Energy Alert
(by Timothy M. Miller and Christopher B. (Kip) Power)
On August 29, 2018, the United States District Court for the Southern District of West Virginia issued a Memorandum Opinion and Order granting Mountain Valley Pipeline (MVP) summary judgment and permanently enjoining the County Commission of Fayette County, West Virginia, from using a zoning ordinance to bar construction of the Stallworth Compressor Station (CSS). The CSS is a vital part of the 303.5-mile long, 42-inch diameter, MVP pipeline project stretching from Wetzel County, West Virginia, to Pittsylvania County, Virginia. See Mountain Valley Pipeline v. Matthew D. Wender, et al., Case No. 2:17-cv-04377, Mem. Op. and Order (S.D. W. Va. August 29, 2018).
The CSS is being constructed on property owned by MVP in an area that is currently zoned Rural-Residential under the County’s Unified Development Code. MVP sought approval for the limited re-zoning of the area to Heavy-Industrial, while also seeking a FERC certificate of authority for construction of the station. FERC ultimately granted the certificate of authority during the re-zoning application process, but the County Commission nevertheless denied the re-zoning request. Violations of the zoning ordinance exposed MVP to potential civil and criminal penalties.
The FERC approval process, as noted by the District Court, requires an applicant to make a bona fide attempt to comply with state and local authorities, but this “rule of reason” is secondary to FERC’s authority under the Natural Gas Act to preempt state and local authority over jurisdictional facilities authorized by FERC.
The Court dismissed the various theories relied upon by the County Commission and held the zoning ordinance was unenforceable due to field and conflict preemption pursuant to the Supremacy Clause of the United States Constitution. U.S. Const. art. VI, cl. 2. The Court noted the zoning ordinance specifically targeted oil and gas transmission lines and related facilities and therefore squarely conflicted with the federal authority granted to FERC. The Court also rejected the Commission’s argument there was no “actual controversy” because MVP had not yet been cited or penalized for violating the ordinance, citing to well-established authority that when a party is faced with potential criminal penalties, that is sufficient to establish a case and controversy.
This is the second time a federal court has enjoined efforts by the Fayette County Commission to bar or regulate oil and gas operations. In 2016, the Commission enacted an ordinance seeking to prohibit disposal of oil and gas wastes and operation of underground injection control wells in Fayette County. EQT Production Company filed a legal challenge and the District Court held the ordinance was preempted due to conflict with West Virginia’s state-wide regulation of the oil and gas industry. That case was appealed and affirmed by the Fourth Circuit Court of Appeals in 2017. See EQT Prod. Co. v. Wender, 807 F.3d 322 (August 30, 2017).
Timothy M. Miller and Christopher B. Power of Babst Calland served as counsel for MVP in the recent case, and as counsel for EQT in in the earlier matter. The August 29, 2018 decision in the Mountain Valley Pipeline matter can be found here.
If you have any questions about the Mountain Valley Pipeline decision or its impact on the oil and gas industry, please contact Timothy Miller at (681) 265-1361 or tmiller@babstcalland.com, or Christopher “Kip” Power at (681) 265-1362 or cpower@babstcalland.com.
Click here for PDF.
Babst Calland Facilitates Discussion Regarding Autonomous Vehicles Technology
On Friday, August 31st, The Department of Transportation’s Under Secretary of Transportation for Policy, Derek Kan, joins Congressman Keith Rothfus (PA-12) in Western Pennsylvania to discuss projects of regional importance, as well as emerging autonomous vehicle technology, with local leaders and professionals in the transportation and infrastructure sectors.
Justine Kasznica of Babst Calland’s Mobility, Transport and Safety practice will facilitate the roundtable discussion related to autonomous vehicles and drones among leading manufacturers, technology companies, and universities.
Environmental Alert
(by Jean M. Mosites and Kevin J. Garber)
On August 23, 2018, the Commonwealth Court issued a unanimous opinion invalidating components of the new pre-permit process created in 25 Pa. Code
§§ 78a.1 and 78a.15(f), and (g), pertaining to new “public resources.” The Marcellus Shale Coalition (MSC) challenged the provisions as unlawful and unreasonable, seeking declaratory and injunctive relief. The Marcellus Shale Coalition v. Department of Environmental Protection and Environmental Quality Board, 573 M.D. 2016.
There is no statutory right to judicial review of new regulations in Pennsylvania. Such challenges must proceed in the form of declaratory judgment action in the Commonwealth Court or “as applied” in an appeal before the Environmental Hearing Board on a case-by-case basis. The latter course is duplicative, lengthy and costly, offering only piecemeal relief. MSC challenged portions of the new Chapter 78a regulatory package through a declaratory judgment action in October 2016, seeking relief for its members from regulations beyond the scope of EQB’s authority, regulations with high cost and little discernible benefit.
Count I of MSC’s Petition for Review challenged Sections 78a.15(f) and (g), and the related definitions contained in Section 78a.1 of the Chapter 78a regulations. The provisions created a new pre-permitting process for well permit applicants, providing new notice and comment opportunities in addition to those expressly authorized by Act 13, as adopted in 2012.
Following a hearing for temporary injunctive relief, the Commonwealth Court preliminarily enjoined application of portions of the regulations on November 8, 2016. MSC filed an application for partial summary relief on Count I on August 31, 2017. Pending review of that application, the Pennsylvania Supreme Court affirmed the grant of preliminary injunction relief as to Count I on June 1, 2018. 185 A.3d 985 (Pa. 2018)
In its decision on the merits of Count I, the Court invalidated the new public resources and new public resource agencies that had been created by the EQB beyond its legal authority.
The Court held that by defining “other critical communities” to include “species of special concern,” Section 78a.1 unlawfully expanded the list of public resources identified in Section 3215(c) of Act 13. The Court further held that the regulatory definition of “other critical communities” as including “species of special concern” included in the PNDI database violates the Commonwealth Documents Law, circumventing rulemaking requirements for notice and comment by the public.
The Court also held that the regulatory definitions of “common areas of a school’s property” and “playground” are not of the same general class or nature as their statutory counterparts. The Court declared that the regulatory definition of “playground” is so broad as to defy quantification and compliance, the sheer diversity of which renders the regulation unreasonable. The Court concluded that the addition of these new “public resources” was unlawful.
The Court concluded that the addition of “playground owners” as a public resource agency is void. Given the definition of playground in Section 78a.1, playground owners are not easily identifiable, and they are neither government agencies nor trustees with any duties or obligations under Article I, Section 27 of the Pennsylvania Constitution.
Finally, the Court concluded that Section 78a.15(g)’s requirement that the Department will consider comments and recommendations submitted by municipalities fails absent statutory authority. In Robinson Township v. Commonwealth, the Supreme Court had invalidated Section 3215(d) which provided that “[t]he [D]epartment may consider the comments submitted under section 3212.1 (relating to comments by municipalities and storage operators) in making a determination on a well permit.” 83 A.3d 901 (Pa. 2013)
On the other hand, the Court declined to invalidate Section 78a.15(f) entirely, allowing the Department to seek information from well applicants and comments from public resource agencies as part of its impact consideration required under Section 3215(c) of Act 13, limited in accordance with this decision. The Court also declined to invalidate Section 78a.15(g) of the regulation as unconstitutionally vague, leaving further evaluation of the legal limits of the regulation to be made on a case-by-case basis. The Court also declined to invalidate the regulation for Department’s failure to estimate the costs of mitigation of impacts to public resources, finding no evidence to suggest that the Independent Regulatory Review Commission’s review was thwarted by the lack of a cost estimate.
The Court’s decision confirms that the obligations under Act 13 and Chapter 78a related to public resources for those seeking permits for unconventional oil and gas wells are consistent with those obligations as they existed before Chapter 78a was adopted in October 2016. What is new is the addition of an express regulatory notification obligation that had been part of standard industry practice for the protection of threatened and endangered species and listed resources, such as scenic rivers, national landmarks, and archaeological sites.
If you have any questions about the opinion or its impact on the oil and gas industry, please contact Jean M. Mosites at (412) 394-6468 or jmosites@babstcalland.com, or Kevin J. Garber at (412) 394-5404 or kgarber@babstcalland.com.
Click here for PDF.
