Articles, Alerts & Perspectives

Divided Commonwealth Court Holds Local Agencies are Prohibited from Adding Non-Emergency and Non-De Minimis Agenda Items to the Posted Agenda

Public Sector Alert

(By Max Junker and Anna Jewart)

On June 30, 2021, Governor Tom Wolf signed Senate Bill 554 into law as Act 65 of 2021 which amended the Pennsylvania Sunshine Act, 65 Pa.C.S. §§701-716, (Sunshine Act) to require that agencies subject to the Act make their meeting agendas available to the public, and set restrictions on taking official action on any item not listed on the agenda as published. These changes took effect on August 30, 2021.

Act 65 amended Section 709 of the Sunshine Act to require that agencies post a copy of the agenda for the meeting, including a listing of each matter of agency business that will be or may be the subject of deliberation or official action on its official website, at the meeting location, and at its principal office no later than 24 hours in advance of the time of the convening of the meeting. In addition, Act 65 added a new Section 712.1 which identified the instances in which official action could be taken on an item not included in the posted agenda. Early interpretations of Section 712.1 indicated that the new subsection (e) could be used to add any item to the agenda so long as it was added by majority vote and the agenda was revised and reposted within 24 hours of the meeting.  Schmidt v. Ringgold School District, No. 2022-0128 (Ct. Comm. Pls. Washington Co. Dec. 9, 2022).

However, in a reported decision issued November 8, 2023, the Commonwealth Court, in Coleman v. Parkland School District, No. 1416 C.D. 2022 (Pa. Cmwlth. Nov. 8, 2023) rejected this interpretation and determined that in order for official action to be taken on an item not included on the agenda posted in accordance with Section 709 of the Sunshine Act, the issue must meet one of the three enumerated exceptions identified in Sections 712.1(b),(c) or (d) of the Sunshine Act.

Under Coleman and Section 712.1(a) of the Sunshine Act, 65 P.S. §712.1(a), an agency may not take official action on a matter of agency business if that matter was not included in the posted agenda unless it qualifies as:

712.1(b): a matter that relates to a real or potential emergency involving a clear and present danger to life or property; or

712.1(c): a matter brought to the attention of the agency within the 24-hour period prior to the meeting, provided the matter is de minimis in nature and does not involve the expenditure of funds or entering into any contract or agreement; or

712.1(d): a matter raised by a resident or taxpayer at the meeting to be considered for the purposes of referring it to staff, researching it for inclusion at a later meeting, or for full consideration where it is de minimis and does not involve the expenditure of funds or entering into any contract or agreement.

The Court in Coleman clarified that in order for an agency to add an item to its agenda for official action it must first qualify under Sections 712.1(b), (c) or (d) and then the agency must vote to add the item to the agenda, by majority vote, in accordance with Section 712.1(e) which states:

Upon majority vote of the individuals present and voting during the conduct of a meeting, an agency may add a matter of agency business to the agenda. The reasons for the changes to the agenda shall be announced at the meeting before any vote is conducted to make the changes to the agenda. The agency may subsequently take official action on the matter added to the agenda. The agency shall post the amended agenda on the agency’s publicly accessible Internet website, if available, and at the agency’s principal office location no later than the first business day following the meeting at which the agenda was changed.

Impact and Considerations.

Many agencies have been operating under the interpretation that Section 712.1(e) is a “catch-all” provision allowing any item to be added to an agenda by majority vote, regardless of whether it meets Sections 712.1(b), (c), or (d). Based on the Court’s analysis in Coleman, this practice is now improper and can be considered a violation of the Sunshine Act.

Under Section 713 of the Act, a challenge to any violation must be filed within 30 days from the date of the meeting at which the alleged violation occurred (or 30 days from the date the violation was discovered if the meeting was not open to the public). In no instance can a legal challenge be commenced more than one year from the date of that meeting. Therefore, agencies do not need to cure any defective actions taken at open meetings prior to October 8, 2023. However, agencies should consider ratifying any action taken on an item added by majority vote in the past 30 days by adding the ratification motion to the agenda of their next public meeting.

Any member of an agency who participates in a meeting with the intent and purpose of violating the Sunshine Act may be found to have committed a summary offense and may be sentenced to fines of up to $1,000 for a first offense or $2,000 for a second. In addition, under Section 713, if a court determines that a meeting did not meet the requirements of the Sunshine Act, it may in its discretion find that any or all official action taken at that meeting was invalid. Therefore, it is important that any agency subject to the Act prepare to put in place procedures for posting its agendas in advance of any public meeting, and only take official action on business included in the agenda posted at least 24 hours prior to the meeting unless one of the exceptions above are met.

If you have questions about Sections 712.1(b),(c) or (d) of the Sunshine Act, please contact Robert (Max) Junker at 412-773-8722 or rjunker@babstcalland.com or Anna Skipper Jewart at 412-253-8806 or ajewart@babstcalland.com.

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Trick or Treat? EPA Tightens Reporting Requirements for PFAS and other Chemicals of Special Concern

Environmental Alert

(By Joseph Schaeffer and Jessica Deyoe)

In a final rule published in the Federal Register this Halloween, which we previewed at the time of proposal, Environmental Protection Agency (EPA) increased the reporting requirements for per-and-polyfluoroalkyl substances (PFAS) and other chemicals of special concern under the Emergency Planning and Community Right-to-Know-Act, 42 U.S.C. §§ 11001-11050 (EPCRA), and the Pollution Prevention Act, 42 U.S.C. §§ 13101-13109 (PPA). 88 Fed. Reg. 74360. EPA believes that these changes will provide regulators, industry, and the public with more insight into the presence of these chemicals. The rule will take effect on November 30, 2023, and will apply to the reporting year beginning on January 1, 2024.

EPCRA § 313 establishes a toxics release inventory (TRI) that requires certain facilities manufacturing, processing, or using chemicals above certain threshold amounts to report environmental releases and waste management activities for those chemicals on an annual basis. PPA § 6607 requires facilities to report pollution prevention and recycling data for chemicals listed on the TRI, as well. Among the chemicals listed on the TRI, EPA has designated certain chemicals as “chemicals of special concern.” See 40 C.F.R. 372.28. Chemicals of special concern are excluded from de minimis exemptions, as well as the use of simplified reporting forms and range reporting. Historically, chemicals of special concern were those that EPA had identified as persistent, bioaccumulative, and toxic.

As part of the National Defense Authorization Act for Fiscal Year 2020 (NDAA), Congress established two methods for adding PFAS to the TRI. Section 7321(b) of the NDAA added 14 PFAS by name or Chemical Abstract Service Registry Number and other PFAS that met specified criteria. Section 7321(c) of the NDAA provided that additional PFAS would be automatically added to the TRI effective January 1 of the calendar year subsequent to the occurrence of one of the following enumerated triggers: (1) EPA finalizes a toxicity value for the PFAS; (2) EPA makes a covered determination for the PFAS, i.e., a determination made by rule under the Toxic Substances Control Act (TSCA) section 5(a)(2) that a use of a PFAS or a class of PFAS is a significant new use; (3) the PFAS is added to a list of substances covered by a covered determination; or (4) the PFAS to which a covered determination applies is added to the list published under section 8(b)(1) of TSCA and is designated as an active chemical substance under TSCA § 8(b)(5)(B). Section 8(b) of TSCA requires EPA to compile a list of each chemical substance manufactured, processed, or imported in the United States. To date, 189 PFAS have been added to the TRI.

The final rule designates all PFAS listed, or to be listed, on the TRI as chemicals of special concern. This means that PFAS are no longer eligible to rely on the de minimis exemption that allows facilities to exclude small concentrations of chemicals in mixtures or other trade name products from release and waste management calculations. It also means that facilities can no longer rely on reporting ranges for releases or waste management transfers of less than 1,000 pounds but must, instead, report whole numbers. And it means further that facilities can no longer use the simplified Form A, which does not require reporting of release or waste management volumes, but must instead use the more detailed Form R.

In addition to designating PFAS as chemicals of special concern, EPA also eliminated a de minimis exemption in Supplier Notification Requirements that exempted suppliers from providing notifications for chemicals of special concern in mixtures or trade name products if the chemicals of special concern were present at concentrations below 1% of the mixture (or 0.1% for carcinogens). Because the de minimis exemption was based on concentration rather than amount, a mixture could include chemicals of special concern in excess of reporting thresholds without the purchaser being aware. A 100,000 pound mixture with a 0.9% concentration of PFAS, for instance, would include 900 pounds of PFAS—nine times the reporting threshold established under the NDAA—without imposing supplier notification requirements. Notably, elimination of this de minimis exemption affects not only PFAS but all chemicals of special concern.

