PIOGA Press
(By Lisa Bruderly)
Projects involving oil or natural gas development or pipeline construction require U.S. Army Corps of Engineers (Corps) permitting for impacts from crossing, or otherwise disturbing, federally regulated streams and wetlands. The extent of required federal permitting is dependent on the definition of “waters of the United States” (WOTUS), which determines federal jurisdiction under the Clean Water Act (CWA). Typically, the more impacts to federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.
As one of their last actions for 2022, U. S. EPA and the Corps (the Agencies) released a prepublication notice of a new definition of WOTUS on December 30, 2022. The new definition will become final 60 days after publication in the Federal Register.
Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)). The Agencies reverted back to this definition in August of 2021, when the U.S. District Court for the District of Arizona vacated the definition of WOTUS promulgated by President Trump’s administration, referred to as the Navigable Waters Protection Rule (NWPR).
The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). Justice Anthony Kennedy, however, advanced a broader interpretation of WOTUS in his concurring opinion, which was based on the concept of a “significant nexus,” meaning that wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered water.”
President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination. Publication of this definition, at this time, is likely a preemptive move by the Agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the Court is considering whether the Ninth Circuit “set forth the proper test for determining whether wetlands are ‘waters of the United States.’” Some have speculated that the U. S. Supreme Court’s opinion may support a more narrow interpretation of WOTUS than is currently being implemented by the Agencies. If true, this inconsistency would create even more uncertainty in identifying WOTUS.
While this new WOTUS definition may not, conceptually, be a significant change to how the Agencies approach regulating streams and wetlands, the new definition could expand how the Agencies evaluate whether a wetland is “adjacent” to a WOTUS and whether a waterbody will “significantly affect” a WOTUS, both of which would support federal jurisdiction of the stream/wetland. The preamble to the new definition includes lengthy discussion regarding adjacent wetlands. In addition, the new definition of “significantly affect” enumerates five factors to be assessed and five functions to be considered in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water. Factors include distance from the traditionally navigable water, hydrologic factors (e.g., frequency, duration, magnitude of hydrologic connection) and climatological variables (e.g., temperature and rainfall). Functions include contribution of flow, retention and attenuation of runoff and provision of habitat and food resources for aquatic species in traditionally navigable waters. Both the factors and the functions are broad and open to interpretation, which could lead to the Agencies asserting jurisdiction over more waterbodies.
The new definition also codifies that the effect of the potentially regulated water must be evaluated “alone or in combination with similarly situated waters in the region,” which will likely broaden how the Agencies evaluate the potential regulation of ephemeral and isolated waterbodies.
If the fate of the new WOTUS definition follows the same path as President Obama’s Clean Water Rule and President Trump’s Navigable Waters Protection Rule, the new definition will be challenged quickly after it becomes effective. These challenges may result in the stay or vacatur of the new definition. If this occurs, the Agencies may, again, revert back to the current definition of WOTUS.
Babst Calland will continue to follow these and other Clean Water Act developments. If you have any questions about these developments, contact Lisa Bruderly at 412-394-6495 or lbruderly@babstcalland.com.
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Reprinted with permission from the January 2023 issue of The PIOGA Press. All rights reserved.
Pittsburgh Business Times- Pittsburgh INNO
(By Nate Doughty)
A new Pittsburgh-based investment program backed by local angel investors has marked the close of its first capital infusion into a startup company.
IF Ventures, a joint program from Pittsburgh-based nonprofit economic development organization Idea Foundry made in partnership with Pittsburgh-based law firm Babst Calland, announced it invested over $300,000 into one of the program’s inaugural cohort of companies.
Chris Farmakis, a shareholder and board chair at Babst Calland, declined to disclose the name of the startup that received the investment citing confidentiality agreements made between the parties but noted that this is just the first of several deals the program is looking to make in the coming months.
Farmakis said the program isn’t to be likened to a fund like those raised by venture capital firms. Instead, IF Ventures serves as the vetter of hundreds of companies looking to take on investment and only selects a few firms to be presented to its cadre of angel investors who are open to deploying capital in budding enterprises.
There is no requirement that individuals in this program invest in every company, Farmakis said, though periodic investments must be made if investors wish to remain participants in the program.
“This is more about taking successful entrepreneurs, successful business people and people that have the ability to invest in these companies, aggregate them together and give them access in a painless way to make discernible investment decisions,” Farmakis said. “And that’s what we’re doing with this program.”
IF Ventures is expecting to close on its second investment soon and a second cohort of companies will be brought before the investors in its program next month.
Breaking Ground
(By Max Junker and Anna Hosack)
Since the 1999 enactment of the Pennsylvania Construction Code Act (“PCCA”), Pennsylvania has sought to establish uniformity for construction standards throughout the Commonwealth. In pursuit of uniformity the PCCA embraced the adoption of standards drafted by the International Code Council (“ICC”), a private non-profit entity, and directed the Department of Labor & Industry (“Department”) to promulgate certain ICC standards under the Uniform Construction Code (“UCC”). The directive to adopt standards originating from a non-governmental entity such as the ICC implicates a legal concept known as the non-delegation doctrine. The Commonwealth Court recently invoked the non-delegation doctrine to enjoin the enforcement of the 2021 accessibility regulations promulgated by the Department in Pennsylvania Builders Association v. Department of Labor & Industry, No. 479 M.D. 2021, 2022 WL 14668728 (Pa. Cmwlth. Oct. 26, 2022).
The non-delegation doctrine is embodied in Article II, Section 1 of the Pennsylvania Constitution where it states: “The legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives.” Together with Article III, Section 1 of the Pennsylvania Constitution addressing the passage of laws, the non-delegation doctrine constrains the General Assembly so that it cannot delegate its lawmaking power to any other branch of government, another body, or some other authority. Christ the King Manor v. Dep’t of Pub. Welfare, 911 A.2d 624 (Pa. Cmwlth. 2006), aff’d 951 A.2d 255 (Pa. 2008).
The Commonwealth Court’s recent decision in Pennsylvania Builders Association is the culmination of litigation filed by the Pennsylvania Builders Association (“PBA”) against the Department alleging that the ICC accessibility provisions adopted pursuant to Section 304(a)(3) of the PCCA (“Accessibility Regulations”) constituted an unconstitutional delegation of legislative authority.
On December 25, 2021, pursuant to Section 304(a)(3) of the PCCA, the Department amended Sections 403.21, 403.26, and 403.28 of the Department’s regulations and certain definitions in Section 401.1 to expressly adopt the ICC’s 2021 amendments to accessibility provisions of the International Building Code, International Existing Building Code, and International Swimming Pool and Spa Code. On December 29, 2021, PBA filed a complaint in the Commonwealth Court’s original jurisdiction alleging that the General Assembly delegated unfettered legislative authority to a private entity, the ICC, to establish accessibility standards, and that PBA and its members were aggrieved as a result. PBA claimed that the association and its members were denied the opportunity to provide meaningful comment during the promulgation process in addition to suffering future adverse economic impacts, delays, as well as foreseeable interpretive and enforcement difficulties. Section 304(a)(3) of the PCCA directs: “The Department shall promulgate regulations updating accessibility standards under Chapter 3 [Uniform Commercial Construction Code] by adopting by December 31 of the year of issuance of the accessibility provisions of the most recently published edition of the ICC codes and any other accessibility requirements which shall be specified in the regulations or contained in or referenced by the [UCC] relating to persons with disabilities.” 35 P.S. § 7210.304(a)(3). PBA argued that Section 304(a)(3) is a directive that in its essence requires the Department to rubber-stamp into law whatever accessibility standards the ICC publishes, without a process to consider any alterations to those standards. Furthermore, that the General Assembly failed to provide any mechanism for the Department to question, modify, reject, or even independently review and concur with the accessibility standards the ICC creates.
This is not the first time that PBA has accused the Department of violating the non-delegation doctrine. The General Assembly’s previous solution to complying with the non-delegation doctrine while still upholding the purpose of the PCCA was to establish the UCC Review and Advisory Council (“RAC”). Established in 2008, RAC is charged with making recommendations to the Governor, the General Assembly, and the Department regarding proposed changes to the PCCA. Additionally, RAC is responsible for reviewing the most recent building code updates published by the ICC. RAC is authorized to make determinations as to whether any new or amended provisions of ICC’s codes are not consistent with the PCCA, or are inappropriate for inclusion in Pennsylvania’s UCC, and RAC is to notify the Department of the same by May 1 of the issuing year. When that happens, the Department must exclude the challenged provisions when adopting the UCC, thereby leaving the corresponding provisions of the prior UCC version in effect. In late 2010, PBA filed a petition for review seeking a declaration that the 2009 UCC and other related codes are null and void as violative of the non-delegation doctrine. However, the Commonwealth Court held that the 2009 UCC amendments were valid because the inclusion of RAC in the Department’s process to adopt the Pennsylvania UCC afforded oversight and input by industry members and meant that the Department could no longer adopt ICC’s codes “sight unseen.” Pennsylvania Builders Ass’n v. Dept. of Labor & Indus., 4 A.3d 215, 222 (Pa. Cmwlth. 2010).
As noted by the Commonwealth Court, the distinguishing factor in the current case challenging the Accessibility Regulations was that RAC was uninvolved in the process. Section 106(b) of the PCCA specifies that “the Accessibility Advisory Board shall review all proposed regulations under [the PCCA] and shall offer comment and advice to the [Department’s] secretary on all issues relating to accessibility by persons with physical disabilities, including those which relate to the enforcement of the accessibility requirements.” 35 P.S. § 7210.106(b) (emphasis added). On July 15, 2021, the Department sought input from the Accessibility Advisory Board which “expressed no concern with the proposed changes.” However, the Department must only consider the Accessibility Advisory Board’s comments and advice in contrast with the binding determinations that are issued by RAC. The General Assembly has not expressly authorized the Department to alter ICC’s accessibility standards based on input from the Accessibility Advisory Board. Therefore, the Court found that due to the General Assembly’s statutory mandate that the Department must adopt the ICC’s accessibility codes without modification, the Accessibility Advisory Board’s review process does not in any way guide or restrain the ICC’s control over Pennsylvania’s UCC and the Department’s regulations.
Judge Covey, writing for the majority, stated: “The non-delegation doctrine prohibits the General Assembly from incorporating sight unseen, subsequent modifications to such standards without also providing adequate criteria to guide and restrain the exercise of the delegated authority.” Without the oversight of RAC in the promulgation process, the Accessibility Regulations were being adopted sight unseen and without any subsequent modification by the legislature. Therefore, the Commonwealth Court determined that Section 304(a)(3) of the PCCA contains valid provisions inseparable from invalid provisions, struck Section 304(a)(3) in its entirety from the PCCA, and permanently enjoined the Department from its enforcement.
After the Commonwealth Court’s ruling, it is likely that review of the ICC accessibility provisions will be referred to RAC and therefore avoid non-delegation doctrine issues in the future. Although it might seem like a short-lived win for PBA because the PCCA could utilize RAC to avoid the non-delegation doctrine, there is a crucial argument to be made following the recent decision. Because Section 304(a)(3) of the PCCA was declared unconstitutional, there is a strong argument that the Commonwealth Court also rendered invalid all accessibility regulations previously promulgated pursuant to that provision; not just the 2021 Accessibility Regulations at issue in the case. Although some accessibility provisions have been promulgated under Section 301 of the PCCA, a great deal of the accessibility provisions were promulgated by adopting a successor or revised code under the authority granted by Section 304(a)(3). Furthermore, if Section 304(a)(3) is unconstitutional, as ruled by the Commonwealth Court, by necessary implication those previous accessibility provisions adopted as regulations should be invalid as well.