Environmental Alert
(by Donald C. Bluedorn II and Gary E. Steinbauer)
On August 21, 2018, the D.C. Circuit Court of Appeals issued its Opinion in Utility Solid Waste Activities Group, et al. v. EPA , addressing the consolidated petitions challenging the United States Environmental Protection Agency’s (EPA) Coal Combustion Residuals (CCR) Rule. The Court largely upheld the challenges raised by environmental groups and denied the challenges raised by industry groups. A copy of the Opinion is available at https://www.cadc.uscourts.gov/internet/opinions. nsf/0/5A6D02C8038BA2CA852582F0004E0D37/$file/15-1219-1746578.pdf.
After years of studying CCR and public pressure stemming from catastrophic failures like the 2008 incident at the Tennessee Valley Authority’s Kingston, Tennessee facility, EPA promulgated the CCR Rule in 2015. For the first time since the federal Resource Conservation and Recovery Act was enacted in 1976, the Rule established minimum national “Subtitle D” criteria for existing and new CCR landfills and surface impoundments operated by electric utilities and independent power plants.
Not surprisingly, the Rule was challenged shortly after it was promulgated by a group of environmental organizations, known collectively as the “Environmental Petitioners,” and several groups of industry groups, known collectively as the “Industry Petitioners.” On June 14, 2016, the Court granted EPA’s motion to remand certain portions of the CCR Rule. Shortly before the Court held oral argument in November 2017, EPA filed a motion seeking voluntary remand on specific provisions of the CCR Rule that remained at issue in the litigation. More than three years after the Rule was challenged, the Court issued a lengthy 72-page opinion largely upholding the challenges of the Environmental Petitioners and denying the challenges of the Industry Petitioners.
Here is a quick summary of the key points from the Court’s Opinion:
- The Court granted EPA’s motion for a voluntary remand on three parts of the Rule:
- The definition of “Coal Residuals Piles” as discussed in 40 C.F.R. § 257.53;
- The 12,400-ton “beneficial use” threshold discussed in 40 C.F.R. § 257.53; and
- The alternative groundwater protection standards discussed in 40 C.F.R.§ 257.95(h)(2).
The Court denied EPA’s motion to remand the provisions pertaining to inactive surface impoundments and landfills at active power plants (40 C.F.R. §§ 257.50(c) and 257.100), and inactive surface impoundments at inactive power plants (40 C.F.R. § 257.50(e)).
- The Court granted the Environmental Petitioners’ challenges on the following points, vacating and remanding the pertinent portions of the Rule:
- EPA failed to require the closure or retrofit of unlined surface impoundments (see 40 C.F.R. § 257.101(a));
- EPA failed in classifying clay-lined impoundments as “lined” (see 40 C.F.R. § 257.71(a)(1)(i)); and
- EPA failed by exempting inactive surface impoundments at inactive power plants from regulation (see 40 C.F.R. § 257.50(e)).
The Court rejected the Environmental Petitioners’ challenges to the Rule’s public notice provisions as untimely.
- The Court denied all of the Industry Petitioners’ challenges, holding that: (a) EPA has authority to regulate inactive impoundments; (b) EPA provided sufficient notice of its intention to apply the aquifer location criteria to existing impoundments; (c) EPA did not arbitrarily issue location requirements based on seismic impact zones; and (d) EPA did not arbitrarily impose temporary closure procedures.
In sum, the Court vacated and remanded significant portions of the CCR Rule and did so in a way that likely will limit EPA’s flexibility on remand.
If you have any questions about the D.C. Circuit’s August 21, 2018 Opinion on the CCR Rule, please contact Donald C. Bluedorn II at (412) 394-5450 or dbluedorn@babstcalland.com, or Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com.
Click here for PDF.
Environmental Alert
(by Lisa M. Bruderly, Janet L. McQuaid, Gary E. Steinbauer)
Late last week, a South Carolina district court reinstated the Obama administration’s 2015 Clean Water Rule (referring to it as “the 2015 WOTUS rule”) in 26 states, including Pennsylvania, Ohio, New York, Maryland, New Jersey and the New England states. The decision overturns a move by the Trump administration earlier this year to delay the applicability date of the 2015 WOTUS rule until early 2020 and brings the Rule’s definition of “waters of the United States” (WOTUS) into effect in these states, at least for the time being. Unless the South Carolina decision is overturned or invalidated, the reinstatement of the 2015 definition of WOTUS could have significant Clean Water Act (CWA) permitting, compliance and enforcement implications for regulated entities in these 26 states, given that the 2015 definition of WOTUS is widely regarded by industry as unreasonably expanding the types of waterbodies under U.S. EPA and U. S Army Corps of Engineers’ jurisdiction.
Background Regarding the Clean Water Rule
Shortly after the August 28, 2015 effective date of the 2015 WOTUS rule, the Rule was challenged in federal courts, including the Sixth Circuit. While the Sixth Circuit preliminarily enjoined the Rule in October 2015 (See Ohio v. United States Army Corps of Eng’rs, 803 F.3d 804 (Oct. 9, 2015)), on January 22, 2018, the Supreme Court invalidated the Sixth Circuit’s preliminary injunction, holding that the district courts, rather than the courts of appeal, had original jurisdiction over the appeals (S.Ct. 16-299). Nat’l Ass’n of Mfrs. v. DOD, 138 S. Ct. 617 (2018).
In anticipation of the Sixth Circuit vacating its preliminary injunction (and the 2015 WOTUS rule coming into effect in all but then 13 states), on January 31, 2018, EPA and the Corps finalized a rule setting an applicability date for the 2015 WOTUS rule of February 6, 2020. This rule, termed by the district court as the “Suspension Rule,” was intended to give the agencies time to reconsider the 2015 WOTUS rule, as they had been directed to do by Executive Order 13778 issued by President Donald Trump in February 2017. In proposing the Suspension Rule, EPA and the Corps solicited comments on adding an applicability date but excluded from the solicitation comments on the definition of WOTUS.
South Carolina District Court Decision
On August 16, 2018, the South Carolina district court overturned the Suspension Rule on motions for summary judgment by the environmental plaintiffs. (See South Carolina Coastal Conservation League et al. v. Pruitt (D.S.C. Case No. 2:18-cv-330)).
In granting summary judgment to the environmental plaintiffs, Judge David Norton (who had been appointed by President George H.W. Bush), held that EPA and Corps had failed to comply with the Administrative Procedures Act (APA) in issuing the Suspension Rule. Judge Norton expressly declined to reach the merits of the 2015 WOTUS rule, but did point to Fourth Circuit precedent, which holds that when an agency suspends later regulations and reinstates previous ones, while “preventing any discussion of the ‘substance or merits’ of either set of regulations” the opportunity for comment “cannot be said to have been ‘a meaningful opportunity’ for comment” within the meaning of the APA. Slip op. at *10 (quoting N. Carolina Growers’ Ass’n, Inc. v. United Farm Workers, 702 F.3d 755, 770 (4th Cir. 2012)).
The district court held that because the definitions of WOTUS under the 2015 rule and the 1980’s regulations of WOTUS were “drastically different,” the agencies were required to solicit and consider comments on the merits of the regulatory definitions. By failing to do so, the district court held that the agencies violated the APA.
The court further held that a nationwide injunction of the Suspension Rule was necessary to provide complete relief, in part because the environmental plaintiffs made a “facial APA challenge,” and in part because the Suspension Rule affects a “vast array of wetlands across the United States,” including those outside South Carolina and the Fourth Circuit. Slip op. at *16-17. In granting the nationwide injunction, the district court quoted U.S. Attorney General Jeff Sessions’ approval of another nationwide injunction and observed, “What is good for the goose is good for the gander.” Slip op. *18, n.4.
The day after the district court enjoined the Suspension Rule, industry and agricultural defendants appealed the court’s decision to the Fourth Circuit. Appellants are seeking a stay of the injunction pending the Fourth Circuit’s decision on the appeal or, in the alternative, until the Fourth Circuit rules on a motion for stay to be filed in that court. A stay, if granted, would temporarily reinstate the Suspension Rule and take the 2015 WOTUS rule back out of effect.
Implications of the South Carolina Decision
For the time being, the South Carolina’s nationwide order enjoining the Suspension Rule means that the 2015 WOTUS rule is in effect in 26 states. These states are:
California Massachusetts Oregon
Connecticut Michigan* Pennsylvania
Delaware Minnesota Rhode Island
Hawaii Mississippi* Tennessee*
Illinois New Hampshire Texas*
Iowa New Jersey Vermont
Louisiana* New York Virginia
Maine Ohio* Washington
Maryland Oklahoma
The six states indicated with an asterisk have motions for preliminary injunctions of the 2015 WOTUS rule pending in the district courts, as discussed in more detail later in this Alert. In all 26 states, however, the South Carolina decision could currently have significant CWA permitting and compliance effects on developers, industry and other entities because the 2015 WOTUS rule, arguably, expands the scope of regulated waters under the jurisdiction of U.S. EPA and the Corps.
