GO-WV
(By Lisa Bruderly)
U. S. EPA and the U. S. Army Corps of Engineers (the Agencies) have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20, 2023. The definition of WOTUS determines federal jurisdiction under the Clean Water Act (CWA). For example, projects involving oil or natural gas development or pipeline construction require Corps permitting for impacts from crossing, or otherwise disturbing, WOTUS. Typically, the more impacts to such federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.
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-need-ed 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’ 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 “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 regulate 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 and climatological variables. Functions include contribution of flow and retention and attenuation of runoff. 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.
Consistent with President Obama’s Clean Water Rule and President Trump’s Navigable Waters Protection Rule, the new WOTUS definition has already been challenged in the U.S. District Court of the Southern District of Texas by Texas and 18 industry groups, including the American Petroleum Institute, claiming that the new definition is “unworkable” and in conflict with the CWA. 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.
Click here, to view the article online in the February issue of Go-WV News.
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On December 10, 2022, the Pennsylvania Environmental Quality Board (EQB) published in the Pennsylvania Bulletin a final-omitted rulemaking (Conventional VOC Rule), 52 Pa. Bull. 7635, and a final-form rulemaking (Unconventional VOC Rule), 52 Pa. Bull. 7587, adopting reasonably available control technology (RACT) standards to control volatile organic compound (VOC) and methane emissions from existing and future conventional oil and gas operations and unconventional oil and gas operations. These regulations establish RACT requirements for conventional and 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.
The Conventional VOC Rule was effective on notice from the Pennsylvania Department of Environmental Protection (PADEP) on December 2, 2022. Members of the Pennsylvania House Environmental Resources and Energy (ERE) Committee had disapproved the final-omitted regulation, Regulation #7-579, in a November 14, 2022, letter to the Independent Regulatory Review Commission (IRRC). On November 17, 2022, the IRRC approved the final-omitted rulemaking, and the EQB subsequently adopted an emergency certified final-omitted regulation, Regulation #7-580, on November 30, 2022. See Press Release, PADEP, “EQB Adopts Emergency Air Quality Regulation for Existing Conventional Oil and Gas Sources” (Nov. 30, 2022). Regulation #7-580 is identical to Regulation #7-579 except that it received an emergency certification of need from then-Governor Tom Wolf. PADEP said that the final-omitted regulation was appropriate under the Commonwealth Documents Law because notice and comment from the public was unnecessary, impractical, and contrary to the public interest. PADEP recommended that EQB adopt the regulation as a final-omitted regulation as part of the process to meet the U.S. Environmental Protection Agency’s (EPA) 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); see also Vol. 39, No. 4 (2022) of this Newsletter. Failure of the state to adopt the required regulations reportedly could have resulted in the loss of over $500 million in federal highway assistance. On December 5, 2022, the Pennsylvania Independent Oil & Gas Association, Pennsylvania Independent Petroleum Producers, and Pennsylvania Grade Crude Oil Coalition filed a lawsuit challenging the legality of the Conventional VOC Rule. See Petition for Review in the Nature of a Complaint for Declaratory Relief, Pa. Indep. Oil & Gas Ass’n v. Commonwealth, No. 574 MD 2022 (Pa. Commw. Ct. filed Dec. 5, 2022).
The Unconventional VOC Rule, which became effective upon publication in the Pennsylvania Bulletin, was adopted by the EQB at 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 took further action and the regulation was published in the Pennsylvania Bulletin.