The Department did not file an appeal with the Supreme Court so the Commonwealth Court’s decision stands. We will continue to follow developments in this area of the law and its intersection with the design, construction, and inspection activities of the Master Builders’ Association of Western Pennsylvania’s members.
Act of November 10, 1999, P.L. 491, as amended, 35 P.S. §§ 7210.101-7210.1103; See Commonwealth v. Null, 186 A.3d 424, 427 (Pa. Super. 2018) (quoting Flanders v. Ford City Borough, 986 A.2d 964, 969 (Pa. Cmwlth. 2009)).
Max Junker is a shareholder at Babst Calland. He can be reached at rjunker@babstcalland.com. Anna Hosack is an attorney at Babst Calland. She can be reached at ahosack@babstcalland.com.
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Reprinted from the January/February 2023 edition of Breaking Ground magazine with permission from the publisher Tall Timber Group. All rights reserved.
Babst Calland recently names Tiffany Arbaugh, Dane Fennell, Sean Keegan and Matthew Wood as Senior Counsel in the Firm.
Tiffany Arbaugh is a member of the Energy and Natural Resources and Litigation groups. Mrs. Arbaugh has more than 16 years of experience in the oil and gas industry. She focuses her practice on representing corporations in a variety of litigation matters with an emphasis on mineral title, real estate, trespass, fraud and title curative disputes. Mrs. Arbaugh’s practice also includes advising clients in customary business operations, litigation avoidance strategies and litigation preparedness.
Dane Fennell is a member of the Corporate and Commercial group of Babst Calland. Mr. Fennell’s practice focuses primarily on commercial real estate transactions, mergers and acquisitions, drafting commercial transaction agreements, and general corporate matters. Mr. Fennell’s background includes managing complex due diligence aspects of small and large acquisitions and contract management projects. For these projects, he works closely with Solvaire Technologies, L.P., an affiliate of Babst Calland, to achieve reliable and cost-effective results.
Sean Keegan is a member of the Litigation and Employment and Labor groups of Babst Calland. Mr. Keegan has a broad range of litigation experience in several practice areas including commercial, labor and employment, energy, and maritime. He has experience defending shareholder dispute claims, oil and gas lease disputes, insurance claims, and premises liability claims. Mr. Keegan has represented clients in both state and federal courts throughout the United States.
Matthew Wood is a member of the Environmental group. He assists clients on a variety of environmentally-related legal matters arising under major federal and state environmental and regulatory programs, with a focus on issues involving government inquiries, environmental investigations, remediation and concomitant activities under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), and their state analogs. In connection with this experience, he has advised clients during all stages of multi-year environmental remediation projects under consent decrees and administrative orders at sites across the U.S. Mr. Wood counsels clients in the manufacturing, chemical, metals, and other sectors on permitting matters, compliance, enforcement actions, and government investigations and provides support on issue assessment, risk management, and strategy implementation to ensure effective client operations.
Babst Calland recently named Varun Shekhar and Josh Snyder shareholders in the Firm.
Varun Shekhar is a member of the Environmental and Transportation Safety groups. Mr. Shekhar’s Environmental practice emphasizes federal, state and local regulatory matters arising under the Clean Air Act (CAA). He counsels Title V facilities across the country regarding compliance determination and assurance, CAA Section 114 information requests, and environmental audits. Mr. Shekhar draws upon his science and engineering background to help clients develop compliance solutions that are practical, technically and legally sound, and to advise entities in the course of enforcement actions by the U.S. Environmental Protection Agency, U.S. Department of Justice, and state agencies, as well as citizen suits within federal district and appellate courts. Mr. Shekhar also has substantial experience in assisting entities with continuous parametric and emissions monitoring systems, including coordinating with consultants and other technical advisors in identifying and addressing operational and data processing issues as they relate to compliance determination.
Joshua Snyder is a member of the Litigation and Energy and Natural Resources groups of Babst Calland. Mr. Snyder has extensive experience representing oil and gas producers in a range of disputes. His energy litigation experience includes defending oil and gas producers and contractors from personal injury, toxic tort, nuisance, and lease dispute claims. Additionally, Mr. Snyder has represented clients in the manufacturing, finance, healthcare, and coal industries in a range of commercial disputes. He has represented clients in federal and state courts, as well as before administrative bodies and arbitration panels.
Smart Business
(By Sue Ostrowski featuring Gina Falaschi and Susanna Bagdasarova)
Under a proposed new rule, many federal suppliers would be required to annually disclose their greenhouse gas (GHG) emissions and climate-related financial risks, in addition to setting GHG emissions reduction targets. The result could be a significant impact on a business’s reporting requirements.
“The proposed rule was published on Nov. 14, 2022, by the Department of Defense, General Services Administration and National Aeronautics and Space Administration,” says Susanna Bagdasarova, an associate at Babst Calland. “The Federal Supplier Climate Risks and Resilience Rule directs some federal suppliers to address climate-related risks as part of the Biden administration’s climate-change initiatives, including its goal of achieving a net-zero emissions economy by 2050.
“Businesses with government contracts should assess whether they need to comply,” says Gina Falaschi, an associate at Babst Calland. “Assessing potential impacts will help businesses be prepared for compliance deadlines when and if the rule is finalized.”
Companies can submit written comments on the proposed rule until Feb. 13, 2023, which will be reviewed prior to the federal agencies releasing the text of the final rule.
Smart Business spoke with Falaschi and Bagdasarova about how the Federal Supplier Climate Risks and Resilience Rule could impact federal suppliers.
What does the proposed rule require?
It imposes GHG emissions disclosure and reporting requirements on certain federal suppliers. “Significant contractors,” those receiving at least $7.5 million but less than $50 million in federal contract obligations during the previous fiscal year, would be required to report an annual inventory of their Scope 1 and Scope 2 emissions.
“Major contractors,” those receiving more than $50 million in federal contract obligations during the previous year, would be subject to the same requirements. They would also be required to publicly disclose an annual inventory of their Scope 3 emissions, an assessment of their climate-related financial risks and science-based targets to reduce their GHG emissions.
The first step is an internal review of contracts to determine whether this proposed rule applies and assess whether you already report GHG emissions or make voluntary climate-related disclosures. For companies not currently required to report emissions, compliance could be costly.
Under the proposed rule, companies that do not complete the required annual disclosures would become ineligible for federal contract awards until they are compliant. However, some organizations are excluded, including higher education institutions, nonprofit research entities, state and local governments, and federal management and operating contractors that get at least 80 percent of their revenue from those contracts.
What is the timeframe for compliance?
Significant and major contractors would be required to report Scope 1 and Scope 2 emissions one year following publication of the final rule, while major contractors will be required to disclose Scope 3 emissions, climate-related risks and science-based targets two years after publication. Companies may be required to hire additional personnel or consultants to complete calculations and compile information for the required disclosures.
Even if your business doesn’t fall into an impacted category, if your customers have government contracts and are required to make disclosures, they may ask your business to calculate your GHG emissions as part of their upstream supply chain.
What are some takeaways?
Companies may be required to report and make publicly available information they haven’t before, leading to potential litigation risk. Some may decide not to bid for government contracts due to compliance obligations, or it could result in including the cost of compliance in bids, possibly making government procurement more expensive. In addition, as part of the effort of the Biden administration to implement a comprehensive, government-wide strategy to mitigate climate change, disclosures will likely lay the groundwork for future climate policy.
The comment period closes on Feb. 13, 2023, so review the proposed rule now to determine the possible impact on your business and make your voice heard.
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Legal Intelligencer
(By Harley Stone and Anna Jewart)
Enacting and amending zoning regulations is a time-consuming matter. In fact, months often pass from the inception of an idea to the implementation of a zoning scheme and its actual effective date. This is due in large part to the stringent adoption requirements set forth by the Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq. (MPC). These MPC mandated procedures require municipalities to obtain recommendations from their local planning bodies, submit proposed zoning ordinances and amendments to the relevant county planning agency, and to hold public hearings to solicit public comment.
Consequently, municipalities frequently must consider what to do with land use applications received during the period in which an ordinance is “pending,” but has not yet become effective. The “pending ordinance doctrine,” was created by the courts prior to adoption of the MPC. The doctrine was designed to protect municipalities from instances where an applicant proposes a use which conforms to the existing zoning scheme but would not be permitted under zoning changes being considered by the municipality and for which it has advertised its intent to hold public hearings. When the pending ordinance doctrine applies, a land use applicant may be required to conform to proposed zoning regulations which have not yet been adopted.
However, the doctrine does not always apply. In fact, the MPC includes certain statutory exceptions to the pending ordinance doctrine which are intended to protect landowners and applicants. Section 508(4)(i) of the MPC, and its counterpart in Section 917 modify the applicability of the pending ordinance doctrine to protect duly filed land development applications from changes or amendments in the relevant zoning ordinance. Section 508(4)(i) states applicants for approval of a plat “shall be entitled to a decision in accordance with the provisions of the governing ordinances … as they stood at the time the application was duly filed.” The Commonwealth Court’s recent reported opinion in In re Jaindl Land, No. 776 C.D. 2021, No. 1187 C.D. 2021, 2022 WL 14965490 (Pa. Cmwlth. 2022), issued a reminder to municipalities and applicants alike that under the MPC the pending ordinance doctrine does not apply to applications for subdivision or land development.
In In re Jaindl Land, the developer, Jaindl, was the equitable owner of 87 acres of property in Green Township, Franklin County. The property was split zoned with a portion located in the township’s LI Light Industrial District and another located in its HC Highway Commercial District. In 2018 Jaindl entered into a contract for the sale of the property with its legal owners. As of the date of the agreement the township zoning ordinance permitted industrial warehouses and distribution centers as a use by right in the LI District. In 2018 and 2019 representatives of Jaindl met with township representatives, including its zoning officer and engineer to discuss plans to develop the property with industrial uses. In October 2019, the township planner proposed several amendments to the township zoning map that included a recommendation that a portion of the property be rezoned from the LI District to the Transitional Commercial District in which warehousing is not a permitted use. In November 2019, the township mailed notices of the proposed amendments to affected and adjoining property owners, including notice of a public hearing scheduled for Jan. 14, 2020, which was received by the legal owners of the property. On Dec. 1, 2019, the township published its first advertisement of its intent to amend the zoning map in a newspaper of general circulation in the municipality. The public hearing was held as advertised on Jan. 14, 2020, but adoption of the amendment was tabled. The same day, Jaindl submitted a preliminary land development application for the construction of an industrial warehouse on the property. The ordinance was eventually adopted on Jan. 28, 2020.
On Feb. 5, 2020, the township zoning officer issued a written determination that Jaindl’s land development application was subject to the pending ordinance doctrine, which would mean the township would get the benefit of the more restrictive newly enacted 2020 ordinance. The zoning officer denied the application, and Jaindl appealed to the Township Zoning Hearing Board which held hearings in May and June 2020. The ZHB affirmed the denial in July 2020. During that time Jaindl also filed a challenge to the substantive validity of the 2020 ordinance, arguing it was arbitrary, irrational, discriminatory and constituted special legislation. That challenge was also denied by the ZHB following a separate hearing in September 2020. Jaindl appealed both decisions to the Franklin County Common Pleas Court, which consolidated, and then denied, both appeals. The lower court held that because the township had “advertised” the 2020 ordinance prior to submission of the application it, rather than the prior ordinance, applied to the application. On July 7, 2021, Jaindl appealed to the Commonwealth Court.