For example, if additional WOTUS are identified in areas of impact by development, more complicated, lengthy and expensive Section 404 permitting and mitigation may be required. In some instances, the development may not be permitted at all. As a further example, the compliance point for a wastewater or stormwater discharge may change because the regulating agency may determine that the nearest receiving water is closer than previously determined.
In addition to federal compliance and permitting, states with authorized programs will need to examine the decision to determine how it impacts their regulatory and enforcement programs.
Existing Preliminary Injunctions in 24 States
A district court has preliminarily enjoined the 2015 WOTUS rule pending a decision on the merits in 24 states, and the 2015 WOTUS rule will not go into effect in these states. The 2015 WOTUS rule has been preliminarily enjoined:
- By the North Dakota District Court (3:15-cv-59), in 13 states since August 27, 2015: North Dakota, Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, South Dakota, Wyoming, and New Mexico.
- By the Southern District of Georgia (2:15-cv-79), in 11 states since June 8, 2018: Georgia, Alabama, Florida, Indiana, Kansas, North Carolina, South Carolina, Utah, West Virginia, Wisconsin, and Kentucky. The National Wildlife Federation (NWF) appealed the preliminary injunction to the Eleventh Circuit (Case No. 18-13054).
In these 24 states, the Corps’ and EPA’s 1986 and 1988 regulations and related guidance will continue to define the scope of federal jurisdiction until the district court’s decision on the merits, the agencies finalize a replacement rule, or, if NWF’s appeal to the Eleventh Circuit were to be successful, the court vacates the preliminary injunction.
Status of 2015 WOTUS Rule Litigation
As to the other 26 states, there were reportedly a total of 16 challenges of the 2015 WOTUS rule filed in 13 district courts by more than 80 parties representing the many sides of the WOTUS issues. Some of these challenges were dismissed on jurisdictional grounds, and others have been stayed pending decisions on the jurisdictional issues and the challenges to the Suspension Rule. However, several of the challenges to the 2015 WOTUS rule are now moving forward.
Of particular relevance to this Alert, six states (indicated with an asterisk (*) in the table above), along with business and industry groups, have filed motions in the Southern District of Texas (Case Nos. 3:15-cv-162 and -165) and the Southern District of Ohio (2:15-cv-2467) for preliminary injunctions of the 2015 WOTUS rule, potentially with nationwide reach. Ten states, the District of Columbia and several environmental interest groups have intervened or filed amicus briefs opposing the motions for preliminary injunctions. The Texas and Ohio district courts may rule on the motions for preliminary injunction in relatively short order. The unsuccessful parties in Texas would have the right to appeal to the Fifth Circuit. The unsuccessful parties in Ohio would have the right to appeal to the Sixth Circuit, which is the same court that previously issued a nationwide preliminary injunction in October 2015.
If you would like to discuss how the South Carolina decision may impact your facility’s environmental compliance or the status of pending WOTUS litigation, please contact Lisa M. Bruderly at lbruderly@babstcalland.com or 412.394.6495, Janet L. McQuaid at jmcquaid@babstcalland.com or 412-394-6498, or Gary E. Steinbauer at gsteinbauer@babstcalland.com or 412-394-6590.
Click here for PDF.
The Legal Intelligencer
(by Lizzy McLellan)
With its latest lateral hires, Pittsburgh-based Babst, Calland, Clements and Zomnir is doubling down on emerging technologies, including driverless vehicle technology.
The firm this week hired shareholder Justine Kasznica in its mobility, transport and safety group, as well as its corporate and commercial group. Also joining are intellectual property shareholder Carl Ronald and associate Michael Fink, also in the corporate and commercial group.
Kasznica’s practice is focused on unmanned aircraft, driverless cars and space companies. She and Ronald are both joining from Baer Crossey McDemus, a business and technology law boutique with offices in Philadelphia and Pittsburgh. Fink was an associate at Buchanan Ingersoll & Rooney.
The additions come a month after Babst Calland added William Godfrey, who was a senior U.S. federal regulatory chief at the National Highway Traffic Safety Administration.
“When I was approached by a recruiter who talked about Babst Calland, I had known of them as an oil and gas, environmental firm,” Kasznica said. But she quickly learned that the firm was also investing in its technology-related practices. A major selling point, she said, was that Babst Calland last year had hired Timothy Goodman, a former U.S. Department of Transportation lawyer, in Washington, D.C. He now leads the firm’s mobility, transport and safety group.
“In working with frontier technology, you’re essentially required to try to understand and work alongside policy and regulations that are either nascent, nonexistent or present but need to be adapted,” Kasznica said. “The channel to Washington, D.C., and the fact that Babst Calland has strategically built and focused on building that office … is absolutely critical and critical for the companies that will be working with us.”
Kasznica grew up interested in model aircraft and aviation, she said, then began to learn more about robotics during law school, through a friend of hers at Carnegie Mellon University. That friend ended up starting a company that became Kasznica’s first client when she was an associate at Wolf Block.
She stayed involved in the local startup scene after moving to Pittsburgh in 2008, including her own work as a founding member of ReefBot—a project in which Carnegie Mellon, the Pittsburgh Zoo and PPG Aquarium are working to develop autonomous underwater vehicles.
Ronald practiced as a solo lawyer for nine years, and just joined Baer Crossey earlier this year. His clients include cybersecurity businesses and medical device companies, as well as a number of startups.
“Like Justine, I needed some support for what I do,” he said. And Babst Calland “really [is] putting a huge effort into owning this robotics and autonomous space here in Pittsburgh.”
While he doesn’t work directly on regulatory issues, he said, the firm’s investment in having a Washington, D.C., technology law presence “shows a desire on behalf of the firm, and an emphasis on that practice area.”
“Justine, Carl, and Michael are well-respected, accomplished legal professionals with backgrounds and experience unique to the industries and clients they serve,” Babst Calland managing shareholder Donald Bluedorn said in a statement. “They join forces with Babst Calland’s existing multidisciplinary team focusing on the needs and expectations of startups and companies with emerging technologies.”
Baer Crossey did not respond to a request for comment.
*Reprinted with permission from the 7/11/18 issue of The Legal Intelligencer. © 2018 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
For the full article, click here.
Babst Calland is pleased to announce that five lawyers were selected as 2019 Best Lawyers “Lawyer of the Year” in the Pittsburgh, Pa. and Charleston, W. Va. Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant.
Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, professionalism, and integrity. Those named to the 2019 Best Lawyers “Lawyer of the Year” by BL Rankings include:
Kevin J. Garber, Natural Resources Law “Lawyer of the Year” in Pittsburgh, Pa. – In addition to the “Lawyer of the Year” award, Kevin Garber was also listed in the 2019 Edition of The Best Lawyers in America in Environmental Law, Energy Law, Water Law, and Litigation – Environmental.
Joseph K. Reinhart, Environmental Law “Lawyer of the Year” in Pittsburgh, Pa. – In addition to the “Lawyer of the Year” award, Joseph K. Reinhart was also listed in the 2019 Edition of The Best Lawyers in America in Natural Resources Law, Energy Law, and Litigation – Environmental.
Mark D. Shepard, Litigation – Environmental “Lawyer of the Year” in Pittsburgh, Pa. – In addition to the “Lawyer of the Year” award, Mark D. Shepard was also listed in the 2019 Edition of The Best Lawyers in America in Commercial Litigation and Bet-the-Company Litigation.
Timothy M. Miller, Litigation – Environmental “Lawyer of the Year” in Charleston, W.Va. – In addition to the “Lawyer of the Year” award, Timothy Miller was also listed in the 2019 Edition of The Best Lawyers in America in Commercial Litigation, Bet-the-Company Litigation, Oil and Gas Law, and Litigation – Environmental.
Christopher B. “Kip” Power, Environmental Law “Lawyer of the Year” in Charleston, W.Va. – In addition to the “Lawyer of the Year” award, Kip Power was also listed in the 2019 Edition of The Best Lawyers in America in Natural Resources Law, Energy Law, Commercial Litigation, Mining Law, Oil and Gas Law, Litigation – Regulatory Enforcement (SEC, Telecom, Energy), Litigation – Environmental, Litigation – Land Use and Zoning, and Litigation – Municipal.
