Legal Intelligencer
(By Gina N. Falaschi and Marley R. Kimelman)
On June 30, 2022, the United States Supreme Court issued its opinion in West Virginia v. EPA. The Court held that the United States Environmental Protection Agency (EPA) exceeded its rulemaking authority under Section 111(d) of the Clean Air Act in promulgating the 2015 Clean Power Plan (CPP). The majority found that the term “best system of emission reduction” does not include a regulatory scheme that requires shifting power generation from coal to natural gas and renewable or other zero-emitting sources. While a narrow holding, this decision will impact the Biden administration’s coming regulations regarding power plants and many future rulemakings as well.
Background
Section 111 of the Clean Air Act directs EPA to list categories of stationary sources that it determines cause or contribute significantly to air pollution. For each of these categories, the agency must promulgate standards of performance for new or modified sources under Section 111(b). A standard of performance is defined as:
a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the [EPA] Administrator determines has been adequately demonstrated.
42 U.S.C. §7411(a)(1) (emphasis added). Under Section 111(d) of the Clean Air Act, when EPA has set new source performance standards addressing emissions of a particular pollutant from a particular type of new or modified stationary source under Section 111(b), it must address emissions of the same pollutant by existing sources, but only if that pollutant is not already regulated under the National Ambient Air Quality Standards or Hazardous Air Pollutant Program.
After the Court found that greenhouse gases are air pollutants under the Clean Air Act in Massachusetts v. EPA, EPA made an endangerment finding that greenhouse gas pollution threatens Americans’ health and welfare by leading to long-lasting changes in climate that can have negative effects on human health and the environment. 74 Fed. Reg. 66,496 (Dec. 15, 2009). Upon making this endangerment finding, EPA was required by the statute to set new source performance standards for major sources of greenhouse gases like power plants, and, because greenhouse gases are not otherwise regulated, for existing sources as well. In October 2015, the Obama administration finalized two rules, one for new and modified sources and the other for existing sources, known as the CPP. 80 Fed. Reg. 64661 (Oct. 23, 2015).
In the CPP, EPA calculated rate-based (amount of carbon dioxide emitted per megawatt hour generated) and mass-based (total amount of carbon dioxide emitted per year) targets for each state through application of three “building blocks” that were deemed to constitute the “best system of emission reduction…adequately demonstrated” (BSER). These “building blocks” include: (1) improvements to heat rates (a measure of heat input to power output efficiency) achieved at individual power generation facilities; (2) shifting power generation to natural gas-fired or combined cycle (NGCC) facilities; and (3) increased power generation from renewable and zero-emitting sources. The latter two “building blocks” constituted the CPP’s “generation shifting” scheme, such that the EPA determined that the BSER included restructuring the nation’s overall mix of electricity generation, to transition from 38 percent from coal-fired sources to 27 percent from coal-fired sources by 2030.
The CPP was immediately challenged in the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit). The D.C. Circuit rejected a petition to stay the rule. Upon appeal to the Supreme Court, however, the Court stayed the rule. Upon the change in presidential administration, the Trump EPA asked the D.C. Circuit to suspend litigation pending the new administration’s review of the CPP. In 2019, the Trump administration simultaneously repealed the CPP and promulgated the Affordable Clean Energy (ACE) rule. 84 Fed. Reg. 32520 (July 8, 2019). Public health organizations, environmental organization, cities, and states challenged the ACE rule in the D.C. Circuit. Industry groups also filed petitions in the D.C. Circuit challenging EPA’s authority to regulate carbon dioxide emissions in the ACE rule, and 30 cities and states intervened. These challenges were consolidated into a single docket. American Lung Association v. EPA, Docket No. 19-01140 (D.C. Cir.). After extensive briefing followed by over nine hours of oral argument, the D.C. Circuit struck down the ACE rule and remanded it to the agency. American Lung Assn. v. EPA, 985 F. 3d 914 (D.C. Cir. 2021).
On February 12, 2021, the Biden EPA issued a memorandum explaining that it did not believe the D.C. Circuit’s decision striking down the ACE rule reinstated the CPP and thus states would not be required to submit the plans required under the rule. Memorandum from Joseph Goffman, Acting Assistant Administrator for Air and Radiation, to Regional Administrators (Feb. 12, 2021).
A coalition of states and power and coal companies led by West Virginia’s Attorney General Patrick Morrisey petitioned the Supreme Court to review the decision to strike down the ACE Rule and reinstate the CPP. Specifically, the petitioners asked the Supreme Court to revisit the D.C. Circuit’s holding that EPA’s ACE rule, and the simultaneous repeal of the CPP, was based on a “mistaken reading of the Clean Air Act.” Petitioners contended that the “generation shifting” scheme employed by the CPP cannot be a “system of emission reduction” under Section 111 of the Clean Air Act. Despite EPA’s decision not to seek states’ compliance with the CPP, the Supreme Court granted certiorari.
The Court’s Analysis
Chief Justice John Roberts authored the majority opinion for the Court. The 6-3 majority reversed and remanded the D.C. Circuit’s ruling.
First, the Court found that the petitioners had proper Article III standing. The Court then found that the CPP, which the D.C. Circuit’s ruling purports to put back into effect by vacating the ACE Rule and its embedded repeal of the CPP, harmed the states. West Virginia v. Environmental Protection Agency, No. 20-1530, slip op. at 14 (2022). Further, the Biden administration’s commitment not to enforce the CPP would not moot the case unless it is “absolutely clear wrongful behavior could not reasonably be expected to recur.” Id. at 15-16. Because EPA could reimpose the generation shifting emissions limits in another form, the Court did not dismiss the case as moot. Id. at 16.
On the merits, the majority found that EPA had exceeded its authority under the federal Clean Air Act. The majority explained that Congress had not been sufficiently specific in granting EPA the authority to implement a generation shifting regulatory scheme to constitute BSER under Section 111(d), and regulating greenhouse gas emissions from power plants in such a way constitutes a “major question.” Id. at 4. The “major question doctrine” holds that if Congress intended agencies to make sweeping, economy-wide changes with their regulations, the relevant legislation must say so “specifically and clearly.” Id. at 28.
Here, the majority found it “highly unlikely that Congress would leave” to “agency discretion” the decision of how much coal-based generation there should be over the coming decades since the agency has no “comparative expertise” in making such policy judgments. Id. at 25. The majority rejected EPA’s argument, holding that Section 111(d)’s use of “best system of emission reduction” did not provide the agency the clear authority needed to employ the generation shifting approach because “the word [system] is an empty vessel” and “[s]uch a vague statutory grant is not close to the sort of clear authorization required by our precedents.” Id. at 28. Further, the majority described Section 111(d) as a “gap filler” that “had rarely been used.” Id. at 6.
In examining Congress’ delegation, the majority explained that the term “system” was used in the past to apply measures under the Clean Air Act that would force individual sources to “operate more cleanly,” never to reduce pollution by “shifting pollution activity from dirtier to cleaner sources.” Id. at 20-21. The proposed scheme “effected a fundamental revision of the statute” in the majority’s view. Id. at 24.
Justice Neil Gorsuch filed a concurring opinion, joined by Justice Samuel Alito, in which he provided several examples of cases that would fall into the “major questions” doctrine: the FDA attempting to ban tobacco, the Attorney General prosecuting doctors who prescribe drugs used for assisted suicide, CDC’s Covid-19 Eviction Moratorium, and OSHA’s COVID-19 vaccine mandate. West Virginia v. Environmental Protection Agency, No. 20-1530, slip op. at 8 (2022) (Gorsuch, J., concurring). These examples could provide a roadmap for future challenges to impactful administrative actions.