On appeal Jaindl raised two issues, that the lower court erred in finding the pending ordinance applied to their preliminary land development application; and that it erred in finding the ordinance was not invalid special legislation specifically targeted to prevent their development of the property. Tackling the pending ordinance issue at the forefront, the court detailed the history of the pending ordinance doctrine, relevant sections of the MPC, and several notable prior judicial interpretations of Section 508(4). Quoting its 1973 opinion in Monumental Properties v. Board of Commissioners of Whitehall Township, 173 A.2d 725, 727 (Pa. Cmwlth. 1973), the court emphasized:
“The Legislature could not have more clearly stated that a preliminary land development plan may not be disapproved on the basis of subsequently enacted zoning changes. The section makes no mention whatsoever of public advertisement of proposed zoning changes or of the time of such advertisement vis-à-vis the time of filing an application.”
The court consequently found that the pending ordinance did not apply to Jaindl’s application and that the 2020 ordinance, enacted after it was filed, had no effect on the plan, and was not proper grounds for disapproval.
An intriguing interpretation to the application of the doctrine was brushed upon by the court but not fully addressed, perhaps due to our Supreme Court’s recent consideration of the issue in In re Board of Commissioners of Cheltenham Township, 211 A.3d 845 (Pa. 2019). In Cheltenham the court took a look at not only Section 508(4), but its counterpart in Section 917 of the MPC, 53 P.S. Section 10917. At issue was the application of the pending ordinance doctrine to zoning relief needed for purposes of land development plan approval. The court noted that Section 917 of the MPC largely mirrors Section 508(4)(i) and provides that while an application for a special exception related to a land development is pending, the applicant is entitled to a decision in accordance with the provisions of the ordinances as they stood at the time the application was filed. In other words, the MPC’s protection of land development applications from the pending ordinance doctrine applies not only to the land development approval, but to any zoning approvals required to effectuate the development.
Although the court’s decision in Jaindl is essentially a reminder of the express terms of the MPC, the breadth of case law on this issue indicates that it was a well-warranted one. While timing of advertisement and other factors must be considered when pure zoning relief is sought, Jaindl reminds us that the MPC is clear: land development applications (and zoning relief necessary for their approval) are always subject to the ordinance as it stands at the time the application is filed.
Harley S. Stone is a shareholder in Babst Calland Clements and Zomnir’s public sector group. Stone provides a wide range of services to municipal governments, authorities and private developers, with an emphasis on municipal permitting, planning, land use and zoning. Please contact him at 412-394-5410 or hstone@babstcalland.com.
Anna S. Jewart is an associate in the firm’s public sector group. Jewart focuses her practice on zoning, subdivision, land development, and general municipal matters. Please contact her at 412-253-8806 or ajewart@babstcalland.com.
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Reprinted with permission from the December 22, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.
Legal Intelligencer
(by Ben Clapp)
The risk transfer transaction structure is being increasingly employed in Pennsylvania and elsewhere as industrial site owners seek to clear long-tail environmental liabilities off their balance sheets. Commonly known as an environmental liability transfer, these transactions generally involve the purchaser acquiring the real property and other assets associated with an industrial facility and assuming responsibility for all environmental liabilities associated with that property, including site closure, demolition, and environmental remediation obligations. Often, the purchaser agrees to assume all such liabilities regardless of whether they arose prior to or after the purchaser’s acquisition of the facility. The purchaser also commonly provides a release of liability and indemnity to the seller. The costs associated with the purchaser assuming these obligations and liabilities are then deducted from the value of the assets being acquired to arrive at the transaction price. This price is frequently “upside-down,” with the seller paying the purchaser to acquire the property and assume its obligations.
While environmental liability transfers have been around for years, the transaction structure appears to have increased in popularity recently as power generators and other industrial companies are motivated to divest non-core assets and reduce environmental expenditures. In the power sector in particular, a shift away from coal-fired electricity generation has left power producers holding old coal plants that are closed or rapidly nearing closure, and ancillary assets such as coal ash landfills, all of which come with hefty environmental carrying costs. On the other hand, these properties are often well-suited for redevelopment, being industrially zoned, with access to electricity transmission lines and, often, shoreline infrastructure. Companies specializing in acquiring properties through environmental liability transfers believe that they can address environmental issues more efficiently and cost-effectively than the previous owners, leaving them well-positioned to profit by redeveloping the property and either selling or operating it once environmental obligations have been satisfied.
While relatively easy to conceptualize, environmental liability transfers can pose legal and technical challenges. Obviously, a seller will want to ensure that they are reducing their exposure to residual liability for a given site to the greatest extent possible. However, a seller generally cannot eliminate its exposure to statutory environmental liability arising from its past ownership or operation of a facility by simply contracting away that liability to a third party. For example, Section 107(e) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” aka “Superfund”), makes clear that “[n]o indemnification, hold harmless, or similar agreement . . . shall be effective to transfer from the owner or operator of any . . . facility or from any person who may be liable for a release or threat of a release under [CERCLA], to any other person the liability imposed under [CERCLA].” 42 U.S.C. § 9607(e)(1). This provision does not bar contractual arrangements allocating CERCLA liability between private parties. See 42 U.S.C. § 9607(e)(2). It simply means that the government will continue to have a claim against a party liable under CERCLA regardless of whether that party may have contracted with a third party to assume that liability.
As long as the purchaser remains a viable party with the financial wherewithal to honor its contractual indemnification obligations, and those obligations are sufficiently robust to cover any environmental liability that may arise, the seller can feel comfortable that it is largely protected from residual environmental liabilities. To that end, a seller should employ a suite of contractual, legal and financial protections designed to insulate itself from environmental liabilities that were assumed by the purchaser. Contractual protections include drafting provisions relating to the buyer’s assumption of liabilities that are broad enough to ensure that the seller is not inadvertently retaining liabilities relating to pre-closing operations that were intended to be assumed by the buyer. The contract should also include an acknowledgement by the buyer that it is acquiring the property “As Is, Where Is, With All Faults” and a provision releasing the seller from any claims by the buyer arising from the environmental condition of the property and other liabilities assumed by the buyer. The seller should also seek an indemnity from the buyer, whereby the buyer agrees to indemnify and defend the seller for the assumed liabilities, including all claims arising under environmental laws. Other contractual provisions, such as covenants requiring the buyer to perform certain environmental obligations, and provisions conditioning closing on the satisfaction of certain events such as the transfer of material permits or obtaining key regulatory approvals may also be required depending on the circumstances of a given transaction. The seller may also be subject to consent orders or similar instruments obligating it to perform remediation or other environmental compliance activities at the subject property, in which case the parties may seek to engage with the applicable regulatory authorities to modify such instruments to replace the seller with the buyer as a party. Another key consideration is that financial assurance posted by the seller to secure its environmental obligations will need to be replaced by financial assurance posted by the buyer.
The buyer should feel comfortable taking on these obligations provided that they are confident that they are assuming only those liabilities that they are being compensated for assuming, and that the compensation they are receiving is sufficient to cover the costs of those obligations. Thus, from the buyer’s perspective, a careful review of the contract’s assumed liabilities is required, likely involving input from real estate, environmental and corporate counsel, among others. The contractual review should complement a robust due diligence process that provides for an accurate accounting of all demolition, remediation, restoration, closure and other activities that will be required at the property. This process also involves input from counsel, as well as various contractors and one or more environmental consulting and engineering firms. Buyers will also often seek to protect themselves from unknown environmental liabilities through the purchase of environmental insurance products.
For upside-down transactions, where the seller pays a sum to the buyer on or after the closing date, a final consideration for the parties is how the transaction price will be distributed to the buyer. The seller should take steps to ensure that the funds it pays are put to use for their intended purpose. If the funds are extinguished prior to the completion of work the buyer has agreed to perform, and the buyer becomes bankrupt, the seller runs the risk that some or all of the environmental liabilities it has attempted to contract away will revert to the seller. To avoid this scenario, the parties will often agree to have the transaction funds placed in an escrow account. An independent engineer is employed to track the progress of the work being performed by the buyer, as measured by the achievement of certain agreed upon milestones. Upon verification by the independent engineer that a certain milestone has been achieved, the escrow agent is instructed to release a predetermined amount of funds to the buyer. In this way, the seller is provided with a level of protection against the insolvency of the buyer, while the buyer is ensured of receiving the funds it needs to complete the work.
Environmental liability transfers can be complicated contractually, require technical expertise and are diligence-intensive exercises. However, when well-executed, an environmental liability transfer is a “win-win” for the buyer and the seller and can benefit the surrounding communities as well when an idle industrial property is put back into productive use.
Ben Clapp is a shareholder of Babst Calland. Mr. Clapp’s transactional work, which straddles the Firm’s Environmental and Corporate practice areas, consists of advising clients on the environmental components of complex deals, including identifying and analyzing significant environmental liability and compliance issues arising in connection with mergers and acquisitions, asset sales, project financings, and corporate restructurings, and working to resolve, manage, allocate or mitigate these environmental risks in the client’s best interest. Contact him at 202-853-3488 or bclapp@babstcalland.com.
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Reprinted with permission from the December 15, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.
TEQ Magazine
(By Justine Kasznica)
Be Prepared
According to the CISA and the FBI the first and most important step towards protection is preparation. Being prepared includes creating, maintaining, and exercising a cyber incident response plan, resilience plan, and continuity of operations plan; ensuring personnel are familiar with key steps that must be followed during a cyber breach incident; identifying a resilience plan that addresses how to operate if you lose access to-or control of- your company’s systems; and implementing back data back-up procedures. In addition, companies need to minimize gaps by ensuring all security protocols and protections happen around the clock, including holidays and weekends.
Enhance the Organization’s Cyber Posture
Enhancing an organization’s cyber posture is imperative to its safety from any form of cyberattack. An organization may ensure proper identity and success management, protective controls and architecture, and vulnerability and configuration, by requiring strong passwords and multi-factor authentication for all users. By monitoring and detecting abnormal activity like various unsuccessful logins or unlikely geographic access, a company can spot attempted breaches early enough to prevent any damage from occurring. It is also helpful to update software in a timely manner and to be sure to use industry recommended antivirus programs.
Stay Vigilant
Simply implementing initial data privacy, security, and response measures is not enough. Cybercriminals and their methods are constantly evolving. Taking a proactive approach to data privacy and security, and being willing to invest in same, is vital to ensuring that a company’s safeguards are adequate and up-to-date. As necessary, internal and external annual audits and/or reviews of a company’s systems and policies is crucial to its data security. For example, companies should:
- Review existing segmentation and preventative controls that may have atrophied over time.
- Identify shared systems or infrastructure on the IT side that could allow an adversarial group to pivot and deploy ransomware to the OT side.
- Review dataflows of critical business system applications reliant on OT communications and document them.
- Ensure backups are being performed across critical OT systems. Periodically test the backups and ensure there is an offline copy in the event that an online system becomes encrypted from ransomware.
- Engineering and OT teams should evaluate what systems should leverage remote access.
- Remote access requirements should be determined, including what IP addresses, communication types, and processes can be monitored. All others should be disabled by default. Validate your external exposure of IT and OT systems.
- For remote access, all communications should be centrally logged and monitored. Various detection techniques should be implemented on remote access systems, such as looking for brute force attempts or specific exploits for known vulnerabilities. Multi-factor authentication should be implemented.
In addition, data privacy and security laws, both in the United States and abroad, are frequently being updated to combat cyberthreats, and oftentimes impose new requirements on companies meeting certain thresholds. A company can increase organizational vigilance by staying up-to-date on government notifications and being sure to receive information on current security issues or vulnerabilities.