In addition, 33 Babst Calland lawyers were selected for inclusion in The Best Lawyers in America, the most respected peer-review publication in the legal profession, in the following 26 practice areas:
- Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law: Norman E. Gilkey
- Bet-the-Company Litigation: Mark D. Shepard, Timothy M. Miller
- Commercial Litigation: Steven F. Baicker-McKee, Matthew S. Casto, Mark D. Shepard, Steven B. Silverman, Timothy M. Miller, Christopher B. Power, Robert M. Stonestreet
- Construction Law: Kurt F. Fernsler, D. Matthew Jameson III, Richard J. Lolli, David E. White
- Corporate Law: Frank J. Clements, Bruce F. Rudoy, Laura Stone
- Employment Law – Management: Richard J. Antonelli
- Energy Law: Kevin J. Garber, Steven M. Green, Blaine A. Lucas, Timothy M. Miller, Christopher B. Power, Joseph K. Reinhart
- Environmental Law: Chester R. Babst III, Steven F. Baicker-McKee, Donald C. Bluedorn II, Dean A. Calland, Kevin J. Garber, Lindsay P. Howard, Janet L. McQuaid, Jean M. Mosites, Christopher B. Power, Joseph K. Reinhart, Robert M. Stonestreet, Michael H. Winek
- Information Technology Law: Steven B. Silverman
- Labor Law – Management: Richard J. Antonelli, John A. McCreary, Jr.
- Land Use and Zoning Law: Blaine A. Lucas
- Litigation – Bankruptcy: Norman E. Gilkey
- Litigation – Construction: Kurt F. Fernsler, D. Matthew Jameson III, James D. Miller, Richard W. Saxe. Jr., David E. White
- Litigation – Environmental: Chester R. Babst III, Steven F. Baicker-McKee, Donald C. Bluedorn II, Kevin J. Garber, Lindsay P. Howard, Timothy M. Miller, Christopher B. Power, Joseph K. Reinhart, Mark D. Shepard
- Litigation – ERISA: Mychal S. Schulz
- Litigation – Labor and Employment: Richard J. Antonelli
- Litigation – Land Use and Zoning: Blaine A. Lucas, Christopher B. Power
- Litigation – Municipal: Christopher B. Power
- Litigation – Regulatory Enforcement (SEC, Telecom, Energy): Christopher B. Power
- Mergers and Acquisitions Law: Bruce F. Rudoy
- Mining Law: Christopher B. Power
- Municipal Law: Blaine A. Lucas
- Natural Resources Law: Kevin K. Douglass, Kevin J. Garber, Christopher B. Power, Joseph K. Reinhart
- Oil and Gas Law: Timothy M. Miller, Christopher B. Power
- Real Estate Law: Charles Saffer
- Water Law: Donald C. Bluedorn II, Kevin J. Garber
Best Lawyers undergoes an authentication process, and inclusion in The Best Lawyers in America is based solely on peer review and is divided by geographic region and practice areas. The list has published for more than three decades, earning the respect of the profession, the media, and the public as the most reliable, unbiased source of legal referrals. Its first international list was published in 2006 and since then has grown to provide lists in over 65 countries.
Pipeline Safety Alert
(by James Curry, Keith Coyle, and Brianne Kurdock)
On July 31, 2018, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published an advance notice of proposed rulemaking (ANPRM) in the Federal Register asking for public comment on whether the Agency should change its class location requirements for gas pipeline facilities. Specifically, PHMSA is seeking comment on alternatives to pipe replacements driven by class location changes. Adopted nearly five decades ago, PHMSA’s class location requirements use population density and surrounding land uses to categorize the potential risk that gas pipeline facilities pose to public safety.
The Agency is asking the public to comment on whether the class location requirements should be updated to account for recent developments in the pipeline industry, particularly the widespread use of integrity management (IM) principles and new technologies. The current regulations require operators to reduce pressure, replace pipe, or conduct hydrostatic pressure testing in response to class location changes, and PHMSA is considering whether other alternatives should be available. Comments must be submitted to the Agency on or before October 1, 2018.
The ANPRM is PHMSA’s first new pipeline safety rulemaking proceeding in the Trump era. The Agency began examining the need to modernize the class location regulations several years ago in response to a mandate that Congress included in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, and PHMSA is framing the ANPRM as an extension of that earlier effort. The Agency’s decision to issue the ANPRM sends a strong signal about its commitment to President Donald Trump’s regulatory reform agenda and willingness to address an issue of longstanding concern to the pipeline industry.
As the pipeline industry indicated in previous comments to PHMSA, the class location concept predates the extension of IM principles to the pipeline industry by several decades, and public safety could be improved if IM measures are implemented as an alternative to pressure reductions, pipe replacements, or hydrostatic pressure testing. PHMSA has identified several topics that should be considered in responding to the ANPRM, including whether pipelines with certain integrity or recordkeeping issues should be excluded from any potential changes to the class location regulations. In commenting on the ANPRM, the pipeline industry may wish to focus on these specific areas, in support of the broader goal of ensuring that PHMSA does not pursue regulatory changes that are unnecessarily restrictive, unduly burdensome, or overly complex.
Where Did Class Locations Come From?
The class location concept first appeared in the 1955 edition of Section 8 of American Standard Code for Pressure Piping (B31.1.8-1955). The B31.1.8-1955 required operators to use one-mile and 10-mile population density indexes, as measured along a half-mile-wide zone laid out along the centerline, to determine the class location of a pipeline segment at the time of construction.
Four class location categories were originally recognized in the B31.1.8-1955:
- Class 1 locations, which included unpopulated areas such as “waste lands, deserts, rugged mountains, grazing land, and farm land”.
- Class 2 locations, which included “[f]ringe areas around cities and towns” and other “farm and industrial areas”.
- Class 3 locations, which included more developed residential or commercial areas with buildings that did not exceed three stories in height.
- Class 4 locations, which included areas with buildings of four or more stories in height, heavy traffic, and other underground utilities.
The B31.1.8-1955 applied a design factor to the construction and testing of a pipeline within each class location. That design factor served to provide a higher margin of safety for pipelines in more densely populated areas and other at-risk locations, like road or highway crossings.
The 1968 edition of B31.8 (B31.8-1968) included new provisions to address class location changes that occurred after pipeline construction. The B31.8-1968 required operators to conduct periodic inspections of higher stress pipelines operating at pressures above 40 percent of specified minimum yield strength (SMYS) to detect potential changes in class location. If an increase in population density indicated that hoop stress of the pipeline was no longer commensurate with the current class location, an operator also had to conduct a study and take appropriate action to confirm or revise the pipeline’s maximum allowable operating pressure (MAOP).
PHMSA incorporated the B31.8-1968’s class location concept in the 1970 final rule that established the original minimum federal safety standards for gas pipeline facilities. In so doing, the Agency eliminated the 10-mile population density index; narrowed the zone that operators had to evaluate for human occupancy purposes to one-eighth mile on either side of the centerline; reduced the number of buildings that served as the limiting factor for Class 1 and Class 2 locations; modified the definitions of a Class 3 and Class 4 location; and introduced the “sliding mile” approach for conducting class location surveys. That sliding mile approach required operators to consider the number of buildings intended for human occupancy within a 1-mile-long “class location unit” that moves continuously along a pipeline’s centerline.
PHMSA also added a provision allowing operators to adjust the boundaries of a pipeline’s class location to accommodate clusters of buildings intended for human occupancy. Without that provision, the presence of a cluster of buildings in a defined area, such as a road crossing, would increase the class location for the entire sliding mile. To avoid that result, PHMSA allowed operators to end the class location designation 220 yards from the nearest building in the cluster.
How Are Class Locations Used Today?
The original class location regulations have remained largely intact since PHMSA issued the 1970 final rule. Four class locations are recognized in the current regulations:
- Class 1, which includes an offshore location, or a class location unit with 10 or fewer buildings.
- Class 2, which includes a class location unit with more than 10, but fewer than 46 buildings.
- Class 3, which includes a class location unit with 46 or more buildings, or an area where the pipeline lies within 100 yards of either a building or a small, well-defined outside area (such as a playground, recreation area outdoor theater, or other such place of public assembly) that is occupied by 20 or more people on at least five days a week for 10 weeks in any 12-month period.
- Class 4, which includes a class location unit where buildings with four or more stories above the ground are prevalent.
Operators have the option of using “the cluster rule” to limit a pipeline’s class location to 220 yards in either direction from the nearest building in the cluster.
