FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
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).
Copyright © 2022, 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 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.
Copyright © 2022, 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 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).
Copyright © 2022, 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 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).
Copyright © 2022, 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)
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.
Copyright © 2022, 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 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
FNREL 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.
Copyright © 2022, 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 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).
Copyright © 2022, 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)
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
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
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.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL 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).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Pittsburgh Business Times
In March, the Securities and Exchange Commission (SEC) released a proposed rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors. If finalized, this rule would become some of the first mandatory Environmental, Social and Governance (ESG) reporting requirements for U.S. companies, requiring the disclosure of climate-related risk information in registration statements and periodic reports.
This proposed regulation has significant consequences not just for public companies, but private companies as well. Babst Calland Environmental Attorney Gina N. Falaschi explains the implications of the proposed rules, should they take effect.
What requirements could the rules introduce?
Under the SEC proposal, public companies would be required to disclose the oversight and governance of climate-related risk by their board and management; how any climate-related risk has a material effect on business and consolidated financial statements; the process for identifying, assessing and managing climate-related risks and how to integrate those processes into the company’s overall risk management; whether the company has adopted a transition plan to deal with climate-related risks and how to measure any physical or transitional risks to its operations; the effect of severe weather events and related natural conditions; and information regarding any publicly set climate-related targets or goals.
The SEC’s proposal also requires the disclosure of certain greenhouse gas emissions. These emissions are divided into three categories based on the Greenhouse Gas Protocol definitions. Scope 1 emissions are the direct greenhouse gas emissions that occur from sources that a company owns or controls, such as emissions from manufacturing activities and vehicles. Scope 2 emissions are the indirect greenhouse gas emissions that occur from the generation of energy that a company buys and consumes in its operations. Scope 3 emissions are the result of assets not owned or controlled by a company that the company indirectly impacts in its value chain, both upstream and downstream, from the company’s operations, such as the purchased goods and services, waste generation, business travel, downstream transportation, distribution and use of products sold, and the end-of-life treatment of products sold. Scope 3 emissions would have to be disclosed only if considered “material.”
What do companies need to do to prepare?
While the regulation has not yet been finalized, many companies could be required to begin compliance in the near future, so it’s prudent that both publicly traded and privately held companies consider the implications of this proposed rule.
Publicly traded companies may need to consider how the disclosed information will be used. The assumption is that forced disclosure will make companies change their behavior and reduce emissions. But it could also open companies to significant liability, including shareholder litigation.
Climate disclosures are surrounded by a degree of uncertainty, especially in anticipating climate impact. Scope 3 emissions calculations require many assumptions about human behavior and estimates to derive at a final number. These emissions also may be counted multiple times by different companies in the same value chain for a particular product.
This rule also requires companies to submit extensive amounts of information, which may require them to hire new personnel or outside consultants to analyze and report the required data to the SEC.
How are private companies affected?
Private companies may be asked by their publicly traded customers to estimate or account for their greenhouse gas emissions, which may also require them to hire outside consultants to assist with calculations and data gathering.
Additionally, this new rule will likely become a standard by which all companies are evaluated. Having ESG disclosures may make companies more attractive to customers and put private companies without ESG disclosures at a competitive disadvantage.
Although intended to drive companies to become greener, the new required disclosures may discourage companies from going public. ESG matters also will likely become a meaningful component of M&A transactions, and due diligence efforts will need to take into account the impact that a potential merger or acquisition will have on its climate disclosures.
ESG is a rapidly developing area of law. Business leaders should work with legal counsel and sustainability consultants when developing both voluntary and mandatory climate-related disclosures to mitigate risks related to these disclosures.
To view the full video with Gina Falaschi on this topic and other articles on current business issues and trends, visit www.pittsburghbusinesstimes.com/babstcalland. To learn more about Babst Calland and its environmental practice, go to www.babstcalland.com.
To view the full article and PDF, click here.
To view the full article and video, click here.
Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
Smart Business
(By SBN Staff featuring Gina Falaschi)
In March, the Securities and Exchange Commission (SEC) released a proposed rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors. If finalized, this rule would become some of the first mandatory Environmental, Social and Governance (ESG) reporting requirements for U.S. companies, requiring the disclosure of climate-related risk information in registration statements and periodic reports.
This proposed regulation has significant consequences not just for public companies, but private companies as well.
Smart Business spoke with Gina N. Falaschi, an associate at Babst Calland, about the implications of the proposed rule, should it take effect.
What requirements could the rule introduce?