In her dissenting opinion, Justice Elena Kagan, joined by Justice Sonya Sotomayor and Justice Stephen Breyer, argued that Congress had, in fact, delegated sufficient authority to EPA to regulate through a generation shifting scheme, and pointed to other sections of the statute pursuant to which EPA utilizes cap-and-trade regulatory schemes based on similar language. West Virginia v. Environmental Protection Agency, No. 20-1530, slip op. at 4 & 9 (2022) (Kagan, J., dissenting). She also expressed concern that the “major question doctrine” would make it harder for agencies to promulgate rules that serve the public interest. Id. at 13.
Key Takeaways
The Court’s decision to grant certiorari came as a surprise to many, as the Biden administration had said it would not enforce the CPP and would propose its own regulation, meaning that the Supreme Court was reviewing a regulation that had never, and would likely never, take effect. As noted in Justice Kagan’s dissenting opinion, because the Court’s docket is discretionary and because no one is subject to the CPP, the Court’s ruling may be viewed as an “advisory opinion on the proper scope of the new rule EPA is considering.” Id. at 4.
The ruling is expected to affect most, if not all, of EPA’s Section 111 rulemakings for greenhouse gases as well as other pollutants. EPA is expected to propose a new power plant regulation in the coming months, which will need to be tailored to fit within the Court’s holding. During a Senate Environment and Public Works Committee hearing on April 6, 2022, EPA Administrator Michael Regan acknowledged as much, saying, “we want to be sure that the rule that we design will fall within where the Supreme Court will land” and that the agency will be “ready to go as soon as the Supreme Court rules.” The U.S. Environmental Protection Agency’s Proposed 2023 Budget: Hearing Before the Senate Committee on Environment and Public Works, 117th Cong. (2022) (statement of Michael Regan, EPA Administrator).
Finally, this opinion raises questions regarding the limit of EPA’s regulatory power under Section 111. While the decision clearly held that generation-shifting is outside of the scope of delegated authority under the Clean Air Act and that inside-the-fenceline systems of emissions reduction are within the scope, the Court did not find that any and all outside-the-fenceline system of emission reduction would be impermissible. This is a potential topic for Clean Air Act litigation in the near future.
Gina Falaschi and Marley Kimelman are associates in Babst, Calland, Clements and Zomnir’s environmental group. Their practice is focused, in part, on compliance matters arising under the Clean Air Act and implementing regulations. Contact them at gfalaschi@babstcalland.com or mkimelman@babstcalland.com.
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Reprinted with permission from the July 21, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.
The American Oil & Gas Reporter
(By Del Torkelson)
Ensuring energy security and addressing climate change are not mutually exclusive goals, insists Senator Joe Manchin, D-W.V., and it is imperative for the United States to pursue both.
The chairman of the U.S. Senate Energy and Natural Resources Committee offered his perspective on the outlook for the country’s energy policy during a “Message to the Industry” video conversation included in The 2022 Babst Calland Report–Legal & Regulatory Perspectives for the U.S. Energy Industry, which the law firm released in late June. Joining Manchin in the report’s introductory webinar recording were Babst Calland energy attorneys Joe Reinhart, Moore Capito and Jim Curry.
The firm says its 12th annual energy analysis also contains perspectives from energy attorneys on critical issues facing the industry, including:
- Regulatory developments and enduring concern about climate change;
- Cybersecurity risks and the steps companies can take to minimize them;
- The U.S. Securities and Exchange Commission’s environment, social and governance-oriented disclosure requirements, as well as federal and state efforts to promote environmental justice;
- The role hydrogen and carbon capture and sequestration can play, as well as the factors influencing how quickly both technologies can expand;
- Recent and pending regulations related to permitting and operating pipelines; and
- The challenges renewable energy companies must overcome as they secure land and permits.
During the half-hour discussion with Manchin, the senator emphasized that laudable environmental ambitions must be rooted in reality. “You cannot just be aspirational and think ‘This is my wish; I wish it would work that way,’” Manchin advised. “It’s not the real world that we live in–and I have seen the real world. The world depends on the United States of America and West Virginia to provide what they need: life-saving energy that provides for them, their families and their economies.”
U.S. companies produce energy with environmental standards that are much higher than their counterparts in places such as the Middle East, Russia and Venezuela, but American producers must continue shrinking their environmental footprint, he said. Such improvement will come through the industry’s creativity, Manchin predicted, and not through artificial constraints intended to speed fossil fuels’ demise.
“Elimination is not the way to go,” the senator assessed. “Innovation is the way to go.”
Secure Energy Supplies
Reflecting on the United States’ top energy challenges and opportunities, Manchin said the United States must protect itself from the sort of supply chain limitations that have confronted many European countries since Vladimir Putin ordered Russian forces to invade Ukraine. The senator noted that when Germany’s Green Party gained power years ago, it not only embraced alternative energy sources, but also moved to shut down affordable and dependable traditional energy.
“They had nothing to replace it with and got themselves in one heck of a mess,” Manchin observed. “Now they are trying to scurry around and build portable liquefied natural gas terminals.”
Alternative energy sources face their own supply chain vulnerabilities that the United States and its allies will do well to avoid, the senator advised. Efforts in Washington to greatly expand the share of electric vehicles in U.S. fleets without securing and diversifying the components critical to building and powering them is short-sighted, he warned.
“China has captured 80% of processing of all rare earth minerals in the world, which is exactly what we need to have to build the batteries these vehicles run on,” Manchin observed. “I am old enough to remember standing in line trying to buy gasoline in 1974 when OPEC decided to shut us off . . . I sure as heck am not going to sign up to wait for that next battery in 2030 or 2035 when (China) won’t ship over the products we need to build that battery because we have not become self-reliant.”
To advance local supply chains, the senator said he was helping arrange a North American alliance on matters such as energy and critical minerals. After all, he suggested, Chinese Premier Xi Jinping is drawing lessons from the energy leverage Putin has used against Europe.
As for the leading opportunities Manchin mentioned, the senator pointed toward the United States’ ability to replace significant volumes of Russian oil and gas with production from plays such as the Marcellus and Utica shales. By contrast, he noted, Russian gas is “produced with much more emissions (that harm) the atmosphere.
“This is going to be truly historic,” he predicted. “We have to make sure we can give (European countries) all that support. The greatest support they need is dependable, reliable energy and that is what the United States can do.”
Ultimately, the senator urged, “We must demonstrate that the United States and our allies are going to lead the global decarbonization and produce fossil fuels with lower emissions than any other countries in the world. This includes continuing efforts to minimize methane emissions, growing the production and use of hydrogen, and deploying carbon capture utilization and storage.”
During the half-hour discussion with Manchin, the senator emphasized that laudable environmental ambitions must be rooted in reality. “You cannot just be aspirational and think ‘This is my wish; I wish it would work that way,’” Manchin advised. To hear Senator Manchin’s remarks, request access to the report at https://reports.babstcalland.com/energy2022-2/.
Transmission Infrastructure
Attorney Moore Capito posed a question that centered on opportunities that Manchin perceived to boost U.S. energy production and plausible policy paths to enable them. The senator acknowledged that U.S. political realities limit the scope of possibilities, in part because the Senate has 50 Republicans and 50 Democrats.