Ransomware Attacks: Pay or Not to Pay
As a general rule, the FBI does not support paying ransom to cybercriminals in ransomware attacks for two reasons.⁴³ First, paying a ransom will encourage and incentivize cybercrime. If hackers’ demands are met, they will be more likely to target other victims. Further, if others perceive that this kind of crime does, in fact, “pay,” they will be incentivized to become involved in cybercriminal activity. Second, there is no guarantee that paying a ransom will result in the release of data.
The other side of the argument can be equally compelling. Paying a ransom can be an attractive option when the alternative is to shell out millions of dollars to restore and remediate the systems. Additionally, the chaos that the disruption in services can cause cannot be discounted. In contrast, a company who decides to pay the ransom, while also working with the FBI to recoup some of the ransom and ultimately obtaining the decryption key in short order. While these results should not be expected, it is difficult to argue that, in this instance, the wrong choice was made by paying the ransom.
When faced with a ransomware attack, there are no “good” options. On one hand, organizations must consider the potential consequences of not paying the ransom: employee/customer health and safety; costs of disrupted services; internal and external impacts from potential shutdowns; release of confidential data stolen by the attacker; etc. On the other, the ransom itself may be a substantial, unrecoverable cost — one that may or may not achieve the end goal.
Ultimately, as ransomware attacks become more common and sophisticated, the safest organizations will be those that take these threats seriously and proactively fortify their networks — prevention always beats intervention.
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The Wildcatter
(By Nikolas Tysiak)
I hope everyone had a wonderful Thanksgiving holiday full of friends and family (and delicious, delicious turkey). I want to start out this update with something that should have been in the last update but was not.
Effective June 10, 2022, the West Virginia legislature modified Chapter 11A of the West Virginia Code to streamline the tax sale process by (1) eliminating the bifurcated distinction between “delinquent” and “non-entered” tax assessments, and (2) standardizing the statute of limitations for bringing procedural challenges to the tax sale process. Under the old laws, separate tax sale procedures existed for tax assessments that were “delinquent” (e.g., entered on the tax rolls but not timely paid) vs. “non-entered” (e.g., an assessment for a given real estate interest did not clearly exist on the appropriate county tax rolls). For delinquent assessments, the local sheriff’s tax office had original jurisdiction over the administration of sales and tax deeds; if a given assessment was not redeemed from delinquency or sold within certain time frames, such delinquent assessments were turned over to the State Auditor’s office for further administration and sale. Non-entered assessments existed exclusively under the original jurisdiction of the State Auditor’s office for administration and sale. In practice, the State Auditor’s office either explicitly or implicitly gave county assessors and sheriffs significant leeway in administering these taxation issues.
As landmen and lawyers practicing in West Virginia likely know, property interests affected by tax sales and tax deeds have proven challenging insofar as the ownership of executive rights and royalties pertaining to oil and gas. Recent caselaw brought a semblance of continuity to the effect of “non-standard” assessments affecting oil and gas interests, but in a way that was not anticipated by many title and real estate practitioners, which yielded varying and sometimes counter-intuitive results. Under the new tax sale regime, however, all sales of tax assessments for whatever reason (i.e., delinquency, non-entry, etc.) are to be administered by the State Auditor’s office directly. In addition, due to the elimination of local, procedural activities from the process, the legislature extended the statutes of limitations within which procedural challenges to tax sales and deeds may be brought from 2 years to 3 years. Given that tax sales and deeds under the new laws will not take place until early 2023, it remains to be seen whether the State Auditor will continue its practice of “out-sourcing” tax sale efforts to the relevant county offices or take a more active role in administration of these interests. Mark your calendars for some time in 2024/2025 for these cases to make their way to the Supreme Court.
The West Virginia Supreme Court heard several cases on writs of prohibition involving some of our colleagues. A writ of prohibition is a special action brought directly to the West Virginia Supreme Court alleging that the underlying court exceeded its authority or lacked jurisdiction over the case at hand. While the facts are not necessarily relevant to landmen directly, there were several of these recently involving landmen working in multiple capacities for oil and gas production companies. See e.g., State ex rel. Antero Resources Corp. v. McCarthy, 2022 WL 17038493, — S.E.2d — (November 17, 2022); State ex rel. TH Exploration II, LLC v. Venable Royalty, Ltd, 2022 WL 12524993 (October 21, 2022).
On October 19, 2022, the Ohio Seventh District Court of Appeals found that the assignment of an overriding royalty interest out of a leasehold interest cannot be effective against subsequent leases in Marquette ORRI Holdings, LLC v. Ascent Resources-Utica, LLC (2022-Ohio-3786).
In that case, an oil and gas lessee under a prior oil and gas lease had assigned an override to Marquette ORRI and other parties, including language that the assignment would be effective against “top leases and/or new leases covering all or any portion of the lands and interests which are included . . .” in the underlying leasehold. The Court reasoned that there is no “privity of contract” (in other words, a direct, contractual relationship) between the override owner under a prior lease and a subsequent lessee, resulting in the language regarding future leases to be unenforceable between Marquette and a later lessee (in this case, Ascent).
Also in the Seventh District, on September 30, 2022, the Court issued its decision in the fourth of four cases involving the Whitacre group of companies dealing with whether a lease remains in production “in paying quantities” under Ohio law (Hogue v. Whitacre, 2022-Ohio-3616; Whitacre IV). The court reiterated the long-standing Ohio principle that “in paying quantities” only requires that gross profit exceed direct operating expenses monthly (as determined in Blausey v. Stein, 61 Ohio St.2d 264 (1980)). “Indirect expenses,” including the actual cost of drilling the well amortized, are not considered to be direct operating expenses under this test and are therefore irrelevant. Under this test, the lease at issue in Whitacre IV was determined to be
In Pennsylvania, the Superior Court issued a decision regarding ownership of minerals arising from a potentially ambiguous oil and gas reservation on September 29, 2022 (Hunnell as Trustee of Hunnell Family Revocable Living Trust v. Krawczewicz, 2022 PA Super 166, — A.3d —). The controversy arose from a 1920 severance involving 104 acres of land, where prior owners (the “Theakstons”) excepted and reserved from a conveyance to Brtko as follows: “all the oil and gas within and underlying the hereinbefore described tract of land is also reserved together with such rights to drill or operate for same as are set forth in full in lease . . .” The successors to Brtko as to the surface estate attempted to allege that they were the proper owners of the underlying oil and gas because the reservation was limited to a prior oil and gas lease. The trial court held that the language constituted an exception of all the oil and gas estate. Citing to the distinction between a reservation and an exception under Pennsylvania law, the Superior Court found that the trial court had not erred by vesting oil and gas ownership in the Theakstons (and their successors) as an “exception” and awarded ownership of the oil and gas accordingly.
For once, no notable Marketable Title Act or Dormant Mineral Act cases to report in Ohio. A lull, or just an anomaly? Stay tuned in January for more! Have a Happy Holiday season from your friendly, neighborhood Legislative and Regulatory Chair!
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Reprinted with permission from the MLBC December 2022 issue of The Wildcatter. All rights reserved.
PIOGA Press
(By Gary Steinbauer, Gina Falaschi and Christina Puhnaty)
On November 11, 2022, the U.S. Environmental Protection Agency (EPA) released a pre-publication version of its supplemental proposal for Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review (Supplemental Proposal). The Supplemental Proposal has been highly anticipated since EPA published its initial proposal on November 15, 2021. EPA, Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review, 86 Fed. Reg. 63110 (Nov. 15, 2021) (Initial Proposal).
EPA currently regulates emissions from oil and natural gas facilities under 40 C.F.R Part 60 Subparts OOOO[1] and OOOOa.[2] As part of the Initial and Supplemental Proposals, EPA would regulate oil and natural gas facilities constructed, modified, or reconstructed after November 15, 2021, under a new Subpart OOOOb. With the Supplemental Proposal, EPA has released proposed regulatory language for Subpart OOOOb. In addition, EPA released proposed regulatory text for emissions guidelines in a new Subpart OOOOc. These emissions guidelines are intended to inform states in the development, submittal, and implementation of state plans to establish standards of performance for greenhouse gases (in the form of limitations on methane) from sources existing on or before November 15, 2021. Under the Supplemental Proposal, states and tribes would be required to submit plans to EPA for review within 18 months of the publication of a final rule, with a compliance deadline for existing sources that is no later than 36 months after the deadline to submit the plan to EPA. The Supplemental Proposal also includes an updated proposed “Appendix K,” which is a protocol for determining leaks using optical gas imaging that EPA is now proposing to limit to natural gas processing plants.
The Supplemental Proposal includes several significant changes or updates, which EPA describes as improvements, and additional proposed requirements for sources that were not covered in the Initial Proposal. Several consequential aspects of the Supplemental Proposal include:
- Super-Emitter Response Program: EPA is proposing to allow regulatory agencies and approved “qualified” third parties to monitor well sites, centralized production facilities, and compressor stations for “super-emitter emission events,” which are defined as emission events resulting in 100 kilograms (220.5 pounds) per hour or more of methane. Upon receipt of a notification by a third party, owners and operators of these facilities would be required to initiate a prescribed root cause analysis within five days and complete the root cause analysis and initial corrective actions within 10 calendar days. If initial corrective actions do not rectify the identified cause of the event, facility owners and operators will be required to prepare and submit a corrective action plan to EPA. In addition, recipients of “super-emitter emission event” notifications would also be required to notify EPA within 15 days of completing corrective actions. EPA plans to host a public website that will include information related to the proposed Super-Emitter Response Program.
- Abandoned and Unplugged Well Monitoring: The Supplemental Proposal includes new suite of well closure requirements. Under these proposed requirements, owners and operators of well sites would be required to submit a closure plan to EPA within 30 days of the cessation of production. The contents of this plan would need to include the steps necessary to permanently plug all wells, a description of financial requirements and assurance to complete closure, and the schedule for completing closure. Fugitive emissions monitoring would be required until closure, and an Optical Gas Imaging survey would be required to confirm that closure eliminated any emissions from the well.
- Fugitive Emissions Monitoring for All Wells: Contrary to its Initial Proposal, in which EPA proposed to require fugitive emissions monitoring (i.e., leak detection and repair or LDAR monitoring) at wells with estimated emissions of 3 tons per year or more, the Supplemental Proposal would require LDAR monitoring at all well sites, regardless of estimated fugitive emissions from the well sites. The type (audio, visual, or olfactory versus instrument) and frequency of LDAR monitoring will vary depending on whether the facility in question is a single wellhead-only well site, wellhead only well site with two or more wellheads, or a well site or a centralized production facility that contains “major production and processing equipment.”
These are only some of the numerous additional requirements that EPA is proposing in the Supplemental Proposal. Due to the breadth and complexity of the Supplemental Proposal and the long-awaited release of proposed regulatory text, EPA has also published a memorandum and accompanying chart that summarizes where, throughout the proposal, the agency is soliciting public comment (Summary of Comment Solicitations). In the Summary of Comment Solicitations, EPA has organized the agency’s 142 solicitations for comment by topic, preamble section, and issue to assist the public in understanding on which aspects of the proposal the agency specifically seeks input and guidance. Examples of the topics on which EPA solicits comment include: the potential of advanced methane detection technologies; the “equivalence determination” now required by Clean Air Act Section 136(f)(6)(A)(ii), a provision added to the per the Biden Administration’s Inflation Reduction Act of 2022; and the proposed Super-Emitter Response Program.