Under the SEC proposal, public companies would be required to make a number of disclosures related to their climate-related risks and impact. Those include disclosures regarding the oversight and governance of climate-related risk by their board and management, how any climate-related risk has a material effect on business and consolidated financial statements, and information regarding any publicly set climate-related targets or goals.
The SEC’s proposal also requires the disclosure of certain greenhouse gas emissions, which are divided into three categories. Scope 1 emissions are the direct greenhouse gas emissions that occur from sources that a company owns or controls. Scope 2 emissions are the indirect greenhouse gas emissions that occur from the generation of energy that a company buys and consumes in its operations. Scope 3 emissions are the result of assets not owned or controlled by a company that the company indirectly impacts in its value chain, both upstream and downstream from the company’s operations. Scope 3 emissions would have to be disclosed only if considered ‘material.’
What do companies need to do to prepare?
While the regulation has not yet been finalized, many companies could be required to begin compliance in the near future, so it’s prudent that both publicly traded and privately held companies consider the implications of this proposed rule.
Publicly traded companies may need to consider how the disclosed information will be used. The assumption is that forced disclosure will make companies change their behavior and reduce emissions. But it could also open companies to significant liability, including shareholder litigation.
Climate disclosures are surrounded by a degree of uncertainty, especially in anticipating climate impact. Scope 3 emissions calculations require many assumptions about human behavior and estimates to derive at a final number. These emissions also may be counted multiple times by different companies in the same value chain for a particular product.
This rule also requires companies to submit extensive amounts of information, which may require them to hire new personnel or outside consultants to analyze and report the required data to the SEC.
How are private companies affected?
Private companies may be asked by their publicly traded customers to estimate or account for their greenhouse gas emissions, which may also require them to hire outside consultants to assist with calculations and data gathering.
Additionally, this new rule will likely become a standard by which all companies are evaluated. Having ESG disclosures may make companies more attractive to customers and put private companies without ESG disclosures at a competitive disadvantage.
Although intended to drive companies to become greener, the new required disclosures may discourage companies from going public. ESG matters also will likely become a meaningful component of M&A transactions, and due diligence efforts will need to take into account the impact that a potential merger or acquisition will have on its climate disclosures.
ESG is a rapidly developing area of law. Business leaders should work with legal counsel and sustainability consultants when developing both voluntary and mandatory climate-related disclosures to mitigate risks related to these disclosures.
To view the PDF, click here.
To view the full article, click here.
The American College of Environmental Lawyers (ACOEL)
(By Donald C. Bluedorn II)
On November 3, 2022, Pennsylvania Governor Wolf signed House Bill 1059, which amends the Commonwealth’s Tax Reform Code and, among other things, establishes the Pennsylvania Economic Development for a Growing Economy (“PA EDGE”) program, consisting of tax credits for four economic areas. https://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?sYear=2021&sInd=0&body=H&type=B&bn=1059.
Much of the publicity around the bill has focused on the tax credits available to promote a “hydrogen hub” and the use of hydrogen-based technologies. Indeed, the bill provides for tax credits up
to $50 million per year, or a total of $1 billion over a 20-year period.
In explaining his support for House Bill 1059, Governor Wolf started by noting his belief in the importance of the role of hydrogen in addressing the effects of climate change. “In its most recent report, the Intergovernmental Panel on Climate Change notes that ‘hydrogen is a promising energy carrier for a decarbonized world,’ and highlights hydrogen’s potential to ‘provide low-carbon heat for industrial processes or be utilized for direct reduction of iron ore.’” https://www.governor.pa.gov/wp-content/uploads/2022/11/20221103-1059.pdf.
The Governor then went on to note his belief that the use of hydrogen must be tied responsibly to the reduction of emissions and the consideration of Environmental Justice.
That said, I recognize that in order for hydrogen to play a meaningful role in reducing emissions, we must ensure that hydrogen used is truly “clean” through stringent emissions standards. We must also commit to strong and equitable community protections to prevent impacts to already overburdened communities and to guide benefits to communities that need them.
Perhaps the most controversial provisions of the bill, or at least those that drew the most attention in much of the press, were the provisions that also authorized a tax credit for the use of natural gas in the manufacturing of petrochemicals or fertilizers. In explaining his support for these provisions, the Governor highlighted his belief that these were stop-gap measures to help build a bridge to the future.