The final rule will significantly increase visibility into the use of PFAS. By eliminating the de minimis exemption for chemicals of special concern in Supplier Notification Requirements, purchasers will have information about PFAS concentrations in mixtures and other trade name products used in their own businesses. And by eliminating the de minimis reporting exemption, as well as the availability of other burden reduction tools for chemicals of special concern, both the number and accuracy of reports should increase.

As for the burden of this increased visibility, EPA estimates that it will affect between 623 to 2,015 entities (of which 486 to 1,333 are estimated to be small businesses) and cost between $3.32-$10.73 million in the first reporting year and between $1.58-$5.11 million in each subsequent reporting year. EPA projects that the average cost per small firm will be $7,413-$7,520, depending on discount rate, and will not exceed 1% of annualized cost impacts for even the smallest firms.

Opinions on the reasonableness of the final rule, and particularly its cost estimates, are likely to diverge widely, and litigation challenging the final rule is always possible. What the final rule signals, however, is that EPA under the current administration has identified PFAS as a priority area for regulation, and industry should plan accordingly. Indeed, under its 2021 PFAS Strategic Roadmap (available here), EPA has taken a “whole-of-the-agency approach” to address PFAS with primary directives to (1) research; (2) restrict; and (3) remediate PFAS.

As the federal and state governments continue to take action to address PFAS across many program areas, Babst Calland attorneys continue to track these developments and are available to assist you with PFAS-related matters. For more information on this development and other remediation matters, please contact Joseph V. Schaeffer at (412) 394-5499 or jschaeffer@babstcalland.com, Jessica L. Deyoe at (202) 853-3489 or jdeyoe@babstcalland.com, or any of our other environmental attorneys.

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CAA Gag Clause Attestation Deadline Soon Approaching

Employment Alert

(By Jenn Malik)

Employers and plan sponsors: December 31, 2023 is the deadline for submission of the inaugural Section 201 Gag Clause Prohibition Compliance Attestation (Attestation) to the Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments). The federal government passed the Consolidated Appropriations Act in 2020 (CAA) with the goal of improving price and quality transparency in healthcare. Specifically, Section 201 of the CAA prohibits employers/plan sponsors from entering into contractual arrangements that contain “gag clauses”, i.e. contractual provisions that would prevent a plan from accessing provider cost and quality information for plan participants. To ensure compliance, Section 201 requires that plans submit an annual attestation that the plan did not enter any agreements that contain gag clauses. This requirement applies to ERISA plans, non-federal governmental plans, church plans, grandfathered group health plans, and plans sold on the health insurance marketplace.

The Attestation can be completed online on CMS’s website either by the plan, on its own behalf, or a third party – typically, a TPA or health insurer. Submissions require an authentication code generated by the federal government to access the webform where the attestation can be made which is available here: https://hios.cms.gov/HIOS-GCPCA-UI.

The individual submitting the Attestation (Submitter), whether it be an authorized representative of the plan or a third-party, should be prepared to provide the following information to complete the Attestation:

• Submitter’s name and contact information;
• The Reporting Entity’s, i.e. Plan’s, information including a point of contact that can respond to the Departments’ questions about compliance with the prohibition on gag clauses;
• A certification that the Reporting Entity is in compliance with the prohibition on gag clauses and has not entered into an agreement with a provider, network, or association of providers, TPA, or other service provider offering access to a network of providers that would directly or indirectly restrict Reporting Entity from disclosing information on cost, quality of care data, and certain other information to participants, beneficiaries or enrollees.¹

Thereafter, plans must file an Attestation annually by December 31. Now is the time to confirm with your TPA or health coverage issuer(s) if they will be filing the Attestation on your plan’s behalf or to make arrangements to make the filing on behalf of your health plan. If you have any questions about the Section 201 reporting requirements in the CAA, please contact Jenn Malik at 412.525.6755 or jmalik@babstcalland.com.

¹ If they have not done so already, Plan Sponsors should immediately review their agreements with their TPAs and carriers to ensure that their contracts do not contain gag clauses.  To the extent that an agreement contains a gag clause, immediate steps should be taken to have those provisions removed so that the Plan Sponsor may comply with the Section 201 Attestation requirement. 

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Court Holds Pennsylvania’s RGGI Rule Unconstitutional

Environmental Alert

(by Kevin Garber and Jessica Deyoe)

On November 1, 2023, the Commonwealth Court of Pennsylvania held that the Pennsylvania Department of Environmental Protection’s CO₂ Budget Trading Program Regulation is an unconstitutional tax, declared the rule to be void, and enjoined DEP from enforcing it. See Bowfin KeyCon Holdings, LLC et al v. Pennsylvania Department of Environmental Protection and Pennsylvania Environmental Quality Board (No. 247 M.D. 2022). The Regulation would have linked Pennsylvania’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), which is the regional, market-based cap-and-trade program designed to reduce carbon dioxide emissions from fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10 percent of their annual gross generation to the electric grid.

The Court reaffirmed its earlier July 8, 2022 opinion in which it preliminarily enjoined the Regulation as an unconstitutional tax. In this November 1 decision on the merits, the Court held that the Regulation constitutes a tax imposed by DEP in violation of the Pennsylvania Constitution.

Undisputed facts of record established that only 6 percent of RGGI auction proceeds are necessary to cover the cost of administering the program and that the annual revenue anticipated from RGGI would be three times greater than the total amount allocated to DEP from the General Fund in a single year. The Court found that the money to be generated by Pennsylvania’s participation in RGGI would be “grossly disproportionate” to the costs of overseeing participation in the program and DEP’s annual needs. Relying on the Pennsylvania Supreme Court’s opinion in Flynn v. Horst, 51 A.2d 54, 60 (Pa. 1947), which found that

[n]o principle is more firmly established in the law of Pennsylvania than the principle that a revenue tax cannot be constitutionally imposed upon a business under the guise of a police regulation, and that if the amount of a ‘license fee’ is grossly disproportionate to the sum required to pay the cost of the due regulation of the business the ‘license fee’ act will be struck down,

the Commonwealth Court concluded that Pennsylvania’s participation in RGGI “may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through the Rulemaking promulgated by DEP and EQB.

For more information, please contact Kevin Garber at (412) 394-5404 or kgarber@babstcalland.com, Jessica Deyoe at (202) 853-3489 or jdeyoe@babstcalland.com, or any of our other environmental attorneys.

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Court of Appeals Clarifies Need for Certificate of Authority to Maintain Lawsuits in North Carolina

Litigation Alert

(By Kip Power and Joseph Schaeffer)

Recently, the Court of Appeals of North Carolina confirmed that limited liability companies (LLCs) formed in other states must obtain a certificate of authority to transact business in North Carolina to prosecute lawsuits in the state’s Superior Court. JDG Environmental, LLC v. BJ & Associates, Inc., et al., Appeal No. COA21-692 (N.C. App. Oct. 17, 2023) (click here for the opinion). As addressed in an Alert released earlier this year, the issue raised in JDG Environmental involves yet another gloss on the question of how state business registration may be mandated and the implications for foreign LLCs and other foreign entities of registering to conduct business in other states. (See “Where Can a Corporation Be Sued for, Well, Anything? (An Evolving Test),” August 2023 Litigation Alert, click here.)

The Court of Appeals decision addressed a civil action filed in North Carolina Superior Court by JDG Environmental, LLC (JDG), an Oklahoma LLC, against BJ & Associates, Inc. (BJ), a general contractor that engaged JDG to perform cleanup work in a residential community in Newport, North Carolina, damaged by Hurricane Florence. During oral arguments on JDG’s motion for summary judgment, counsel for BJ made a cross-motion for summary judgment against JDG on the grounds that it had failed to comply with N.C. Gen. Stat.§ 57D-7-02. That statute provides that “no foreign LLC transacting business in this State without permission obtained through a certificate of authority may maintain any proceeding in any court of this State unless the foreign LLC has obtained a certificate of authority prior to trial.” (A similar statute (N.C. Gen. Stat.§ 57D-15-02(a)) applies to foreign corporations.) Since JDG had not obtained a certificate of authority from the North Carolina Secretary of State, the Superior Court orally granted BJ’s motion and later entered judgment against JDG.

The Court of Appeals reversed the Superior Court’s ruling on two grounds.

First, the statute at issue requires only that a foreign LLC obtain a certificate of authority “prior to trial.” Applying the plain meaning of this phrase that is not otherwise defined in the law, the Court held that JDG could have obtained a certificate and complied with this requirement any time prior to the empanelment of a jury in the case (i.e., prior to the time a jury trial is generally considered to have “commenced”). JDG Environmental, at 5-6. By granting judgment against JDG at the summary judgment stage, the Superior Court improperly cut short its opportunity to comply with the statute.