“We are in historic times,” he said. “The Senate has never been evenly split for this long in . . . 237 years. Never. Five-six months is as long as it was ever split before. So how do we navigate that?”
As the country works to mitigate energy supply risks, he suggested, policymakers should adopt a broader perspective that integrates big-picture considerations. The country should steer clear of skewed trade practices that make it easy to import from foreign countries with poor records on human rights and environmental protection, Manchin argued.
“Not that we are protectionist, we are just basically trying to level the playing field,” he characterized. “If you are just going to (ignore human rights and the environment) in your country–because it’s communistic or an autocracy–and . . . ship goods into our markets, that has got to stop.”
Although many of Manchin’s congressional colleagues assure him they understand the importance of U.S. energy supplies, he said they also cheer efforts to frustrate pipeline construction. “The Mountain Valley Pipeline is almost 90%-95% completed and the Third Circuit (Court of Appeals) keeps stopping us from moving forward to complete it. That would put 2 billion cubic feet a day into the market,” he lamented. “Until I see those people . . . making a deal in the real world, with its real challenges, I am sure not going down their path and saying, ‘Throw caution to the wind.’
“I want to develop the new technologies for the future,” he assured. “It’s going to have to coexist with realizing that we have to have a real robust fossil industry here.”
Manchin took issue with fossil fuel opponents’ contention that the United States should stop building pipelines to address climate change. “They have been shutting us down everywhere they can,” Manchin described. “They talk a good game, but then they put up so many obstacles. So I said, ‘Fine. Don’t count on me helping you on other areas until you are able to have a clear path of 10 years of how we are going to be able to drill (and) . . . produce.’”
To that end, the senator highlighted the senselessness of imposing strict methane regulations without supporting more transmission infrastructure. “You cannot fine me for methane escape when you will not let me build a pipeline to take the methane,” he mused. “You are either going to be on the team with us or sitting on the sideline watching us play the game.”
Babst Calland’s report also discusses the business outlook for the energy industry and contains sections on climate change; cybersecurity; ESG and environmental justice; hydrogen and carbon capture and sequestration; pipelines; and renewables. To request access, visit https://reports.babstcalland.com/energy2022-2/.
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PIOGA Press
(By Kevin Garber, Varun Shekhar, Gina Falaschi and Marley Kimelman)
This article is an excerpt of The 2022 Babst Calland Report, which represents the legal perspective of Babst Calland’s energy attorneys addressing the most current business and regulatory issues facing the energy industry. To view the full report, go to reports.babstcalland.com/energy2022-2.
On June 30, the United States Supreme Court held, in West Virginia v. EPA, that the U.S. Environmental Protection Agency may not force existing coal-fired power plants to shift their electricity generation to cleaner sources under Section 111(d) of the Clean Air Act, thereby narrowing EPA’s authority to regulate greenhouse gas emissions from power plants.
West Virginia and a coalition of states, power companies and coal interests petitioned the Supreme Court to review the D.C. Circuit’s 2021 invalidation of the Trump administration’s 2019 Affordable Clean Energy rule, which had replaced the Obama administration’s 2015 Clean Power Plan. Under the Clean Power Plan, EPA calculated rate-based (amount of carbon dioxide emitted per megawatt hour generated) and mass-based (total amount of carbon dioxide emitted per year) targets for each state through application of three “building blocks” that were deemed to constitute the “best system of emission reduction…adequately demonstrated” (BSER) under Section 111(d) of the Clean Air Act: (1) improvements to heat rates (a measure of heat input to power output efficiency) achieved at individual power generation facilities; (2) shifting power generation to natural gas-fired or combined cycle facilities; and (3) increased power generation from renewable and zero-emitting sources. The latter two “building blocks” constituted the Clean Power Plan’s designed “generation shifting.” EPA projected that this BSER would drive down electricity derived from coal-fired sources from 38 percent of the nation’s overall generation in 2014 to 27 percent by 2030.
The Supreme Court held that EPA exceeded its authority under Section 111(d) of the Clean Air Act because Congress did not clearly authorize generation shifting regulations to constitute BSER under the statute. The court found EPA’s program presented a “major questions” issue, the resolution of which is to be determined by determining whether Congress so “specifically and clearly” empowered regulatory agencies through legislation to make sweeping, economy-wide changes. Here, the court found it “highly unlikely that Congress would leave” to “agency discretion” the decision of how much coal-based generation there should be over the coming decades. The court stated that the statutory term “best system of emission reduction” did not give the agency the authority to require widespread generation shifting as a means to reduce CO2 emissions because “the word [system] is an empty vessel” and “[s]uch a vague statutory grant is not close to the sort of clear authorization required by our precedents.” The court concluded that a “decision of such magnitude and consequence [i.e., the amount of coal-based generation] rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”
The decision has significant implications for the Biden administration’s focus on climate change specifically and for administrative law generally. For example, it is very unlikely that EPA may adopt a federal carbon cap-and-trade program administratively without Congressional authorization.
The court’s reasoning, while not necessarily binding, should also be persuasive in states that try to adopt wide-ranging climate change programs administratively based on state law, like the Pennsylvania Regional Greenhouse Gas Initiative, where state statutes do not provide such authority.
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Reprinted with permission from the July 2022 issue of The PIOGA Press. All rights reserved.
Babst Calland congratulates Attorney Tim Miller as the recipient of this year’s Energy & Mineral Law Foundation John L. McClaugherty Award, which recognizes outstanding contributions to the Foundation and the field of energy and mineral law. Each year, EMLF recognizes leaders who have shaped EMLF, and who are recognized as industry and community leaders.
To view the EMLF award presentation, click here.
Smart Business
(By Sue Ostrowski featuring Marc Felezzola)
If you are building new commercial construction, or making improvements to your existing facility, it is critical before starting to take steps to protect yourself from potential mechanics’ liens. Failing to do so could result in making double payments, or potentially forfeiting your property to foreclosure, says Marc Felezzola, a shareholder in Babst Calland’s Construction, Environmental and Litigation groups.
For example, if a prime contractor — someone who contracts directly with the owner — fails to pay a subcontractor — anyone who supplies labor or materials to the prime contractor or its direct subcontractor — the subcontractor can file a mechanics’ lien against the property on which the project was built. And if the subcontractor is not paid the lien amount, it can foreclose on the lien, force a sheriff sale of the property and take its payment from the proceeds of that sale.
This is true even if the owner has paid the contractor for the subcontractor’s work, meaning the owner could be subject to the double jeopardy of having to pay for subcontractor labor and materials twice.
“When you improve real property with construction, contractors and subcontractors confer a benefit that increases the property’s value,” Felezzola says. “The law allows for a lien against the property to secure payment for the benefit someone has contributed to increasing that value. As an owner, protecting yourself requires forethought before construction starts, to set the project up for transparency about potential lienholders and limit the scope of that potential to those with whom the owner directly contracts.”
Smart Business spoke with Felezzola about three ways to protect yourself before beginning a construction project.
How can a no lien agreement between the owner and the prime contractor offer protection?
A prime contractor may, but does not have to, purchase performance and payment bonds that provide a guaranty the contractor will perform and pay for the work required under the contract. If the contractor posts those bonds, Pennsylvania law allows the contractor to waive the right to mechanics’ file liens on behalf of subcontractors because they have the payment bond as alternative security for their right to payment.