A rule substantially similar to those published on December 10 was approved by the EQB in March 2022, but it did not distinguish between conventional and unconventional emission sources. That rulemaking had advanced to the Pennsylvania House and Senate ERE Committees and the 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 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 submitted both the Unconventional VOC and Conventional VOC Rules to EPA as a revision to Pennsylvania’s state implementation plan (SIP). On December 14, 2022, EPA issued a completeness determination for PADEP’s revision to Pennsylvania’s SIP, which avoided the imposition of federal highway funding sanctions that were set to take effect on December 16, 2022. EPA is now evaluating whether it will approve the SIP revision.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On December 9, 2022, the Pennsylvania Department of Environmental Protection (PADEP) announced that it had issued an administrative order and two compliance orders related to a natural gas storage facility release event that occurred in Jackson Township, Cambria County, Pennsylvania, in November 2022. See Press Release, PADEP, “DEP Issues Three Orders to Equitrans in Wake of Rager Mountain Storage Reservoir Natural Gas Release” (Dec. 9, 2022) (at which the three orders are available). In the press release, PADEP said its investigations into the event are ongoing.
At the December 1, 2022, Oil and Gas Technical Advisory Board (TAB) meeting, Kurt Klapkowski, Acting Deputy Secretary for PADEP’s Office of Oil and Gas Management, referenced the release event and indicated that it will inform PADEP actions in 2023. After praising Pennsylvania’s current regulations, which were adopted in 1994, as “very good” in terms of the requirements they place on the gas storage industry, Klapkowski said that in response to the release event, stakeholders can probably expect “significant development of potential proposed rule-makings, potential proposed statutory changes, [and] potential proposed administrative and implementation changes.” TAB Meeting at 29:10, 30:50 (Dec. 1, 2022). To achieve these goals, Klapkowski said that he expected significant interaction between PADEP and operators, as well as coordination with TAB and the Crude Development Advisory Council (CDAC). Id. at 32:13. CDAC, which reports to TAB, will be involved in any proposed rulemakings, guidance, or other administrative changes because storage wells are defined as conventional wells governed by 25 Pa. Code ch. 78.
Although Klapkowski did not provide specific details about PADEP’s potential actions and the form of the process, he said the changes may be proposed to chapter 78 and “[e]verything is on the table for consideration in terms of making sure that this industry is regulated appropriately and the public gets protected and the environment is protected from potential incidents like this happening again in the future.” Id. at 34:53. Prior to answering questions from attendees, Klapkowski said that PADEP is going to be spending significant effort on this in the coming weeks and months. Id. at 35:22. PADEP further addressed the release event and its response applicable to Pennsylvania gas storage operations, now under the new Shapiro administration, at CDAC’s February 16, 2023, meeting.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On November 3, 2022, then-Pennsylvania Governor Tom Wolf signed House Bill 2528 into law as Act 136 of 2022. The Act, effective January 3, 2023, amended Pennsylvania law to create the Orphan Oil and Gas Well Plugging Grant Program and bring the program into compliance with the requirements for the use of federal funding for well plugging. Among the significant amendments, the Act requires that no less than 20% of the funds allocated from the federal Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021), be made available for plugging conventional oil and gas wells (unless funds remain uncommitted six months prior to any deadline for recapture of the funds by the federal government, in which case they may be used for other purposes). 58 Pa. Cons. Stat. Ann. § 2811(a). The Act also increases the maximum grant amounts from $10,000 to $40,000 (or the actual cost, whichever is less) for wells up to 3,000 feet deep and from $20,000 to $70,000 (or the actual cost, whichever is less) for wells deeper than 3,000 feet. Id. § 2822(b).
The Act includes additional criteria an applicant must submit to the Pennsylvania Department of Environmental Protection (PADEP) to be considered a qualified well plugger (e.g., a demonstration that the applicant has access to the necessary equipment, materials, resources, and services required to plug wells). Id. § 2824(a). A qualified well plugger must also attest that (1) it will provide necessary documentation to allow PADEP to demonstrate it is complying with funding allocation requirements, and (2) each well plugged by the qualified well plugger will be plugged in accordance with applicable requirements. Id. § 2825(b).
The Act also requires that PADEP allow Pennsylvania companies of any size to bid on well plugging contracts. Id. § 3271.1. To qualify, any such company must be headquartered or have its main offices in Pennsylvania and conduct at least 50% of its business activities in the commonwealth. Id. Alternatively, other companies may qualify as “Pennsylvania companies” if they subcontract the work to subcontractors selected through a competitive bidding process that gives priority to subcontractors, when possible, that satisfy the location and business activity thresholds described above. Id. These requirements do not prohibit PADEP from accepting bids from or awarding contracts to companies that are not “Pennsylvania companies” if taking such action is not otherwise prohibited. Id.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On November 3, 2022, then-Pennsylvania Governor Tom Wolf signed Senate Bill 806 into law as Act 153 of 2022. The Act, effective March 3, 2023, amends the Oil and Gas Lease Act to clarify the minimum amount of information that a conventional or unconventional oil and gas operator is required to provide to a royalty owner on a royalty payment check stub or in an attachment to other forms of payment. The Act requires that an operator/payor furnish the following items (the complete details of which are available in the Act’s text):
- identifying information for the lease, property, unit, or wells for which payment is being made;
- the month and year of oil, gas, or natural gas liquids production for which the payment is being made;
- the total volume of oil, gas, or natural gas liquids produced and sold per well;
- the price received per unit of oil, natural gas, or natural gas liquids sold;
- the aggregate amounts for each category of deductions for each well incurred that reduces the royalty owner’s payment, including all severance and other production taxes;
- net and gross value of the payor’s total sales from each well less any deductions;
- the royalty owner’s legal and contractual interest in the payor’s share, expressed as a decimal or fraction;
- the royalty owner’s share of the gross value of the payor’s total sales before any deductions;
- the royalty owner’s share of the sales value less the royalty owner’s share of taxes and any deductions; and
- the payor’s contact information, including an address and telephone number.
See 58 Pa. Stat. §§ 35.2, .3(a).
The Act allows an unconventional operator and royalty owner to agree that the operator may provide this information in a summary format, so long as the operator provides the complete information upon the royalty owner’s request by certified mail. Id. § 35.3(b). If an unconventional operator fails to provide complete payment information without good reason within 60 days of a royalty owner’s request, the amendments authorize a royalty owner to bring a civil action against the operator to obtain the information and recover any incurred associated attorney’s fees and court costs in doing so. Id. § 35.3(c). The Act also sets deadlines for payment for unconventional operators (within 120 days from the date of first sale; thereafter, within 60 days after the end of the month when the production is sold), subject to certain exceptions, and imposes interest penalties for late payments. Id. § 35.3(e).
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
On November 18, 2022, the Pennsylvania Environmental Quality Board (EQB) notified Pennsylvania’s Independent Regulatory Review Commission (IRRC) that it was formally withdrawing its widely-opposed proposed rulemaking to change the water quality criterion for manganese in the commonwealth. See Letter from Laura Griffin, Regulatory Coordinator, EQB, to David Summer, Exec. Dir., IRRC (Nov. 18, 2022); see also Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). The manganese rule would have added a numeric water quality criterion for manganese of 0.3 mg/L to Table 5 at 25 Pa. Code § 93.8c and deleted the existing water quality criterion of 1.0 mg/L from 25 Pa. Code § 93.7. See Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). In its rule proposal, the EQB and the Pennsylvania Department of Environmental Protection 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,” but specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expected that mining operators would need to perform additional treatment to meet this criterion. Id. at 3.
The EQB’s withdrawal of the rule follows the November 2022 disapproval of the rulemaking by the IRRC and the Pennsylvania House and Senate Environmental Resources and Energy standing committees. See Vol. 39, No. 4 (2022) of this Newsletter.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
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 commonwealth’s cap-and-trade program to the Regional Greenhouse Gas Initiative (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.
A number of legal challenges were filed in response to the publication of the final rule. 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. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been filed and the court heard 30 minutes of oral argument in the case on November 16, 2022. The parties await the court’s ruling.
Additionally, on July 13, 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 petitioned to intervene in the case, but later filed a joint motion to stay intervention proceedings on October 31, 2022, which the court granted. The stay on the application for intervention remains in place. Briefing in this case has been filed and oral argument is set for February 8, 2023.
In a third suit filed by the acting Secretary of PADEP against the Pennsylvania Legislative Reference Bureau in February 2022, PADEP filed suit in the Pennsylvania Commonwealth Court seeking to compel the Pennsylvania Legislative Reference Bureau to publish the Pennsylvania Environmental Quality Board’s final-form rulemaking for the CO2 Budget Trading Program in the Pennsylvania Bulletin. See McDonnell v. Pa. Legis. Reference Bureau, No. 41 MD 2022 (Pa. Commw. Ct. filed Feb. 3, 2022). By law, the House and Senate each have 30 calendar days or 10 legislative days—whichever is longer—to vote on a disapproval resolution to stop a new rule from taking effect. PADEP argued that the periods should have run simultaneously for the House and Senate, rather than one after the other, and the Pennsylvania Legislative Reference Bureau’s improper interpretation delayed issuance of the rule. On January 19, 2023, the commonwealth court dismissed the case as moot, as the rule was published in April 2022, without ruling on the merits.
On an interlocutory appeal in PADEP’s action, the Supreme Court of Pennsylvania upheld a preliminary injunction of the RGGI Rule granted by the commonwealth court. 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 Wolf appealed the injunction to the Supreme Court of Pennsylvania. 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. See Ziadeh v. Pa. Legis. Reference Bureau, No. 79 MAP 2022 (Pa. Aug. 31, 2022); Vol. 39, No. 4 (2022) of this Newsletter. The regulation remains stayed.
On January 18, 2023, every member of the Pennsylvania Senate Republican Caucus signed a letter to the newly inaugurated Governor Josh Shapiro that urged him to repeal the final RGGI regulation. See Letter from the Senate Republican Caucus to Gov. Shapiro (Jan. 18, 2023). The letter highlighted the economic burden that would be placed on Pennsylvania electric generating units and subsequently passed on to businesses and consumers. The letter also referenced Governor Shapiro’s previous statements that implied doubt as to whether participation in RGGI was the best approach for the commonwealth.
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.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Pretrial Practice & Discovery
American Bar Association Litigation Section
(By Jessica Barnes)
The application and scope of the attorney-client privilege for communications containing both legal and nonlegal advice is a critical consideration to protect the privilege.
A “bedrock doctrine of the legal profession,” “hallmark of Anglo-American jurisprudence,” and “cornerstone of the American legal system”—these are just a few ways that the attorney-client privilege was described in briefing in a matter before the Supreme Court of the United States (SCOTUS) that has attracted attention from legal scholars across the country.
This closely watched SCOTUS case is In Re Grand Jury, No. 21-1397, which involves a dispute over the withholding of documents in the form of communications containing both legal and non-legal advice (dual-purpose communications) in response to grand-jury subpoenas on the basis of privilege. Specifically, the petitioner-law firm provided legal advice to a client regarding the tax consequences of the client’s anticipated expatriation (i.e., renouncing citizenship). Thus, some of the communications from the law firm to the client were made for the dual purpose of providing legal advice about tax consequences and to facilitate preparation of the client’s tax returns.
For example, some of the documents that the law firm withheld on a privileged basis included communications related to unsettled statutory requirements, strategies for filing amended income-tax returns for purposes of expatriation, and the drafting of a submission to the IRS advocating for the abatement of a penalty assessment. The law firm withheld these dual-purpose communications on the ground that while relating to the client’s tax returns, they were sufficiently motivated by the additional purpose of obtaining or providing legal advice regarding the client’s taxes.
The District Court for the Central District of California used the “primary purpose test” and permitted petitioner-law firm to withhold in full a set of documents related to the preparation of the client’s tax return because the “primary purpose” of those documents was obtaining legal advice and not solely tax-return preparation. Additionally, the district court ordered disclosure of the portions of communications where the primary or predominant purpose concerned the procedural aspects of the preparation of the client’s tax return.
Where it found that a portion of a tax-preparation communication contained tax-related legal advice, the district court instructed petitioner-law firm to redact the communication before disclosing the rest of the document. The Ninth Circuit affirmed, upholding the primary-purpose test’s application to dual-purpose communications.
Notably, there is a circuit split as to when the attorney-client privilege applies in dual-purpose communications:
- The D.C. Circuit uses the “significant purpose test” and directs courts to look to the legal purpose behind a communication and evaluate whether it is significant.
- The Ninth Circuit, on the other hand, uses the primary-purpose test and directs courts to determine the primary purpose of a communication, and find that the communication is privileged only when that one primary purpose is legal advice.
- The Seventh Circuit has taken a different approach, at least in the context of tax law, concluding that a dual-purpose tax-related document—a document prepared for use in preparing tax returns and for use in litigation—is not privileged.
Various amici filed briefs arguing against the stricter standard for asserting attorney client privilege, including:
- Association of Professional Responsibility Lawyers: While ultimately not supporting either side, the association emphasized the critical importance of the privilege and urged the court to adopt a rule that provides certainty and clarity as to the scope of the privilege at the moment that communications between lawyers and their clients occur.
- Federation of Defense & Corporate Counsel: Writing in support of petitioner-law firm, the group argued that the need for certainty is heightened further by the new realities of corporate life, in which legal advice is often sought for combined legal and business reasons by digital means, leading to even more dual-purpose legal communications. Ultimately, this group concluded that the significant-purpose test strikes the right balance.
- American Bar Association: Filing a brief in support of petitioner-law firm, the ABA argued that the primary-purpose test would narrow the privilege far beyond already well-established exceptions and limitations (e.g., crime-fraud exception, waiver by publication to third parties, and inapplicability when not seeking legal advice at all), without justification.
Overall, it is important for attorneys to be mindful of the state of the law in the jurisdictions in which they practice, especially until SCOTUS opines on the breadth of the sacred attorney-client privilege in the realm of dual-purpose communications.
Jessica Barnes is an associate at Babst, Calland, Clements & Zomnir P.C. in Pittsburgh, Pennsylvania.
To view the full article, click here.
To view the PDF, click here.
© 2023. SCOTUS to Weigh in on Privilege Standard for Dual-Purpose Communications, Pretrial Practice & Discovery, American Bar Association Litigation Section, January 18, 2023 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.
Pittsburgh Trib
(By Stephanie Ritenbaugh)
An Oakland business incubator closed its initial investment — over $300,000 — in one of its first cohort of companies through its ‘angel investment’ program.
Idea Foundry’s program, IF Ventures, said the company that received the infusion was one of five presented to a group of investors in September.
Idea Foundry and its partner, law firm Babst Calland, declined to name the company because of confidentiality agreements. However, President and CEO Mike Matesic was able to say that it’s a company that develops software to help retailers and distributors.
The company is generating revenue, Matesic said.
“Part of our investment will be used for the company to expand into additional geographic models,” said Chris Farmakis, shareholder and board chairman of Pittsburgh-based Babst Calland.
Additional investments are still being considered for the group, Matesic said.
IF Ventures is an investment group managed by Idea Foundry Inc., a non-profit economic development organization. The goal of the program is to attract investors and funding for companies to boost economic development through entrepreneurship and business growth.
“The investor interest and attraction of new investors exceeded our expectations at this early stage,” Matesic said.
“One of the most promising actions that occurred was that our initial group of investors encouraged their peers to join and ultimately became part of this initial investment,” he said.
To view the full article, click here.
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.
To read the full article, click here.
To view the PDF, click here.
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.
To view the full article, click here.
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.
To view the PDF, click here.
To view the full article, click here.