Although the Supplemental Proposal has not been published in the Federal Register, EPA has established a public comment deadline of February 13, 2023, and will hold virtual public hearings on January 10 and 11, 2023. Comments can be submitted to EPA by registering to speak at the public meeting or in writing on the Federal e-rulemaking portal (www.regulations.gov). The agency plans to issue a final rule in 2023.
EPA’s efforts to advance CAA regulations to reduce methane emissions from the oil and gas industry sector are separate from the inspections and anticipated rulemaking by the Pipeline and Hazardous Materials Safety Administration (PHMSA) under Sections 113 and 114 of the PIPES Act of 2020. While PHMSA has stated that EPA’s regulations may satisfy some Section 114 PIPES Act requirements, it has provided little guidance on this issue.
If you have any questions about the Supplemental Proposed Rule or submission of comments to EPA, please contact one of the authors.
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Reprinted with permission from the December 2022 issue of The PIOGA Press. All rights reserved.
Pretrial Practice & Discovery
American Bar Association Litigation Section
(By Jessica Barnes)
Numerous allegations of misconduct support a request for over $2 million in sanctions in an ongoing discovery dispute.
There is a line between zealous advocacy and bad-faith avoidance of discovery obligations. Attorneys in In re: Facebook Inc. Consumer Privacy User Profile Litigation, Case No. 18-md-02843-VC (N.D. Ca. 2022) may have crossed that line.
This matter began in March 2018 and involves the discovery that a third-party app developer harvested personal data from roughly 87 million Facebook users and sold it to Cambridge Analytica, a political consulting firm.
In September 2022, the Facebook-user plaintiffs explained to a California district judge why discovery sanctions were appropriate in this case. Specifically, the judge found “abominable” deposition misconduct and was outraged by Facebook’s years-long refusal to turn over certain user data and non-privileged internal communications.
The so-called “deposition misconduct” included Facebook’s witness refusing to answer basic questions and the defense attorney repeatedly telling the witness that she did not have to respond to the question.
With respect to the allegations of refusing to turn over certain information, Facebook attorneys argued that the orders of the judge who presided over discovery disputes were ambiguous. The current district judge did not buy that argument, accusing Facebook attorneys of pouncing on any “little ambiguity” and using it to obstruct and delay the production of obviously responsive materials.
In November 2022, the Facebook-user plaintiffs submitted their total monetary request for sanctions related to fees and costs as a result of discovery misconduct—which totaled over $2 million.
The Facebook-user plaintiffs explained in their briefing, “Plaintiffs believe that the general approach that Facebook . . . took to this litigation greatly delayed progress and increased fees and costs well beyond what is sought in this submission. The fees and costs sought here, however, are only limited to what would not have been incurred absent two categories of sanctionable misconduct that the Court identified in its order.”
No sanction award has been made yet, but its obvious that the district judge is entertaining the sanctions request. Furthermore, there is a crystal-clear takeaway from this case for litigation attorneys: Always take discovery obligations seriously.
It cannot be good for one’s case to have the judge describe the attorney’s conduct as “a good example of bad-faith dilatory conduct.” It also, may just cost millions of dollars.
Jessica Barnes is an associate at Babst, Calland, Clements & Zomnir P.C. in Pittsburgh, Pennsylvania.
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© 2022. Discovery Misconduct May Cost Millions in Sanctions, Pretrial Practice & Discovery, American Bar Association Litigation Section, December 6, 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On June 25, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published General Permit WMGR163 (Permit) in the Pennsylvania Bulletin, 52 Pa. Bull. 3632 (June 25, 2022). PADEP issued the Permit following a 60-day comment period that closed on March 15, 2022. As issued, the Permit authorizes the short-term processing, transfer, and beneficial use of oil and gas liquid waste to hydraulically fracture or otherwise develop an oil or gas well under the authority of the Solid Waste Management Act, 35 Pa. Stat. §§ 6018.101– .1003, and the Municipal Waste Planning, Recycling and Waste Reduction Act, 53 Pa. Stat. §§ 4000.101–.1904. The Permit covers facilities that process and beneficially reuse oil and gas liquid waste for no more than 180 consecutive days at any one time.
Any company interested in using the Permit must register its authorized activities with PADEP. 25 Pa. Code § 287.643. In addition, PADEP is prohibited from requiring an applicant to obtain a determination of applicability from the agency prior to the issuance of the final permit for the land application of material. See id. § 287.641(c), (d). The Permit is applicable to the same oil and gas facilities eligible for coverage under General Permit WMGR123 (“Processing and Beneficial Use of Oil and Gas Liquid Waste”), but with fewer conditions. Key provisions in the Permit include:
- An authorized facility may process and transfer oil and gas liquid waste for no more than 180 consecutive days during the Permit’s two-year coverage period and a permittee can only operate for a maximum of one year during that period. A permittee’s coverage automatically expires one year from the date waste is first received or processed, or two years from date of permit issuance, whichever is less.
- Under the Permit, oil and gas liquid waste is not subject to concentration limits or chemical testing in order to be stored in an impoundment (unlike General Permit WMGR123).
- The applicable facility must meet the siting requirements set forth in the Permit (e.g., it must not be located within a 100-year floodplain or within certain distances of exceptional value wetlands, occupied dwellings, or property lines, subject to certain exceptions).
- A permittee must develop and make available at the facility a preparedness, prevention, and contingency plan that is consistent with applicable PADEP guidance.
The following key terms and provisions were revised based on public comments:
- The duration of the Permit’s coverage was extended from one year to two years, with the maximum operational timeframe of one year.
- The definition of “operate” was revised to clarify that the operational period does not commence prior to oil and gas liquid waste being received or processed at the permitted location.
- Condition C.1 in the draft version of the Permit, which stipulated no more than 100,000 gallons of oil and liquid waste could be stored on-site, was eliminated.
- Former Condition C.26 (now Condition C.25) was revised to clarify that permittees are not authorized to store oil and gas liquid waste in impoundments. The condition was also revised to allow permittees to demonstrate they are exempt from emission permits for open-top storage tanks or other emissions sources in accordance with applicable regulations.
- Condition F.1 was revised to clarify that a renewal request must be submitted at least 180 days in advance of the Permit expiration date and include a certified statement that information contained in the original Permit application has not changed since Permit issuance.
- Condition F.3 was revised to clarify that a permittee may apply for coverage at a previously covered site, but a new Permit cannot be issued until the permittee successfully completes closure and post-closure activities in accordance with Condition C.4 of the Permit.
The Permit became effective June 25, 2022, and expires June 25, 2032.
PADEP Updates Guidance for Handling Radioactive Waste to Address Unconventional Oil and Gas Operations and Publishes Radioactive Materials Disposal Data
On June 11, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a substantive revision to its technical guidance document (TGD) Radioactivity Monitoring at Solid Waste Processing and Disposal Facilities (Guidance), TGD No. 250-3100-001 (June 11, 2022), in the Pennsylvania Bulletin, 52 Pa. Bull. 3374 (June 11, 2022). PADEP updated the Guidance, which was immediately effective, to assist unconventional oil and gas operators in complying with the obligation under 25 Pa. Code § 78a.58(d) to prepare an action plan specifying procedures for monitoring for and responding to radioactive material produced by the treatment processes (and other procedures). The Guidance does not cover waste from conventional oil and gas operations.
The Guidance applies to all solid waste processing or disposal facilities, including underground injection control wells, as defined in the Guidance, and well sites where fluids or drill cuttings generated by the development, drilling, stimulation, operation, or plugging of an oil or gas well are processed on-site. Facilities that are not required to monitor radiation, but do so voluntarily, are also subject to the Guidance.
PADEP originally published a draft version of the Guidance in the Pennsylvania Bulletin in October 2019. See 49 Pa. Bull. 6197 (Oct. 19, 2019). The final Guidance follows PADEP’s July 2021 announcement that all Pennsylvania landfills, including those accepting unconventional oil and gas waste, would be required to conduct quarterly testing of leachate for radiological contamination prior to the liquid being treated on-site or being sent to an off-site wastewater treatment facility. See Press Release, PADEP, “Wolf Administration to Move Forward with Radiological Testing of Leachate at Landfills” (July 26, 2021).
In a September 30, 2022, meeting with the Low-Level Waste Radioactive Advisory Committee, PADEP presented its most recent data summarizing low-level radioactive waste (LLRW) disposal among the Appalachian Compact states (Pennsylvania, West Virginia, Delaware, and Maryland). Among the data presented, PADEP noted that in 2021 oil and gas operators sent approximately 236,000 cubic feet of technologically enhanced naturally occurring radioactive material (TENORM) waste generated during operations for disposal to out-of-state LLRW facilities. According to PADEP, shale gas operators disposed of a total of 811,070 cubic feet of TENORM waste between 2016 and 2021, most of which was sent to LLRW disposal facilities in Texas and Utah. See PowerPoint Presentation, PADEP, “Appalachian Compact: Low Level Radioactive Waste (LLRW) Disposal Data—Calendar Year 2021” (Sept. 30, 2022). PADEP is also currently reviewing its regulations allowing on-site disposal of radioactive and nonradioactive waste associated with well plugging activities, a response to the increased scale of the well plugging that will occur pursuant to the federal Infrastructure Investment and Jobs Act’s conventional well plugging program. See Meeting Minutes, Oil & Gas Technical Advisory Bd. (Apr. 25, 2022).
Bill Setting Pennsylvania’s Conventional Oil and Gas Bonding Levels Becomes Law
On July 19, 2022, House Bill 2644, 2022 Pa. Legis. Serv. Act 2022-96 (Act 96), became law, without Pennsylvania Governor Tom Wolf’s signature. The new law keeps Pennsylvania’s oil and gas well bonding amounts at the current levels of $2,500 per conventional well and $25,000 for a blanket bond for multiple conventional wells. The blanket bond amount will increase by $1,000 for every additional conventional well drilled six months after July 19, 2022, not to exceed $100,000. However, the Pennsylvania Department of Environmental Protection (PADEP) will waive the $1,000 increase for a new conventional well if the operator has plugged an orphan well at the operator’s own expense. Other than the $1,000 increase for blanket bonds, Act 96 precludes PADEP and the Environmental Quality Board (EQB) from raising bonding amounts for 10 years from the effective date. During this time, only the general assembly has such authority. Act 96 does not place a similar 10-year protection period on the adjustment of unconventional well bond amounts, allowing the EQB to adjust amounts every two years to reflect PADEP’s projected well plugging costs. The EQB has been considering two petitions: one to increase well bonding amounts for conventional wells to $38,000 per well and another to increase unconventional well bonding amounts to $83,000 per well. Act 96’s enactment effectively prevents the petitioned increase for conventional wells. See Vol. XXXVIII, No. 4 (2021) of this Newsletter.
In a formal statement published in the July 30, 2022, Pennsylvania Bulletin, Governor Wolf said he allowed Act 96 to become law, but had several concerns with the legislation, including: (1) the directive that federal Infrastructure Investment and Jobs Act (IIJA), Pub. L. No. 117-58, 135 Stat. 429 (2021), funds be deposited into the commonwealth’s orphan well plugging fund, in apparent contravention of the IIJA’s framework for administering funds; (2) that grant amounts are tied to well depths and not actual plugging costs; (3) the elimination of PADEP’s authority to impose federally mandated requirements on recipients receiving plugging grants; and (4) the withdrawal of the EQB’s authority to establish bonding amounts for conventional operations. See 52 Pa. Bull. 4229 (July 30, 2022).
Due to these concerns, Governor Wolf stated that PADEP is reviewing existing processes and procedures and will provide evaluations and recommendations on the following by September 1, 2022:
- Evaluation of the conventional industry’s recent record of compliance with reporting requirements and performance requirements under existing law.