Class location affects the design and construction requirements and operation and maintenance activities that must be performed on a pipeline. Class location also plays an important role in establishing MAOP, the highest pressure that a pipeline may experience under PHMSA’s regulations. MAOP is typically based on the pipeline’s design pressure, a percentage of the post-construction test pressure, or the maximum safe operating pressure, whichever is lower. A more conservative safety factor is applied in determining MAOP as the class location increases.
An operator must take certain actions to review and confirm that the MAOP for a pipeline remains commensurate if a segment experiences a change in class location. These actions, which must be completed within two years of the class location change, include (1) reducing the MAOP of the affected pipeline segment, (2) replacing the existing pipe, (3) reconfirming the current MAOP based on existing records, or (4) conducting a new pressure test to re-establish the MAOP.
While occurring with less frequency in recent years, some operators have asked PHMSA for special permits when class location changes occur. A special permit is an order waiving an operator’s obligation to comply with a requirement in the pipeline safety laws or regulations. PHMSA only issues a special permit if the operator demonstrates that granting the waiver would not be inconsistent with pipeline safety. Special permits also include additional terms, conditions, and limitations where necessary to maintain safety, protect the environment, or serve the public interest.
What’s in the ANPRM?
The Agency asked for public comments on ten different questions in the ANPRM, including whether an IM alternative should be available for multi-level class location changes, i.e., from Class 1 to Class 3 or Class 2 to Class 4, and class location changes due to additional structures built outside of clustered areas. PHMSA also asked whether there should be any situations or conditions that would make a pipeline segment ineligible for an IM alternative, e.g., if the pipe is grandfathered, operates above 72 percent SMYS, has been manufactured with material or seam welding processes known to have integrity issues, has failure or leak history, has significant corrosion, has been damaged or lost ground cover, or has a history of seam failures.
In addition, PHMSA asked whether there should be maximum diameter, pressure, or potential impact radius limits on an operator’s ability to use integrity management measurements, and whether the IM alternative should only be available to operators that have traceable, verifiable, and complete records. The Agency raised other topics as well, including whether the conditions from class location change special permits should be incorporated into the regulations and whether operators consult growth and development plans to avoid costly pipeline change-outs. Finally, PHMSA asked for more detailed information about the amount of pipe currently being replaced due to class location change-outs and the total costs associated with class location compliance.
What’s Next?
The ANPRM is the first step in what is likely to be a lengthy rulemaking process. After reviewing the initial round of public comments, PHMSA may issue a notice of proposed rulemaking (NPRM) proposing regulatory changes. PHMSA would need to provide an opportunity for public comment and present the proposal to the Gas Pipeline Advisory Committee (GPAC), the federal advisory committee that reviews the Agency’s proposed changes to the gas pipeline safety regulations. Once the GPAC process is complete, PHMSA may issue a final rule. While the exact course and timing cannot be predicted with certainty, it is likely that the Agency will need several years to complete this rulemaking process.
Click here for PDF.
Environmental Alert
(by Lisa M. Bruderly and Gary E. Steinbauer)
Nearly one year after officially proposing to repeal the Clean Water Rule (CWR), the landmark 2015 Obama Administration rule that redefined “waters of the United States” and arguably expanded the geographic scope of the Clean Water Act (Act), the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers (collectively, the “Agencies”) have clarified the legal basis for, and are soliciting additional comments related to, the proposed repeal. On July 12, 2018, the Agencies published a lengthy Supplemental Notice of Proposed Rulemaking (Supplemental Notice) in the Federal Register to clarify, supplement, and seek additional comment on their proposal to permanently repeal the CWR and recodify the regulatory definition of “waters of the United States” that existed before 2015. 83 Fed. Reg. 32227. Interested parties have until August 13, 2018 to submit comments in response to the Supplemental Notice.
As compared with the initial July 2017 proposal (82 Fed. Reg. 34899), the Supplemental Notice is rich in detail and includes significantly more legal analysis and citations, as well as references to and evaluations of documents included in the administrative record for the CWR. For almost every new or more detailed justification for the proposed repeal, the Agencies request comment. Some of the arguments and reoccurring themes for which the Agencies request comment include:
- The CWR exceeds the Agencies’ authority under the Act by (1) failing to give sufficient effect to the statute’s use of the term “navigable” to define the Agencies’ jurisdiction and (2) focusing too much on the biological and environmental importance of wetlands.
- The CWR is a misapplication of the “significant nexus” test for jurisdiction under the Act established by soon-to-be-retired U.S. Supreme Court Justice Anthony Kennedy in the 2006 decision in Rapanos v. United States, 547 U.S. 715 (2006).
- The CWR upsets the federal-state balance contrary to one of the Act’s identified Congressional policies “to recognize, preserve, and protect the primary responsibilities and rights of states” to plan the development and use of their water and land resources. 33 U.S.C. § 1251(b).
- Specific findings and assumptions used by the Agencies to support the promulgation of the CWR were incorrect.
If you have any questions about the Supplemental Notice and the Agencies’ requests for comments, please contact Lisa M. Bruderly at (412) 394-6495 or lbruderly@babstcalland.com, or Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com.
Click here for PDF.
Alert: PA Environmental Hearing Board Update
(by Jean M. Mosites and Kevin J. Garber)
On July 2, 2018, the Pennsylvania Environmental Hearing Board issued an opinion and order related to a discovery dispute, concluding that no discovery was appropriate in a third-party appeal from an amended settlement agreement under the Hazardous Sites Cleanup Act (HSCA).
The Pennsylvania Department of Environmental Protection signed a prospective purchaser agreement in 2005 with a developer to clean up an abandoned tube manufacturing facility in Chester County, amended the agreement in 2007 and 2010, and published notice of the agreement in 2017 as a settlement under HSCA. Section 1113 of HSCA provides that an appeal of a HSCA settlement agreement must be decided on the administrative record, which is limited to: (1) PADEP’s notice of the proposed settlement, (2) written comments to the settlement, and (3) PADEP’s response to those comments. The Delaware Riverkeeper sought more.
The EHB determined that a party seeking discovery in an administrative record review appeal under Section 1113 of HSCA bears a heavy burden to show discovery is necessary. None of the Delaware Riverkeeper arguments—based on Article I, Section 27 of the Pennsylvania Constitution, as well as allegations of improper procedure and bad faith—met that burden. The full opinion can be found here.
Click here for PDF.
The PIOGA Press
(by Blaine A. Lucas and Robert Max Junker)
In Gorsline, court declines to rule on broader issue of compatibility with uses in residential and agricultural zoning districts, but suggests that municipalities may permit unconventional natural gas drilling in any and all zoning districts
The Pennsylvania Supreme Court published its long-awaited opinion in Gorsline v. Board of Supervisors of Fairfield Township on June 1. Although the majority reversed the Commonwealth Court’s decision affirming the granting of a conditional use for an unconventional natural gas well pad, it did so in a narrow holding, finding that Inflection Energy, LLC did not present enough evidence before the Fairfield Township Board of Supervisors establishing that its proposed unconventional gas well pad was similar to other uses allowed in the township’s Residential-Agricultural Zoning District. Unlike most zoning ordinances, the township’s zoning ordinance did not specifically authorize oil and gas wells. Instead, Inflection had relied upon a “savings clause,” which allowed uses “similar to” the other uses specifically allowed in the R-A District.
Despite headlines and press releases touting the Gorsline decision as a wholesale rejection of oil and gas development in residential and agricultural zoning districts, its ruling was much more limited. In fact, language in both the Gorsline majority and dissenting opinions largely rejects the post-Robinson Township assertion of many shale gas opponents that natural gas wells must be relegated to industrial zoning districts and are fundamentally incompatible with residential or agricultural zoning districts.
Background
In 2013, Inflection submitted a conditional use application to the board seeking to construct a natural gas well site in the township’s R-A District. After two nights
of hearings on Inflection’s application, the township granted the application under the “savings clause” and subject to 14 additional conditions.
Neighboring landowners appealed the township’s approval, arguing that a natural gas well site is an industrial activity which is fundamentally incompatible with the uses allowed in the R-A District and that it should be permitted only in the township’s industrial zoning district. After argument and briefing, and without taking any additional evidence, the Lycoming County Court of Common Pleas granted the neighbors’ appeal, thereby invalidating the township’s conditional use approval. The lower court rejected the township’s conclusion that Inflection’s natural gas well site is similar to and compatible with the other uses permitted in the R-A District. Inflection appealed to the Commonwealth Court.
On September 14, 2015, the Commonwealth Court overturned the lower court in an opinion addressing the compatibility of natural gas development in a zoning district consisting of mixed residential and agriculture uses. The Commonwealth Court agreed with the board’s decision, finding that Inflection’s proposed well pad was similar to and compatible with a “public service facility” use and an “essential service” use, based on its decision in MarkWest Liberty Midstream & Resources, LLC v. Cecil Township Zoning Hearing Board. The Commonwealth Court also noted that the township already permitted four gas well pads within the R-A District, which demonstrated that the use was compatible with other uses in that district.
The Supreme Court granted the neighbor’s petition for allowance of appeal to consider four issues, including whether “the Commonwealth Court’s decision below, that an industrial shale gas development is similar to and compatible with uses expressly permitted in a[n] RA District, conflicts with this Court’s decision in Robinson Township?”
The majority opinion
Despite all the attention the Gorsline case garnered leading up to the Supreme Court’s decision, the actual holding is that the board erred in granting a conditional use permit under the township zoning ordinance’s savings clause because of differences between the proposed well pad and those uses expressly allowed in the township’s R-A District and Inflection’s failure to address these perceived differences through the development of a factual record. Justice Christine Donohue authored the majority opinion joined by Chief Justice Thomas J. Saylor, Justice David N. Wecht, and Justice Debra McCloskey Todd.
In reversing the Commonwealth Court, the majority found that the board’s decision did not contain findings of fact with respect to similarity of use. The majority also disagreed with the Commonwealth Court’s determination that the board had made witness credibility determinations, and instead found that there was no substantial evidence presented by Inflection to support the board’s conclusion that Inflection satisfied its burden of proof.
The majority took no issue with the decision in MarkWest, a case in which the Commonwealth Court determined that a compressor station was of the same general character as an “essential service” permitted by Cecil Township’s unified development ordinance.
However, the majority found that the Commonwealth Court’s reliance on MarkWest was error. Instead, the majority reviewed the record developed before the board and the text of the township’s zoning ordinance and faulted the board for approving the application on a “clearly inadequate evidentiary record” with “no meaningful interpretive analysis of the language of its existing zoning laws.”
In analyzing the non-residential uses permitted in the R-A District, the majority looked at features that complemented and served the other residents within the district and the public nature of such features and activities. In the majority’s view, the well pad was intended solely for Inflection’s own commercial benefit and did not provide services to the residential and agricultural development in the township. Notably absent from the majority’s analysis is any discussion of the bonus payments and royalty streams that accrue to residents within the unit or the impact fees received by the township.
The majority also disagreed with the Commonwealth Court’s reliance on the fact that the board already had approved four other well pads in the R-A District. The majority again faulted the lack of information about these other well pads in the record and explained that the only inquiry under a savings clause should be about the uses permitted by the zoning ordinance. To decide otherwise would elevate a single approval into a zonewide amendment of the “savings clause” language.
Due to the determination that Inflection did not meet its burden of proof and that the board should not have approved Inflection’s application, the majority declined to address the closely watched constitutional question in its allowance of appeal—objectors’ claimed violations of substantive due process rights and the Environmental Rights Amendment based on their interpretation of Robinson Township. However, the majority opinion concluded with strong language rejecting the objectors’ position and recognizing that zoning decisions are inherently local matters and local municipalities are empowered to “permit oil and gas development in any or all of its zoning districts.” In addition, the majority cautioned that its narrow holding “should not be misconstrued as an indication that oil and gas development is never permitted in residential/agricultural districts, or that it is fundamentally incompatible with residential or agricultural uses.”
The dissenting opinion
Justice Kevin M. Dougherty authored a dissenting opinion, joined by Justice Max Baer and Justice Sallie Updyke Mundy. Justice Dougherty’s dissent opened by questioning why the majority avoided the important question on the applicability and scope of Robinson Township to the facts of the case and instead engaged in mere error review when the constitutional question was the sole issue of first impression accepted by the court. In the dissent’s view, this constitutional question is answered by finding no conflict between the Commonwealth Court’s decision and Robinson Township.
The dissent took issue with the majority’s statement that oil and gas development is a “purely industrial use.” Justice Dougherty acknowledged that the actual use of a producing well pad is a passive use, and that any industrial-like activities during construction and drilling are only temporary and do not make a well pad an industrial use of property. The dissent viewed the majority’s reading of the “savings clause” as unduly restrictive and stated that the majority misapprehended the object of the “similar to” requirement. The dissent would have affirmed the Commonwealth Court’s determination that the board correctly granted Inflection’s application.
On the Robinson Township question of whether natural gas development is inherently incompatible with residential and agricultural uses, the dissent cited the Agricultural Area Security Law and the Farmland and Forest Land Assessment Act (“Clean and Green”) as an acknowledgement by the General Assembly that oil and gas development is not per se incompatible with agricultural uses. The dissent also cited the court’s decision in Huntley & Huntley, Inc. v. Borough Council of the Borough of Oakmont as evidence that the court has not ruled that natural gas development is always inherently incompatible with residential uses. The dissent faulted the objectors for reading Robinson Township too broadly when they claim that natural gas development is inherently incompatible with residential uses, and its impacts can never be mitigated through imposition of conditions.
Impact on current and future cases and industry practices
The Supreme Court did not give anti-shale activists the bright-line rule they were hoping for in Gorsline, and, to the contrary, criticized the absolutist position advocated by those who read Robinson Township as mandating that oil and gas development be restricted to industrial zoning districts.
The next step for the Supreme Court will be to address the Commonwealth Court’s decision in Delaware Riverkeeper Network v. Middlesex Township Zoning Hearing Board, a substantive validity challenge to a township’s zoning ordinance. The Commonwealth Court affirmed the rulings by the local zoning hearing board and Butler County Common Pleas Court, which found that oil and gas development was compatible with residential and agricultural zoning districts. In November 2017, the Supreme Court ordered that the petition for allowance of appeal filed in that case be placed on hold pending disposition of Gorsline. The Commonwealth Court also will have the opportunity to address Gorsline in the pending appeal of Frederick v. Allegheny Township, a substantive validity challenge to a local zoning ordinance, argument on which was heard by the court en banc on February 7.
Regardless of the outcome of these other cases, the primary takeaway from Gorsline is that in those limited instances where an operator encounters the potential applicability of a savings clause, great care should be taken to analyze the ordinance requirements and build an appropriate record. In fact, where local government officials are receptive to industry activities, the better approach might be to ask the municipality to amend its zoning ordinance so as to eliminate the need to rely on a savings clause.
More broadly, the Gorsline decision underscores the importance of developing an extensive record for all local zoning hearings, even where oil and gas uses are expressly authorized. Although a local zoning body may appear to be favorably inclined toward the industry generally or a zoning application specifically, all it takes, like in Gorsline, is one objector to attack the zoning approval.
Click here for PDF.
Pipeline Alert
(by James Curry, Keith J. Coyle and Brianne K. Kurdock)
On June 21, 2018, the U.S. House of Representatives, Transportation and Infrastructure Committee, Subcommittee on Railroads, Pipelines, and Hazardous Materials, held an oversight hearing related to the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) implementation of the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (2016 Act) and its predecessor, the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (2011 Act).
The primary focus of the hearing, the first since the appointment of Howard “Skip” Elliott as the new PHMSA Administrator, was the status of several outstanding statutory mandates from the 2011 Act. Those mandates directed PHMSA to make appropriate changes to the federal pipeline safety regulations to address the National Transportation Safety Board’s (NTSB) recommendations following its investigation of two significant pipeline accidents that occurred in 2010.
The members of the Subcommittee expressed bipartisan concern with PHMSA’s failure to satisfy the mandates from the 2011 Act, which largely address concerns that the NTSB identified following its investigation of pipeline accidents that occurred nearly eight years ago. As Administrator Elliott acknowledged during the hearing, PHMSA has not yet made all of the changes necessary to address the mandates in the 2011 Act. Administrator Elliott indicated that some of the mandates will be addressed in a rule relating to the safety of hazardous liquid pipelines that is in the final stages of review.
Other mandates will be addressed in a rule relating to the safety of gas transmission lines that PHMSA recently presented to the Gas Pipeline Advisory Committee, the federal advisory committee that reviews proposed changes to the gas pipeline safety regulations, for consideration. Another mandate dedicated to the use of valves and rupture detection equipment will be addressed in a separate rule that is in a much earlier stage of development. The mandates also included certain statutory deadlines for taking action that PHMSA did not meet. For these reasons, the oversight hearing was contentious at times, despite the fact that Administrator Elliott has only been in his position at PHMSA since October 2017.