And while the bond premium gets passed on to the owner, the owner gets the security of knowing there is no risk of having to double pay for work because its property won’t be subject to subcontractor liens.
How can a filing a notice of commencement reduce risk?
An owner can file a notice of commencement in the State Construction Notices Directory stating the project is commencing. If the owner does so, subcontractors must file a notice in the directory within 45 days informing the owner they are contributing to the project. Failure to do so forfeits any right to file a lien.
This ensures transparency and allows the owner to actively ensure against liens by contacting potential lienholders during the project and confirming they being paid as they perform their work.
How else can owners protect themselves?
An owner may also file a copy of the contract with the prime contractor with the court in the county where the project is located. Doing so limits the owner’s total liability for liens for work performed under that prime contract to the contract’s unpaid balance.
Thus, although filing the contract does not eliminate any subcontractor lien rights, it does eliminate the owner’s risk of the double jeopardy of having to pay subcontractors amounts the owner has already paid the contractor.
Before beginning any construction project — and before signing a contract — meet with an experienced attorney to ensure the terms of the contract are appropriate and create a game plan to both understand potential lienholders and take measures to manage the risk of mechanics’ liens.
None of these steps is expensive or time-consuming, and they will set your project up for success. However, once the project begins, these options are off the table, so reach out early to limit your risk of mechanics’ liens and the possibility of losing your property to foreclosure.
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GO-WV
(By Robert Stonestreet)
What does the West Virginia oil and gas industry have in common with freshwater mussels, how the federal government chooses to define the term “habitat,” and drilling activity on federal lands in the west? Quite a bit, actually. As explained below, recent developments on each of these topics intersect with the regulatory programs that govern oil and gas operations in West Virginia.
WVDNR Mussel Guidance
On June 23, 2022, the West Virginia Division of Natural Resources (WVDNR) published final guidance reflecting the agency’s recommendations for other state and federal government agencies to consider when issuing environmental permits authorizing activities that may impact freshwater mussels. Why does this matter to the West Virginia oil and gas industry? Because the guidance hopefully resolves a long running effort to address what some viewed as improper efforts by the WVDNR to directly regulate oil and gas operations.
In addition to various permits required by the West Virginia Department of Environmental Protection (WVDEP) and the United States Army Corps of Engineers (Corps) for activities that impact certain streams, operators are required to obtain a “right of entry” permit from the WVDNR before any disturbance may take place in or under certain size streams. This permit stems from the State of West Virginia’s claim to own the stream bed of certain waterways. Activities requiring a “right of entry” permit include installation of equipment to withdraw water for use in well completion or other activities.
Several years ago, WVDNR began attempting to impose conditions in “right of entry” permits that would regulate the design of certain stream crossings and impose restrictions on when and how much water could be withdrawn from a stream. These conditions were intended to minimize impacts on freshwater mussels, including those protected under the Endangered Species Act. After much discussion and negotiation between the agency and industry representatives concerning the propriety of such conditions, WVDNR agreed to publish either regulations or guidance on how to address freshwater mussels in the permitting process. Following a comment period on draft guidance published in the summer of 2021, WVNDR published the final guidance on June 23, 2022. In that document, WVDNR makes a number of recommendations for other agencies, such as WVDEP and the Corps, to consider during the consultation and coordination process associated with applications for environmental permits governing projects that may impact freshwater mussels. For example, WVDNR encourages the use of construction methods that minimize mussel impacts and recommends selection of project locations that avoid mussel populations. The guidance also speaks directly to horizontal directional drilling activities used to bore underneath streams rather than trenching through them. WVDNR also sets forth specific recommendations to restrict water withdrawals under certain stream conditions.
In addition to the guidance on the consultation process, WVDNR also revised its existing protocol to be followed by licensed divers when performing a stream bed survey to ascertain the presence and concentration of freshwater mussels. The survey protocol is a rather technical document that lays out the agency’s views on how and where mussel surveys should be conducted in large streams, such as the Ohio and Kanawha Rivers, as well as proposed restrictions on instream dredging or construction activities depending on the results of a mussel survey. Those working in or around streams that serve as habitat for freshwater mussel populations should consult the guidance, which can be downloaded from the WVDNR’s website: https://wvdnr.gov/plants-ani-mals/freshwater-mussels/.
Service Rescinds Definition of “Habitat”
Speaking of habitat, the United States Fish & Wildlife Service (Service) recently vacated the regulatory definition of the term “habitat” under the federal Endangered Species Act. Why is this relevant to oil and gas operators in West Virginia? This change could lead to areas in West Virginia being designated as “critical habitat” for a threatened or endangered species even if the species could not survive there, which would likely preclude development activities on or near those areas.
The Endangered Species Act precludes federal agencies from taking actions, including issuance of permits, that may adversely modify areas designated as “critical habitat” for species listed under the Act as “threatened” or “endangered.” The Act defines the term “critical habitat” to generally mean areas designated as essential to preserve or promote recovery of protected species regardless of whether the species is actually present in the area. The term “habitat,” however, was not itself defined in the Act or regulations until January, 2021 when a regulation published by the Service in December, 2020 became effective. (85 Fed. Reg. 81411). That regulation was in response to litigation challenging a “critical habitat” designation by the Service of an area where the relevant species could not survive under current conditions, which went all the way up to the United States Supreme Court. Weyerhaeuser Co. v. United States Fish and Wildlife Service, 139 S. Ct. 361 (2018). In making the designation, the Service reasoned that the area was once occupied by the species, and certain modifications could be made in the future that would allow the species to return to the area. The property owner challenged the designation arguing that an area could serve as “critical habitat” for a species if the area could not support the species as it exists – i.e. serve as “habitat” as that word is commonly understood. Both the district court and the court of appeals ruled that an area did not have to be “habitat” (as commonly understood) to meet the statutory definition of “critical habitat.” A unanimous Supreme Court disagreed and remanded the case with instructions to the lower court to make a determination of whether the subject area would qualify as “habitat” for the relevant species.
In response to the Weyerhauser decision, the Service undertook a rulemaking effort to specifically define “habitat” for purposes of making
“critical habitat” designations under the Endangered Species Act. After a lengthy comment period, the Service ultimately defined “habitat” as follows: “the abiotic and biotic setting that currently or periodically contains the resources and conditions necessary to support one or more life processes of a species.” Said another way, habitat means the conditions that presently or sometimes will support one facet of a listed species’ life processes (feeding, breeding, etc.). Under this definition, the Service could likely not designate an area as “critical habitat” unless the relevant species could survive in that area as it presently exists.
Immediately upon taking power, the Biden administration announced plans to evaluate a number of regulations promulgated during the prior administration, including those implementing the Endangered Species Act. In October, 2021, the Service proposed to rescind the regulation defining “habitat” and did so on June 24, 2022 (87 Fed. Reg. 37757). In the rulemaking, the Service readily acknowledged that “we are changing our position on some aspects of the rationale underpinning the definition’s adoption[.]” The current leadership of the Service determined that the regulatory definition of “habitat” adopted in early 2021 is “inconsistent with the conservation purposes of the Act” because it restricts the Service’s ability to designate certain areas as critical habitat – i.e. those areas where a species could not presently survive. According to the rulemaking announcement, rescinding the “habitat” definition will allow the Service “to designate unoccupied areas as critical habitat if those areas fit within any reasonable biological understanding of ‘habitat’ as established by the best available scientific data for a particular species, and if such areas are essential for the recovery of the species.” In other words, the Service should have more discretion in determining what qualifies as “habitat” when making critical habitat designations. This discretion is exactly what led to the critical habitat designation successfully challenged in the Weyerhauser case. The bottom line is that the Service has returned to the regulatory framework applied by the Service to designate an area where a protected species could not survive as critical habitat for that species. Couple this with ongoing efforts to list more and more species for protection under the Endangered Species Act, property owners and project developers should be concerned.