- Evaluation of using existing authority, including increased exercise of civil penalty authority and forfeiting conventional oil and gas well bonds and requiring submission of replacement bonds, as methods to deter and motivate conventional operators to address abandoned wells and violations of the applicable law.
- Recommendations for increased scrutiny of conventional oil and gas operators’ requests for regulatory inactive status approval and permit transfers, because these steps are often precursors to improper abandonment of wells.
- Evaluation of using existing criminal provisions related to conventional oil and gas operations as a means of deterring and motivating conventional operators to address abandoned wells and violations of the applicable law.
- Recommendations for regulatory reform to comprehensively regulate conventional drilling according to modern best practices and industry standards.
Id. at 4230.
Act 96 also requires PADEP to create a new initiative to provide grants to well plugging companies to maximize the volume of orphan wells being plugged. Grants of $10,000 would be awarded for plugging wells less than 3,000 feet deep, with grants of $20,000 awarded for plugging wells more than 3,000 feet deep. Further, Act 96 exempts conventional wells drilled prior to April 1985 from bonding requirements. PADEP estimates a majority of the more than 110,000 active conventional oil and gas wells in Pennsylvania were drilled before April 1985.
Opponents of Act 96 claim that its passage potentially risks Pennsylvania’s receipt of federal funding from the IIJA’s conventional oil and gas well plugging program to plug abandoned and orphan oil and gas wells. Sierra Club, for example, which is one of the entities that filed a petition to increase conventional well bond amounts in Pennsylvania, claims that Pennsylvania may have to return already-allocated funding or may miss out on future funding because Act 96 precludes PADEP from following federal requirements for use of the funds. See Press Release, Sierra Club, “Pennsylvania Legislation Will Exacerbate Massive Oil and Gas Well Backlog and Mismanagement of Federal Funds” (July 19, 2022). In a statement to the Pittsburgh Post-Gazette, Governor Wolf’s Press Secretary Elizabeth Rementer said that “[t]he administration is currently exploring the next steps to ensure the industry is held accountable in order to protect the environment and that we don’t lose out on millions of dollars in federal funding for well plugging.” Laura Legere, “As Pa. Faces ‘Looming Crisis’ of New Abandoned Wells, State Law Will Freeze Well Bonding Rates for a Decade,” Pittsburgh Post-Gazette (July 19, 2022).
Allegheny County Bans Future Oil and Gas Development of County Park Land
On July 19, 2022, the Allegheny County Council voted 12-3 to override County Executive Rich Fitzgerald’s veto on Bill No. 12162-22. The bill, which the Council originally passed on July 5, and Fitzgerald vetoed on July 12, bans new natural gas drilling and other industrial activity, including hydraulic fracturing, mining, and commercial forestry, within and underneath county-owned parks. The ban, which does not apply to existing leases, but does prevent expansion of existing operations at Deer Lakes Park, took effect immediately.
In his veto message, Fitzgerald described his opposition to the measure, stating it prevents the County from negotiating environmental protections for any future oil and gas or other industrial activity in the vicinity of county park land. See Fitzgerald Veto Message (July 12, 2022). Specifically, Fitzgerald said passage of the bill prevents
- baseline water testing before, during, and after extraction activities;
- air monitoring requirements during natural gas drilling and other industrial activity; and
- limiting hours of operation and setting noise, dust, trucking, and light pollution limits from natural gas drilling and other industrial activity.
Id. Moreover, Fitzgerald said future legislation authorizing natural gas extraction under county land would act to repeal the ban. Id. Fitzgerald supported a separate bill, Bill No. 12357-22, that would have prevented surface drilling within county parks but allowed leasing of subsurface rights deeper than 7,000 feet. It would have also mandated that the County include environmental protections, including bad actor provisions, in any future lease agreements. Despite his opposition and subsequent veto prior to Bill No. 12162-22’s passage, Fitzgerald said he had no plans to lease county park land for natural gas operations. Id. On October 18, 2022, the Pennsylvania Senate Environmental Resources and Energy Committee reported out Senate Bill 1331, which would deny revenue from Act 13 of 2012 drilling impact fees to counties that ban fracking on county-owned land. The bill now moves to the full Senate for action.
Study Finds Spreading of Conventional Oil and Gas Wastewater Poses Danger to Environment and Human Health
On May 26, 2022, Penn State announced that a health study commissioned by the Pennsylvania Department of Environmental Protection (PADEP) to examine the environmental and human health impacts of spreading conventional oil and gas produced water (OGPW) as a dust suppressant concluded the practice is ineffective for that purpose and poses dangers to the environment and human health. See News Release, Tim Schley & Ashley J. WennersHerron, Penn State Coll. of Eng’g, “Oil and Gas Brine Control Dust ‘No Better’ than Rainwater, Researchers Find” (May 26, 2022). The announcement coincided with PADEP’s finalization of the study. See William Burgos et al., Penn State Univ., “Evaluation of Environmental Impacts from Dust Suppressants Used on Gravel Roads” (May 26, 2022) (Study).
Historically, road spreading OGPW was authorized in Pennsylvania, but PADEP placed a moratorium on the practice in response to a 2018 legal challenge and subsequent decision by the Environmental Hearing Board. See Lawson v. PADEP, EHB Docket No. 2017-051-B (May 17, 2018). In accordance with Pennsylvania solid waste laws, using OGPW on roads for dust control could continue if conventional operators demonstrated the chemical makeup of the wastewater was similar to commercially available dust suppressants.
The Study assessed the effectiveness and environmental impacts associated with various dust suppressants used on dirt and gravel roadways, which included testing synthetic rainwater, calcium chloride (CaCl2) brine, soybean oil, and OGPW from three conventional oil and gas operations.
PADEP presented the study results at the July 25, 2022, Oil and Gas Technical Advisory Board meeting. In sum, the study found that OGPW is no more effective than rainwater as a dust suppressant on roadways, likely due in part to OGPW’s high sodium concentrations, which can affect how OGPW “sticks” to dust particles. Further, the study showed OGPW actually destabilized gravel roadways, which could lead to more dust and increased long-term road maintenance costs. According to the study results, only CaCl2-based brines and soybean oil were effective dust suppressants, with the study’s rainfall-runoff experiments showing that CaCl2-based brines led to the lowest concentration of total suspended solids washed off the roadbeds. Study at 9.
The study also found that runoff from spreading OGPW on unpaved roadways contained concentrations of barium, strontium, lithium, iron, and manganese that exceeded human-health based criteria and levels of radioactive radium that exceeded industrial discharge standards. In addition, most contaminants contained in the applied dust suppressants washed from the roadbed during rain events. However, roadbeds treated with OGPW retained traces of radium, sodium, iron, and manganese after rainfall events and had the highest concentration of combined radium in runoff. Id. at 9–10. The study supports Penn State’s conclusions from a similar peer-reviewed study published in 2021. See Audrey M. Stallworth et al., “Efficacy of Oil and Gas Produced Water as a Dust Suppressant,” 799 Sci. of the Total Env’t 149347 (2021).
On September 20, 2022, PADEP informed the Citizens Advisory Council (CAC) that analysis of brine as a co-product submitted by conventional operators to allow for spreading on roadways for dust control did not meet the state’s residual waste regulations. PADEP is currently updating waste disposal and handling standards for conventional operations and a draft rulemaking is expected to be presented to oil and gas advisory committees following the December 18, 2022, Pennsylvania Grade Crude Development Advisory Council meeting. See Meeting Minutes, CAC (Sept. 20, 2022); PADEP, “October 2022 Report to the Citizens Advisory Council” (Oct. 2022). A report from PADEP detailing, among other things, conventional operators’ compliance with state environmental and regulatory requirements was due to the Governor’s Office on September 1, 2022, but has not been made public as of the time of this report. See 52 Pa. Bull. 4229 (July 30, 2022).
EQB Adopts Regulations Reducing Emissions from Unconventional and Conventional Operations
During its June 14, 2022, meeting, the Pennsylvania Environmental Quality Board (EQB) voted 15-3, with one abstention, to adopt Part I of a revised final regulation reducing volatile organic compound (VOC) and methane emissions from unconventional wells and facilities. See Final-Form Rulemaking Preamble, EQB, “Control of VOC Emissions from Unconventional Oil and Natural Gas Sources” (June 14, 2022). This regulation establishes reasonably available control technology (RACT) requirements for unconventional oil and natural gas sources of VOC emissions. These sources include natural gas-driven continuous bleed pneumatic controllers, natural gas-driven diaphragm pumps, reciprocating compressors, centrifugal compressors, fugitive emissions components, and storage vessels installed at unconventional well sites, gathering and boosting stations, and natural gas processing plants, as well as storage vessels in the natural gas transmission and storage segment. Id. at 1.
A substantially similar rule approved by the EQB in March 2022 did not distinguish between conventional and unconventional emission sources. That rulemaking had advanced to the Pennsylvania House and Senate Environmental Resources and Energy (ERE) Committees and the Independent Regulatory Review Commission (IRRC) for consideration, but the House ERE Committee issued a disapproval letter for the rulemaking on April 26, 2022. Three trade associations also filed a petition for review of the rulemaking in the Commonwealth Court of Pennsylvania. The petition and the House ERE Committee’s disapproval letter alleged that the Pennsylvania Department of Environmental Protection (PADEP) failed to comply with Act 52 of 2016, which requires that any rulemaking concerning conventional oil and gas wells be undertaken separately and independently from those concerning unconventional oil and gas wells or other subjects. As a result, PADEP withdrew the regulation from IRRC consideration on May 4, 2022. See Vol. 39, No. 2 (2022) of this Newsletter.
PADEP revised the regulation to remove provisions regulating conventional wells and facilities and submitted the regulation to the EQB for approval, which it approved during its June 14, 2022, meeting. The House ERE Committee met on July 11, 2022, and approved a letter to the IRRC announcing its opposition to the final EQB regulation on a number of grounds, including that the revised regulation had not gone through public notice and comment. During its July 21, 2022, meeting, the IRRC unanimously voted to approve the regulation. The House ERE Committee met on August 2, 2022, to vote on a concurrent resolution disapproving of the rule, and the resolution was voted out of committee. The House and Senate each had 30 calendar days, or 10 legislative voting days (whichever is later), to adopt the concurrent resolution. Neither body took further action.
On October 12, 2022, the EQB voted 15-3 to approve Part II, a separate rule addressing VOC and methane emissions from conventional wells and facilities. See Final-Omitted Rulemaking Preamble, EQB, “Control of VOC Emissions from Conventional Oil and Natural Gas Sources” (Oct. 12, 2022). PADEP recommended that the EQB adopt Part II as a final-omitted regulation as part of the process to meet the U.S. Environmental Protection Agency’s December 16, 2022, deadline for the state to adopt methane emission controls for oil and gas operations. See Executive Summary, “Control of VOC Emissions from Conventional Oil and Natural Gas Sources—25 Pa. Code Chapter 129” (Oct. 12, 2022). Adoption of Part II as a final-omitted regulation allows for the rulemaking to skip the proposed rulemaking stage and proceed forward without any public comment. Per the Pennsylvania Commonwealth Documents Law, PADEP may use the final-omitted process if starting at the proposed stage for rulemaking is “impracticable, unnecessary, or contrary to the public interest.” 45 Pa. Stat. § 1204(3). In its executive summary of the rulemaking, PADEP justified promulgation of Part II as a final-omitted regulation, stating that “[a] public comment period is also contrary to the public interest because it will delay the implementation of the VOC RACT requirements in this final-omitted rulemaking, resulting in the Commonwealth being unable to satisfy the December 16, 2022, sanction deadline.” Executive Summary at 5. Under the Regulatory Review Act, 71 Pa. Stat. §§ 745.1–.14, the IRRC and the House and Senate still have the opportunity to review the rulemaking. Failure of the state to adopt this rule reportedly may result in the loss of over $500 million in federal highway funding. Executive Summary at 5.
PADEP Officials Hold Workgroup Meetings and Finalize First Bid Packages to Plug Conventional Oil and Gas Wells Using Federal Funds
In response to passage of the Infrastructure Investment and Jobs Act (IIJA), Pub. L. No. 117-58, 135 Stat. 429 (2021), and its conventional well plugging component, the Pennsylvania Department of Environmental Protection (PADEP) invited stakeholders to participate in several workgroup sessions to gather information and assist with PADEP’s development of a new conventional oil and gas well plugging program. See PowerPoint Presentation, PADEP, “Infrastructure Investment and Jobs Act (IIJA) Implementation” (Apr. 28, 2022); Notice, “DEP Inviting Stakeholders to Participate in Workgroups on New Federal Conventional Oil & Gas Well Plugging Program,” PA Env’t Digest (Aug. 4, 2022).
PADEP held seven workgroup sessions between August 23 and September 19, 2022. The sessions were open to the public, other interested parties, and industry. Covered topics included due diligence and documentation of previously undocumented abandoned wells; project prioritization; engineering design, permitting, and monitoring requirements; and handling of waste generated from plugging abandoned wells and reclaiming well sites. See PADEP, “September 2022 Report to the Citizens Advisory Council” (Sept. 2022); PADEP, “October 2022 Report to the Citizens Advisory Council” (Oct. 2022).
Of note, at a September 1, 2022, workgroup meeting, Joe Kelly, PADEP Bureau of Oil and Gas Planning and Program Management, said that any waste generated by the new plugging program will not be exempt from hazardous waste requirements, unlike the same or similar wastes generated from active oil and gas production wells and facilities (as exempted by 40 C.F.R. § 261.4(b)(5)). See David E. Hass, “DEP: Wastes Generated by the New Conventional Oil & Gas Well Plugging Program Will NOT Be Exempt from Hazardous Waste Regulations, Unlike Wastes from Active Wells,” PA Env’t Digest Blog (Sept. 1, 2022). Kelly went on to say that contractors will also have to meet existing spill notification and cleanup requirements and prepare pollution prevention contingency plans to implement spill and leak prevention measures. Id.
The stakeholder input PADEP received during the workgroup meetings will assist the agency in developing Pennsylvania’s IIJA well plugging program, including preparing invitations to quote, requests for bids, and requests for proposals. Following the last workgroup session, PADEP finalized the first group of bid packages to plug 249 conventional oil and gas wells using IIJA funds, which were posted on BidExpress.com for review by potential contractors. See PADEP, “Plugging Contractor Information,” https://www.dep.pa.gov/Business/Energy/ Oil-andGasPrograms/OilandGasMgmt/LegacyWells/Pages/Contractors.aspx.
Waste disposal and handling updates are expected to be presented to the Pennsylvania Grade Crude Development Advisory Council at its scheduled December 18, 2022, meeting. The most recent draft of the waste handling regulations update was posted by PADEP in September 2021. See PADEP, Draft Chapter 78 Conventional Oil and Gas Well Regulations (Aug. 19, 2021).
Third Circuit Finds Plaintiffs Lack Standing to Challenge the DRBC’s Hydraulic Fracturing Ban
On September 16, 2022, the U.S. Court of Appeals for the Third Circuit affirmed a district court ruling that Pennsylvania state legislators and municipalities lacked standing to challenge the Delaware River Basin Commission’s (DRBC) regulation banning hydraulic fracturing for natural gas within the basin. Yaw v. DRBC, 49 F.4th 302 (3d Cir. 2022), aff’g No. 2:21-cv-00119, 2021 WL 2400765 (E.D. Pa. June 11, 2021); see Vol. XXXVIII, No. 3 (2021) of this Newsletter. The court held that the appellants failed to meet the standing requirements of Article III of the U.S. Constitution because: (1) in the case of the state senator appellants, individual members of the state legislature lack standing to assert the interests of the legislature as a whole; and (2) in the case of the municipality appellants, their alleged injuries were “conjectural” or “hypothetical,” as opposed to “actual” or “imminent.” The court also held that none of the appellants had standing as trustees of Pennsylvania’s public natural resources under the Environmental Rights Amendment to the Pennsylvania Constitution because the DRBC’s ban has not cognizably harmed the trust.
The five-member DRBC is governed by a compact between the federal government and four states that draw water from the Delaware River: Pennsylvania, New Jersey, Delaware, and New York, represented by a member of the U.S. Army Corps of Engineers and each state’s governor, respectively. See Delaware River Basin Compact, Pub. L. No. 87-328, 75 Stat. 688. The DRBC has authority to approve, construct, operate, and regulate projects and facilities that use the basin’s water resources. It can also address issues outside the basin if they have a substantial effect on the basin’s water quality and water supply and if the issues conflict with the DRBC’s comprehensive plan. See Cong. Research Serv., “Federal Conservation of the Delaware River” (Mar. 18, 2015).
The Third Circuit’s decision follows the DRBC’s February 2021 vote to ban hydraulic fracturing in the basin, which had been under a de facto moratorium since 2010. In support of the ban, the DRBC found that hydraulic fracturing for extraction of oil and natural gas “poses significant, immediate and long-term risks to the development, conservation, utilization, management, and preservation” of water resources within the basin. Yaw, 49 F.4th at 307. Following the ban, Pennsylvania legislators and municipalities filed suit, arguing that the DRBC overstepped its legal authority. Among other things, they alleged the ban “violated the Takings Clause of the United States Constitution, illegally exercised the power of eminent domain, and violated the Constitution’s guarantee of a republican form of government.” Id.
Acknowledging that challenges are likely to continue, the court noted that its ruling is narrow. It said that although the legislators and municipalities lack standing, they can attempt to seek redress of the issues by other means, such as requesting that the DRBC reverse the ban, seeking to amend the compact, or persuading a party with standing to assert the institutional injuries. Id.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
The Supreme Court of Pennsylvania has upheld a preliminary injunction of the Regional Greenhouse Gas Initiative (RGGI) rule granted by the Commonwealth Court of Pennsylvania. On July 8, 2022, the commonwealth court granted a preliminary injunction preventing the state from participating in RGGI pending resolution of the case. See Vol. 39, No. 3 (2022) of this Newsletter. Governor Tom Wolf appealed the injunction to the supreme court. On August 31, 2022, the supreme court denied the state’s emergency request to reinstate the automatic supersedeas, thereby maintaining the preliminary injunction while litigation on the merits proceeds before the commonwealth court later this year. See Ziadeh v. Pa. Legis. Reference Bureau, No. 79 MAP 2022 (Pa. Aug. 31, 2022).
As previously reported in Vol. 39, No. 2 (2022) of this Newsletter, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule, or RGGI rule, which links the state’s cap-and-trade program to RGGI, was published in the Pennsylvania Bulletin in April 2022. See 52 Pa. Bull. 2471 (Apr. 23, 2022). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.
On April 25, 2022, owners of coal-fired power plants and other stakeholders filed a petition for review and an application for special relief in the form of a temporary injunction, and a group of state lawmakers filed a challenge as well. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been completed and a hearing is expected to occur in November 2022.
Additionally, on July 12, 2022, natural gas companies Calpine Corp., Tenaska Westmoreland Management LLC, and Fairless Energy LLC filed a third legal challenge to the rule with arguments similar to those brought in the other two cases. See Calpine Corp. v. PADEP, No. 357 MD 2022 (Pa. Commw. Ct. filed July 12, 2022). Constellation Energy Corporation and Constellation Energy Generation LLC have petitioned to intervene in the case and a hearing on this application was scheduled for November 2, 2022. Briefing in this case is due in December 2022.
Further information regarding the rule and the history of the rulemaking can be found on PADEP’s RGGI webpage at https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx.
Rulemaking Review Committees Disapprove Proposed Water Quality Standard for Manganese
As reported in Vol. 55, No. 3 (2022) of the Water Law Newsletter, the Pennsylvania House and Senate Environmental Resources and Energy standing committees (Standing Committees) and the Independent Regulatory Review Commission (IRRC) recently disapproved a proposed rulemaking to change the water quality criterion for manganese in Pennsylvania. The future of the rulemaking is now uncertain.
Proposed Changes to Manganese Water Quality Criterion
The proposed manganese rule would add a numeric water quality criterion for manganese of 0.3mg/L to Table 5 at 25 Pa. Code § 93.8c, which is intended to “protect human health from the neurotoxicological effects of manganese.” Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). Section 93.8c establishes human health and aquatic life criteria for toxic substances, meaning the Pennsylvania Department of Environmental Protection (PADEP) would be regulating manganese as a toxic substance. The existing criterion of 1.0 mg/L, which was established in 25 Pa. Code § 93.7 as a water quality criterion, would be deleted. The 0.3 mg/L criterion would apply to all surface waters in the commonwealth. PADEP identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth.” Executive Summary at 3.
PADEP also specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expects that mining operators would need to perform additional treatment to meet this criterion. Id. Final amendments to treatment systems would be implemented through PADEP’s permitting process and other approval actions. Consulting and engineering firm Tetra Tech estimated the overall cost to the mining industry to achieve compliance with the 0.3 mg/L standard “could range between $44–$88 million in annual costs (that is, for active treatment systems using chemical addition for manganese removal) and upwards of $200 million in capital costs.” Comment and Response Document at 213, “Water Quality Standard for Manganese and Implementation” (Aug. 9, 2022).
Rulemaking History
The Pennsylvania Environmental Quality Board (EQB) adopted the proposed rulemaking in December 2019. See Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). This rulemaking was prompted by the addition of subsection (j) to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, by Act 40 on October 30, 2017. Act 40 directed the EQB to promulgate regulations under Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, and related statutes to require that the water quality criteria for manganese established under 25 Pa. Code ch. 93 be met.
On June 30, 2020, PADEP submitted a copy of the proposed rulemaking to the IRRC and to the chairpersons of the Standing Committees for review and comment. The proposed rulemaking was published in the Pennsylvania Bulletin on July 25, 2020, 50 Pa. Bull. 3724, with a 60-day public comment period that closed on September 25, 2020. Comments were received from 957 commenters, including testimony from 13 witnesses at the public hearings. Since the proposed rulemaking, PADEP met with the Mining and Reclamation Advisory Board, the Aggregate Advisory Board, the Public Water Systems Technical Assistance Center Board, and the Water Resources Advisory Committee to discuss the proposed rule. On August 9, 2022, the EQB voted to adopt the final manganese rule.
Recent Disapproval of Proposed Manganese Criterion and Possible Next Steps
After the EQB adopted the manganese rule as final at its August 9 meeting, the rulemaking was sent to the Standing Committees and the IRRC. The IRRC received over 30 comments on the rulemaking and heard in-person testimony from numerous interested parties, including members of the regulated industry. The Standing Committees and the IRRC each voted to disapprove the rulemaking in early September. See IRRC, “Regulation #7-553: Water Quality Standard for Manganese and Implementation,” http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3271.
Because of these disapprovals, the manganese rule was not sent immediately to the Office of the Attorney General for final approval. Instead, the rule was sent back to the EQB, who can choose to withdraw the regulation or resubmit it—with or without changes—to the IRRC and the Standing Committees within 40 days. If the EQB resubmits the rulemaking, the IRRC will hold a second public meeting within 15 days, and the Standing Committees then receive the rulemaking and can issue a concurrent resolution disapproving the regulation within 14 days. If the Standing Committees do not issue a concurrent resolution, the rulemaking can become final after the Attorney General’s approval. If the Standing Committees do issue a concurrent resolution, the rulemaking is sent to the General Assembly for a vote. If the General Assembly adopts the concurrent resolution, the General Assembly presents it to the Governor to sign or veto. If the General Assembly does not adopt the concurrent resolution, the rulemaking is sent to the Attorney General, who can approve the rulemaking. The regulation becomes final at publication in the Pennsylvania Bulletin. See 71 Pa. Stat. § 745.7; IRRC, “The Regulatory Review Process in Pennsylvania,” at 17–22 (2019).
PADEP’s RACT III Rule Requires Action from Major Sources of NOx and VOCs by End of Year
On November 12, 2022, the Pennsylvania Environmental Quality Board (EQB) published amendments to the Pennsylvania Department of Environmental Protection’s (PADEP) regulations in 25 Pa. Code chs. 121 and 129 for all major stationary sources of nitrogen oxides (NOx) or volatile organic compound (VOC) emissions, which is commonly known as the RACT III rule. See 52 Pa. Bull. 6960 (Nov. 12, 2022). The rule requires major sources of either or both of these air pollutants in existence on or before August 3, 2018, to meet reasonably available control technology (RACT) emission limits and requirements by January 1, 2023. See also Vol. 39, No. 1 (2022) of this Newsletter (Pennsylvania – Oil & Gas report).
These regulations are being promulgated to address federal Clean Air Act (CAA) RACT requirements to meet the 2015 ozone National Ambient Air Quality Standards (NAAQS) in the commonwealth. The CAA requires a reevaluation of RACT when new ozone NAAQS are promulgated. RACT is required in nonattainment areas, including the Ozone Transport Region, which includes Pennsylvania. The RACT III rulemaking establishes presumptive RACT requirements and emission limits for specific source categories of affected facilities. The RACT III rulemaking also imposes additional requirements for all major sources of NOx and/or VOCs, not just those subject to the presumptive RACT requirements and limitations.
RACT III applies to all major sources of VOCs and NOx. Because the commonwealth is in the Northeast Ozone Transport Region, the major source threshold is 50 tons per year (tpy) of VOCs and 100 tpy of NOx. PADEP estimates that 425 title V facility owners and operators will be subject to the final rule. Affected source categories include combustion units; process heaters; turbines; stationary internal combustion engines; direct-fired heaters, furnaces, or ovens; and other sources that are not regulated elsewhere under chapter 129. The sources included in these categories are located at various facility types, including fossil fuel-burning and other electric generation, petroleum and coal products manufacturing, and iron and steel milling. RACT III imposes presumptive RACT limitations at 25 Pa. Code § 129.112 on additional categories of facilities that were not previously subject to any presumptive RACT limitations or requirements. These categories include glass melting furnaces, lime kilns, and certain combustion units.
The owner or operator of a NOx air contamination source with a potential emission rate equal to or greater than 5.0 tpy of NOx for which presumptive RACT requirements are not outlined in section 129.112 is required to propose a NOx RACT requirement or RACT emission limitation to PADEP. Similarly, the owner or operator of a VOC air contamination source with a potential emission rate equal to or greater than 2.7 tpy of VOCs for which presumptive RACT requirements are not outlined in section 129.112 is required to propose a VOC RACT requirement or RACT emission limitation to PADEP.
Notably, 25 Pa. Code § 129.115 requires that all major VOC or NOx emitting facilities submit a written notification to PADEP or the appropriate local air pollution control agency by December 31, 2022, identifying air contamination sources at the facility as covered by—or exempt from—RACT III requirements. This written notification requirement applies to all major sources of NOx and VOC emissions, even if those facilities are not subject to the presumptive RACT provisions of section 129.112. The written notification must include the following for each identified air contamination source:
- a description of each identified air contamination source at the facility, including make, model, and location;
- the applicable RACT requirement or RACT emission limitation;
- how the owner or operator will comply with the application RACT requirement or RACT emission limitation; and
- the reason why a source is exempt from the RACT requirements and RACT emission limitations, if applicable.
Operators are not required to immediately amend operating permits to include RACT III, but as of January 1, 2023, the final rulemaking will apply to those sources covered by the rulemaking. As of this compliance date, RACT III’s requirements could supersede any conflicting requirements and emissions limitations in a facility’s permit or Pennsylvania regulations, unless those conflicting requirements are more stringent than RACT III. See 25 Pa. Code § 129.112(l)–(m).
The EQB adopted the proposed rulemaking in May 2021. The proposed rulemaking was published for public comment, see Vol. XXXVIII, No. 4 (2021) of this Newsletter, and PADEP held public hearings on the proposal. PADEP reviewed and responded to comments on the proposed rule and presented the final rule to the EQB at its August 9, 2022, meeting, where it was approved. Upon approval, the regulation was submitted to the Pennsylvania House and Senate Environmental Resources and Energy standing committees and the Pennsylvania Independent Regulatory Review Commission (IRRC). The standing committees approved the regulation on September 14, 2022, and the IRRC approved the regulation on September 15, 2022. The regulation was then approved by the Office of the Attorney General before being published in the Pennsylvania Bulletin. PADEP will now submit the regulation to the U.S. Environmental Protection Agency (EPA) for incorporation into Pennsylvania’s state implementation plan.
The RACT III compliance date established by EPA is January 1, 2023, and this regulation went into effect immediately upon publication in the Pennsylvania Bulletin. Owners and operators should take note of the impending December 31, 2022, notification deadline described above.
PADEP Non-Regulatory Agenda for 2023 Focuses on Mining Program
In late July 2022, the Pennsylvania Department of Environmental Protection (PADEP) published its Non-Regulatory Agenda, which outlines the agency’s upcoming plans related to its documents, manuals, and technical guidance. The Non-Regulatory Agenda outlines the agency’s intent to rescind its Engineering Manual for Mining Operations, TGD No. 563-0300-101 (Jan. 1, 1999), by the end of this year. The agenda also notes PADEP’s intent to revise several other technical guidance documents (TGDs) related to coal mining activities in the commonwealth. The TGDs identified by PADEP to be revised in early 2023 are:
- Surface Water Protection – Underground Bituminous Coal Mining Operations, TGD No. 563-2000-655 (Oct. 8, 2005);
- Financial Assurance and Bond Adjustments for Mine Sites with Post-Mining Discharges, TGD No. 563-2504-450 (Dec. 15, 2007) (draft);
- Increased Operation and Maintenance Costs of Re-placement Water Supplies (on All Coal and Surface Noncoal Sites), TGD No. 562-4000-102 (Dec. 2, 2006);
- Water Supply Replacement and Permitting, TGD No. 563-2112-605 (Dec. 31, 1998); and
- Water Supply Replacement and Compliance, TGD No. 562-4000-101 (Oct. 18, 1999).
Draft revisions will be published in the Pennsylvania Bulletin and should be available online at https://www.depgreenport. state.pa.us/elibrary/GetFolder?FolderID=4556. The public will have an opportunity to comment on these draft revisions for a period of at least 30 days.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Foundation Water Law Newsletter
(By Lisa Bruderly and Christina Puhnaty)
In early September 2022, the Pennsylvania House and Senate Environmental Resources and Energy standing committees (Standing Committees) and the Independent Regulatory Review Commission (IRRC) disapproved the proposed rulemaking to change the water quality criterion for manganese in Pennsylvania. The future of the rulemaking is now uncertain.
Proposed Changes to Manganese Water Quality Criterion
The proposed manganese rule would add a numeric water quality criterion for manganese of 0.3 mg/L to Table 5 at 25 Pa. Code § 93.8c, which is intended to “protect human health from the neurotoxicological effects of manganese.” Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). Section 93.8c establishes human health and aquatic life criteria for toxic substances, meaning the Pennsylvania Department of Environmental Protection (PADEP) would be regulating manganese as a toxic substance. The existing criterion of 1.0 mg/L, which was established in 25 Pa. Code § 93.7 as a water quality criterion, would be deleted. The 0.3 mg/L criterion would apply to all surface waters in the commonwealth. PADEP identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth.” Executive Summary at 3.
PADEP also specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expects that mining operators would need to perform additional treatment to meet this criterion. Id. Final amendments to treatment systems would be implemented through PADEP’s permitting process and other approval actions. Consulting and engineering firm Tetra Tech estimated the overall cost to the mining industry to achieve compliance with the 0.3 mg/L criterion “could range between $44–$88 million in annual costs (that is, for active treatment systems using chemical addition for manganese removal) and upwards of $200 million in capital costs.” Comment and Response Document at 213, “Water Quality Standard for Manganese and Implementation” (Aug. 9, 2022).
Rulemaking History
The Pennsylvania Environmental Quality Board (EQB) adopted the proposed rulemaking in December 2019. See Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). This rulemaking was prompted by the addition of subsection (j) to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, by Act 40 on October 30, 2017. Act 40 directed the EQB to promulgate regulations under Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, and related statutes to require that the water quality criteria for manganese established under 25 Pa. Code ch. 93 be met.
On June 30, 2020, PADEP submitted a copy of the proposed rulemaking to the IRRC and to the chairpersons of the Standing Committees for review and comment. The proposed rulemaking was published in the Pennsylvania Bulletin on July 25, 2020, 50 Pa. Bull. 3724, with a 60-day public comment period that closed on September 25, 2020. Comments were received from 957 commenters, including testimony from 13 witnesses at the public hearings. Since the proposed rulemaking, PADEP met with the Mining and Reclamation Advisory Board, the Aggregate Advisory Board, the Public Water Systems Technical Assistance Center Board, and the Water Resources Advisory Committee to discuss the proposed rule. On August 9, 2022, the EQB voted to adopt the final manganese rule.
Recent Disapproval of Proposed Manganese Criterion and Possible Next Steps
After the EQB adopted the manganese rule as final at its August 9 meeting, the rulemaking was sent to the Standing Committees and the IRRC. The IRRC received over 30 comments on the rulemaking and heard in-person testimony from numerous interested parties, including members of the regulated industry. The Standing Committees and the IRRC each voted to disapprove the rulemaking in early September. See IRRC, “Regulation #7-553: Water Quality Standard for Manganese and Implementation,” http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3271.
Because of these disapprovals, the manganese rule was not sent immediately to the Office of the Attorney General Office for final approval. Instead, the rule was sent back to the EQB, who can choose to withdraw the regulation or resubmit it—with or without changes—to the IRRC and the Standing Committees within 40 days. If the EQB resubmits the rulemaking, the IRRC will hold a second public meeting within 15 days, and the Standing Committees then receive the rulemaking and can issue a concurrent resolution disapproving the regulation within 14 days. If the Standing Committees do not issue a concurrent resolution, the rulemaking can become final after the Attorney General’s approval. If the Standing Committees do issue a concurrent resolution, the rulemaking is then sent to the General Assembly for a vote. If the General Assembly adopts the concurrent resolution, the General Assembly presents it to the Governor to sign or veto. If the General Assembly does not adopt the concurrent resolution, the rulemaking is sent to the Attorney General, who can approve the rulemaking. The regulation becomes final upon publication in the Pennsylvania Bulletin. See 71 Pa. Stat. § 745.7; IRRC, “The Regulatory Review Process in Pennsylvania,” at 17–22 (2019).
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