Additional hearings in the U.S. House of Representatives and U.S. Senate are likely to occur in the coming months as Congress considers the next reauthorization of the Pipeline Safety Act. The 2016 Act only authorized the pipeline safety program through September 30, 2019, and new legislation to extend that authorization for future years should be introduced next year. While traditionally a bipartisan exercise, the results of the November 2018 midterm elections could affect the provisions that end up in that legislation. Current events, particularly pipeline incidents, and PHMSA’s progress in addressing the mandates from the 2011 Act are two other factors that may also play a role. Proposed amendments that did not garner sufficient support in the past could resurface as well. The pipeline industry should consider these factors in developing a strategy for addressing reauthorization.
For additional information on pipeline safety matters, please contact Jim Curry at 202-853-3461 or jcurry@babstcalland.com, Keith Coyle at 202-853-3460 or kcoyle@babstcalland.com, or Brianne Kurdock at 202-853-3462 or bkurdock@babstcalland.comin the firm’s Pipeline and HazMat Safety Practice Group.
Click here for PDF.
Public Sector Alert
(by John A. McCreary, Jr., Robert Max Junker and Stephen L. Korbel)
In Janus v. AFSCME Council 31, ___ U.S. ___, No. 16-1466 (2018) the U.S. Supreme Court declared that Illinois’ statutory requirement for nonmembers to pay an “agency fee,” intended to support the collective bargaining related expenses of unions representing public employees, violated the First Amendment. The Janus Court reasoned that because public sector bargaining addressed and affected such matters as the allocation of scarce public resources and the cost of public services, “the union speech at issue in this case [collective bargaining and grievance/arbitration proceedings] is overwhelmingly of substantial public concern,” slip op. at 31. The compulsory payment required by Illinois law, therefore, fell squarely within the Court’s precedent prohibiting governmental compulsion of, or interference with, individual expression. The Court concluded that Illinois’ requirement that nonmembers pay agency fees to unions “violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern.” Janus, slip op. at 1. The Court remanded the case to the lower court for further proceedings, which are likely to consist entirely of a damages calculation.
The Janus decision invalidates Pennsylvania’s Public Employee Fair Share Fee Law, 43 Pa.C.S.A. §1102.1 et seq. (Fair Share Law). The Fair Share Law permits public employers and the unions representing their employees to negotiate the payment of “fair share fees” by nonmembers: “If the provisions of a collective bargaining agreement so provide, each nonmember of a collective bargaining unit shall be required to pay to the exclusive representative a fair share fee.” 43 Pa.C.S.A. §1102.3. The “fair share fee” is defined as the “regular membership dues required of members of the exclusive representative, less the cost for the previous fiscal year of its activities or undertakings which were not reasonably employed to implement or effectuate the duties of the employee organization as exclusive representative.” The law requires any public employer that has agreed to fair share to deduct the amount certified by the union from the pay of each nonmember identified by the union. Id. §1102.4(a).
Janus is clear that Pennsylvania’s law does not survive:
For these reasons, States and public-sector unions may no longer extract agency fees from nonconsenting employees. Under Illinois law, if a public-sector collective bargaining agreement includes an agency-fee provision and the union certifies to the employer the amount of the fee, that amount is automatically deducted from the nonmember’s wages. §315/6(e). No form of employee consent is required.
This procedure violates the First Amendment and cannot continue. Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay. By agreeing to pay, nonmembers are waiving their First Amendment rights, and such a waiver cannot be presumed. [Citations omitted]. Rather, to be effective, the waiver must be freely given and shown by “clear and compelling” evidence. [Citations omitted]. Unless employees clearly and affirmatively consent before any money is taken from them, this standard cannot be met.
Slip op. at 48.
All public employers in Pennsylvania therefore need to immediately stop deducting fair share fees from the pay of employees who are not members of the union. Further, public employers and public sector unions should anticipate litigation from nonmembers individually or as a class seeking to recover fair share fee payments previously made.
For more information regarding the Janus decision, please contact John A. McCreary, Jr. at 412-394-6695 or jmccreary@babstcalland.com, Robert Max Junker at 412-773-8722 or rjunker@babstcalland.com, or Stephen L. Korbel at 412-394-5627 or skorbel@babstcalland.com.
Click here for PDF.
ASA’s The Contractor’s Compass
(by Marc J. Felezzola)
Although every subcontractor begins a project with full expectations of a successful project for which it will receive timely payment, the reality is that some projects encounter financial difficulties. Fortunately, the law provides subcontractors with security against those difficulties in the form of mechanic’s lien or payment bond rights (or sometimes both). This security is not absolute, however, and there are many potential pitfalls along the way about which subcontractors should be aware to ensure their right to the security provided by a lien and/or payment bond is not inadvertently lost. This article provides a general overview of the potential ways in which a subcontractor may lose its payment security during a construction project and provides some general guidance on how to avoid them.
The general concept underpinning a mechanic’s lien is that construction of a building or other structure improves the value of the real estate on which the building or structure is constructed, and therefore, those who furnish the labor and materials for the construction (collectively, “constructors”) should be allowed to put a lien on the title to the property as security for payment for their work. Importantly, the lien is against the property itself rather than the property owner, and therefore, the property serves as the collateral securing the debt owed to the constructor. Thus, in the event of nonpayment, a constructor with a mechanic’s lien can foreclose on the lien and force the sale of the property. The proceeds from that sale will then be used to pay the debt owed the constructor.
This mechanism of providing constructors security works well for privately owned property, where a change in ownership will not have a significant detriment to the general public. However, publically owned property presents a different situation. Take an elementary school for example. If an unpaid constructor were allowed to lien and sell the elementary school, to recover an unpaid debt, the sale would (or at least could) deprive the community of its school, resulting in a significant loss to the general public, not just the public owner. Thus, states and the federal government have enacted laws requiring posting of performance and payment bonds for virtually all public construction projects. A performance bond protects the public owner (and the public generally) from contractor default, whereas a payment bond serves as alternative security replacing their mechanic’s lien rights in the event of nonpayment. (Although all states have some form of statute requiring payment bonds for public projects, some states also allow a subcontractor to file a lien against the public funds earmarked for paying for the project.)
Thus, generally speaking a subcontractor or material supplier (collectively, a “subcontractor”) always should have security for the work it performs. For a private project, that security comes in the form of a mechanic’s lien. For a public project, the security generally comes in the form of a payment bond. This security, however, is not absolute, and if one is not cautious, it can be lost before the subcontractor or material supplier ever mobilizes or makes its first delivery to the job site. Thus, a contractor must be careful at to preserve its rights at the time of contract formation, mobilization, and completion of the project.
Contract Formation: Do Not Waive Lien Rights in Your Subcontract and/ or Confirm Requisite Bond Has Been Posted
Virtually every subcontractor has received a subcontract or purchase order with language purporting to waive all of its mechanic’s lien rights against the project. This type of lien wiaver is often referred to as a “blanket lien waiver” or “upfront lien waiver” because it covers work before it is performed and states something like “subcontractor hereby waives and releases any and all liens or right of liens or mechanic’s liens for any labor or materials furnished under this subcontract.”
Blanket lien waivers are enforceable in approximately 20 states, and in those states, signing a subcontract with a blanket lien waiver will automatically deprive a subcontractor of mechanic’s lien rights all of its work. Thus, in states where blanket lien waivers are valid, subcontractors who sign contracts containing them will have no payment security for their work unless the project is bonded.
It is much less common for a subcontractor to lose its payment bond rights before starting a project. However, although all states have some law requiring prime contractors to post payment bonds as security for subcontractor work, not all of those laws provide consequences in the event the prime contractor does not actually post a payment bond. For example, although Pennsylvania law requires payment bonds for all public projects, the law provides no penalty in the event the prime contractor simply fails to post the requisite payment bond, and Pennsylvania courts have held a subcontractor has no redress against the government for failing to ensure the required bond was posted. Thus, at least in Pennsylvania, a subcontractor working on a public project may find itself working without payment security despite laws requiring payment bonds. Therefore, subcontractors should always obtain a copy of the payment bond for a public project before commencing work to make sure it has the alternative security required by law.
Commencing Work: Adhere to All Preliminary Notice Requirements
Avoiding blanket lien waivers and ensuring the prime contractor posted the requisite bond is often only the first step in ensuring a subcontractor will have payment security for its work. In fact, in many states, a subcontractor can still lose its payment security very early in the project by failing to provide statutorily required preliminary notice of its work on the project.
Increasingly, states are enacting requirements that subcontractors (or at least second-tier subcontractors) and material suppliers provide notice (often in the form of a “notice of furnishing”) prior to or soon after commencing work on a project. Preliminary notices are intended to alert the project owner, prime contractor, and/or surety of the lower tier subcontractors who are contributing to the project. The purpose behind these requirements is a good one—if the owner is aware of the lower-tier subcontractors, it can make sure they are receiving timely payment for their work (usually by requiring the prime to provide partial lien waivers from lower tier subcontractors before issuing the next progress payment). However, consequence of these requirements is that the subcontractor’s failure to provide them often results in the loss of mechanic’s lien or payment bond rights.
Thus, it is absolutely imperative that subcontractors check the laws of the state where the project is being built prior to commencing work on the project to check for and ensure compliance with any preliminary notice requirements. Doing so will ensure the subcontractor preserves its mechanic’s lien or payment bond rights for the project.
Punching-Out: Meet All Notice and Filing Deadlines
Finally, every state’s lien or bond law sets forth detailed requirements for how and when to perfect a mechanic’s lien or payment bond claim. These requirements vary from state to state, but they typically include some or all of the following: a requirement that second-tier (and lower) subcontractors provide some advanced notice to the owner, prime contractor, and/or surety prior to filing or recording a claim; a formal filing or recording of a claim with the court or recorder’s office; initiation of legal proceedings to prosecute or foreclose on the claim. Each step in the process will usually have its own deadline and failure to meet every deadline will likely result in a loss of the payment security.
Again, no two states are identical, so it is imperative to check the law of the state where the project is located at the time a subcontractor is completing its work to determine the applicable requirements for perfecting their lien or payment bond claim. Although there is no substitute for checking the current statutes, the ASA’s Web site, www.asaonline.com, is a valuable resource for subcontractors and contains information about each state’s mechanic’s lien and payment bond claim perfection requirements.
Environmental Alert
(by Robert M. Stonestreet and Christopher B. Power)
On West Virginia’s 155th birthday, the Fourth Circuit Court of Appeals vindicated the state’s approach to developing plans for improving the quality of its waterways. The appeals court reversed a lower court decision that concluded West Virginia had failed to timely submit such plans to the federal Environmental Protection Agency (EPA) for approval, which could have required the EPA to supplant West Virginia’s role in developing those plans. A brief background on the applicable law and circumstances of the litigation will help provide context for understanding the ruling.
The federal Clean Water Act requires states who administer approved water pollution control programs to take certain actions and make a multitude of different submissions to the EPA reflecting those actions. These submissions include proposed water quality standards, draft permits, reports on the health of a state’s waterways, and action plans to address waterways determined to be impaired. The Clean Water Act requires the EPA to approve or disapprove certain of these state submissions, such as plans to improve the quality of impaired waters through the development of “total maximum daily loads” for the waterbody (TMDLs). TMDLs are essentially calculations of the maximum volume of certain pollutants that can be discharged into a waterway and still allow the waterway to achieve compliance with water quality standards – i.e. no longer be impaired. Once a TMDL is adopted, a “waste load allocation” based on the TMDL is used to calculate effluent limits for those who hold permits to discharge into that waterbody so that the total cumulative discharged concentration of the pollutant at issue does not exceed the TMDL.
Many TMDLs address numeric water quality standards, which as the name suggests, are numeric concentrations of various substances that may exist in waterways without impairing the designated uses of the water. Another type of water quality standard is a narrative criteria. Rather than establish a maximum numeric value for a substance, narrative criteria prohibit certain conditions from existing in a waterway, such as foam or oily slicks, sludge deposits, or taste or odor that adversely affects use of the water. In West Virginia, narrative standards also include a biological component that generally prohibits “materials in concentrations which are harmful, hazardous or toxic to . . . aquatic life” and conditions that have a “significant adverse impact” on the biological components of aquatic ecosystems.
If the EPA disapproves a state’s proposed TMDL, the Clean Water Act requires the EPA to proceed with promulgating the TMDL for that state. What happens if a state does not submit TMDLs, or does not submit TMDLs to address certain conditions believed to cause impairment of a waterbody? May the EPA, or a court, deem the failure to submit a TMDL a “constructive submission” of no TMDL that the EPA must approve or disapprove, and thus potentially trigger the EPA’s obligation to promulgate the TMDLs?
In 2015, a coalition of four environmental advocacy groups lead by the Ohio Valley Environmental Coalition (OVEC) filed suit against the EPA seeking a court order that West Virginia made such a “constructive submission” of no TMDLs to address streams failing to meet West Virginia’s biological component of the narrative water quality standards due to “ionic toxicity.” Ionic toxicity refers to the adverse impact on certain aquatic life from the concentration of dissolved minerals in the water (often referred to as conductivity). Permitted discharges from mining operations, construction activity, wastewater treatment plants, and other industrial operations can contain concentrations of dissolved minerals exceeding the background levels present in a receiving waterbody.
At the time OVEC filed suit in 2015, West Virginia estimated that TMDLs would be submitted to the EPA on a rolling basis during the years 2020 to 2025 to address biological impairment of waterways due to ionic toxicity. OVEC argued that West Virginia’s failure to develop such TMDLs sooner amounted to “constructive submission” of no TMDLs for ionic toxicity that the EPA must approve or disapprove. One reason for the projected timeline was the state’s ongoing effort to adopt a new methodology for evaluating the biological health of a waterbody. Prior to 2012, West Virginia used the “West Virginia Stream Condition Index” (WVSCI) methodology to identify biologically impaired waters. WVSCI focuses on populations of certain benthic macroinvertebrate organisms in a waterbody to evaluate biological health, such as insects, crayfish, worms, mussels, etc. In 2012, the West Virginia Legislature amended the West Virginia Water Pollution Control Act to require the biological health of state waterways be evaluated using a methodology that employs a more holistic and broader evaluation of stream health than WVSCI. When OVEC filed suit in 2015, West Virginia was still working toward development of a methodology that would comply with this legislative directive.
In February, 2017, the District Court for the Southern District of West Virginia, Judge Robert C. Chambers presiding, ruled in OVEC’s favor and directed the EPA to take action to approve or disapprove West Virginia’s “constructive submission” of no TMDLs for ionic toxicity. The EPA then approved this “constructive submission” and reached an agreement with West Virginia on a schedule for the state to complete its ionic toxicity TMDLs no later than June 30, 2026. At the same time, the EPA also appealed the district court’s order on the grounds that West Virginia had not made a “constructive submission” of no TMDLs.
In its June 20, 2018 decision, a unanimous three-judge panel of the Fourth Circuit Court of Appeals reversed the district court’s decision. In its opinion, the court observed that other federal appeals courts have recognized the “constructive submission” doctrine in litigation against the EPA involving delays or failures by state governments to submit TMDLs. In only one case, however, had a court determined that a state’s failure to submit TMDLs qualified as “constructive submission” of no TMDLs. In that case, the state had not submitted a single TMDL in 10 years and had not even completed the first stage of TMDL development. By contrast, West Virginia had submitted a number of TMDLs over the years to the EPA for approval, and was working toward development of ionic toxicity TMDLs on a reasonable schedule.
In reaching its decision, the Fourth Circuit did not adopt or reject the “constructive submission” doctrine. Rather, the court ruled that if the doctrine were to apply, it would not be satisfied in this case for three reasons. First, West Virginia has submitted a number of TMDLs to the EPA to address specific pollutants that likely contribute to biological impairment. Second, the state is working in good faith to comply with the legislative directive to change the methodology for evaluating the biological health of waterbodies. And third, West Virginia has a credible plan with the EPA to develop TMDLs to specifically address ionic toxicity.
The court cautioned that while West Virginia had not yet made a “constructive submission” of no TMDLs for ionic toxicity, further delays in the implementation schedule may change that conclusion.
This decision should be considered a victory for West Virginia’s efforts to address the complex issue of biological impairment and ionic toxicity, which has broad implications for all industrial and commercial operations that hold water discharge permits. The decision also supports the role of the states, rather than the EPA, as the primary regulators of water quality within their borders.
For questions about the Fourth Circuit’s decision or the Clean Water Act in general, 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.
Click here for PDF.