Cumulative impact of federal drilling permits on endangered species
In addition to potential impacts on critical habitat, the Endangered Species Act also requires federal agencies to consult with the Service to determine whether a proposed project may adversely affect listed species. Two anti-industry organizations have sued the United States Department of Interior and United States Bureau of Land Management challenging over 3,500 drilling permits issued for federal lands in New Mexico and Wyoming on the grounds that the agencies failed to consider the impacts of climate change and therefore impacts on certain endangered species. Center for Biological Diversity v. United States Department of Interior, No. 1:22-cv-01716 (D. D.C. June 15, 2022). Why should oil and gas industry in West Virginia care about this? Because the arguments advanced to challenge those permits also apply to environmental permits often needed for oil and gas operations in West Virginia.
The groups who filed the lawsuit allege that the federal agencies failed to consult with the Service prior to issuing the permits concerning the cumulative impacts of all the approvals on climate change and associated effects on “climate-imperiled” species listed for protection under the Endangered Species Act. According to the complaint, climate change is a primary driver for the decline of approximately 150 species. The complaint further alleges failure to consider the cumulative effects of the permits violates the National Environmental Policy Act (NEPA) and the Federal Land Policy and Management Act. The groups ask the court to vacate all the drilling permits and prohibit the agencies from approving any additional drilling permits until they have “fully complied” with the cited statutes.
Those in West Virginia should be concerned with this challenge for several reasons. First, while there is not much drilling on federal lands in the state, federal Clean Water Act section 404 “dredge and fill” permits are often required to build roads and pipelines associated with oil and gas development in the state. These permits, issued by the Corps, are subject to the consultation process under the Endangered Species Act. One of the same groups suing to vacate the federal drilling permits has a case pending since May, 2021 in Montana alleging that the Corps failed to adequately consult with the Service prior to issuing the section 404 nationwide permit used for pipelines (known as NWP 12). Center for Biological Diversity v. Spellmon, No. 4:21-cv-00047 (D. Mont.). A decision on the merits of that challenge could be issued soon.
Second, imposition of a “cumulative effects” analysis could displace a case-by-case evaluation of each individual project. Deeming a certain category of projects to be detrimental to climate change, and thus harmful to “climate-imperiled” species, could preclude approval of all permits for individual projects in that category.
Third, the incremental impact of one or more projects, or even a category of projects, on climate change, much less individual species, is difficult if not impossible to ascertain. Are bureaucrats at the Service qualified to make such decisions? Should they be making policy judgments about the net effect of a natural gas development project on climate change?
Fourth, the Service recently published a proposed rule to further expand its authority under the Endangered Species Act. On June 7, 2022, the Service published a proposal to revise its regulations to authorize the agency to create populations of threatened or endangered species in areas where those species have never been known to exist. (87 Fed. Reg. 34625). Historically, the agency has authority to re-introduce listed species into geographic areas within the species probable historical range, which are known as “experimental populations.” In other words, if the agency has evidence that a listed species once existed in an area, the Service can release the species to that area in an attempt to re-establish a population. The Service now seeks to expand the scope of eligible geographic areas to include locations outside of the species’ known historical range. The Service cites the impact of climate change on species and their habitats as justification for the proposed rule change. Under the proposed revised regulation, property owners and developers could face significant delays, or even outright cancellation, of projects in areas where the Service has chosen to attempt to establish a population of listed species that never before existed there. Comments on the proposed rule are due by August 8, 2022.
Conclusion
State and federal actions addressing wildlife management, especially under the Endangered Species Act, continue to pose challenges for the oil and gas industry. Operators would be wise to monitor regulatory and litigation developments, and to engage their consultants and attorneys early in the planning process to address anticipated issues arising under the Act.
Click here, to view the article online in the July issue of Go-WV News.
Melissa M. Rounds recently joined Babst Calland as senior counsel in the Energy and Natural Resources Group. Mrs. Rounds has represented clients in the oil and gas industry for more than 15 years and has assisted producers in a variety of transactional matters, including real estate closings, preparation of documents for leasing purposes and examining and certifying title. Her work includes resolving complex title defects, coordinating urgent title projects, working in-house with major energy producers to provide comprehensive lease analysis and assistance with mineral purchases, and providing legal analysis for changes in statutory and case law.
Mrs. Rounds’ work on behalf of the oil and gas community is primarily focused in Morgantown, West Virginia. Her representation in the Morgantown area includes working with operators to reach drilling commitments, and interactions with county officials in major producing counties in northcentral West Virginia.
Prior to joining Babst Calland, Mrs. Rounds was the owner and attorney for Melissa Rounds Law. She is a 2006 graduate of West Virginia University College of Law.
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
On March 4, 2022, Pennsylvania Governor Tom Wolf announced that the commonwealth is eligible for almost $26.5 million in Abandoned Mine Reclamation Fund program annual grants. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $26.5 Million Federal Funding to Help Reclaim Abandoned Mine Lands” (Mar. 4, 2022). This is in addition to the almost $250 million authorized for annual distribution to Pennsylvania over 15 years from the federal Abandoned Mine Land (AML) Trust Fund. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $244.9 Million Bipartisan Infrastructure Law Investment to Cleanup Pennsylvania’s Abandoned Mine Lands” (Feb. 7, 2022). The AML program was established pursuant to title IV of the Surface Mining Control and Reclamation Act of 1977, Pub. L. No. 95-87, 91 Stat. 445, and the $250 million annual distribution for Pennsylvania stems from President Joe Biden’s November 2021 bipartisan Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021).
In Governor Wolf’s March 4 announcement, he noted that AML funding supports jobs in coal communities and could lead to the reduction of methane emissions throughout the commonwealth. Pennsylvania expects to receive almost $4 billion over the next 15 years to address contamination and pollution caused by coal mining and the estimated 5,000 abandoned mines throughout the commonwealth. In 2019, the Pennsylvania Department of Environmental Protection (PADEP) reported that the commonwealth had over 287,000 acres of land in need of reclamation, with the estimated cost of reclamation expected to exceed $5 billion. See Fact Sheet, PADEP, “Pennsylvania’s Surface Mining Control and Reclamation Act Funded Abandoned Mine Lands Program: Past, Present, and Future” (Mar. 2019). A year-by-year summary of the AML grants awarded to Pennsylvania is available on PADEP’s website at https://www. dep.pa.gov/Business/Land/Mining/AbandonedMineReclamatio n/AMLProgramInformation/Pages/AMLFunding.aspx.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
On March 12, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a revised draft of its Environmental Justice Policy (Draft EJ Policy) for public comment. See 52 Pa. Bull. 1537 (Mar. 12, 2022); PADEP, Draft EJ Policy (Mar. 12, 2022). Publication of the Draft EJ Policy comes approximately four years after PADEP published a revised version of its then-current EJ Policy focused on enhancing public participation during permit reviews in identified environmental justice (EJ) areas. PADEP withdrew that revision after public comments indicated that the proposed revisions were beyond the scope of PADEP’s stated focus. See 50 Pa. Bull. 5920 (Oct. 24, 2020). With the withdrawal, PADEP indicated that it intended to develop and integrate a broader EJ policy into its policies and practices. Id. The Draft EJ Policy incorporates, refines, and expands on the withdrawn 2018 revisions, relying on many of the developments that have occurred in the intervening years, and proposes to make significant changes to the current EJ Policy. See PADEP, Environmental Justice Public Participation Policy (Apr. 24, 2004). Below are some of the most significant changes.
