2020, and without advanced notice, Pennsylvania Governor Tom Wolf issued an Order for all “non-life-sustaining businesses” in the Commonwealth to close their physical locations. The Order was effective at 8 p.m. last evening with enforcement to begin at 12:01 a.m. on Saturday, March 21. A copy of the Order can be found here. There are many questions that arise from the Governor’s Order, and it can be expected that further clarifications will be forthcoming from the Governor’s office. The Governor’s office has also issued a press release with additional information.
In a press conference at 2 p.m. today, the Governor stated that the guidelines are being revised based upon feedback from businesses and other stakeholders, and that the forthcoming guidelines will be in line with the federal government’s Cyberspace and Critical Infrastructure Security Agency (CISA) guidance that has identified 16 “Critical Infrastructure Sectors,” as available here. In addition, the Governor encouraged businesses to seek a waiver if they believe that they have been incorrectly categorized as “non-life-sustaining.” The waiver process is meant to “cut through red tape” and the Governor stated that decisions will issue via email.
While further guidance remains pending, this Alert will summarize the current Order and suggest methods to address confusion regarding the Order or to seek relief from its provisions.
The Order provides that “No person or entity shall operate a place of business in the Commonwealth that is not a life sustaining business regardless of whether the business is open to the members of the public.” The Order does not prevent working from home. The Order further provides specific guidance on what the Governor has decided is a “life sustaining business.” A list of businesses and industries that “can remain open” and their classification can be found here. No doubt the list was designed to attempt to provide clarity on what is a “life sustaining business.” However, the list creates uncertainty regarding what businesses are covered by the Order and how to obtain relief from the Order.
There are options to seek clarity regarding the Order. Those options include pursuing an exemption or clarification through the Governor’s office or an entity such as the Pennsylvania Department of Community and Economic Development (“DCED”) or challenging the Order in Court. Waivers can be sought through an online form, available here.
Babst Calland is closely monitoring the developments regarding the Order and providing input to our clients to address the Order and other risks caused by the novel coronavirus. If there are questions about the Order, please contact Jim Corbelli at jcorbelli@babstcalland.com or Molly Meacham at mmeacham@babstcalland.com.
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Environmental Alert
(by Kevin Garber, Sean McGovern and Jean Mosites)
On March 6, 2020, Governor Tom Wolf issued a Proclamation of Disaster Emergency throughout the Commonwealth under the Pennsylvania Emergency Management Services Code in response to the expanding COVID-19 coronavirus pandemic. On March 13, President Donald Trump declared a state of national emergency. Many other states and local governments are following suit. These government actions may be a basis to invoke the force majeure clause of consent orders and consent decrees between regulated parties and the Pennsylvania Department of Environmental Protection, other state and local environmental regulatory agencies or the U.S. Environmental Protection Agency.
The standard force majeure provision of most PADEP consent order and agreements allows deadlines in the order to be extended if circumstances beyond the reasonable control of the regulated party prevent compliance with the order. Similar provisions are often found in consent agreements with USEPA and in consent decrees approved by federal and state courts. These force majeure provisions typically require the affected party to notify the agency of the force majeure event when the party becomes aware or reasonably should have become aware of the event impeding performance. For example, the model PADEP Consent Order and Agreement requires telephone notice within five working days and written notice, in some circumstances by notarized affidavit, within 10 working days describing the reasons for the delay, the expected duration of the delay, and the efforts being taken to mitigate the effects of the event and length of the delay. This model provision states that failure to comply with the timing and notice requirements invalidates a force majeure extension.
There are compelling reasons why the coronavirus pandemic, which is unlike any event experienced in this country, is beyond the contemplated scope of agency force majeure clauses such that strict adherence to the timing and notice provisions should be excused and extensions should be granted as necessary. If the pandemic is interfering or threatening to interfere with your ability to comply with requirements or deadlines in a consent order or consent agreement, because of a limited availability of employees, vendors, supplies or otherwise, consider potential options within the force majeure clause of the agreement. Also consider an application of force majeure principles to pandemic-related difficulties complying with environmental permits.
Babst Calland’s Environmental attorneys are available to help you with your situation and recommend the best course of action for proceeding in these uncertain times. For more information, please contact Kevin J. Garber at (412) 394-5404 or kgarber@babstcalland.com Sean M. McGovern at (412) 394-5439 or smcgovern@babstcalland.com, or Jean M. Mosites at (412) 394-6468 or jmosites@babstcalland.com.
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Client Advisory
(by Christian Farmakis)
Dear Clients and Friends:
Clearly, in light of the COVID-19 pandemic, this is a time for reflection and a time for staying on top of our personal and professional priorities.
With the Coronavirus pandemic having a widespread effect on business continuity, supply chains and revenues, Babst Calland and its alternative legal service provider, Solvaire, are currently advising C-suite executives and managers as they seek to quickly assess their contract provisions, evaluate their exposure and make effective operational and financial risk-based decisions. Of particular concern, key suppliers may desire to invoke “force majeure”, delay or termination provisions during this time of uncertainty. Similarly, our clients may desire to invoke these same provisions to delay or terminate unessential projects.
By employing a series of AI/machine learning and other legal technologies, we can conduct accelerated and thorough searches across huge document sets revealing key information about each contract before our professional staff even begins reviewing the documents.
During this time, we understand the unprecedented challenges your organization and internal teams may be facing. Our team is here to help. Solvaire has 20 years of project management and quality control experience to organize and manage contract review projects from start to finish.
We employ flexible staffing models and can quickly ramp up staffing based on deadlines and need. Our reviewers and staff are fully capable of working remotely, allowing us to comply with the latest CDC Guidelines regarding social distancing.
Projects can be customized to fit your timeline and needs. Representative contract clause extraction provisions include force majeure, material adverse effect, termination, insurance, delay, term, governing law, payments and notice information, among others. Our legal technologies can also be quickly “trained” to find critical contract provisions unique to your business or industry.
Our entire team stands ready to assist in your business continuity. Please take care of yourself, your families, your customers and your business. Let us know how we can help. For immediate assistance, please call me at (412) 337-9269, or my colleague Charles G. Rile at (412) 654-6528.
Thank you.
Christian A. Farmakis
Chairman of the Board, Babst Calland
President, Solvaire
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Smart Business
(by Jayne Gest with Kevin Wills)
Representations and warranties insurance, which has become more affordable for merger and acquisition transactions, is growing much more prevalent in recent years as the market for such insurance has grown more competitive.
“If you haven’t paid attention or you’re not a regular acquirer of businesses or assets, your opinion of reps and warranties insurance might be dated,” says Kevin T. Wills, shareholder and chair of the corporate and commercial group at Babst Calland.
Smart Business spoke with Wills about how representations and warranties insurance works and what to consider with this risk mitigator.
What are the benefits of utilizing reps and warranties coverage?
These policies can be advantageous for both buyers and sellers.
For a seller, it can reduce or eliminate any need to holdback or escrow a portion of the purchase price with respect to post-closing indemnification claims for breaches of representations and warranties. This provides a seller with a cleaner exit with less contingent liabilities and more certainty as to the sale proceeds. Additionally, if a seller is going to have an ongoing relationship with the buyer, it also avoids the potential awkwardness a lawsuit may cause.
On the buyer side, it can make your bid more attractive if the seller knows that it will not be responsible for post-closing claims for breaches of representations and warranties. It helps with the negotiation of the purchase agreement because a seller is less concerned with their post-closing exposure for breaches of representations and warranties, which saves time and reduces legal fees. Also, in some instances, the coverage limit and duration that the buyer acquires — the amount of the insurance policy and the term thereof— may exceed what the seller would be willing to give in a negotiated indemnification context. Further, liability baskets and caps do not need to be negotiated with an insurance company.
What are some limitations to be aware of?
A representations and warranties policy is not a cure all; an insurance policy is not a guarantee of recovery.
Further, this insurance only covers breaches of representations and warranties. It does not cover, for example, items such as breaches of covenants of a seller; breaches for which the buyer had knowledge at closing; retained liabilities of the seller, unless they can be tied to a breach of a representation; purchase price and working capital adjustments that might be negotiated in a purchase agreement; and extraordinary losses (those exceeding the policy amount). The policy will contain certain exclusions based on the insurance company’s underwriting that won’t be covered as well.
That is why it is critical for buyers to truly understand the policy binder before obtaining the coverage. Just because a buyer has expended $50,000 in underwriting fees, does not mean the buyer should proceed to pay the premium of 2 to 3 percent of the purchase price if the coverage does not look right once the buyer reviews the policy.
Where wouldn’t reps and warranties coverage make sense?
A strategic buyer who conducts robust due diligence and is familiar with the subject matter of the transaction may not want to spend additional money to acquire a policy. Further, the lower the deal value, the higher the sticker shock and impact on the deal may be. Percentages are universal, but 2 to 3 percent of $20 million, which is a typical minimum deal value for an insurance carrier, can have a greater impact to the bottom line than 2 to 3 percent of $1 billion.
How often are claims paid out?
Claims are typically subject to arbitration, so claims payment is not usually public. However, a payment history is being established and there is a growing track record of honoring claims. For example, insurance carrier AIG reported that in 2018 it had a 19.4 percent claims frequency and the average claim payout was $19 million.
What’s your takeaway for business owners?
Representations and warranties coverage appears to be here to stay and is something to seriously consider for your next deal. Further, it may be something that buyers are obligated to do, especially in a bid process. Some sellers with a desirable business or assets are requiring buyers to buy representations and warranties insurance.
For the full article, click here.
For the PDF, click here.
Pipeline Safety Alert
(by James Curry, Keith Coyle and Brianne Kurdock)
On February 12, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA or Agency) released a final rule establishing new safety standards and reporting requirements for underground natural gas storage (UNGS) facilities (the Final Rule). The Final Rule modifies regulations that PHMSA previously established in an interim final rule (IFR) to address a congressional mandate in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act).
The Final Rule follows the approach taken in the IFR by incorporating the provisions in two industry safety standards for UNGS facilities by reference but eliminates the requirement to treat the permissive elements of those standards as mandatory. The Final Rule also makes other changes to the IFR, many of which respond to issues raised in public comments, a petition for reconsideration filed by several industry trade organizations, and a petition for judicial review filed by the State of Texas in the U.S. Court of Appeals for the 5th Circuit. Additional information about the Final Rule, which takes effect on March 13, 2020, is provided below.
Revised Approach to Non-Mandatory Provisions of API RP 1170 and API RP 1171
The Final Rule eliminates what was arguably the most controversial aspect of the IFR, i.e. the requirement to treat the permissive elements of two industry standards as mandatory. In the 2016 IFR, PHMSA incorporated API Recommended Practice 1170 Design and Operation of Solution-mined Salt Caverns Used for Natural Gas Storage (RP 1170) and Recommended Practice 1171 Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs (RP 1171 or RPs, collectively) by reference. Like most industry standards, the RPs contain provisions that create mandatory obligations (“shall” statements) and non-mandatory permissive obligations (“should” statements). The IFR treated the “should” statements in the RPs as mandatory “shall” statements, unless an operator included an adequate technical justification in its operation and maintenance procedures justifying a deviation. Numerous commenters challenged the appropriateness of the should-to-shall conversion, and PHMSA eliminated that provision in the Final Rule. Accordingly, the Final Rule no longer requires operators to treat the RP’s permissive provisions as mandatory.
Modifications to Integrity Management Requirements
Consistent with the FAQs that PHMSA issued for the IFR, the Final Rule codifies a requirement that UNGS operators meet specific integrity management (IM) program elements.
Establish an initial written framework: The IFR required UNGS operators with facilities constructed before July 18, 2017, to establish a framework for IM by January 18, 2018. The Final Rule prescribes the specific elements for that framework, which must include:
- A general discussion or definition of risk management;
- Data collection and integration;
- Threat and hazard identification and analysis;
- Risk assessment;
- Preventive and mitigative measures;
- Periodic review and reassessment; and
- Recordkeeping.
PHMSA also codified the required elements of an operator’s IM plan. It must include:
- A plan for developing and implementing each program element;
- An outline of the procedures to be developed;
- Roles and responsibilities of UNGS facility staff assigned to develop and implement the procedures;
- A plan for training staff about the procedures and how they will be applied;
- Timelines for implementing each program element, including risk analyses and baseline risk assessments; and
- A plan for incorporating information gained from experience into the IM plan on a continuous basis.
Operators of depleted hydrocarbon or aquifer reservoirs constructed on or before July 18, 2017, must meet these enhanced IM requirements by March 13, 2021.
Extension of Section 8 of API RP 1171 to Solution-Mined Salt Caverns: The Final Rule extends the risk-management provisions of section 8 of RP 1171, previously only applicable to depleted hydrocarbon reservoirs and aquifer reservoirs, to solution-mined salt caverns. Under the IFR, operators of solution-mined salt caverns were subject to section 10 of RP 1170 to implement a “holistic and comprehensive approach to monitoring cavern integrity.” The Final Rule continues this requirement but PHMSA also applies section 8 of RP 1171 to these facilities “to the extent that they apply to the physical characteristics and operations of solution-mined salt caverns.” Operators of solution-mined salt cavern UNGS facilities must adopt and implement risk-management procedures by March 13, 2021.
Baseline risk assessments: PHMSA included the deadlines for baseline assessments from the FAQs in the Final Rule. Operators must complete baseline risk assessments of UNGS assets according to the following schedule.
- All reservoirs and caverns by March 13, 2024
- 40% of all wellbores, wellheads, and associated components, prioritized by highest risk by March 13, 2024
- The remaining 60% of wellbores, wellheads, and associated components by March 13, 2027
Periodic reassessments: Operators must conduct reassessments on a risk-based schedule, with a maximum reassessment period of seven years.
Recordkeeping: Operators must maintain records for the life of the UNGS facility in the same manner required by the IM programs for gas transmission pipelines, gas distribution systems, and hazardous liquid pipelines.
Reporting Requirements for UNGS Facilities
PHMSA clarified in the Final Rule that UNGS operators are not required to report routine maintenance activities to the Agency. Operators must notify PHMSA 60 days before new facility construction, all plugging and abandonment activities (regardless of cost), and construction or maintenance that requires a workover rig and costs $200,000 or more for labor, materials, and operations. The Final Rule also adds an emergency exemption when 60 days’ notice is not practicable. In this case, the operator must promptly respond to the emergency, notify the Agency as soon as practicable, and document the emergency and any reason for the delay in notification.
Under the Final Rule, operators of a salt cavern UNGS facility must now file safety-related condition reports when any malfunction or operating error causes a UNGS facility’s pressure to drop below its minimum allowable operating pressure. However, the Final Rule exempts operators from reporting safety-related conditions where a wellhead is isolated and the reservoir or cavern and all other components continue to operate normally without a pressure reduction.
Definition of Underground Natural Gas Storage Facilities
The Final Rule modifies the definition of “underground natural gas storage facility” to better demarcate the line between a UNGS facilities subject to the Final Rule and surface gas pipeline facilities that are subject to other sections of Part 192. First, PHMSA considers a UNGS facility “to include all components up to the valve assembly (and their flanges) that route gas at the wellhead to or from the connected pipeline(s).” Second, the Final Rule clarifies that UNGS facilities are subject only to 192.12.
The States’ Role in Enforcing the UNGS Rule
The Final Rule affirms the well-established principle that states may impose additional requirements on intrastate facilities so long as the state has a certification with PHMSA and the additional requirements do not conflict with the federal safety standards.