Second, the Court addressed the last sentence in N.C. Gen. Stat.§ 57D-7-02, which states that “[A]n issue arising under this subsection must be raised by motion and determined by the trial judge prior to trial.” Observing that motions for summary judgment in North Carolina courts are commonly heard by a judge who will not be the judge presiding over the trial of the case, the Court of Appeals also held that BJ had raised its motion with the wrong judge. Again, taking the statutory language at face value, such a motion must be heard and determined by the “trial judge,” not the judge hearing pre-trial motions.

As a result of the Court of Appeals’ decision, JDG will have its day in court (it had obtained its certificate of authority even before the Superior Court issued its written opinion in the case).  But the time and expense associated with litigating this issue could have been avoided had JDG complied with the certificate requirement before filing suit. That decision, though, is not always without its own consequences. In the August 2023 Litigation Alert referenced above, we discussed how the United States Supreme Court upheld a Pennsylvania statute that requires foreign corporations registering in the Commonwealth to consent to the jurisdiction of its courts over any dispute, not just those involving in-state activities.[1] The North Carolina statute at issue in this case does not attach such onerous conditions, but registration can trigger other obligations—ranging in significance from annual reporting and fees to other regulatory burdens. It may therefore be prudent to seek legal counsel before registering to do business in a new jurisdiction, even if it is just to prosecute a single lawsuit.

For questions about the North Carolina law related to this decision, please contact Christopher B. (Kip) Power (licensed to practice in North Carolina, West Virginia and Kentucky) at (681) 265-1362 or cpower@babstcalland.com. For questions concerning the federal and state constitutional and procedural aspects of corporate registration and jurisdiction to sue or be sued, please contact Joseph V. Schaeffer (licensed to practice in Pennsylvania, District of Columbia, Virginia and West Virginia) at (412) 394-5499 or jschaeffer@babstcalland.com.

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[1] The Supreme Court limited its consideration to a constitutional due process challenge and remanded the case to the Supreme Court of Pennsylvania to consider challenges under the dormant commerce clause. Meanwhile, other challenges to the Commonwealth’s business registration statute are working their way through Pennsylvania courts.

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PA DEP Secretary Negrin Resigns

Environmental Alert

(By Jean Mosites and Ben Clapp)

Pennsylvania Department of Environmental Protection (PA DEP) Secretary Rich Negrin submitted his resignation on October 26. Negrin’s resignation is effective December 9, 2023, and he will be taking a medical leave of absence until his resignation becomes effective. Former Executive Deputy Secretary Jessica Shirley will serve as Interim Active Secretary, effective immediately. Prior to serving as Executive Deputy Secretary, Shirly held the position of PA DEP Policy Director.

Babst Calland will continue to track these developments and provide further updates as additional information becomes available. If you have any questions regarding this change of leadership at PA DEP, please contact Jean Mosites at (412) 394-6468 or jmosites@babstcalland.com, or Ben Clapp at (202) 853-3488 or bclapp@babstcalland.com.

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DEP’s Interim Final Environmental Justice Policy and Mapping and Screening Tool Now in Effect

Legal Intelligencer

(by Sean McGovern and Amanda Brosy)

The Shapiro administration recently released its Interim Final Environmental Justice Policy DEP ID: 015-0501-002 (“Interim Final Policy”) (http://www.depgreenport.state.pa.us/elibrary/GetFolder?FolderID=4556 (follow link to “Environmental Justice Policy.PDF”) (last visited Sept. 23, 2023)), along with a link to the latest Environmental Justice Mapping and Screening Tool (“PennEnviroScreen”) (available online at https://gis.dep.pa.gov/PennEnviroScreen/ (last visited Sept. 23, 2023)). The Policy took effect on September 16, 2023, when official notice of the interim final rulemaking was published in the Pennsylvania Bulletin. See 53 Pa. Bull. 5854 (September 16, 2023).

Pennsylvania’s Environmental Justice Policy

The Commonwealth first adopted an Environmental Justice Policy (EJ Policy) in 2004 to provide citizens in EJ communities enhanced public participation opportunities during certain DEP permit application processes. In 2018, DEP circulated a draft revised policy for public comment, but ultimately withdrew the proposed revisions in 2020 following receipt of public comments. After conducting further outreach in 2021, DEP proposed an updated policy that would refine and expand the scope of the withdrawn 2018 revisions. On March 12, 2022, DEP released a draft of the EJ Policy for public comment, and subsequently received more than 1,200 comments during the comment period. The Interim Final Policy is the latest version of the EJ Policy to have been released by DEP since the comment period closed last spring. Although DEP had previously indicated that it was working to prepare a Comment Response Document in tandem with the Interim Final Policy, it has yet to release such a Document.

Important Features of the Interim Final Policy

The Interim Final Policy will likely have a tangible impact on permitting and enforcement processes for various industries going forward. Below are some important provisions to be aware of:

1. The Pennsylvania EJ Mapping and Screening Tool – PennEnviroScreen

The Interim Final Policy requires use of the PennEnviroScreen tool, which will replace DEP’s current EJ Areas Viewer tool. PennEnviroScreen is currently live and fully accessible to the public. DEP began using the tool on September 16th to determine whether facilities are located in EJ areas based on 32 environmental, health, socioeconomic, and demographic indicators. According to DEP’s recently revised Environmental Justice Policy Revision webpage, permit applicants planning to file a permit application on or after September 16, 2023 “should consider using the new PennEnviroScreen tool to determine if the permit’s facility is in an environmental justice area.” (Emphasis added). See https://www.dep.pa.gov/PublicParticipation/OfficeofEnvironmentalJustice/Pages/Policy-Revision.aspx) (note that shortly after the Interim Final Policy’s release, this webpage had indicated that applicants “must use” the new tool on/after September 16th). A 113-page “Methodology Document,” (DEP ID: 015-0501-003) which is intended to explain the rationale behind the PennEnviroScreen tool, is also available (http://www.depgreenport.state.pa.us/elibrary/GetFolder?FolderID=4556 (follow link to “Pennsylvania Environmental Justice Mapping and Screening Tool (PennEnviroScreen) Methodology Documentation 2023.PDF”) (last visited Sept. 23, 2023)). Industry should be aware that DEP plans to regularly update the criteria used to evaluate areas where the Interim Final Policy applies (EJ areas). To allow for a level of certainty, however, the Interim Final Policy states that “the EJ Areas in effect at the key decision point of the project will follow that project.” Interim Final Policy at Section III; see also Appendix B, “Environmental Justice Area Criteria”.

2. Trigger Projects v. Opt-In Projects

DEP regulated activities that are listed as “Trigger Projects” in Appendix C automatically require application of the Interim Final Policy’s provisions. Examples in the Interim Final Policy include various mining permits (bituminous and anthracite underground and surface mines), waste permits (landfills, transfer stations, commercial incinerators), and air permits (new major source of hazardous pollutants or criteria pollutants). Id. at Appendix C, “Public Participation Trigger Projects”. While the 2022 Draft Policy had classified Oil and Gas unconventional well permits as Trigger Projects, the Interim Final Policy does not; however, various types of unconventional oil and gas projects are listed as “Opt-In Projects.” Other Opt-In Projects include resource recovery facilities, scrap metal facilities, and “other projects as identified by the community.” Id. After receiving a request from the community or a DEP staff member to apply the Interim Final Policy to Opt-In Projects, DEP may decide to do so using its “discretion and expertise.” Id. at Section V(A)(2).

3. Inspections, Compliance, and Enforcement

In the event there are comparable inspection and enforcement scenarios, and DEP does not have the resources to take all the necessary actions at the same time, DEP may exercise its discretion and prioritize an EJ Area. Further, DEP plans to form an “Enforcement and Compliance Team to “prioritize inspection and monitoring at sites which have multiple authorizations, multiple on record complaints, habitual violations sites with high volume generation or unique permit conditions, EJ communities, and sites of significant geographic location and to ensure timely and appropriate responses to violations, implement an efficient criminal referral protocol, and ensure effective collaboration.” Id. at Section VI(B)(1).

4. Civil Penalties

The Interim Final Policy also indicates that DEP interprets impacts to the environment or the public health and safety at an EJ Area to be a relevant factor in the calculation of penalties for violations, and may include a dollar figure in the penalty amount for such a violation “provided there is adequate evidence to support a factual finding that the violation caused harm and the penalty amount fits within the statutory limits.” Id. at Section VI(B)(2).

What’s Next?

The Interim Final Policy’s publication date was also the start of a formal public comment period that will run until October 29, 2023. During the comment period, DEP will accept both written and verbal comments on both the Interim Final Policy and the Methodology Document. Starting on October 11, 2023, DEP will hold two virtual public comment meetings and seven in-person public comment meetings to gather public feedback (the full Community Public Meeting Schedule is available online at https://www.dep.pa.gov/PublicParticipation/OfficeofEnvironmentalJustice/Pages/Policy-Revision.aspx (last visited Sept. 23, 2023)). These meetings will include time for DEP to describe the Interim Final Policy and PennEnviroScreen and take questions, as well as a public hearing portion where DEP will accept public testimony.

Receipt and review of public comments on the Interim Final Policy will be yet another “critical benchmark towards the final EJ Policy,” which is due from DEP in 2024. DEP Newsroom, Shapiro Administration Expands Environmental Justice Protections with Updated Policy and Improved Mapping Tool (Aug. 29, 2023), https://www.ahs.dep.pa.gov/NewsRoomPublic/articleviewer.aspx?id=22337&typeid=1.

Babst Calland’s energy and environmental attorneys will be tracking the EJ Policy as DEP responds to comments and moves to finalize the policy next year. If you have any questions about the environmental justice developments described in this article, please contact Sean McGovern at 412-394-5439 or smcgovern@babstcalland.com or Amanda Brosy at 202-853-3465 or abrosy@babstcalland.com.

Sean McGovern is a shareholder in the Environmental and Energy and Natural Resources practices  of Babst Calland. His practice involves counseling clients on a variety of federal, state, and local regulatory and compliance issues related to mining, renewable, oil and natural gas well development, production, midstream, storage, plugging and restoration in the Appalachian Basin. He also has experience with environmental transactions, including due diligence activities; environmental justice considerations and requirements; and river basin commissions.

Amanda Brosy is an associate in the Environmental practice  of Babst Calland. Her practice involves client counseling on compliance with federal and state environmental laws and regulations, resolving liabilities under federal and state remediation programs, and advising clients on significant environmental liability and compliance issues arising in various types of transactions.

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Reprinted with permission from the October 5, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.

EPA Releases Wide-Reaching Climate Enforcement and Compliance Strategy Memorandum

Environmental Alert

(by Gary Steinbauer and Gina Buchman)

On September 28, 2023, the United States Environmental Protection Agency (EPA) Office of Enforcement and Compliance Assurance (OECA) released a guidance memorandum entitled EPA’s Climate Enforcement and Compliance Strategy.[1]  EPA is directing all of its enforcement and compliance offices to address climate change in every matter within their jurisdiction, as appropriate.  This action was taken in conjunction with: President Joe Biden’s Executive Order 14008,[2] which directs all federal agencies to implement a “whole of government” approach to climate change; EPA’s overarching goal of addressing climate change issues in its FY2022-2026 Strategic Plan;[3] and EPA’s inclusion of Mitigating Climate Change as one it is six recently finalized National Enforcement and Compliance Initiatives for FY2024-2027.[4]  To implement this new strategy, EPA’s enforcement and compliance programs are directed to take action in three specific areas across all enforcement and compliance activities, including criminal, civil, federal facilities, and cleanup enforcement:

1. Prioritize Enforcement and Compliance Activities to Reduce Emissions of Greenhouse Gases

EPA plans to prioritize current enforcement initiatives that will reduce greenhouse gas emissions.  The National Enforcement and Compliance Initiative of Mitigating Climate Change focuses on reducing methane and hydrofluorocarbons (HFCs) emissions.  To reduce methane emissions, EPA is placing a greater emphasis on compliance with new source performance standards (NSPS) at oil and gas facilities and landfills.  EPA plans to place a particular focus on oil and gas “super-emitter events”, which are part of a new set of requirements in the soon to be finalized NSPS Part 60 Subparts OOOOb and OOOOc.  EPA will also use its enforcement authority to ensure compliance with the American Innovation and Manufacturing Act, which phases out the production and consumption of HFCs.

Enforcement of any forthcoming climate rules will also be subject to this initiative.  EPA will also prioritize enforcement actions that will reduce emissions of greenhouse gases by addressing violations related to carbon dioxide, nitrous oxide, and volatile organic compound emissions.  Examples cited include gas flaring, storage tank emissions, wastewater treatment systems, incineration/combustion operations, Greenhouse Gas Reporting Rule compliance, and Renewable Fuel Standards compliance.

EPA is directing its enforcement staff to consider climate change in administrative, civil, and criminal case development process and settlements.  Enforcement staff should consider clean renewable energy projects (like wind, solar, and vehicle electrification), green infrastructure cleanup responses, and climate mitigation remedies in case resolution, including the use of Supplemental Environmental Projects.

Key take-aways:  The regulated community can expect an increased enforcement focus on alleged violations of laws and regulations aimed at reducing greenhouse gas emissions.  In particular, the oil and gas industry can expect continued, and likely increased, enforcement of NSPS Part 60, Subparts OOOO and OOOOa, and, when finalized, Subparts OOOOb and OOOOc.  Subparts OOOOb and OOOOc will allow for third parties to become certified to collect methane emissions data, report “super-emitter” events to EPA and the facility, and force action by the facility, making data gathering, and therefore enforcement efforts, easier for the agency.

2. Incorporate Climate Adaptation and Resilience Principles into All Enforcement and Compliance Activities

EPA’s enforcement and compliance program will incorporate climate resilience into case resolutions.  Relevant climate risk will be raised in negotiations and, if appropriate, injunctive relief that promotes resilience to climate change will be included.  Further guidance regarding these sustainability efforts is anticipated.

The agency will also target investigations at facilities at risk for climate-related impacts, considering, for example, the frequency with which the area experiences significant weather events.  Settlements of violations under other environmental laws, including the Safe Drinking Water Act, Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), Resource Conservation and Recovery Act (RCRA), and Clean Water Act, may be used as opportunities to reduce risk of harm to the environmental or communities from climate impacts.  Enforcement staff is directed to anticipate and prepare for future extreme weather events when developing injunctive relief in regulatory settlements under these laws.

Key take-aways: With this new directive, EPA may, especially in cleanup programs, seek injunctive relief aimed at accounting for potential future climate-related impacts that may not be directly tied to the alleged violation or the area to be remediated.  Anticipating future health and climate conditions may make future remediation projects more costly and time-consuming.

3. Provide Technical Assistance and Build Climate Change Capacity Among EPA Staff and State and Local Partners

To promote this new strategy, OECA will provide technical assistance and training to EPA staff, as well as state and local partners, regarding the integration of climate change considerations into enforcement and compliance activities and infrastructure planning.  EPA will promote the use of the Climate Resilience Evaluation and Awareness Tool for infrastructure planning and expand OECA’s Climate Adaptation Network.

Under the Clean Air Act § 112(r) Accidental Release Prevention and Risk Management Plan program, as well as under RCRA and CERCLA, agency staff will consider climate change risk in inspection targeting and civil and criminal case investigation.  Staff will also work with the Office of Land and Emergency Management to identify vulnerable facilities and develop compliance assistance materials.

Key take-aways: Facilities located in coastal and other areas believed to be impacted by climate change should expect increased scrutiny by the agency, including inspections and information requests. Operators of drinking water and wastewater systems should also expect EPA and state and local agencies to focus on climate resiliency as part of compliance and enforcement activities.

For more information on this development and other climate change or EPA enforcement matters, please contact Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Gina F. Buchman at (202) 853-3483 or gbuchman@babstcalland.com, or any of our other environmental attorneys.

_____________

[1] Memorandum from David M. Uhlman to OECA Office Directors and Deputies, et al., EPA’s Climate Enforcement and Compliance Strategy, Sept. 28, 2023.

[2]  Executive Order 14008, Tackling the Climate Crisis at Home and Abroad, Jan. 27, 2021.

[3]  FY 2022-2026 EPA Strategic Plan (Mar. 2022).

[4]  OECA FY 2024 – 2027 National Enforcement and Compliance Initiatives, Aug. 17, 2023.

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Legislative & Regulatory Update

The Wildcatter

(By Nikolas Tysiak)

Hello friends – only two relevant developments to report on this time – one in Ohio and one in Pennsylvania.

First, in French v. Ascent Resources-Utica, LLC, 2023-Ohio-3228 (7th Dist.), the Court of Appeals took an appeal from Ascent regarding the trial court’s summary judgment, finding that several leases on the land of French (and others) had expired. Ascent argued that the leases had been unitized as part of an existing unit, and therefore the leases were properly held beyond the primary term. The court found, however, that while a unitization document had been filed, several of the tracts within the unit were not under the control of Ascent, and there was no relationship between Ascent and the lessees of those lands that would allow the Unit to commence operations as conceived. Because of this, Ascent did not meet the operational requirements under the leases to maintain the leasehold rights beyond the primary terms of the leases. Additionally, the Court found there had been no actual drilling activity on the Unit, as no drilling permit had been issued. Consequently, no operations or production occurred on the Unit including the leases, either. The Court therefore upheld the motion for summary judgment against Ascent.

Second – in Douglas Equipment, Inc. v. EQT Production Company, 2023 WL 5239153 (Pa. Sup. Court August 15, 2023), the Superior Court was confronted with interpreting the language of a deed relating to a reservation of oil and gas rights. The landowners entered into an oil and gas lease in 1994. Importantly, shut-in payments could not be paid for more than 3 years under the terms of the lease. After executing the lease, the same landowners conveyed the land to Holt and Lee, excepting and reserving “all rights, title and interest” in the underlying lease, except for the free gas privilege. The lessee under the 1994 lease made shut-in payments starting in 2008, and apparently never stopped such payments. In 2016, Holt and Lee leased the land to EQT. The 1994 lease was assigned to LOLA Drilling. The successors to the original landowners under the 1994 lease claimed that the 1994 lease remained in full force and effect. Holt and Lee claimed that the 1994 lease had expired three years after production stopped in 2008, despite the ongoing payment of shut-in payments beyond the three-year period as an at-will lease subject to continuation by mutual consent. The trial court granted summary judgment in favor of EQT, and the original landowners appealed. The Superior Court agreed with the trial court, holding that at-will tenancy is a function of traditional landlord and tenant law, which does not apply in the context of an oil and gas lease. Instead, the Superior Court found that the terms of the lease itself govern the relationship between the parties in this instance, unless the same had been modified. Because there was no clear modification of the terms, the lease terms applied. Consequently, following three years of shut-in payments, the 1994 lease expired some time in 2011, resulting in leasing rights reverting to Holt and Lee and that time. This conclusion effectively affirmed the authority of EQT under the EQT lease to act as sole lessee on the property.

As always, let us know if you come across any interesting developments that should be shared with the membership.

To view the full article, click here.

To view the PDF, click here.

Reprinted with permission from the MLBC October 2023 issue of The Wildcatter. All rights reserved.

PHMSA Releases Proposed Rule Addressing 2020 PIPES Act Gas Distribution Mandates

Pipeline Safety Alert

(by Jim Curry, Varun Shekhar and Chris Kuhman)

On September 7, 2023, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published in the Federal Register a Notice of Proposed Rulemaking (NPRM) titled, “Pipeline Safety: Safety of Gas Distribution and Other Pipeline Safety Initiatives.”  The NPRM implements provisions from the Leonel Rondon Pipeline Safety Act – part of the Protecting Our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2020 – as well as a National Transportation Safety Board (NTSB) recommendation issued in response to an incident that occurred on a gas distribution pipeline system in Massachusetts’ Merrimack Valley on September 13, 2018.

PHMSA proposes to revise certain pipeline safety regulations in 49 C.F.R. Parts 191, 192, and 198.  While the NPRM focuses largely on gas distribution pipelines, PHMSA also proposes changes that would apply to all Part 192 regulated pipelines, including gas transmission and gathering pipelines.  Finally, PHMSA proposes to apply annual reporting requirements to small liquified petroleum gas (LPG) operators.

Comments on the NPRM are due on November 6, 2023.  Key aspects of the NPRM include:

Proposed Amendments to Part 191 Reporting Requirements:

• PHMSA proposes to collect additional information from operators of distribution lines, such as the number of miles of low-pressure service lines, including their overpressure protection methods.  For small LPG operators, PHMSA also proposes to collect information on the number and miles of service lines, and the disposition of any leaks.  The reporting requirements for LPG operators are proposed in lieu of an integrity management program, as discussed below.

Proposed Amendments to Part 192 Safety Requirements:

General

• PHMSA proposes to eliminate certain amendments to Part 192 that the Agency adopted in response to the U.S. Court of Appeals for the D.C. Circuit’s (D.C. Circuit) decision in GPA Midstream v. DOT, 67 F.4th 1188 (D.C. Cir. 2023). In GPA Midstream, the D.C. Circuit vacated the requirements for gathering lines in an April 8, 2022 final rule, titled “Pipeline Safety: Requirement of Valve Installation and Minimum Rupture Detection Standards” (RMV Rule).  Shortly after the D.C. Circuit’s decision, the Agency issued another final rule amending various provisions in Part 192 to provide explicit exceptions for gathering lines from the requirements in the RMV Rule.  PHMSA proposes to reverse those amendments, in part, by removing the exception for gathering lines in the definitions of “Entirely replaced onshore transmission pipeline segments”, “Notification of potential rupture”, and “Rupture-mitigation valve” in Section 192.3.  PHMSA also proposes to adopt certain amendments to § 192.9 to require operators of regulated gathering lines to develop emergency response plans in accordance with the current version of § 192.615.  According to the NPRM, the Agency does not intend to extend the other requirements from the RMV Rule pertaining to rupture mitigation, valve installation, operation, and maintenance to gathering lines.

Design

• PHMSA proposes to amend § 192.195 requiring new, replaced, relocated, or otherwise changed district regulator stations that serve low-pressure gas distribution systems be equipped with at least two methods of overpressure protection. Operators would also be required to monitor the gas pressure at or near the location of overpressure protection devices with a system providing real-time notification capability in the event of an overpressurization event.

Construction

• PHMSA proposes to amend § 192.305 requiring operators to inspect new, replaced, relocated, or otherwise changed transmission lines and mains to ensure they are constructed in accordance with Subpart G. Operator personnel that perform the construction task would be prohibited from performing the required inspection.  There is, however, an exception for small operators in situations where the operator could only perform the inspection by using a third-party inspector.

Testing

• PHMSA proposes to amend § 192.517 requiring gas pipeline operators to maintain test records of pipelines operating below 100 psig, service lines, and plastic pipelines for the life of the pipeline – well beyond the current 5 year requirement. The records would also need to include certain information about the operator and pipeline that was tested, similar to what is currently required in § 192.517 for other pipelines.

Operations 

• PHMSA proposes to amend § 192.605 requiring operators of gas distribution pipelines to update their O&M procedures to account for the risk of an overpressurization event. This includes identifying and responding to overpressurization indications, as well as investigating, responding to, and correcting the cause of an overpressurization indication.  PHMSA also proposes to require that operators of gas distribution pipelines develop and follow a Management of Change (MOC) process when conducting certain activities. As part of the MOC process, operators would be required, among other things, to ensure that qualified personnel review and certify construction plans associated with installations, modifications, replacements, or upgrades for accuracy and completeness, before the work begins.

• For all gas pipeline operators, PHMSA proposes to expand the existing list of pipeline emergencies in § 192.615 for which operators must have an emergency response plan. Under the proposal, the list would include a notification of a potential rupture, a release of gas that results in one or more fatalities, and any incident deemed significant by the operator.  For gas distribution lines, the list would also include the unintentional release of gas and shutdown of gas service to 50 or more customers (or 50 percent of its customers if it has fewer than 100 total customers).  Operators would need to immediately notify the appropriate public safety answering point after receiving notice of any of the emergencies listed in § 192.615.  PHMSA also proposes certain regulatory amendments requiring gas distribution operators to update their emergency response plans to improve communications with the public during an emergency.

• PHMSA proposes to establish a new § 192.638 requiring operators of gas distribution pipelines to identify and maintain traceable, verifiable, and complete maps and records that document the characteristics of their pipeline systems that are critical to ensuring pressure control. If an operator does not have these records, it would be required to develop and implement procedures for generating or collecting them.

• PHMSA proposes to establish a new § 192.640 requiring operators of gas distribution pipelines to evaluate each construction project to identify potential activities during which an overpressurization event could occur at a regulator station. If the evaluation results in a determination that a potential for overpressurization exists, operators would be required to have qualified personnel at the regulator station to prevent or respond to an overpressurization event.  The NPRM provides an exception for systems with remote monitoring and automatic shutdown capabilities.

Maintenance

• PHMSA proposes to amend § 192.725 requiring operators to test in the same manner as a new service line each disconnected service line being returned to service. Records of these tests would need to be maintained for the life of the pipeline as proposed in § 192.517, discussed above.

• PHMSA proposes to amend § 192.741 requiring operators of gas distribution pipelines to monitor the outlet gas pressure at or near regulator stations in accordance with § 192.195, discussed above.

Distribution Integrity Management Program (DIMP)

• PHMSA proposes to exempt small LPG operators from the DIMP requirements in Subpart P but extend annual reporting requirements to those operators, as proposed under Part 191 discussed above.

• PHMSA proposes to amend § 192.1007 establishing additional criteria for operators of gas distribution pipelines to evaluate when identifying and implementing measures to address risks identified in DIMP plans. Specifically, operators would need to account for, among other things, risks associated with the age of the pipe and pipeline system, the presence of known issues, and the potential for overpressurizing the system.  Operators would also be required to implement measures to address those risks.  In addition, operators would be required to document that each regulator station meets the design standards in § 192.195, discussed above, or take certain actions to minimize the risk of an overpressurization event.

Proposed Amendments to Part 198 State Pipeline Safety Programs:

• PHMSA proposes to amend §§ 198.3 and 198.13 requiring states to use the State Inspection Calculation Tool to ensure an adequate number of safety inspectors are employed in their pipeline safety programs.

Babst Calland has prepared a redline of Part 192 to show how PHMSA’s proposed changes would affect existing regulations.  Please contact a member of our pipeline safety practice if you would like a copy of the redline.

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WVDEP Notifies Facilities of PFAS Reporting Requirements

Environmental Alert

(by Kip Power and Matt Wood)

At the end of August 2023, the West Virginia Department of Environmental Protection (WVDEP) began sending letters to facilities that the agency believes may be subject to new requirements to report production or use of specific per- and polyfluoroalkyl substances (PFAS).  The requirements are included in the recently passed House Bill 3189, also known as the PFAS Protection Act (“the Act”), which Governor Jim Justice signed into law on March 28, 2023.

PFAS have been linked to effects on the human immune system, cardiovascular problems, and cancer.  They are often referred to as “forever chemicals” because of their persistence in the environment and tendency to accumulate in people and animals over time. Broadly, the Act is intended to identify sources of PFAS that are impacting drinking water sources in West Virginia.

WVDEP’s recent form letter notifies recipients that under the Act, facilities that discharge to surface water under an applicable National Pollution Discharge Elimination System (NPDES) permit or to a Publicly Owned Treatment Works (POTW) under an industrial pretreatment program, “which manufacture or knowingly use or have used” certain PFAS in their production process since January 1, 2017, are required to report such use to WVDEP on or before December 31, 2023.  Specifically, the Act requires that these facilities report any PFAS that the United States Geological Service (USGS) found in its recent study of raw water from 279 West Virginia public water systems.  Under the Act, facilities are also required to report their use of other PFAS that WVDEP identifies as harmful to human health and potentially present in detectable levels in West Virginia waters.

The list of 12 PFAS identified in the USGS study is included in WVDEP’s June 2022 presentation to the Joint Legislative Oversight Commission on State Water Resources, available here.  USGS’s complete study is available here.  Note, however, that WVDEP’s letter includes a list of 15 PFAS that are subject to the reporting requirement, including three additional chemicals identified by WVDEP that were not on the USGS list.  Facility reports must include each chemical’s name, Chemical Abstracts Service number, and the amount used in each year from 2017 through 2022, as well as any other information requested by WVDEP to identify sources of PFAS.  If a facility discharges to a POTW, WVDEP will forward the facility’s report to the POTW within 30 days of receipt.

Any facility subject to the PFAS reporting requirement under the Act must also implement, at a minimum, quarterly monitoring for its self-reported PFAS within six months of submitting its report.  How the monitoring requirement is documented will be based on the facility’s applicable permit.  For those facilities with a NPDES permit, WVDEP will modify the permit to include a monitoring requirement.  If a facility discharges to a POTW, the entity with pretreatment authority (either the POTW or WVDEP) will modify the facility’s pretreatment permit.  In their monitoring, facilities are required to use sampling and analytical methods approved by the U.S. Environmental Protection Agency (USEPA) or USEPA-recommended methods (if approved methods are not available).

While West Virginia moves to regulate PFAS at the state level, the federal government continues to progress along similar lines.  USEPA has proposed rules to establish a National Primary Drinking Water Regulation setting maximum contaminant levels for six PFAS.  It has also proposed to designate PFOA and PFOS (the two most prevalent and widely studied PFAS) as hazardous substances under CERCLA and is considering the same action for six other PFAS. These federal developments are some of the actions cited in the “Legislative Background” portion of the Act as justification for its enactment.

On a different legal front, a large number of PFAS-based lawsuits are pending against PFAS manufacturers, distributors and users, in many cases focusing on the historical use of aqueous film-forming foams (AFFF) in fighting liquid fuel fires at airports, military bases, and other industrial sites.  At least two federal Multi-District Litigation matters are currently pending, in the U.S. District Court for the District of South Carolina (AFFF Products Liability Litigation, MDL No. 2873) and in the U.S. District Court for the Southern District of Ohio (MDL No. 2433, encompassing wrongful death and personal injury actions involving discharges from Dupont’s Washington Works facility located near Parkersburg, West Virginia).  In June 2023, DuPont, Chemours, and Corteva reached a $1.185 billion agreement, and 3M Company reached a $10.3 billion agreement, to settle drinking water contamination claims by public water suppliers in the AFFF litigation.

As West Virginia, other states, and the federal government continue to take action to address PFAS across many program areas, Babst Calland attorneys will track these developments and are available to assist you with PFAS-related matters.  For more information on this development or related matters, please contact Christopher B. (Kip) Power at (681) 265-1362 or cpower@babstcalland.com, Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, or any of our other environmental attorneys.

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Clean Energy Tax Credits Tied to Labor Law Compliance

Firm Alert

(by John McCreary and Jim Curry)

The Inflation Reduction Act of 2022 (IRA) created a number of tax incentives in the form of credits and deductions to encourage development of alternative clean energy generation capacity. On August 28, 2023, the U.S. Department of the Treasury published a Notice of Proposed Rulemaking (NPR) detailing the conditions for receipt of the tax incentives and the potential penalties for non-compliance with those conditions by “taxpayers” – the developers and operators of qualifying clean energy projects. Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Registered Apprentice Requirements, 88 Fed.Reg. 60018 (August 28, 2023). Uniquely, many of these incentives and potential penalties are premised on apprenticeship and prevailing wage requirements imposed by the Federal Davis-Bacon Act, 40 U.S.C. §3141, et seq. and its Related Acts (DBA). Compliance with prevailing wage and registered apprenticeship standards is now required for projects seeking the full value of various clean energy tax credits. Failure to comply with the rules will result in developers missing out on the full value of the credit and potentially the imposition of $5,000 multiplied by the total number of laborers and mechanics who were paid below the prevailing wage rate.

Until now the Davis-Bacon and Related Acts (Prevailing Wage Acts or PWA) have been applicable only to contractors actually employing “mechanics or laborers” on federally-funded projects “for construction, alteration, or repair” of “public buildings and public works” 40 U.S.C. §3142(a). The NPR, however, pushes compliance upstream to developers and producers seeking the tax advantages created by the IRA, who in all likelihood do not employ anyone covered by the Prevailing Wage Acts. This Alert provides an overview of how the NPR incorporates these labor laws into the clean energy tax incentives. It also highlights some of the anticipated difficulties developers and producers may encounter when attempting to take advantage of the tax benefits.

Clean Energy Tax Incentives and Penalties

The general intent of the NPR is revealed in Section III of its Preamble: “Generally, if a taxpayer satisfies the PWA requirements … the amount of credit or deduction determined is equal to the otherwise determined amount of the underlying credit or deduction multiplied by five.” 88 Fed. Reg. at 60019. With the multiplier, projects that satisfy the labor requirements can get a bonus rate of 30% for the investment tax credit or 1.5 cents per kilowatt hour for the production tax credit.

Developers and producers who intend to benefit from the incentives need to be cognizant of the penalties for non-compliance. Non-compliance can only be remedied if “the taxpayer makes a correction payment to the laborer or mechanic and pays a penalty to the Secretary of the Treasury ….” Id. The amount of the correction payment is the difference between wages paid and the prevailing wage, plus interest at 6% for the applicable period. Id.  The penalty amount payable to the Secretary is ‘‘$5,000 multiplied by the total number of laborers and mechanics who were paid wages at a rate below the [prevailing wage] rate … for any period’’ during the year.” Id. “Intentional disregard” of the PWA requirements subjects violators to correction payments of three times the difference in wages and a $10,000 penalty for each violation. Id. at 60020.

Apprenticeship Requirements

In addition to the PWA requirements the IRA imposes an apprentice labor hours requirement mandating that developers and producers use qualified apprentices on their projects. Id. at 60020. The NPR mandates employment of “one or more qualified apprentices” by “each taxpayer, contractor, or subcontractor who employs four or more individuals to perform construction, alteration or repair work with respect to the construction of a qualified facility ….” Id. The labor hours required to be worked by apprentices vary depending on when construction of the qualified facility commences: 10% for projects which began before 1/1/2023; 12.5% for projects begun after 12/31/22; and 15% for projects beginning after 12/31/23. Id. Exceptions to the Apprenticeship Requirements are available for demonstrated good faith effort that the taxpayer was unable to procure the necessary number of apprentices from a registered apprentice program, or if the taxpayer makes a penalty payment to the Secretary in the amount of $50 per laborer for each hour that should have been worked by apprentices. Id. A taxpayer determined to have intentionally disregarded the Apprenticeship Requirements faces a $500 per labor hour penalty.

Pre-Hire Project Labor Agreement (PLA) Provisions

Project Labor Agreements are authorized under Section 8(f) of the National Labor Relations Act, 29 U.S.C. §158(f). These are labor contracts applicable to a defined project. Although the IRA and NPR do not require the use of PLAs, as a policy matter they are encouraged on qualified projects: “Pre-hire project labor agreements may be used to incentivize stronger labor standards and worker protections in the types of construction projects for which taxpayers may seek increased credit, and having a project labor agreement in place may also help ensure compliance with PWA requirements. For these reasons, the proposed regulations would also provide that the penalty payment requirement would not apply with respect to a laborer or mechanic employed under a project labor agreement that meets certain requirements and any correction payment owed to the laborer or mechanic is paid on or before a return is filed claiming an increased credit amount.” Id. at 60029.

Anticipated Compliance Difficulties

Because the regulations proposed in the NPR are not yet final and will not become final until sometime next year there is no immediate need to comply. Nevertheless, it is also essential for developers and producers to anticipate the compliance issues that are evident from the NPR, and perhaps even to submit comments to the U.S. Department of the Treasury addressing those issues.

Most developers and producers do not employ “mechanics and laborers” and have no experience administering the Prevailing Wage and Apprenticeship Requirement – compliance with these requirements has heretofore always been the responsibility of the construction contractors. How will taxpayers demonstrate compliance with the PWA and Apprenticeship Requirements? The construction contracts between the taxpayer and its contractors at a minimum should require: (a) warranties that the contractor has complied with all PWA and Apprenticeship Requirements; (b) the contractor to provide to the taxpayer any documentation necessary to establish such compliance; and (c) should contain appropriate indemnification provisions if non-compliance by the contractor results in loss of deductions or credits and imposition of penalties on the taxpayer.

Taxpayers also need to consider the apparent advantages of adopting a Project Labor Agreement for qualified projects and weigh them against the often vehement opposition to such agreements by many competent merit shop contractors and their industry trade groups, such as the Associated Builders and Contractors. Although a developer or producer, as owner of the project, can require the use of a PLA such a requirement could limit the number of otherwise qualified contractors who will bid on a project.

Conclusion

This Alert only summarizes some of the more salient labor-related issues raised by the NPR. The final rule may restrict or expand upon these proposed requirements to take advantage of the tax incentives. Regardless, developers and producers intending to construct qualifying projects need to begin preparing for these compliance issues and others raised by the NPR.

If you have any questions about the Inflation Reduction Act and its implications on clean energy tax incentives, please contact John A. McCreary, Jr. at (412) 394-6695 or jmccreary@babstcalland.com or Jim Curry at (202) 853-3461 or jcurry@babstcalland.com.

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DEP Releases Interim Final Environmental Justice Policy

Environmental Alert

(by Sean McGovern and Amanda Brosy)

1. The Pennsylvania EJ Mapping and Screening Tool – PennEnviroScreen
   The Interim Final Policy requires use of the PennEnviroScreen tool, which will replace DEP’s current EJ Areas Viewer tool. PennEnviroScreen is already live, and DEP plans to begin using the tool on September 16, 2023 to determine whether facilities are located in EJ areas based on 32 environmental, health, socioeconomic, and demographic indicators. According to DEP’s Environmental Justice Policy Revision webpage, permit applicants planning to file a permit application on or after September 16, 2023 “must use the new PennEnviroScreen tool to determine if the permit’s facility is in an environmental justice area.” A 113-page “Methodology Document,” which is intended to explain the rationale behind the PennEnviroScreen tool, is also available.Industry should be aware that DEP plans to regularly update the criteria used to evaluate areas where the Interim Final Policy applies (EJ areas). To allow for a level of certainty, however, the Interim Final Policy states that “the EJ Areas in effect at the key decision point of the project will follow that project.”
2. Trigger Projects v. Opt-In Projects
   DEP regulated activities that are listed as “Trigger Projects” in Appendix C automatically require application of the Interim Final Policy’s provisions. Examples in the Interim Final Policy include various mining permits (bituminous and anthracite underground and surface mines), waste permits (landfills, transfer stations, commercial incinerators), and air permits (new major source of hazardous pollutants or criteria pollutants). While the 2022 Draft Policy had classified oil and gas unconventional well permits as Trigger Projects, the Interim Final Policy does not; however, various types of unconventional oil and gas projects are listed as “Opt-In Projects.” Other Opt-In Projects include resource recovery facilities, scrap metal facilities, and “other projects as identified by the community.” After receiving a request from the community or a DEP staff member to apply the Interim Final Policy to Opt-In Projects, DEP may decide to do so using its “discretion and expertise.”
3. Inspections, Compliance, and Enforcement
   In the event there are comparable inspection and enforcement scenarios, and DEP does not have the resources to take all the necessary actions at the same time, DEP may exercise its discretion and prioritize an EJ Area. Further, DEP plans to form an:

   Enforcement and Compliance Team to prioritize inspection and monitoring at sites which have multiple authorizations, multiple on record complaints, habitual violations, sites with high volume generation or unique permit conditions, EJ communities, and sites of significant geographic location and to ensure timely and appropriate responses to violations, implement an efficient criminal referral protocol, and ensure effective collaboration.

4. Civil Penalties
   The Interim Final Policy also indicates that DEP interprets impacts to the environment or the public health and safety at an EJ Area to be a relevant factor in the calculation of penalties for violations and may include a dollar figure in the penalty amount for such a violation “provided there is adequate evidence to support a factual finding that the violation caused harm and the penalty amount fits within the statutory limits.”

Babst Calland’s energy and environmental attorneys will be tracking the EJ Policy as DEP responds to comments and moves to finalize the policy next year. If you have any questions about the environmental justice developments described in this Alert, please contact Sean McGovern at 412-394-5439 or smgovern@babstcalland.com or Amanda Brosy at 202-853-3465 or abrosy@babstcalland.com.

Department of Labor Proposes Rule Change Permitting Unions to Participate in OSHA Workplace Walk-Throughs

Employment Alert

(by John McCreary and Janet Meub)

On August 29, 2023, the United States Department of Labor (DOL) published a Notice of Proposed Rulemaking that would permit union representatives and other nonemployees to participate in workplace inspections conducted by Occupational Safety and Health Act Compliance and Safety Officers (CSHOs).

Pursuant to the current law, Section 8(e) of the Occupational Safety and Health Act (OSHA) provides “a representative of the employer and a representative authorized by employees the opportunity to accompany CHSOs during the physical inspection of the workplace for the purpose of aiding the inspection.” The OSHA and 29 CFR part 1903 endow the CSHO with the authority to resolve any disputes about who the employer and employee representatives are and to deny any person from participating in the inspection whose conduct interferes with a fair and orderly investigation. The CSHO also has the authority to permit additional employer representatives and representative authorized by employees to participate in the workplace walk-throughs. See 29 CFR 1903.8(a).

Historically, OSHA mandated that the representative authorized by employees for worksite inspections be an actual employee. Over the years, OSHA has offered guidance on its interpretation of section 1903.8(c) and the definition of “representative authorized by employees” for OSHA walk-through inspections. In 2003, OSHA issued a letter of interpretation (Racic Letter) in response to the question of whether a union representative who files a complaint on behalf of a single worker could then act as a walk-through inspection representative in a workplace that had no labor agreement. OSHA determined that there was “no provision for a walkaround representative who has filed a complaint on behalf of an employee of the workplace.” See, ID OSHA – 2023-0008-0002. In 2013, OSHA issued a second letter of interpretation (Sallman Letter) stating that workers at a worksite without a collective bargaining agreement could designate a union or community organization for purposes of an OHSA walk-through inspection “as long as they had been authorized by employees to serve as their representative. OSHA then withdrew the Racic Letter as confusing.

OSHA updated its Field Operations Manual (FOM) in October 2015, incorporating its interpretation of 29 CFR 1903.8(c), stating that there may be instances where workers without a certified or recognized bargaining agent would benefit from a third party representing them at an OSHA inspection. However, in 2016, The National Federation of Independent Business (NFIB), filed suit in the Northern District of Texas, arguing that OSHA’s Sallman Letter interpretation was at odds with its regulations, should have been subject to notice and comment rulemaking, and that the Sallman Letter exceeded OSHA’s statutory authority. The district court concluded 1) that the Sallman Letter contradicted §1903.8(c) which clearly required that the employee representative be an employee himself, and 2) that a change to a regulation must be subject to notice and comment rulemaking. The court did reject the NFIB’s argument that the Sallman Letter conflicted with OSHA itself, concluding that OSHA requires the employee’s representative to be authorized by the employees, not necessarily that the representative be an employee himself. See, Nat’l Fed’n of Indep. Bus. v. Dougherty, 2017 WL 1194666 (N.D. Tex. Feb. 3, 2017). In the wake of that decision, OSHA rescinded the Sallman Letter and removed the language referencing it in the FOM.

And now, engaged in the proper notice and comment rulemaking process, OSHA’s proposed rule change seeks to broaden the types of individuals who may serve as a representative of the employees during OSHA’s physical inspections of the workplace:

• The representative authorized by the employees may be an employee OR a third party (i.e., a union representative, a bilingual interpreter, an expert on a particular piece of equipment, occupational hygienist, etc.).
• A third-party representative authorized by employees may be reasonably necessary to conduct an effective and thorough physical workplace inspection by virtue of her knowledge, skills, or experience.

The proposed change would permit a union representative, even where employees are not represented by a union or in the absence of a collective bargaining agreement, to participate in an OSHA workplace inspection. The DOL and OSHA believe that the rule change strengthens OSHA’s ability to obtain critical information regarding worksite conditions and hazards to ensure safer workplaces everywhere – not just in facilities where the employees are represented by unions. Critics of the proposed rule change argue that OSHA is promoting infiltration of private employer property for unionization efforts.

The DOL seeks written comments on the proposed rule change by all stakeholders by October 30, 2023. If you have any questions about the DOL’s proposed rule change or OSHA workplace inspections, please contact John A. McCreary, Jr. at (412) 394-6695 or jmccreary@babstcalland.com or Janet K. Meub at (412) 394-6506 or jmeub@babstcalland.com.

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Federal CCR Regulatory Update: EPA Adds CCR To National Enforcement and Compliance Initiatives and Proposes to Deny Alabama’s CCR Permit Program

Environmental Alert

(by Don Bluedorn, Gary Steinbauer and Mackenzie Moyer)

In the past week, the U.S. Environmental Protection (EPA) has made two major announcements related to the regulation of Coal Combustion Residuals (CCR). On August 17, 2023, EPA announced its National Enforcement and Compliance Initiatives for fiscal years 2024 through 2027, adding “protecting communities from coal ash contamination” to a list of six priority areas for enforcement. Three days earlier, EPA published notice in the Federal Register of its proposal to deny Alabama’s application to administer its own CCR permitting program in lieu of EPA’s federal CCR program. These developments are among other CCR-related regulatory proposals from EPA earlier this year and a sign that EPA’s focus on CCR regulatory and enforcement will continue.

EPA Adds Coal Ash Contamination as an Enforcement Initiative

Every four years, EPA publishes a list of national initiatives to focus its enforcement efforts. On January 12, 2023, EPA published notice in the Federal Register, seeking comment on the NECIs for fiscal years 2023 to 2027. 88 Fed. Reg. 2093. In this notice, EPA listed “Addressing CCR” as one area “for further consideration of possible development” as an NECI. EPA has now formally adopted CCR issues as an enforcement priority for the next four years, all but guaranteeing that EPA will prioritize CCR enforcement and compliance over the next several years.

EPA Proposes to Deny Alabama’s CCR Permit Program

On August 14, 2023, the U.S. Environmental Protection Agency (EPA) published notice of its proposed denial of Alabama’s application to operate its own Coal Combustion Residuals (CCR) permit program in the Federal Register. Alabama; Denial of State Coal Combustion Residuals Permit Program, 88 Fed. Reg. 55,220.

Section 4005(d) of the Resource Conservation and Recovery Act (RCRA) allows states to seek approval from EPA to administer a state CCR permit program in lieu of the federal CCR Rule. EPA will approve a state’s CCR permit program if the state program requires each CCR unit in the state to achieve compliance with either the federal requirements or state requirements that are as protective of the federal requirements. EPA has already approved CCR permit programs in Oklahoma, Georgia, and Texas, and did so without imposing conditions. EPA’s proposed denial of Alabama’s program is the first time EPA is proposing to deny an application.

The Alabama Department of Environmental Management (ADEM) submitted permit program applications to EPA Region 4 on July 12, 2018, February 26, 2021, and December 29, 2021. While its application before EPA was pending, ADEM began issuing CCR permits and has been doing so since it promulgated its first set of CCR regulations in 2018. ADEM has identified 16 CCR units (three landfills and 13 surface impoundments) that currently, or have been, used for CCR disposal in Alabama. Since 2018, ADEM had issued permits to eight CCR facilities. Thus, EPA’s proposed denial comes after ADEM has issued permits for half of the CCR-regulated units in the state.

In its proposal, EPA stated that although Alabama’s regulations “largely mirror” the federal CCR regulations, it believes ADEM has been issuing permits for CCR units containing permit terms that are neither the same nor as protective as the federal CCR regulations. EPA’s proposal states that it is particularly concerned with deficiencies in ADEM’s permits related to closure requirements for unlined surface impoundments, associated groundwater monitoring networks, and corrective action requirements. According to EPA, ADEM’s permits allow CCR in closed units to remain saturated by groundwater, without requiring any engineering measures to control groundwater flowing into and out of the closed unit. Additionally, ADEM has approved groundwater monitoring systems with an inadequate number of wells in incorrect locations and ADEM’s permits effectively allow the permittee to delay implementation of effective measures to remediate groundwater contamination. For these reasons, EPA proposed to deny Alabama’s CCR permit program.

EPA compared Alabama’s permit conditions with EPA’s CCR Rule and found that Alabama’s permits were “not as protective as the Federal CCR requirements.” However, EPA’s regulations are ambiguous; for example, 40 CFR § 257.91 only requires the owner or operator of a CCR unit to “install a groundwater monitoring system that consists of a sufficient number of wells, installed at appropriate locations and depths.” In short, EPA’s proposing to deny Alabama’s CCR permit program because it views ADEM’s interpretations of what are effectively EPA’s CCR regulations as inconsistent with EPA’s more recently announced interpretations. EPA’s stated issues with ADEM’s implementation of Alabama’s CCR permit program are consistent with those relied on by EPA when it proposed to deny all of the CCR Part A and Part B demonstrations. Notably, EPA’s interpretations in the Part A demonstrations are the subject of ongoing litigation by Utility Solid Waste Activities Group (USWAG) accusing EPA of engaging in illegal rulemaking.

Written comments on EPA’s proposed denial are due on October 13, 2023. EPA also plans on holding an in-person public hearing on September 20, 2023, and a virtual public hearing on September 27, 2023.

EPA’s Other Recent CCR-Related Regulatory Actions

EPA’s proposed denial of Alabama’s permit program is one of many steps EPA has taken recently to regulate CCR units throughout the nation. On March 29, 2023, EPA published a proposed rule to revise the technology-based effluent limitations guidelines and standards for the steam electric power generating point source category applicable to combustion residual leachate. And on May 18, 2023, EPA proposed to establish regulatory requirements for inactive surface impoundments at inactive CCR facilities. Additionally, EPA plans to issue a final rule in October of 2023, outlining a federal permit program for CCR facilities in states that do not have their own approved programs.

EPA has taken several recent actions to solidify its focus on CCR regulatory and enforcement matters and operators of CCR Rule-regulated units should be prepared for continued oversight by EPA. Babst Calland attorneys continue to track these developments and are available to assist you with CCR-related matters. For more information on this development and other waste matters, please contact Donald C. Bluedorn II at (412) 394-5450 or dbluedorn@babstcalland.com, Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Mackenzie M. Moyer at (412) 394-6578 or mmoyer@babstcalland.com, or any of our other environmental attorneys.

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