Incorporation of Executive Order and Expansion of OEJ’s Role
The Draft EJ Policy incorporates Governor Tom Wolf’s October 28, 2021, executive order on EJ by citing it as an authority and addressing the requirements of the order. See Executive Order 2021-07, “Environmental Justice” (Oct. 28, 2021); Draft EJ Policy at i; see also Vol. XXXVIII, No. 4 (2021) of this Newsletter (Pennsylvania—Oil & Gas report). The executive order aligns the commonwealth with federal EJ initiatives and directs PADEP and executive agencies to address EJ across all programs. The executive order also formally established the Office of Environmental Justice (OEJ) and the Draft EJ Policy expands upon and clarifies the roles and responsibilities of the OEJ. Draft EJ Policy at 4–6. OEJ’s responsibilities include carrying out the Draft EJ Policy requirements and leading an interagency council on EJ for the commonwealth. Id. at 4.
Trigger and Opt-in Permits Are More Inclusive
The Draft EJ Policy expands the applicability of the policy to more permits, including “trigger permits,” defined as permits that “may lead to significant public concern due to potential impacts on human health and the environment.” Id. at 3. Trigger permits listed in the policy will automatically fall under the Draft EJ Policy if the project is in an “EJ Area.” Id. at 3, 6, 19–20. Trigger permits listed include surface and underground mining permits, coal refuse disposal, and large coal preparation facilities. Id. at 19. Unconventional oil and gas permits are also listed in the Draft EJ Policy as trigger permits and unconventional oil and gas permit holders must adhere to unique public participation requirements, including generating annual reports on active and anticipated drilling operations in EJ Areas. Id. at 15–16, 20.
Permits not listed as trigger permits or permits outside an EJ Area may still be considered “opt-in permits,” defined as “[a] permit that otherwise does not qualify as a public participation trigger permit, but [PADEP] believes warrants special consideration and enhanced public participation based on identified community concerns, present or anticipated environmental impacts, or reasonably anticipated significant adverse cumulative impacts.” Id. at 2. PADEP maintains broad discretion to apply the Draft EJ Policy to opt-in permits, which may include a permit for a listed opt-in facility type (appendix A of the Draft EJ Policy); a permit that “warrants special consideration,” a phrase undefined in the Draft EJ Policy; or any permit that warrants special consideration based on its “reasonably anticipated significant adverse cumulative impacts,” also undefined in the Draft EJ Policy. Id. at 2; see also id. at 20.
The Draft EJ Policy moves the definition of an “EJ Area” outside of the policy to a supplemental document, which has not yet been drafted or circulated. Id. at 1–2. According to PADEP, this supplemental document should allow for more frequent updates to data and methods used to determine “the geographic location where [PADEP’s] EJ Policy applies.” Id. at 1. Further, the Draft EJ Policy requires use of the new and frequently updated EJ Areas Viewer mapping tool, which includes environmental, demographic, and health data for use in all decisions regarding EJ in the commonwealth. Id. at 2, 5, 7. Because the EJ Areas Viewer will be frequently updated and the definition of an EJ Area will live in a supplemental document, it may prove difficult for permit applicants to predict when the Draft EJ Policy, if finalized, will apply to a project.
Enforcement and Grant Priority, Harmony with Climate Change Initiatives, and Future Updates
The Draft EJ Policy requires PADEP to prioritize inspections and compliance in EJ Areas or areas where environmental and public health conditions warrant increased attention. Id. at 16. PADEP must also develop grant guidance to prioritize EJ projects and create tracking/reporting systems for EJ projects. Id. at 17–18. The Draft EJ Policy also prompts PADEP to harmonize EJ initiatives with climate change initiatives. Id. at 17. If finalized as drafted, PADEP’s Secretary must review the EJ Policy at least every four years to determine whether revisions—via public comment and engagement processes—are necessary. Id. at 18.
PADEP accepted written comments on the Draft EJ Policy through May 11, 2022, and has suggested that the supplemental document defining “EJ Area” will be issued for public review sometime later this year. For more information on the Draft EJ Policy and how to submit comments, visit PADEP’s website at https://www.dep.pa.gov/PublicParticipation/ OfficeofEnvironmentalJustice/Pages/Policy-Revision.aspx.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
On February 19, 2022, the Pennsylvania Department of Environmental Protection (PADEP) announced the bond rate guidelines for the calculation of land reclamation bonds for coal and noncoal mining operations in Pennsylvania. The coal bond rates were effective April 1, 2022, and the noncoal bond rates were effective February 19, 2022.
PADEP will use the coal bond rate guidelines to calculate land reclamation bonds for coal mining operations including surface mines, coal refuse disposal sites, coal refuse reprocessing sites, coal processing facilities, and the surface facilities of underground mining operations. These guidelines do not apply to bonds ensuring replacement of water supplies under section 3.1(c) of the Surface Mining Conservation and Reclamation Act, 52 Pa. Stat. § 1396.3a(c), or to bonds ensuring compliance with the requirements of the Bituminous Mine Subsidence and Land Conservation Act, id. §§ 1406.1—.21.
PADEP will use the noncoal bond rate guidelines to calculate land reclamation bonds for noncoal mining operations including surface mines and facilities and the surface facilities of underground mining operations. Activities including special revegetation plans, wetland mitigation, and stream channel restoration will be estimated on a case-by-case basis. Pursuant to 25 Pa. Code § 86.149 (coal) and 25 Pa. Code § 77.202 (non-coal), the bond schedule must reflect the requirement that the bond equal the estimated cost to PADEP “if it had to complete the reclamation, restoration and abatement work” required under the applicable acts, regulations, and permits. Both the coal and noncoal bond rate schedules and announcements are available on PADEP’s website at https://www.dep.pa.gov/Business/Land/Mining/BureauofMiningPrograms/Bonding/Pages/BondRates.aspx.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
After a lengthy rulemaking process, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule was published in the Pennsylvania Bulletin. See 52 Pa. Bull. 2471 (Apr. 23, 2022). As previously reported in Vol. XXXVI, No. 4 (2019) of this Newsletter, on October 3, 2019, Governor Tom Wolf signed Executive Order No. 2019-07, “Commonwealth Leadership in Addressing Climate Change Through Electric Sector Emissions Reductions,” directing PADEP to initiate a rulemaking to join the Regional Greenhouse Gas Initiative (RGGI). 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. The CO2 Budget Trading Program links Pennsylvania’s program to RGGI.