Relatedly, [the bill] also authorizes a tax credit based on the use of natural gas. This provision was included as a short-term fail-safe in the event that a manufacturing facility is constructed and clean hydrogen is not initially available. While I do not believe that it would be possible for a project facility that has been funded as part of a DOE regional clean hydrogen hub to utilize natural gas instead of hydrogen for a significant duration of time, the bill requires a company applying for the credit to sign a commitment letter stating the date by which it will begin to purchase clean hydrogen. It is my expectation that this period of time would not exceed a year or two.
In addition to its focus on hydrogen technology, House Bill 1059 also provides tax credits for Pennsylvania milk processing, biomedical manufacturing and research, and semiconductor manufacturing. In his statement, the Governor expressly recognized the need for even more support of semiconductor manufacturing in the Commonwealth. “This program is a first step to help chip manufacturers and their suppliers build new facilities in Pennsylvania, but we need to continue to invest in order to make Pennsylvania a leader in this industry.”
Founding Father Benjamin Franklin reportedly wrote that “in this world nothing can be said for certain, except death and taxes.” With the benefit of 21st Century hindsight, perhaps we can add hydrogen, natural gas, and climate change to the list . . . ?
To view the full article, click here.
Reprinted with permission from the November 28, 2022 ACOEL Blog.
Legal Intelligencer
(by Alex Farone and Janet Meub)
Navigating the Family and Medical Leave Act (FMLA) in the COVID era, including the pandemic-related amendments, has felt like a minefield for many employers. Now that the surge of COVID-related uses of FMLA leave has largely passed, a new aspect of statutory compliance is emerging as a hot-button issue: treatment of remote workers under the FMLA.
The FMLA provides eligible employees with up to 12 weeks of protected, unpaid leave per year for qualifying family or medical reasons. In order to be eligible for FMLA coverage, four elements must be met:
- The employer is a covered employer under the Act, meaning it has at least 50 employees for at least 20 weeks in the current or previous year;
- The employee must have worked for the employer for at least 12 months, not necessarily consecutively;
- The employee must have worked at least 1250 hours in the last 12-month period; and
- The employee must be employed at a worksite where the employer employs at least 50 employees within a 75-mile radius.
Many employers do not pay much consideration to the last element, also known as the “50/75 Rule,” likely because the first element requires 50 employees and in the majority of instances those 50 employees are by default going to work within a 75-mile of the employer’s office. However, in the COVID era and beyond, more and more employees are permitted to work remotely on a full-time basis, and employers are hiring remote employees all over the country, regardless of the location of the employer’s physical office or operations.
The FMLA itself does not address remote workers, but the Department of Labor’s regulations specify that an employee’s personal residence is not a worksite for employees who work at home by telecommuting. 29 C.F.R. § 825.111(a)(2). Further, “[f]or employees with no fixed worksite … the worksite is the site to which they are assigned as their home base, from which their work is assigned, or to which they report.” Id.
In many instances, the remote employee’s home base, worksite from which their work is assigned, and worksite to which they report are one and the same—a single location such as a main office. For example, suppose a new data processing company has 100 employees and one physical office, located in Pennsylvania from which all management employees operate on-site. The company’s low-level data entry employees work remotely, and the company has been rapidly hiring employees nationally without regard to their state of residence. If a remote data entry employee in California seeks FMLA leave, the Company must determine her eligibility. Does the Company employ 50 employees within 75 miles of the office, which is the employee’s home base, the location from which her work is assigned, and to which she reports? If 20 employees work in the office, 10 more work remotely nearby in Pennsylvania, and 70 work remotely throughout the country, more than 75 miles away from the Office, then the 50/75 Rule has not been met, and the employee is not eligible for FMLA coverage.
Things get much more complicated, however, if the employer has multiple locations or if supervisors themselves work remotely. When passing the FMLA, the Senate indicated that the term “worksite” was intended to be interpreted in the same manner as the term “single site of employment” under the Worker Adjustment and Retraining Notification Act (WARN) and its regulations. See Sen. Rep. No. 103-3 at 23 (1993). So, when a remote employee’s worksite is not obvious, we look to case law interpreting the WARN Act to determine what it means for a worksite to be the site: (1) to which the employee is assigned as their home base; (2) from which their work is assigned; or (3) to which they report.
The Third Circuit provided a clear interpretation in Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139 (3d Cir. 1998). Per Ciarlante, a remote employee’s “home base” must be, at a minimum, a location at which the employee would be physically present at some point during a typical business trip. It refers to the physical base of the employee, rather than to the physical base of the employer’s operations. A remote employee’s “assigning site” is the source of the day-to-day instructions given to the employee. It is not determined by the location of centralized payroll or other centralized managerial or personnel functions. Instead, it is the location of the workers who are ultimately responsible for creating work tasks—the source of instructions, rather than a mere conduit location through which instructions are passed to the employee. Finally, a remote employee’s “reporting site” is the location of the personnel who are primarily responsible for reviewing reports and other information sent by the employee to assess performance, record tasks completion, etc.
Needless to say, determining a remote employee’s worksite for purposes of analyzing FMLA eligibility under the 50/75 Rule is fact-intensive and case-specific. Employers who are particularly at risk of incorrectly applying the 50/75 Rule or granting FMLA leave to employees who are not actually eligible are: (1) employers with over 50 employees, all of whom work on-site, but are spread out over multiple locations that may not be within 75 miles of one another; and (2) employers with few physical locations but many remote employees who live in multiple states. The Third Circuit has not yet analyzed the 50/75 Rule for remote workers in the current era of now-standard employment of remote employees. The U.S. District Court for the Eastern District of Pennsylvania analyzed the issue back in 2013, but in the context of a remote employee’s transfer to another position and reporting location around the time of her requested FMLA leave. O’Donnell v. Passport Health Communs., 2013 U.S. Dist. LEXIS 51432, 2013 WL 1482621 (E.D. Pa. Apr. 10, 2013). Therefore, employers in this jurisdiction are left largely without guidance from controlling case law as to the legal worksite of remote employees under the FMLA.
It is more than just best practice for employers to get up to speed on the FMLA’s 50/75 Rule application to remote workers—their legal defense of any potential claim depends on it. In a claim for FMLA violation (typically either interference or retaliation), employers may assert the defense of good faith, which means the act or omission that allegedly violated the FMLA was done in good faith and that the employer had reasonable grounds for believing the act or omission was not a violation of the FMLA. See 29 U.S.C. § 2617(a). The FMLA does not define “good faith,” so courts look to the Fair Labor Standards Act for its interpretation of this phrase. Under this interpretation, good faith requires a duty to investigate potential liability and more than reliance on ignorance.
One recent case in another jurisdiction underscored just how substantial the burden is on employers to successfully invoke the good faith defense. See Landgrave v. ForTec Med., Inc., 581 F. Supp. 3d 804 (W.D. Tex. 2022). In January of 2022, a District Court in the Fifth Circuit granted an FMLA-leave-seeking plaintiff’s partial motion for summary judgment to deny her employer’s affirmative defense of good faith. The plaintiff was a remote employee, and the employer had denied her request for FMLA leave, deeming her ineligible under the 50/75 Rule based on their interpretation of the plaintiff’s worksite. Despite this denial, the plaintiff took a leave of absence from work to care for her ailing mother. As she had no available leave to use, her employer deemed her to have voluntarily resigned her position when she failed to report to work by a date certain. The plaintiff claimed that the employer failed to investigate the FMLA’s applicability to remote workers before ending her employment.
The employer’s Human Resources Manager testified that she had no knowledge of the FMLA’s treatment of remote workers and that she did not seek legal counsel regarding FMLA eligibility. She did review the employee handbook’s requirements of FMLA eligibility, which mentioned a requirement of 50 “employees in the work or reported-to location” to reach the decision that the plaintiff did not qualify for FMLA protection. However, the court agreed with the plaintiff that this investigation into FMLA eligibility was insufficient to constitute “good faith” on the part of the employer. Specifically, the court stated that referring to an employee handbook for guidance on how to assess FMLA eligibility of a remote employee does not relieve an employer of its duty to investigate the employee’s rights where the handbook does not address the treatment of remote workers.
Employers should consult legal counsel any time a remote employee seeks FMLA leave to determine if the 50/75 Rule is met. In turn, counsel should specifically inform their employer clients of the 50/75 Rule and ensure that the 50/75 Rule is represented in company policies or handbooks concerning FMLA eligibility for remote workers specifically. Additionally, employers should keep a regularly-updated list of the cities and states in which all remote employees live, to more quickly calculate the number of employees within 75 miles of a particular worksite.
Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations. Please contact her at 412-394-6521 or afarone@babstcalland.com.
Janet Meub is senior counsel in the Litigation and Employment and Labor groups of Babst Calland. Ms. Meub has significant experience in the areas of employment and labor law, professional liability defense, insurance coverage and bad faith litigation, toxic tort litigation, nursing home negligence, and medical malpractice defense. She has a diversified practice that includes defending employers, healthcare providers, law enforcement and other professionals, and non-profits, at all levels of civil litigation through trial. Contact her at 412-394-6506 or jmeub@babstcalland.com.
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Reprinted with permission from the November 17, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.