Operations and Maintenance Procedural Requirements
The IFR required operators to include procedures for operations, maintenance, and emergency response and management for UNGS facilities in the operations and maintenance manuals required for natural gas pipelines (49 C.F.R. § 192.605). The Final Rule simplifies the procedural obligation by not requiring operators to include UNGS procedures in the gas pipeline manuals. The deadline to develop these procedures for existing facilities remains July 18, 2017. An UNGS operator must maintain records necessary to implement the procedures and review them every 15 months, but at least once every calendar year. Under the Final Rule, operators must keep UNGS facility procedure manuals accessible at locations where UNGS facility work will be performed.
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Law firm Babst Calland will participate at the 2020 Smart Business Dealmakers Conference in Pittsburgh, Pa. on March 5 at Wyndham Grand Pittsburgh Downtown.
The conference will feature middle-market CEOs, top private equity and venture capital firms, major lenders and leading service providers participating in sessions that cover the breadth of the merger and acquisition landscape addressing such topics as buying a business, selling a business, financing a deal, liquidity events, merging operations, alternative investing and more.
Attorney Christian A. Farmakis will join a group of recognized entrepreneurs and business experts in discussing Transaction Audits: How to prepare your company for any type of deal.
For more information about the Dealmakers conference, or to register to attend, visit: https://www.smartbusinessdealmakers.com/pittsburgh//event/
Pipeline Safety Alert
(by James Curry, Keith Coyle and Brianne Kurdock)
On February 6, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) in the Federal Register containing new valve installation and minimum rupture detection standards for gas and hazardous liquid pipelines. The NPRM would require the installation of automatic shutoff valves (ASV), remote-control valves (RCV), or equivalent technology, on certain gas transmission and hazardous liquid pipelines. The NPRM also contains proposed requirements for rupture detection and mitigation, including provisions for improving emergency response and conducting failure investigations and analyses. Public comments must be filed in response to the NPRM on or before April 6, 2020. Additional background information and a brief summary of PHMSA’s proposals are provided below.
Why Did PHMSA Issue the NPRM?
In 2010, a pair of significant pipeline incidents occurred in Marshall, Michigan, and San Bruno, California. The resulting NTSB investigations led to the issuance of safety recommendations relating to the use of ASVs and RCVs and other measures to improve rupture detection and response. Also, in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (2011 Act), Congress added mandates to the Pipeline Safety Act directing PHMSA to conduct studies and, if appropriate, establish regulations to address the concerns identified in NTSB’s safety recommendations. In the years following the 2011 Act, PHMSA commissioned the studies required by the congressional mandates and received separate recommendations from GAO on the need to improve pipeline incident response. PHMSA also issued two ANPRMs after the 2010 pipeline incidents asking for public comment on the need to amend the pipeline safety regulations for valve installation and rupture detection. All of these factors culminated in this NPRM.
What’s in the NPRM?
Valve Requirements
- Installation Requirements for New Pipelines: Pursuant to 49 C.F.R. § 192.179(a), the NPRM would require operators to install ASVs, RCVs, or equivalent technology, on all new natural gas transmission and hazardous liquid pipelines 6 inches or greater in nominal diameter, unless the operator demonstrates that installation of a manual valve is justified for reasons of economic, technical, or operational infeasibility. However, there are conflicting statements in the Preliminary Regulatory Impact Analysis covering the scope of the NPRM that may warrant clarification.
- Spacing Requirements for New Pipelines. For new natural gas transmission lines that meet or exceed the 6-inch diameter threshold, the valves would need to be spaced at the intervals provided in 49 C.F.R. §§ 192.179 or proposed 192.634, as applicable. For new hazardous liquid pipelines that meet or exceed the 6-inch diameter threshold, the valves would need to be spaced at intervals of 15 miles or less for pipeline segments that could affect high consequence areas (HCAs) and 20 miles or less for pipeline segments that could not affect HCAs. Additional spacing limitations apply to valves protecting HCAs as preventive and mitigative measures under the integrity management regulations, valves protecting certain water crossings, and valves on highly volatile liquid pipelines.
- Installation Requirements for Existing Pipelines: The NPRM would also require operators to install ASVs, RCVs, or equivalent technology, on existing natural gas transmission lines and hazardous liquid pipelines 6 inches
or greater in nominal diameter that are “entirely replaced”, unless the operator demonstrates that installation of a manual valve is justified for reasons of economic, technical, or operational infeasibility. The phrase “entirely replaced” is limited to situations where two or more contiguous miles of pipe are replaced with new pipe.
- Spacing Requirements for Existing Pipelines. Replacements of gas transmission lines that meet these criteria would need to have rupture mitigation valves spaced at intervals specified in 49 C.F.R. §§ 192.179 or 192.634, as applicable. New rupture-mitigation valve spacing intervals would apply to replacements of hazardous liquid pipelines that meet the criteria as well.
Requirements for Gas Transmission Lines that Undergo a Change in Class Location: The proposed rule states that if a change in class location requires a pipe replacement under the maximum allowable operating pressure regulations, the operator would need to comply with the proposed valve installation, spacing, and shut-off requirements applicable to the new class location. Any necessary valves would be required to be installed within 24 months of the class location change.
Other Requirements
In addition to the proposed valve installation and spacing requirements, the NPRM contains provisions for gas and hazardous liquid pipelines relating to valve shut-off time for rupture mitigation, valve shut-off capability, valve shut-off methods, valve monitoring and operation capabilities, valve shut-off status, valve maintenance, and use of ASVs, RCVs, or equivalent technology, as preventive and mitigative measures under the integrity management regulations.
Of note, PHMSA proposes to require operators to identify a rupture as soon as practicable but no longer than 10 minutes after initial notification or indication of a rupture. PHMSA also proposes a full rupture-mitigation valve shut off within 40 minutes of identification, including where manual valves are used. The NPRM also proposes response time validation and verification requirements and would establish remedial measures for inoperable valves.
Rupture Mitigation
- Definition of “Rupture”: The NPRM proposes to define the term “rupture” in the gas and hazardous liquid pipeline safety regulations for purposes of the new requirements to include certain events that involve an uncontrolled release of a large volume of gas or hazardous liquids. The definitions focus on the point when a release of gas, hazardous liquid, or carbon dioxide is first observed or reported to the pipeline operator and include events that result in unanticipated or unplanned changes in pressure or flow rate that exceed a specified threshold (10 percent or greater) during a specified time interval (15 minutes or less) or that are otherwise representative of these events. PHMSA notes that its use of the term “rupture” elsewhere in the regulations or the incident reporting forms does not refer to this specific definition.
- Emergency Response Plans and Post-Incident Analysis: The NPRM proposes to modify existing regulations for gas and hazardous liquid pipelines to include new provisions for interacting with 911 call centers and emergency response officials. PHMSA included similar provisions in the “Communication During Emergency Situations” Advisory Bulletin issued in 2012. Operators would be required to expand their procedures for investigating and analyzing incidents and accidents to identify and implement post-accident lessons learned and review ruptures involving the closure of rupture mitigation valves.
Areas for Potential Clarification
The NPRM raises many questions.
- How do the valve installation requirements for new pipelines interact with the existing valve installation requirements for replacements, particularly with respect to the various spacing intervals?
- Is the proposed 6-inch diameter threshold for the use of ASVs, RCVs, or equivalent technology, appropriate? What about the proposed 2-mile limitation for pipeline replacements? And the proposed 10-minute identification and 40-minute shutoff times for ruptures?
- Can PHMSA improve the organization and clarity of the proposed rule by defining “rupture mitigation valve” at the outset of the gas and hazardous liquid pipeline safety regulations?
- Are the requirements to perform annual validation drills for valves that will be manually operated reasonable?
- Has PHMSA quantified the benefits of the NPRM in accordance with its statutory mandate to do so?
What’s Next?
PHMSA is providing a 60-day comment period. The deadline is April 6, 2020, subject to PHMSA granting any requests for an extension. After the close of the public comment period, PHMSA will consider the information provided and decide whether to present the NPRM to the Pipeline Advisory Committees for consideration. The Pipeline Advisory Committees are 15-member federal advisory committees that review and provide non-binding recommendations to PHMSA on proposed changes to the pipeline safety regulations. Because the NPRM includes proposed changes to the regulations for gas and hazardous liquid pipelines, both of the Pipeline Advisory Committees (Gas and Liquid) would need to consider the proposals. Once that process is complete, PHMSA can develop a final rule for consideration by the Office of the Secretary and Office of Management and Budget and eventual publication in the Federal Register. At that point, any new regulations for valve installation and minimum rupture detection will have the force and effect of law, subject to any applicable effectives dates for the final rule and compliance deadlines for particular provisions.
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Environmental Alert
(by Lisa Bruderly)
On January 23, 2020, the U. S. Environmental Protection Agency (EPA) and the U. S. Army Corps of Engineers (Corps) pre-published the final Navigable Waters Protection Rule (NWP Rule), which (yet again) redefines the scope of waters that are regulated under the Clean Water Act (CWA). In particular, the final NWP Rule revises the definition of “waters of the United States” (WOTUS) in 12 federal regulations and will become effective 60 days after publication in the Federal Register. Once effective, the NWP Rule will almost certainly be challenged in the courts by NGOs and other interested parties. These challenges could result in the courts staying the NWP Rule in some, or all, states while the lawsuits are litigated.
The NWP Rule is the final step in fulfilling the Trump administration’s promise to repeal and replace the Obama administration’s 2015 Clean Water Rule (CWR), which many believe improperly expanded the scope of waters regulated under the CWA. Effective December 23, 2019, EPA and the Corps repealed the CWR and restored the WOTUS definition that existed prior to 2015 (Pre-2015 Rule). Prior to the repeal, the Pre-2015 Rule’s WOTUS definition applied in approximately half of the states, while the CWR’s WOTUS definition applied in the remainder (including Pennsylvania), resulting in certain states having more federally regulated waters than other states.
The stated intent of the NWP Rule is to provide “clarity, predictability and consistency” regarding CWA jurisdiction. Consistent with the President’s February 28, 2017 Executive Order, the NWP Rule heavily reflects and relies upon Justice Antonin Scalia’s interpretation of the Pre-2015 Rule’s definition of WOTUS, as expressed in his plurality opinion in the seminal case, Rapanos v. United States (547 U.S. 715 (2006)). Missing from the NWP Rule is any reference to the significant nexus test discussed in Justice Anthony Kennedy’s concurring opinion in Rapanos. As background, Justice Scalia opined that relatively permanent, standing, or continuously flowing waters and wetlands with a continuous surface connection to such relatively permanent waters should be regulated under the CWA, while Justice Kennedy advocated for CWA jurisdiction for wetlands with a significant nexus to a navigable water (i.e., a significant effect on the chemical, physical and biological integrity of traditional navigable water).
Scope of NWP Rule is Narrower and Clearer than Previous Rules
The NWP Rule consolidates jurisdictional waters into four categories: (1) territorial seas and navigable-in-fact waters; (2) tributaries; (3) lakes, ponds and impoundments of jurisdictional waters; and (4) adjacent wetlands.
As expected, the WOTUS definition in the NWP Rule is much narrower, and will federally regulate less waters, than would have been regulated under the CWR. The NWP Rule also provides more clarity as to the scope of WOTUS than the Pre-2015 Rule. The NWP Rule includes sixteen definitions and twelve exclusions, as compared to the five definitions and two exclusions in the Pre-2015 Rule, including, for the first time, definitions to clarify the prior converted cropland and waste treatment system exclusions. The NWP Rule categorically excludes, among other things, ephemeral streams and ditches without perennial or intermittent flow.
We note that, despite attempts to provide clarity, the NWP Rule still contains terms that may be subjectively interpreted. For example, the Rule relies on conditions in a “typical year” to determine whether a water meets the definition of an “adjacent wetland,” “lakes and ponds, and impoundments,” or a “tributary.” Subjectivity is likely in making these determinations because a “typical year” is defined by the “normal periodic range” of climatic conditions in a geographic area based on a rolling 30-year period.
Practical Impact of NWP Rule is Uncertain
While the NWP Rule is intended to clarify the scope of federally regulated waters, the practical impact of the Rule for industry, developers, agriculture and others is uncertain. The effect of the NWP Rule is likely less in states with very inclusive definitions of state waters than in states with narrower definitions of the same.
For example, under Pennsylvania’s Clean Streams Law, “waters of the Commonwealth” broadly include “any and all rivers, streams, creeks, rivulets, impoundments, ditches, water courses, storm sewers, lakes, dammed water, ponds, springs and all other bodies or channels of conveyance of surface and underground water, or parts thereof, whether natural or artificial, within or on the boundaries of this Commonwealth.” Pennsylvania’s definition of “waters of the Commonwealth” is generally more expansive (i.e., includes more types of waters) than the NWP Rule’s WOTUS definition. Therefore, projects that are expected to impact, or discharge into, a water of the Commonwealth will still (typically) require state permitting, even if federal permitting may not be required. In some instances, Corps permitting may not be needed for impacts to streams or wetlands that would require a state permit. There may also be implications, in limited circumstances, as to whether Spill Prevention, Control, and Countermeasure (SPCC) plans would be needed for certain facilities.
In states with definitions of state waters that are the same or less inclusive than the NWP Rule, the Rule is expected to be a more significant consideration on projects that require permitting or spill planning/response.
Controversy Continues and Challenges are Expected
While many in industry and agriculture have supported the NWP Rule, a number of NGOs and other interested parties have signaled that they will challenge the NWP Rule on procedural and substantive grounds. In addition, the EPA’s own Science Advisory Board, and other scientific organizations, have criticized the NWP Rule as being in conflict with established science and the objectives of the CWA. With legal challenges looming, the NWP Rule may be stayed in some, or all, states, with the Pre-2015 Rule remaining the definition of WOTUS nationwide or in select states.
EPA and the Corps will hold a public webcast on the NWP Rule on February 13, 2020. Interested parties can register for the webcast at https://www.epa.gov/nwpr. Babst Calland has analyzed the evolution of the regulatory definition of WOTUS in numerous Environmental Alerts over the years (see www.babstcalland.com) and will continue to actively monitor this controversial regulatory issue. If you have questions about the NWP Rule or water-related matters in general, please contact Lisa M. Bruderly at (412) 394-6495 or lbruderly@babstcalland.com.
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The Legal Intelligencer
(by Ben Clapp, Varun Shekhar, Casey Snyder and Brianne Kurdock)
If a newly proposed rulemaking is finalized, the process by which federal agencies are required to analyze the environmental impacts caused by their actions could be comprehensively updated for the first time in over four decades. On Jan. 10, the Council on Environmental Quality (CEQ) published a notice of proposed rulemaking in the Federal Register to update its regulations implementing the National Environmental Policy Act of 1969 (NEPA). The proposed revisions seek to narrow both the scope of projects that must be reviewed under NEPA, as well as the nature and extent of such review. These changes are intended to reduce the time, cost and workload required to comply with NEPA, and could also make it more difficult for opponents of agency actions that seek to block those actions in court based on alleged NEPA violations.
Background of NEPA
NEPA, enacted in 1970, is a procedural law; it does not mandate substantive environmental outcomes. The purpose of NEPA is to promote accountability and transparency in federal decisions to ensure that environmental concerns are integrated into federal decision-making. The CEQ, a division of the Executive Office of the President, is charged with overseeing implementation of NEPA CEQ first promulgated regulations implementing NEPA in 1978.
NEPA applies to major federal actions significantly affecting the quality of the human environment, including those undertaken by nonfederal entities that receive federal funding or require federal permitting approvals. Federal agencies have three primary means of complying with NEPA. First, federal actions that have previously been determined to involve no significant impacts to the environment may receive a categorical exclusion (CE) from a more in-depth and time-consuming, review. Second, projects for which impacts are not expected to be significant or are unknown require the preparation of an environmental assessment, which identifies a project’s anticipated effects and assesses their significance. Third, projects with known significant environmental impacts require the preparation of an environmental impact statement (EIS), which is a lengthier document that analyzes adverse environmental effects from, as well as alternatives to, the proposed action. These are often required for, among other things, federal approvals for major infrastructure projects as well as for approvals of oil and gas leases.
The NEPA process allows for substantial public participation, including the right to challenge an agency’s NEPA analysis in federal court. Moreover, the extent of impacts to be considered in an EIS can change as scientific and social research develop, as evidenced by a recent focus on climate change and environmental justice impacts.
Proposed Changes to NEPA
CEQ’s proposed revisions to the NEPA regulations seek to create a more efficient and timely review process. The proposed changes would impact all aspects of the NEPA process, including fundamental components such as the application and scope of NEPA review, analysis of alternatives and timing requirements.
The most significant change proposed by CEQ is the revision of the term “effects.” Because NEPA requires a federal agency to analyze the environmental effects of its proposed action, revision of the definition of effects should correspondingly alter the required scope of an agency’s NEPA analysis. Under existing regulations, the term is defined to include all direct, indirect and cumulative environmental effects caused by an action. Collectively, this includes all effects caused by the action that occur at the same time and place (direct), effects caused by the action that are later in time or further removed in distance but still reasonably foreseeable (indirect), and effects that result from the incremental impact of the action when added to other past, present or reasonably foreseeable actions (cumulative).
The proposed definition removes reference to direct and indirect effects, revising the term to include those effects that are “reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternative.” The proposed definition explicitly eliminates the requirement to analyze cumulative effects. In addition, the proposed definition clarifies that a “but for” causal relationship is insufficient to trigger an agency’s responsibility to analyze a particular effect. Rather, the phrase “reasonably close causal relationship” is intended to eliminate effects that are remote in time, geographically remote or the product of an attenuated causal chain, as well as those effects which an agency has no authority to prevent or which would happen regardless of the agency action.
The proposed rule does not specifically address the extent to which an agency would be required to analyze effects from greenhouse gas emissions and potential climate change impacts, other than to note that any such analysis must be consistent with the proposed definition of “effects.” However, CEQ’s proposed draft guidance on consideration of greenhouse gas emissions, released last June, would give agencies latitude in determining when quantification and analysis of GHG emissions and their effects are warranted. CEQ solicits input on whether the proposed regulation should incorporate any aspects of this draft guidance.
The proposed rule also aims to provide clarity for determining whether a particular federal action triggers NEPA. Currently, NEPA applies to “major federal actions”—those with effects that may be major and that are potentially subject to federal control and responsibility. This includes an agency’s failure to act. CEQ proposes to strike “potentially” as well as the portion of the definition that relates to a failure to act, narrowing the definition only to affirmative actions that are clearly subject to federal control and responsibility. Further, the definition clarifies that loans, loan guarantees, or other forms of financial assistance in cases where the federal agency does not have sufficient control and responsibility over the effects of the action, are not within the scope of the definition.
Under the current regulations, an agency must analyze all reasonable alternatives, including those not within the jurisdiction of the lead agency. CEQ proposes to strike the term “all” from this requirement, allowing an agency to provide a reasonable number of examples that are technically and economically feasible. In addition, CEQ proposes to remove the requirement that an agency analyze alternatives outside of its jurisdiction.
The proposal contains a host of additional revisions aimed at streamlining the NEPA process. In particular, CEQ proposes to facilitate the use of CE’s by clarifying the process by which an agency can create an exclusion, and to allow agencies to establish procedures for employing CEs created by other agencies. These changes also include more practical components, such as establishing time limits for NEPA reviews (two years for Environmental Impact Statements and one year for Environmental Assessments).
Finally, CEQ has proposed revisions reflecting its goal of resolving allegations of NEPA noncompliance as expeditiously as possible. To that end, the proposed rule stipulates that the NEPA regulations do not create a presumption that a NEPA violation provides a basis for injunctive relief (although a court may still find that it is the appropriate remedy), and that harm arising from an agency’s failure to comply with NEPA can be remedied by the agency complying with the requirements in the proposed regulations.
The proposed revisions, if adopted as a final rule, would supersede all previous CEQ NEPA guidance, and CEQ anticipates that it would withdraw all CEQ NEPA guidance that is currently in effect.
Potential Impacts to the Regulated Community
The proposed revisions could have a significant impact on many industries, particularly energy generation and transmission. In prior years, NEPA requirements have delayed large-scale projects and allegations of deficiencies in the NEPA process are frequently raised by project opponents in efforts to block such projects. For example, in 2018, a Montana district court enjoined construction of the Keystone XL pipeline on the basis that the lead agency, the U.S. Department of State, violated NEPA by failing to evaluate the cumulative climate impacts of the project. The proposed rule’s changes to the definition of effects and potential incorporation of the draft GHG guidance arguably should give more flexibility to agencies in performing review of environmental effects and may make it harder for such issues to give rise to vacatur of agency approvals.
The presumptive time limits for NEPA review should also significantly reduce the current average timeframes for NEPA review by more than 75%. Moreover, the proposal’s limitations on the scope of judicial review could make it more challenging for projects to be blocked by courts as a result of NEPA deficiencies. For these reasons, among others, we note that it is unlikely that these provisions will be implemented without legal challenges from environmental advocacy groups.
Based on its likely impacts to such a wide variety of industries that require approvals, funding or other actions by federal agencies, developers of projects that are potentially subject to NEPA review and other stakeholders are encouraged to comment on the proposed rule. The deadline to submit comments is March 10, and two public hearings will be held, on Feb. 11, in Denver, Colorado, and Feb. 25, in Washington, D.C.
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Environmental Alert
(by Ben Clapp, Varun Shekhar, Casey J. Snyder and Brianne K. Kurdock)
On January 10, 2020, the Council on Environmental Quality (CEQ) published a notice of proposed rulemaking in the Federal Register to revise regulations implementing the National Environmental Policy Act of 1969 (NEPA). These revisions could significantly affect projects in several industries, including infrastructure development, that require approval by federal agencies.
NEPA is a procedural statute that requires federal agencies to evaluate environmental impacts associated with proposed major actions. Major actions are actions subject to federal control and responsibility with potential significant effects. CEQ’s regulations that implement NEPA aim to ensure that environmental effects from such actions are considered before they are undertaken. These regulations have never been comprehensively revised since they were promulgated in 1978, despite statutory changes that provided for a more streamlined NEPA review of certain infrastructural projects. The Trump administration first signaled its intent to update the NEPA regulations in 2017, when it issued an Executive Order directing CEQ to review the environmental review process to enhance its efficiency, specifically for major infrastructure projects. In June 2018, CEQ published an advance notice of proposed rulemaking (ANPRM) soliciting comments on potential revisions to the NEPA regulations. CEQ considered those comments when developing the current proposed rule.
Summary of CEQ’s Proposed Changes
CEQ has proposed extensive revisions to its regulations in an effort to create a more efficient and timely NEPA review process. The proposed changes would impact several fundamental aspects of the NEPA process, such as the application and scope of NEPA review, analysis of alternatives, and timing requirements. Key proposed changes include:
- Revision of the term “effects.” This revision would alter the scope of an agency’s effects analysis under NEPA. Under existing regulations, the term “effects” is defined to include all direct, indirect, and cumulative (incremental) effects of an action. However, effects are not subdivided into these categories in the statute. In the proposed rule, CEQ proposes to include only those effects that are “reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternative.” This revision explicitly eliminates an agency’s obligation to analyze cumulative effects, as well as those direct or indirect effects that are remote in time or geography, or the product of an attenuated causal chain.
- Climate change considerations as “effects.” The proposed rule does not address the extent to which an agency would be required to analyze potential climate change impacts from greenhouse gas (GHG) emissions, but it does note that any such analysis must be consistent with the proposed definition of “effects.” Draft NEPA Guidance on GHG Emissions, released last June, would give agencies latitude in determining when quantification and analysis of GHG emissions and their effects are warranted. CEQ solicits input on whether the proposed regulation should incorporate any aspects of this draft guidance.
- Clarification of NEPA scope. Currently, NEPA applies to major actions that are potentially subject to federal control and responsibility. CEQ proposes narrowing the definition to major federal agency actions that are both affirmatively undertaken and clearly subject to federal control and responsibility. Loans, loan guarantees, or other federal financial assistance in cases where the federal agency does not have sufficient control and responsibility over the effects of the action would not trigger NEPA.
- Narrowing scope of alternatives. Under current regulations, a lead agency must analyze all reasonable alternatives, including those not within its jurisdiction. The proposed regulations would strike the term “all” from this requirement, allowing the agency to consider a more limited range of alternatives, including only those within its jurisdiction and that are technically and economically feasible.
- Streamlining the NEPA process. Under the proposed rule, agencies are encouraged to identify and apply efficiencies, such as the use of Categorical Exclusions (CEs), and adoption of prior NEPA, state, tribal, and local analyses, to avoid duplication of effort and unnecessary expense. Other proposed streamlining efforts include clarifying the process by which an agency can create a CE and use exclusions created by other agencies, implementing presumptive time limits for NEPA reviews (two years for Environmental Impact Statements (EISs) and one year for Environmental Assessments), and imposing presumptive page limits for EISs (300 pages). Agencies would be required to develop (or revise) their NEPA procedures and subagencies are encouraged to adopt their own procedures. This proposed change is significant because certain governmental agencies, such as the Pipeline and Hazardous Materials Safety Administration (PHMSA), do not currently have specific NEPA procedures and/or CEs.
The proposed revisions, if adopted as a final rule, would supersede all previous CEQ NEPA guidance, and CEQ anticipates that it would withdraw all CEQ NEPA guidance that is currently in effect.
Potential Impacts of Proposed Rule on the Regulated Community
The proposed revisions to NEPA, if implemented, would likely have a significant impact on several industries, particularly on privately developed infrastructure projects, including pipelines, electricity transmission lines, water resource projects, and communications infrastructure projects. For example, the construction of interstate natural gas transmission facilities requires a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission, which customarily serves as the lead agency for the NEPA review of such projects. Although these and other federal approvals are likely to trigger NEPA obligations under the proposed rule, revision of the term “effects” and the potential incorporation of the draft GHG Guidance into the NEPA rules are expected to expedite the environmental reviews, which in the past have contributed to costly delays for project approvals. In addition, the proposed rule could make it more difficult for project opponents to successfully seek an injunction based on alleged NEPA violations. Finally, the presumptive time limits for NEPA review would substantially reduce the current average timeframe for NEPA review (about 4.5 years), which would provide for more certainty to the business community when planning projects.
Next Steps
CEQ invites comments on a host of issues, and interested parties are encouraged to use this opportunity to comment on their experience with NEPA generally, or on issues specific to their industries or organizations. Comments are due by March 10, 2020, and public hearings will be held on February 11, 2020 in Denver, Colo. and on February 25, 2020 in Washington, D.C.
Babst Calland is actively monitoring this proposed rulemaking. If you have questions about how NEPA or this rulemaking could affect your operations, or how to comment on the rulemaking, contact Ben Clapp, Varun Shekhar, or Casey J. Snyder within Babst Calland’s Environmental Group, or Brianne K. Kurdock within Babst Calland’s Transportation Safety Group.
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Environmental Alert
(by Julie R. Domike and Gina N. Falaschi)
A new regional program under consideration in 12 Northeast and Mid-Atlantic states and the District of Columbia would create a cap-and-invest program for GHG emissions from fossil fuels used in transportation. The initiative proposed by the Transportation and Climate Initiative (TCI) – a regional collaboration of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia that seeks to improve transportation, develop the clean energy economy and reduce carbon emissions from the transportation sector – would be similar to the Regional Greenhouse Gas Initiative (RGGI), which administers a cap and trade program for power plant GHG emissions.
TCI released a draft memorandum of understanding (TCI MOU) on December 17, 2019, which anticipates that each participating jurisdiction will follow its legal process to adopt a program consistent with a jointly developed Model Rule to implement the final TCI MOU. TCI plans to finalize the Model Rule by the end of 2020 after a 60-day comment period and expects that the TCI cap-and-invest program could be implemented in 2022.
The cap and invest program would begin with an initial GHG emissions allowance cap assigned to each participating jurisdiction, which would then decline each subsequent year to bring about a reduction of emissions from the transportation sources. These emission allowances would be distributed at auctions, and funds generated from these auctions are anticipated to fund low-carbon and clean mobility options in urban, suburban, and rural communities. The contemplated program will cover all gasoline and on-road diesel fuel dispensed at the terminal rack and require fuel suppliers to hold emissions allowances equal to the GHG emissions from the fuel they distribute in the participating jurisdictions.
The proposed TCI MOU defines two types of regulated “State Fuel Suppliers:” “Position Holders” and “Enterers.” Position Holders are defined as owners of the fossil fuel component of motor vehicle gasoline and on-road diesel fuel at terminals delivering across a terminal rack upon removal from a storage facility. Enterers are defined as owners of the fossil fuel component of motor vehicle gasoline and on-road diesel fuel that is delivered into a participating state from a facility in another jurisdiction for final sale or consumption in the participating state. While not entirely clear from the definitions, potential regulated entities could include refining companies and large convenience store and fuel station operators with operations in the TCI member states. The TCI MOU also anticipates that other owners and operators of the fuel supply infrastructure, such as pipelines, terminals or distributors, may also be subject to reporting or recordkeeping obligations under the program.
Many key points remain unresolved in the draft MOU, including: the initial cap for covered fuels, allocation of emission allowances, schedule for future emission reductions, initial compliance period, stability mechanisms such as a reserve of allowances, whether to allow the use of carbon offsets, auction mechanisms and a minimum reserve price, investment of proceeds, and governance of the group.
TCI is seeking public comment on these and any other issues; comments must be submitted by Friday, February 28, 2020. The comment period presents the opportunity to share views and raise questions about the initiative, and to have an impact on the final program. Potentially regulated parties may want to comment on such issues as the anticipated impact of the program, administration of the program, reporting obligations, or interaction of the TCI cap-and-trade program with other regulatory schemes (such as the EPA Renewable Fuels Standard Program).
For a more detailed assessment of this proposed initiative or assistance in drafting and submitting a comment before February 28, 2020, please contact Julie Domike at 202-853-3453 or jdomike@babstcalland.com or Gina Falaschi at 202-853-3483 or gfalaschi@babstcalland.com.
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Environmental Alert
(by Christopher B. “Kip” Power)
The West Virginia Department of Environmental Protection (WVDEP) recently released a new tool consisting of a standardized method for the functional assessment of wetlands, known as the West Virginia Wetland Rapid Assessment Method (WVWRAM). According to the WVDEP’s public notice accompanying its release, the WVWRAM represents the agency’s first effort to devise a state-specific protocol that will rate not just the quantity and type of wetlands, but also their chemical, physical, and biological integrity in arriving at a regulatory score. For permitting and mitigation scenarios (including off-site mitigation and creation of mitigation banks), that WVWRAM score will then be used as an input into the existing functional assessment tool known as the “West Virginia Stream and Wetland Valuation Metric” or “SWVM.”
The WVWRAM was developed as a part of the WVDEP’s federally-funded Wetland Program Plan and has been in the works for at least five years, with field testing in 2017 and 2018 that involved some 22 stakeholder organizations. In addition to the WVWRAM computer model, the WVDEP released an 11-page Field Form (data sheet), a User Manual, and a Reference Manual that were prepared by WVDEP scientists. The WVDEP plans to work with the U.S. Army Corps of Engineers and the Inter-Agency Review Team (IRT) to incorporate the WVWRAM into Clean Water Act Section 404 permitting for sites in West Virginia, and in the preparation of corresponding mitigation plans that are required to compensate for unavoidable loss or damage to wetland resources caused by permitted activities. According to the WVDEP press release, five two-day WVWRAM training workshops were held in 2019, with 122 participants from 40 organizations completing the necessary training to use the new protocol.
Generally, the agency does not expect there will be any change to the average amount of mitigation required for Section 404 projects in West Virginia, but mitigation required for individual projects will change, as the loss of low-functioning wetlands will require less mitigation than before and destruction of higher-functioning wetlands will require more mitigation. Given the amount and detailed nature of the data that will be required to be gathered and compiled, it is reasonable to expect that this new tool will increase both the time and expense associated with wetlands delineations in West Virginia.
The WVWRAM has not yet been adopted as a WVDEP policy mandate for projects involving wetland impacts but it is expected to be finalized early this year. The WVDEP has established a deadline of January 31, 2020 for interested persons to provide “comments and information” regarding the WVWRAM to its Watershed Assessment Branch. More information is available on the WVDEP’s website at https://dep.wv.gov/WWE/watershed/wetland.
If you have any questions about the WVDEP Wetlands Program, the WVWRAM, or Clean Water Section 404 permitting and mitigation in West Virginia, please contact Christopher B. “Kip” Power at (681) 265-1362 or cpower@babstcalland.com.
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RMMLF Mineral Law Newsletter
(By Joseph K. Reinhart, Sean M. McGovern, Hannah L. Baldwin)
EQB Approves Changes to Water Quality Criterion Limit
At its December 17, 2019 board meeting, the Pennsylvania Department of Environmental Protection’s (PADEP) Environmental Quality Board (EQB), a 20-member independent board that reviews and adopts all PADEP regulations before publication for public comment, approved PADEP’s proposed rulemaking to set a new ambient water quality criterion limit for manganese. See Proposed Rulemaking Preamble, PADEP, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019); see also Vol. XXXVI, No. 3 (2019) of this Newsletter.
The amendments to water quality standards and standards implementation for manganese were developed pursuant to an October 30, 2017, amendment to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, known as Act 40 of 2017, directing the EQB to promulgate a manganese water quality criterion within 90 days. See Water Quality Standard for Manganese, 48 Pa. Bull. 605 (Jan. 27, 2018) (advance notice of proposed rulemaking). The Pennsylvania General Assembly passed the Administrative Code change as part of a budget package, with the requirement related to manganese regulation added as an amendment in the Senate.
The amendments approved by the EQB in December 2019 propose to delete manganese from Table 3 at 25 Pa. Code § 93.7 (relating to specific water quality criteria) and add manganese to Table 5 at 25 Pa. Code § 93.8c (relating to human health and aquatic life criteria for toxic substances), changing the numeric water quality criterion standard for manganese from 1 mg/L to 0.3 mg/L. Additionally, the amendments propose two alternatives for a point of compliance with the manganese water quality standard:(1) the point of all existing or planned surface potable water supply withdrawals; or (2) maintenance of the existing point of compliance of all surface waters (i.e., near the point of discharge). If adopted, coal mines, power plants, and other manganese dischargers will face increased treatment costs, regardless of which point of compliance option is implemented. PADEP recommended a 45-day public comment period, including one public hearing to be held in the Harrisburg area.
The proposed rule will be published for public comment in a forthcoming issue of the Pennsylvania Bulletin. It will take at least a year for the package to progress through the Regulatory Review Act review process, which will involve review by the public, the House and Senate Environmental Resources and Energy Committees, and the Independent Regulatory Review Commission.
Update on Mandamus Action to Compel Promulgation of Manganese Standards
On November 12, 2019, the Commonwealth Court of Pennsylvania dismissed the March 29, 2019, mandamus action filed by Senate President Pro Tempore Joe Scarnati (R-Jefferson) and Senator Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental and Natural Resources Committee, to compel PADEP and the EQB to set a water quality standard for manganese as required by Act 40 of 2017. See Scarnati v. PADEP, 220 A.3d 723 (Pa. Commw. Ct. 2019); see also Vol. XXXVI, No. 2 (2019) of this Newsletter.
The court found the petitioners failed to show how the regulator’s failure to propose new standards for manganese within 90 days of the legislature’s passage of Act 40 of 2017 affected the senators’ ability to introduce or vote on legislation, which is the criterion the court uses to determine if a lawmaker has legislative standing.
Senators Scarnati and Yaw filed a notice of appeal of the commonwealth court’s decision to the Pennsylvania Supreme Court on December 11, 2019. See Scarnati v. PADEP, No. 94 MAP 2019 (Pa. filed Dec. 11, 2019). Initial briefs are due to the court in early March.
PADEP ANNOUNCES RELEASE OF ACT 54 REPORT, ASSESSING MINING IMPACTS
On December 20, 2019, the Pennsylvania Department of Environmental Protection (PADEP) announced the release of the fifth report in a series that details the effects of underground mining on structures and water resources. See PADEP, “The Effects of Subsidence Resulting from Underground Bituminous Coal Mining in Pennsylvania, 2013-2018” (Dec. 20, 2019); see also Vol. XXXII, No. 1 (2015) of this Newsletter (coverage of 2008–2013 report). This report, known as the Act 54 Report, was prepared by researchers at the University of Pittsburgh in accordance with the 1994 amendments (Act 54) to the Bituminous Mine Subsidence and Land Conservation Act of 1966. Act 54 requires PADEP to compile data and report findings on the effects of underground mining on land, structures, and water resources to the Governor, the Pennsylvania General Assembly, and PADEP’s Citizens Advisory Council every five years. 52 Pa. Stat. § 1406.18a. The report covers 49 active underground bituminous coal mines underlying 28,854 acres of Pennsylvania. Out of the total mining acreage, 62% is classified as longwall, 29% as room-and-pillar, and 9% as pillar recovery mining.
The 995-page report covers effects related to structures, water supply, land damages, hydrologic balance, groundwater, streams, and wetlands in detail. Notable findings include a reduction in water supply impacts for which the mining company was liable—192 incidents, down from 371 in the last report (covering 2008–2013). The average length of time to resolve operator-liable water supply issues dropped from 415 days to 305.
The report’s primary recommendation focuses on PADEP’s current data tool, the Bituminous Underground Mining Information System (BUMIS), which PADEP has used to track impacts of mining operations on surface structures and water supplies since Act 54 was passed in 1994. Due to the age of the system, BUMIS does not easily integrate with modern tools, which, according to the report, strains the already limited resources of PADEP. The report suggests that modern data tools, including data standardization, written protocols, standard electronic data forms and electronic submission, and especially rapid error and standards checking following data submission, can improve PADEP’s efforts to track mining impacts and provide increased protection to the commonwealth and its citizens.
PADEP TO PRESENT DRAFT CARBON TRADING REGULATIONS FOLLOWING RGGI MODEL
As reported in Vol. XXXVI, No. 4 (2019) of this Newsletter, in October 2019 Governor Tom Wolf issued Executive Order No. 2019-07 instructing the Pennsylvania Department of Environmental Protection (PADEP) to develop and present to its Environmental Quality Board (EQB) a proposed rule to limit carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule. See Exec. Order No. 2019-07, “Commonwealth Leadership in Addressing Climate Change Through Electric Sector Emissions Reductions,” 49 Pa. Bull. 6376 (Oct. 26, 2019).
PADEP has now taken the first step toward following the Governor’s directive. On January 30, 2020, PADEP announced that it will present the concepts of the proposed rule at the meeting of the agency’s Air Quality Technical Advisory Committee (AQTAC) on February 13, 2020. See Press Release, PADEP, “DEP to Unveil Draft Regulations to Cap CO2 Emissions Using RGGI Model” (Jan. 30, 2020).
The draft proposed rule would also allow PADEP to determine whether to participate in the CO2 allowance auctions with other RGGI member states, or to conduct a separate Pennsylvania-run auction. See Draft Proposed 25 Pa. Code § 145.401. PADEP will determine to participate in the multi-state auction if one is available that can provide benefits to Pennsylvania that meet or exceed those conferred through the Pennsylvania-run auction and that would be consistent with the auction process outlined in sections 145.401–.414 of the draft proposed rule, which are provisions relating to the conduct of auctions that PADEP added to the RGGI Model Rule. Id.
Following the presentation of the draft proposed rule at the February 13 AQTAC meeting, PADEP indicated that its next steps in the development of the rule are: (1) continued engagement with the general assembly, stakeholders, and Pennsylvania residents and businesses; and (2) completion of power sector modeling and identification of allowance caps. While the current draft of the proposed rule is already available, PADEP has indicated that it will present the concepts of the rule at the February 13 meeting, and will present the proposed rule itself at the AQTAC’s next quarterly meeting in April 2020.
According to PADEP’s anticipated timeline, the proposed rule will then be presented to the EQB on July 21, 2020, and open for public comment in fall 2020. PADEP then anticipates presenting the final rule to the agency’s advisory committees in spring 2021 and to the EQB in summer 2021, with an anticipated effective date in fall 2021. The February 13 AQTAC meeting is open to the public, and meeting minutes will be posted on the AQTAC’s website following the meeting.
On a parallel track, in November 2019 Republican lawmakers introduced companion bills, Senate Bill 950 and House Bill 2025, in response to Governor Wolf’s executive order. The bills would prohibit PADEP from joining RGGI, establishing a CO2 cap-and-trade program, or taking other action designed to limit, control, or abate CO2 emissions without submitting the proposal through the general assembly and going through a detailed review process set forth in the bills. The bills are currently with their respective Environmental Resources and Energy Committees.
We will continue to closely monitor what is likely to be a robust and contentious rulemaking and legislative process over the coming months and provide updates accordingly.
IRRC APPROVES TRIENNIAL WATER QUALITY STANDARDS
On January 31, 2020, the Independent Regulatory Review Commission (IRRC) issued an order approving the Environmental Quality Board’s (EQB) final proposed rule updating Pennsylvania’s water quality criteria (WQC) and designated water uses under 25 Pa. Code ch. 93. The IRRC’s approval order, the final draft of the updated regulations, and other related rulemaking documents are available on IRRC’s website at http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3193. The Pennsylvania Department of Environmental Protection (PADEP) is required to review and modify, as appropriate, the WQC at least every three years under section 303(c) of the Clean Water Act, 33 U.S.C. § 1313(c). PADEP uses the WQC to set designated uses of waters of the commonwealth, which is done by setting instream narrative and numerical criteria PADEP determines are necessary to protect those uses. These instream criteria are implemented through pollution control measures on individual sources that discharge to those waters, such as treatment requirements and effluent limitations in individual National Pollutant Discharge Elimination System permits, including those issued in connection with mining activities.
The revised WQC make several changes to 25 Pa. Code § 93.7 tbl.3 (specific water quality criteria) and 25 Pa. Code § 93.8c tbl.5 (human health and aquatic life criteria for toxic substances). First, PADEP updated the aquatic life WQC for ammonia and bacteria contained in Table 3. Second, PADEP updated the human health WQC for several toxic substances in Table 5 to adopt the U.S. Environmental Protection Agency’s 2015 updated recommended WQC. Specifically, the updated Table 5 creates more stringent criteria for 55 specific toxic substances. The updated Table 5 also sets less stringent criteria for 18 specific toxic substances than the previous criteria. Finally, the updated Table 5 adds nine additional toxic substances to the table.
Designated water uses and drainage lists are set forth in 25 Pa. Code § 93.9. PADEP revised the drainage lists for several waters of the commonwealth. However, according to PADEP, these changes were administrative and do not make substantive changes to the actual designated uses of these waters. Finally, PADEP revised 25 Pa. Code § 93.8d(c) to clarify that the Biotic Ligand Model now must be used, rather than may be used, for the development of new or updated site-specific criteria for copper in freshwater systems.
Copyright © 2020, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Emerging Technologies Alert
(by Boyd Stephenson and Justine Kasznica)
On December 18, 2019, the Federal Motor Carrier Safety Administration (FMCSA or Agency) published an information collection notice which proposes a limited scope for implementing the Beyond Compliance motor carrier safety program.[1] According to the notice, FMCSA personnel intend to query a little over 100 motor carriers with strong safety records about what technologies they employ and what programs or practices they engage in to achieve strong safety results. According to the notice, this research will be packaged into a technical report, which the Agency researchers will then incorporate into a Beyond Compliance report the Agency is required to transmit to Congress. If only motor carriers are consulted, technology providers may lose the opportunity to identify safety innovations that are not yet widely known to the trucking industry. The docket for comments will remain open through February 18, 2020.
Background
In the Fixing America’s Surface Transportation Act of 2015, (FAST Act) Congress directed the FMCSA to establish the Beyond Compliance program.[2] Congress designed Beyond Compliance to identify advanced trucking safety technologies and practices that are not required by regulation but which improve safety. After identifying these technologies, motor carriers would participate in the Beyond Compliance program by adopting these advanced safety technologies. FMCSA would then reward the carriers by publicly recognizing the motor carrier. Congress has also directed the Agency to deprioritize trucks operating for carriers that meet Beyond Compliance criteria for roadside inspection by either creating a new measurement category in FMCSA’s online CSA Safety Management System (SMS) or by designating that Beyond Compliant carriers’ CSA SMS scores are otherwise improved by participating in the program.
Congress also required FMCSA to adopt a process in which any interested party could submit a technology or process for inclusion in the program. The law will also require the agency to publicly post Beyond Compliance-certified technologies and processes on its website when the program is operational. Because of this public listing, the Beyond Compliance program represents an excellent opportunity for safety technology providers to expand their audience to include motor carriers interested in taking advantage of Beyond Compliance rewards. But, to do so, technology providers need to ensure that their product or process falls within the program’s scope.
FMCSA Notice
The notice contains no information about other information collection efforts. While FMCSA officials might intend to perform similar outreach to technology developers or providers in future information collections, the results from this first information collection are likely to determine next steps and the program’s ultimate contours. Additionally, FMCSA officials have not indicated if they intend to list specific providers and products on the Beyond Compliance website or only types of technology certified.
Motor carriers generally are not also technology developers or providers. A motor carrier’s safety director can identify technologies and processes that they believe make a difference and may even be able to provide data supporting their claim. But, because motor carriers are not typically designing the next generation of safety products, speaking only to them risks building status quo bias into the report and, eventually, into the Beyond Compliance program. Technology providers may have valuable information about what practices may be the most effective for improving safety.
Motor carriers and safety technology developers and providers should watch this issue closely and consider commenting on the proposal so that their products and processes can eventually be included in the program. For more information about the notice and guidance in preparing comments, contact Boyd A. Stephenson at (202) 853-3452 or bstephenson@babstcalland.com or Justine M. Kasznica at (412) 394-6466 or jkasznica@babstcalland.com.
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