Following approval of the rule by the Environmental Quality Board (EQB) in July 2021 and approval by the Pennsylvania Independent Regulatory Review Commission in September 2021, the final form rulemaking was submitted to the Pennsylvania House and Senate Environmental Resources and Energy standing committees. Both houses of the legislature passed Senate Concurrent Regulatory Review Resolution 1 (S.C.R.R.R.1), which disapproved of the rulemaking, and Governor Wolf vetoed the resolution on January 10, 2022. See Vol. 39, No. 1 (2022) of this Newsletter. The Governor’s veto sent the resolution back to the legislature, where each chamber had 30 calendar days or 10 legislative days, whichever was longer, to attempt a veto override. The legislature needs a veto-proof two-thirds majority to override a veto and block a regulation. On April 4, 2022, the Pennsylvania Senate failed by one vote to reach the two-thirds majority vote needed to override Governor Wolf’s veto of S.C.R.R.R.1.
However, while S.C.R.R.R.1 was pending in the legislature, on November 29, 2021, the EQB submitted the CO2 Budget Trading Program rule to the Legislative Reference Bureau for publication in the Pennsylvania Bulletin. The Legislative Reference Bureau informed the EQB that it was not authorized to publish the rule because S.C.R.R.R.1 was still pending before the House of Representatives. On February 3, 2022, Patrick McDonnell, Secretary of PADEP and Chairperson of the EQB, filed suit in commonwealth court seeking to compel the Legislative Reference Bureau to publish the EQB’s final-form rulemaking for the CO2 Budget Trading Program. See McDonnell v. Pa. Legislative Reference Bureau, No. 41 MD 2022 (Pa. Commw. Ct. filed Feb. 3, 2022). On February 25, 2022, Senator Yaw’s office also announced that Pennsylvania Senate leaders petitioned to intervene in the lawsuit.
On April 5, 2022, the commonwealth court issued a stay preventing the Legislative Reference Bureau from publishing the EQB’s final-form rulemaking for the CO2 Budget Trading Program, pending further order of the court. Because no hearing was held on the stay, it was dissolved by operation of Pa. R. Civ. P. 1531(d) after five days.
The Legislative Reference Bureau subsequently published the rule on April 23, 2022. Two days later a group of stakeholders filed a petition for review of the rule and an application for preliminary injunction in the commonwealth court. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). The court held a hearing on the preliminary injunction on May 10 and 11, 2022, and a ruling is expected early this summer.
If the commonwealth court does not grant the application for preliminary injunction, compliance obligations under the rule will begin July 1, 2022. Regulated sources must hold allowances equal to their CO2 emissions over a three-year compliance period. Each allowance is equal to one short ton of CO2. Regulated sources may purchase state-issued allowances at quarterly auctions or through secondary markets and can use allowances issued by any RGGI state to comply. Affected units would need to start monitoring emissions on July 1, 2022, to be able to purchase allowances for CO2 emitted on or after that date. RGGI operates on a three-year compliance schedule whereby only partial compliance is required within the first two years, and then full compliance is required after the end of the third year. The current RGGI three-year compliance period began in 2021, so 2021 and 2022 are interim compliance years and 2023 is a full compliance year. Regulated sources must acquire 50% of the necessary CO2 allowances by March 1, 2023, and acquire 100% of their allowances by March 1, 2024. The allowance price was $13.50 at the last RGGI auction on March 11, 2022. The partial year emissions cap for Pennsylvania would be 40.7 million tons of CO2 for the remainder of 2022. The total annual emissions cap will gradually decline to 58 million in 2030.
Further information regarding the rule 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 Water Law Newsletter
(By Lisa M. Bruderly & Mackenzie Moyer)
On March 19, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a draft technical guidance document entitled “Trenchless Technology Guidance,” PADEP Doc. No. 310-2100-003 (Mar. 19, 2022). See 52 Pa. Bull. 1693 (Mar. 19, 2022). The purpose of this draft guidance document is to outline the steps and options to consider, and implement as appropriate, when proposing to use a trenchless technology installation method on any portion of a project. PADEP intends for this draft guidance to help “avoid, minimize, or eliminate environmental impacts” associated with trenchless technology installation. Trenchless Technology Guidance at 2. The public comment period on the draft guidance closed on May 18, 2022.
The draft guidance developed out of a stakeholder workgroup required as part of a settlement with the Clean Air Council, the Delaware Riverkeeper Network, and the Mountain Watershed Association regarding the PADEP-issued permits for the Mariner East II pipeline project. Two workgroups were formed out of that settlement to create guidance related to two topics: (1) alternatives analysis and (2) trenchless technology. The draft “Alternatives Analysis Technical Guidance Document” was published for public comment in October 2021. PADEP is currently working to revise the guidance in response to comments. The draft Trenchless Technology Guidance is the second draft guidance to come from these workgroups.
Trenchless technology is defined in the draft guidance as “[a] type of subsurface construction work that requires few trenches or no trenches which includes any trenchless construction methodology, including, without limitation: horizontal directional drilling, guided auger bore, cradle bore, conventional auger bore, jack bore, hammer bore, guided bores, and proprietary trenchless technology . . . .” Trenchless Technology Guidance at 6. This draft guidance outlines the steps that proponents of projects using trenchless technology should consider. Each project should evaluate the “suitability, feasibility, and environmental considerations” of using trenchless technology methods on a case-by-case basis, using this guidance, if published, as a step-by-step guide. Id. at 2.
Accordingly, the draft guidance is broken into three major sections—(1) suitability, feasibility, and environmental considerations; (2) design and permitting; and (3) construction and compliance. Each of these sections corresponds to a step in the process of evaluating the use of trenchless technology. Each step is then further broken down into sections that detail the regulatory requirements for each project stage. For example, step one recommends that parties interested in using trenchless technology installation methods utilize a “site suitability analysis” and a “feasibility analysis” to evaluate the potential effects of using trenchless technology. The feasibility analysis should include the assessment for the use of trenchless technology construction as the least environmentally impacting alternative. PADEP recommends that more complex projects consult local stakeholders during the site suitability analysis and the feasibility analysis.
The draft guidance also includes two appendices that PADEP emphasizes are important tools for project proponents to utilize. Appendix A provides a guide to assist project proponents in evaluating risk when using trenchless technologies. Appendix B includes checklists that correspond to each of the major sections of the draft guidance. Project proponents are highly encouraged to use these checklists to assist with due diligence. If a box is not checked, “the project proponent should be prepared to explain why the information was not examined.” Id. at 63. PADEP requests that project proponents submit the applicable checklists with any permit applications. Id. at 31.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On March 15, 2022, the Environmental Quality Board approved final regulations establishing reasonably available control technology (RACT) requirements for volatile organic compounds (VOCs) and other pollutants from existing oil and natural gas production facilities, compressor stations, processing plants, and transmission stations. The regulation will be submitted to the U.S. Environmental Protection Agency (EPA) for approval as part of the commonwealth’s state implementation plan under the Clean Air Act. As reported in more detail in Vol. 39, No. 1 (2022) and Vol. XXXVII, No. 3 (2020) of this Newsletter, under the new regulation, oil and natural gas operators with facilities that exceed VOC emission thresholds would be required to do more frequent leak detection and repair monitoring on certain equipment at their facilities.
The rulemaking had advanced to the Pennsylvania House and Senate Environmental Resources and Energy Committees and the Independent Regulatory Review Commission (IRRC) for consideration. After the House Environmental Resources and Energy Committee issued a disapproval letter for the rulemaking on April 26, 2022, however, the Pennsylvania Department of Environmental Protection (PADEP) withdrew the rule from consideration by the IRRC to reevaluate the rulemaking. The Committee’s disapproval letter alleges 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. PADEP has stated that it needs to finalize the rule by June 16, 2022, to avoid sanctions by the EPA under the Clean Air Act. Documents related to the rule can be found on PADEP’s website at https://www.dep.pa.gov/ Pub-licParticipation/EnvironmentalQuality/Pages/2022-Meetings. aspx.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On February 23, 2022, the Murrysville Watch Committee (MWC) petitioned the Supreme Court of Pennsylvania to allow an appeal of its unsuccessful challenge of the Municipality of Murrysville’s Oil and Gas Ordinance (Ordinance), which authorized oil and gas wells as a conditional use in Murrysville’s Oil and Gas Recovery Overlay District (Overlay District), including parts of the rural residential zoning district. As adopted, the Ordinance’s geographic and other limitations (e.g., required setbacks from well pads) restricted unconventional oil and gas development to only 5% of Murrysville’s land mass. MWC originally filed a validity challenge to the Ordinance in October 2018 before the Murrysville Zoning Hearing Board (Board), claiming, among other things, violations of due process, equal protection, and the Environmental Rights Amendment (ERA) to the Pennsylvania Constitution, Pa. Const. art. I, § 27. Broadly, MWC contended that unconventional oil and gas drilling is an industrial activity incompatible with residential zoning districts. The Board held multiple hearings, denied MWC’s challenge, and issued 167 findings of fact related to its decision. Without presenting any additional evidence, MWC appealed the Board’s decision to the Westmoreland County Court of Common Pleas, which affirmed the Board’s decision, noting that the record showed that MWC provided no evidence to differentiate the Ordinance from other, similar ordinances upheld on appeal, the precedential application of which foreclosed MWC’s challenges. MWC subsequently appealed that decision to the Commonwealth Court of Pennsylvania.
On January 24, 2022, the commonwealth court affirmed the trial court’s and Board’s decisions. Murrysville Watch Comm. v. Municipality of Murrysville Zoning Hearing Bd., No. 579 C.D. 2020 (Pa. Commw. Ct. Jan. 24, 2022). In doing so, the court relied on its prior decisions Frederick v. Allegheny Township Zoning Hearing Board, 196 A.3d 677 (Pa. Commw. Ct. 2018), and Protect PT v. Penn Township Zoning Hearing Board, 220 A.3d 1174 (Pa. Commw. Ct. 2019). In Frederick, the appellees claimed that an Allegheny Township, Westmoreland County, zoning ordinance that allowed oil and gas wells as a use by right in all zoning districts, subject to additional limitations, violated the ERA. The local zoning board and trial court both rejected these challenges and the commonwealth court affirmed, defining the appropriate standard for determining an ERA violation as whether (1) the values in the first clause of the ERA are implicated and (2) the governmental action unreasonably impairs those values. Murrysville, slip op. at 23–24; see Vol. XXXV, No. 4 (2018) of this Newsletter. Likewise, in Protect PT, the commonwealth court affirmed the validity of the Penn Township, Westmoreland County, zoning ordinance, which also faced claims of ERA violations. That ordinance created an overlay district authorizing natural gas operations by special exception, subject to certain limitations. The court rejected the challengers’ arguments of actual risk to the environment or health of township residents and found that the ordinance did not violate the ERA or due process. Murrysville, slip op. at 27–28.
Applying its analysis of these cases, the commonwealth court also found that the appellants failed to provide any evidence that unconventional oil and gas development, as contemplated under the Ordinance, was incompatible in the authorized residential zoning districts. On the contrary, the court concluded that the municipality had appropriately balanced protecting property owners in the Overlay District with economic development considerations and rejected the appellants’ claims that the Ordinance violated citizens’ due process rights. Id. at 21. For similar reasons, the court found that MWC had not shown that the Ordinance “unreasonably impaired” citizens’ rights under the ERA. Id. at 28. Finally, the court rejected the appellants’ claim that the Overlay District violated citizens’ equal protection rights under article III, section 32 of the Pennsylvania Constitution because it treated rural residential districts unequally. Id. at 35. The court reasoned that by their nature, overlay districts are subject to available land and population density, which municipalities can account for in their development. Id. The court also rejected MWC’s remaining claims, as further detailed in the opinion.
On February 23, 2022, MWC filed its petition to the Supreme Court of Pennsylvania to allow it to appeal the commonwealth court’s decision. At the time of this report, the respondents had filed their answers to MWC’s petition. See Murrysville Watch Comm. v. Municipality of Murrysville Zoning Hearing Bd., No. 56 WAL 2022 (Pa. filed Feb. 23, 2022).
Editor’s Note: The reporters’ law firm represents Olympus Energy LLC, an intervenor in the litigation with a pending unconventional gas well in Murrysville.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
The Pennsylvania Department of Environmental Protection (PADEP) is proceeding with two updates amending 25 Pa. Code ch. 78 (conventional oil and gas well regulations). See DEP Regulatory Update (Apr. 23, 2022). The final chapter 78 rulemaking approved by the Environmental Quality Board (EQB) and Independent Regulatory Review Commission (IRRC) in 2016 was used as the basis for the proposed updates. See Meeting Minutes, Oil & Gas Technical Advisory Board (TAB) (Sept. 17, 2020).
The first draft update, “Environmental Protection Performance Standards for Conventional Oil and Gas Operators” (#7-539), proposes updates to well reporting requirements and protection and replacement of public or private water supply regulations to reflect Act 13 of 2012, bonding requirements to reflect Act 57 of 1997, and updates to assessment and inactive status designation regulations to reflect current PADEP practice. Other surface and non-surface activity updates address permit issuance, underground injection well permitting, impoundments and borrow pits, erosion and sedimentation and site restoration requirements, and mechanical integrity testing and reporting. See TAB Meeting (Jan. 14, 2022); Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021). This update was most recently presented to the Pennsylvania Grade Crude Development Advisory Council (CDAC) on December 16, 2021, and TAB on May 5, 2021.
The second update, “Waste Management and Related Issues at Conventional Oil and Gas Well Sites” (#7-540), addresses proper handling, storage, processing, and disposal of drill cuttings and waste water generated by conventional oil and gas operations. Area of review requirements pertaining to preparedness, prevention, and contingency plans, along with reporting and remediation of spills and releases at conventional oil and gas well sites, would be significantly updated by this proposed update. This update was last presented to CDAC on August 19, 2021, and to TAB on September 9, 2021. Of note, the practice of spreading brine for dust suppression and deicing roadways, on which PADEP’s Office of Oil and Gas Management imposed a moratorium in 2018 (but is authorized under PADEP’s Waste Management Program in certain situations), is not addressed in this update. See Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021); Meeting Minutes, TAB (Sept. 9, 2021). PADEP, however, is currently reviewing a Penn State study on the environmental impact of spreading brine on roadways and advised TAB that the report will be released no later than August 2022, and indicated to TAB that the findings of the Penn State study will likely have a broad impact on the practice of brine spreading on roadways. TAB Meeting (Apr. 25, 2022). PADEP’s review of the study coincides with the Pennsylvania Office of the Attorney General’s apparent investigation of alleged illegal disposal, under the residual waste regulations, of brine produced from conventional oil and gas operations on roadways. See Meeting Comments, CDAC (Apr. 21, 2022).
PADEP advised TAB on April 25, 2022, that it will present the first draft update to the EQB for consideration and public comment during the second quarter of 2022. PADEP anticipates presenting the second update to EQB for consideration and public comment the following quarter. See 52 Pa. Bull. 1930 (Mar. 26, 2022).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado