On January 31, 2022, Pennsylvania Governor Tom Wolf announced Pennsylvania was allocated a total of $104 million in Phase I funding to support the cleanup of orphaned and abandoned oil and natural gas wells throughout the state. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $104 Million from President Biden’s Bipartisan Infrastructure Law to Support Orphaned, Abandoned Well Cleanup in PA” (Jan. 31, 2022). The $104 million allocation is based on Pennsylvania’s notice of intent (NOI) to the U.S. Department of the Interior (DOI) indicating the commonwealth’s interest in applying for federal grant money for plugging orphaned wells and remediating orphaned well sites. See Press Release, DOI, “Biden Administration Announces $1.15 Billion for States to Create Jobs Cleaning Up Orphaned Oil and Gas Wells” (Jan. 31, 2022). The grants are part of $1.15 billion the federal government has allocated to states under the DOI with specific goals of reducing methane emissions and other pollution, and creating jobs. See Fact Sheet, White House, “Biden Administration Tackles Super-Polluting Methane Emissions” (Jan. 31, 2022); Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021). In the future, formula grants will allow the commonwealth to access more than $330 million in additional funding for the same purposes. See News Release, Senator Bob Casey, “Pennsylvania to Receive $104 Million to Clean Up Orphaned Oil and Gas Wells” (Jan. 31, 2022).
The Pennsylvania Oil and Gas Act defines an “abandoned well” as a well that (1) has not been used to produce, extract, or inject any gas, petroleum, or other liquid within the preceding 12 months; (2) for which the equipment necessary for production, extraction, or injection has been removed; or (3) is considered dry and not equipped for production within 60 days after drilling, re-drilling, or deepening. 58 Pa. Cons. Stat. Ann. § 3203. An “orphan well” is a well “abandoned prior to April 18, 1985, that has not been affected or operated by the present owner or operator and from which the present owner, operator or lessee has received no economic benefit other than as a landowner or recipient of a royalty interest from the well.” Id. The Pennsylvania Department of Environmental Protection (PADEP) estimates there are between 100,000 and 560,000 wells unaccounted for in state records, a significant number of which may still pose a threat to human health and the environment. See Fact Sheet, PADEP, “Abandoned and Orphan Oil and Gas Wells and the Well Plugging Program” (rev. Apr. 2021).
The funding is allocated in two parts. Phase I, with an initial grant of $25 million, will be used by PADEP to plug and remediate high-priority wells that pose a threat to health and the environment, and document how many orphaned and abandoned wells exist throughout the commonwealth that need to be plugged. See Meeting, Oil and Gas Technical Advisory Board (TAB) (Jan. 14, 2022). At the April 25, 2022, TAB meeting, PADEP stated that it is developing plugging projects for the most efficient expenditure of funds. For example, PADEP said that it intends to include lower priority orphaned wells in the vicinity of high-priority wells, targeting 8 to 10 wells per contract. Per PADEP, doing so will allow for remediating the largest number of orphaned wells possible in the fewest number of trips. Meeting, TAB (Apr. 25, 2022). The second allocation of Phase I funding to the commonwealth, totaling $79 million, was awarded in accordance with Phase I formula grant eligibility requirements based on job loss in the oil and gas industry during the COVID-19 pandemic, the number of documented orphaned wells, and the estimated cost to plug and remediate orphaned wells. See DOI Press Release, supra.
On April 12, 2022, DOI issued guidance to states outlining, among other things, the grant application process, uses for initial grant funding, and recommended best practices for establishing, conducting, and reporting plugging, remediating, and reclaiming activities. See Fact Sheet, DOI, “Bipartisan Infrastructure Law Sec. 40601 Orphaned Well Program—FY 2022 State Initial Grant Guidance” (Apr. 2022). At the January 14, 2022, and April 25, 2022, TAB meetings, PADEP explained that the commonwealth must submit an application for the previously awarded initial grant funding no later than May 13, 2022. The application must include certification that (1) there are orphaned wells in the commonwealth, (2) the commonwealth is a member of the Interstate Oil and Gas Compact Commission, and (3) 90% of the funds will be allotted to plugging contracts or grants within 90 days of receiving federal funding. See also id. at 9. DOI will disperse funds within 30 days of submission of certification. Any funds that remain “unobligated,” i.e., any funding that, on the date one year from the date of receipt, is not subject to a definite commitment for an immediate or future payment for goods or services ordered or received, must be returned to DOI. Id. at 5–6.
Sparked by the newly released Allegheny Conference for Community Development’s long-term vision for achieving 70% reduction in carbon dioxide emission by 2050 and anticipating an upcoming Department of Energy funding opportunity announcement (FOA), local industry leaders gathered recently to discuss the benefits of a hydrogen economy.
Collaboration is key
These leaders all agreed that in order to build momentum toward a hydrogen economy in this region now, a collaboration of community resources, academia, energy and other industries, and public entities is key to producing a successful application proposal. More specifically, according to Krekanova, “if hydrogen and carbon capture utilization and storage (CCUS) could be well understood and thoughtfully negotiated, they can produce positive benefits for the environment, for the economy, and for the people.”
“One of the strengths … in the region here is, we have the industry base, we have the academic base, the research base,” Veser said.
Creating and strengthening opportunities for public and private partnerships and using those pooled resources and expertise will create additional opportunities in this region, he added.
“We can make hydrogen from natural gas, we can do carbon capture, we know how to do this. We know how to electrolyze water,” Veser said.
The challenge, he continued, is to develop more cost effective and energy efficient methods — processes that are more compact, use cheaper materials, and can eliminate the carbon footprint of external firing — that will bring down the cost curve.
And larger sums of money from both government and industry will further accelerate this research.
“We’re at a place where the federal government obviously is interested in this,” Curry said. “They have put money down for hydrogen hubs; we have the 45Q tax credit.”
In addition to federal tax incentives, Curry said there is an educational component of the policymaking phase of support. There is a need to educate the public about the complex issues associated with hydrogen or carbon capture will affect their energy costs, safety and convenience.
Permitting processes must improve
“If you can get people on board, get them comfortable [that] this is safe, this is going to help them, and it’s going to bring jobs to the region then you can really build the political support you need to do good policy,” Curry said.
In terms of regulatory and permitting issues, changes are required — at the federal and state levels — to streamline and speed up the permitting processes throughout the energy sector, noted Curry.
“I think for hydrogen in this region, it’s really the tie back to carbon capture and getting carbon sequestration wells permitted … the historical average for existing sequestration wells is about five years,” he said.
It’s a significant amount of time for project funders to wait on a project, he added.
Garber suggested that permitting processes could be streamlined. A few states — including West Virginia, North Dakota, and Wyoming — have taken the necessary steps to become the permitting authority for carb on sequestration wells.
“I’ve seen estimates that Pennsylvania has the capacity to sequester two and a half billion tons of CO2,” Garber said. “If we are delayed initial permits … then there certainly is the risk that hydrogen development and CCS [carbon capture and sequestration] transport will go to the Midwest and West as opposed to the Appalachia area.”
Clean energy for the region
In terms of regulatory, now is the time for the Pittsburgh region to add “clean energy for all,” to its “meds, eds and bots” identity, said Duquesne Light’s Guzek.
“The speed and flexibility (of how funds are allocated) are the two things from our perspective that really help us make our region competitive and one that can really prosper” he said.
And the Pittsburgh region is poised to supply a workforce that can support the new technologies and business issues associated with a hydrogen economy.
From an academia perspective, the University of Pittsburgh has played a significant role in research and development, and the educational side is now in the late planning stages of reviving its petroleum engineering undergraduate program with a strong focus on natural gas and renewable energy education for engineers, Veser said. The program — the first of its kind in the U.S. established in 1910 — is being reimagined for new technologies that will help graduates bridge the gap between fossil fuels and renewables.
“We really equip these engineers to lead that transition into whatever the future will bring because it is still unclear what ultimately the winning technologies will be and where the pathway will go,” he said. “There is a clear need in educating the next generation of engineers.”
Job opportunities and education will also be created for various trades, Guzek said.
Next gen of engineers and trade workers needed
“We need to continue to reach out into the communities and drive (home the point) that not everybody has to get a four-year degree,” he said.
Leveraging the partnerships throughout the region and its potentially on-demand industries, universities and hard-working communities will drive the region to a clean energy future for all, Guzek continued.
“I think there are some first movers here poised in the region to really jump into this … and I think there is a good chance that others will follow,” Garber said. “There are companies here that are willing to do this.”
“We’re not going to get there by just one technology,” Curry added.
To view the article and the video discussion, click here.
There is one in every town. The abandoned lot, corner or block. Maybe it once housed a building that was torn down long ago. Perhaps it served as the neighborhood sandlot for pick-up baseball games in the summer before the new all-season turf field was installed in the athletic complex. Might be one owner or several parcels with various owners. Likely it has delinquent taxes piling up. Possibly there was an approval in the past with much fanfare, but then the market collapsed, the groundbreaking was canceled and permits expired. People drive past all the time and wonder, “What are they ever going to build there?”
Although land is valuable because they are not making any more of it, a variety of factors can prevent otherwise viable property from being developed. In situations where there are local government hurdles to development, a would-be developer can have several options. A rezoning to change the zoning map and the type of permitted uses on the property is one option. But rezoning comes with risks both to the developer including a spot zoning challenge by neighbors and to the local government due to the possibility that the developer does a project that is now permitted in the new zoning district even though it was not what was proposed during the legislative rezoning process.
Another option for a more targeted development where the local government will have assurances that it will get what was promised is a use variance. Although not as common as the ubiquitous dimensional variance that seek to alter building setbacks or heights beyond what is allowed in the zoning ordinance, a use variance in the right circumstances can be a viable path for both the local government and the developer. Far too often a developer might be scared away from this option due to the heavy burden of establishing that the property is constrained by an unnecessary hardship to warrant the relief of a use variance.
In the Pennsylvania Commonwealth Court’s reported opinion, In re Appeal of Frank Garcia, No. 134 C.D. 2020 (May 10, 2022), the much-maligned use variance concept received a bit of a revival. This city of Philadelphia case involved a rectangular lot over 45,000 square feet in size that had been abandoned and vacant for decades as the Olde Richmond neighborhood around it grew and changed. The property is located at 2600-40 Hagert Street and is bounded by three public streets. Zoning only permitted attached and semi-detached single-family residences on the property.
The developer initially devised a plan to divide the property into three parcels for a multi-family apartment building and eleven single-family dwellings. This plan was not well received by the neighbors and the community association. After meeting with community members, the developer revised its plan to reduce the building size and number of units, create a pedestrian walkway, increase the open areas, and increase the landscaping and preservation of several existing trees. Essentially, the apartment building was turned into a smaller number of duplexes and the eleven single-family dwellings remained. In addition, the developer agreed to provide off-street parking for use by the community and to create a pocket park and community garden for the neighborhood.
The duplexes required a use variance from the Zoning Board of Adjustment. The developer addressed the neighbors’ concerns with traffic and parking problems by comparing its proposal to what could be constructed without the variance. Using the entire property for single-family residences would add to the parking and traffic concerns, and there would be no requirement for the developer to provide for the additional off-street parking spaces and other design features that were offered in the revised plan. In addition, the objecting neighbors claimed that the developer failed to establish an unnecessary hardship or that the requested variance represented the minimum variance that would allow the property to be developed. In response, the developer established that it was not economically viable to do an exclusively single-family development and the surrounding commercial and industrial would impact the ability to market single-family residences to potential buyers.
The Zoning Board of Adjustment granted the use variance for the duplexes over the neighbors’ objections, and the Common Pleas Court affirmed. Judge Patricia McCullough, writing for the unanimous Commonwealth Court, used the opportunity presented by this case to review the standards for a use variance, but more importantly, to explain the common errors that arise when a use variance is viewed in terms of extremes rather than the nuance the law requires. McCullough began by addressing the need to find an “unnecessary hardship” peculiar to the property that is the first step in a use variance case. Based on Supreme Court decisions, the three ways an applicant for a use variance can establish an unnecessary hardship are by establishing either that: the property cannot be used for a permitted purpose due to the physical features of the property, or a permitted use can only be developed at a prohibitive expense or the property is valueless for any use permitted by the zoning ordinance. This is a disjunctive test that has multiple factors, and yet there has been a trend of decisions that only focus on one of these three criteria and ignores other factors. The belief that a use variance was only appropriate for a valueless property or in situations where it was impossible to comply with the zoning ordinance played a large role developers’ fear for seeking one and zoning hearing boards’ reluctance to grant one.
This extreme position is an error. A developer does not need to have a completely valueless property before an unnecessary hardship will be established. McCullough explained the variety of factors that must be considered by a zoning hearing board conclude whether an unnecessary hardship exists. In this case, the developer detailed for the Zoning Board of Adjustment what a single-family development permitted by right would look like. It would be 16 lots in two rows of eight houses back-to-back with front yards that were 20 feet wide and side yards that were 70 feet long. This would look like a suburban subdivision and not like anything in the immediate area. This, coupled with the large size of the lot, the fact that it was bounded by three public streets, and that the surrounding land was not in keeping with a single-family development was sufficient for the Zoning Board of Adjustment to conclude that there was an unnecessary hardship that warranted variance relief.
McCullough next analyzed the objectors’ argument that the developer failed to establish that a use variance for duplexes was the minimum necessary variance. The court noted that this criterion is decidedly more difficult to assess in a use variance than in a dimensional variance case where an applicant can clearly quantify the restriction and show how the building will work if the restriction is changed. However, this difficulty in a use variance case can be overcome by considering the economics of the proposed variance. Too often, developers are not willing to discuss their profit margins or how changes will impact the bottom line. Here, the developer was able to bring forward facts that supported its reasonable profit expectations and how that interacted with the minimum number of dwelling units that would be necessary for the plan to be economically viable. By doing so, the developer gave the Zoning Board of Adjustment substantial evidence to support the determination that the number of duplexes requested in the variance was the minimum variance to make the project economically feasible and justified relief from the hardships posed by the property, the surrounding area, and the zoning ordinance.
The developer in this case was well served to meet with the community and make a revision to the plan to address concerns. The court mentioned these revisions throughout the opinion and a willingness to work with the community played a key role in establishing the economics that led to a decision that the duplexes were the minimum necessary variance. There was a final issue relating to a unique provision in the Philadelphia zoning code that bars a variance if there are delinquent property taxes unless the Zoning Board of Adjustment included a condition that the taxes be satisfied, which was not addressed by the lower court and the Commonwealth Court remanded the case for resolution of that issue.
The city of Philadelphia is not subject to the Pennsylvania Municipalities Planning Code like other municipalities, but Pennsylvania courts recognize the universal considerations that go into any variance application before a local zoning hearing board. Practitioners facing a use variance as either counsel for a developer, attorney for the objectors, or solicitor for the zoning hearing board will all be well served to review In re Appeal of Frank Garcia as they prepare for a public hearing. A use variance is not necessarily something to be feared and it can be an effective solution to put that vacant lot present in every town to productive use.
Robert Max Junkeris a shareholder in the public sector, energy and natural resources and employment and labor groups of Babst, Calland, Clements & Zomnir. Conctact him at rjunker@babstcalland.com.
Babst Calland today published its 12th annual energy industry report: The 2022 Babst Calland Report – Legal & Regulatory Perspectives for the U.S. Energy Industry.Each of our nation’s energy sectors is impacted by local, state and federal policies, many of which are addressed in this inclusive report on legal and regulatory developments for the energy industry in the United States.
The Babst Calland Reportrepresents the timely and insightful perspectives of the firm’s energy attorneys on some of the most critical issues facing the industry, including climate change, cybersecurity, ESG and environmental justice, hydrogen and carbon capture sequestration, pipelines, and renewables.
Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. energy industry, and the U.S. economy as a whole, is reacting to shifting market forces and potential significant new changes in laws and regulations. Importantly, Russia’s invasion of Ukraine earlier this year and the resulting worldwide shortage of oil and gas has spotlighted the world’s continued reliance on fossil fuels and reinforced the value of America’s relative energy independence even as the nation and the world continue to seek alternative energy sources.”
Report Features Video Commentary from U.S. Senator Joe Manchin
This edition of The Babst Calland Report also features commentary from Senator Joe Manchin (D-WV), Chairman of the U.S. Senate Energy and Natural Resources Committee, who spoke with Babst Calland energy clients at a special briefing on May 26, 2022 called “A Perspective on U.S. Energy Policy with Senator Joe Manchin.”
To request a copy of The 2022 Babst Calland Report, click here.
The Babst Calland Report is provided for informational purposes for our clients and friends and is not intended to constitute legal advice.
Commonwealth v. International Development Corporation, 2022 WL 628284 (Commw. Ct. Pa. 2022). This is a deed interpretation case with some Title Wash sprinkles mixed. In 1894, two individuals (Proctor and Hill) conveyed approximately 2,000 acres in Bradford County to Union Tanning Company, excepting and reserving all the coal, oil and gas. This was unseated lands, and the minerals remained assessed with the surface. After several intervening conveyances, the surface estate became vested in Central Pennsylvania Lumber Company (CPLC). CPLC’s surface assessment went delinquent and was sold to Calvin McCauley in 1908. The deed to McCauley effectively “washed” the title to the reserved minerals, which also effectively became vested in McCauley. McCauley subsequently transferred the newly-reunified estates under the 2000 acres back to CPLC in 1910. In 1920, CPLC conveyed the land to the Commonwealth, utilizing the following language:
[t]his conveyance is made subject to all the minerals, coal, oil, gas or petroleum found now or hereafter on, or under the surface on any or all of the lands described in each of the above mentioned parts or divisions [of the 1920 deed]; together with the right and privilege of ingress, egress and regress upon said lands for the purpose of prospecting for, or developing, working or removing the same, as fully as said minerals and mineral rights were excepted and reserved in deed dated October 27, 1894, from … Proctor [and Hill] to … Union …
International Development Corporation became the current successor to CPLC as to the minerals following the above 1920 deed, and the Commonwealth of Pennsylvania continues to own the surface estate to this deed. The case hinges on the interpretation of the above language – is it a reservation benefiting CPLC, or just a limitation on the warranty? The Commonwealth Court determined that, reading the 1920 deed as a whole and in context, the intent of CPLC was clearly to retain for itself the same mineral rights that had originally been reserved by Proctor and Hill in 1894. The Court pointed out that, normally, making a conveyance “subject to” a prior reservation or right does not create a new right. However, in the 1920 deed, CPLC utilized additional language modifying the “subject to” clause that created new rights for itself. As such, the Court effectively vested title to the oil and gas at issue with International Development Corporation, and not the Commonwealth.
WEST VIRGINIA
Antero Resources Corporation v. Irby, 2022 WL 1055446 (S. Ct. W. Va. April 8, 2022). Antero contested the methodology employed by the West Virginia State Tax Commissioner’s valuation of three wells located in Doddridge and Ritchie Counties, on appeal from the West Virginia Business Court. A larger valuation dispute had previously been adjudicated and remanded to that court, to which the parties were able to reach agreement, but the current dispute revolves around wells specifically producing both oil and gas. Essentially, West Virginia regulations allow certain deductions from the assessed value of wells.
Oil wells receive a deduction of $5,750.00, while gas wells receive deductions of $150,000.00 or more per year, with the deductible value increasing year over year. The Tax Commission applied the deductions to the Antero oil and gas wells based on the proportion of revenue generated by each individual resource on a per-well basis. For example, for a well that generated 75% of its revenue on gas and 25% of its revenue on oil, the Commission calculated the deduction as follows: 75% of $150,000.00 plus 25% of $5,750, for a total well deduction of$113,937.50. Antero argued that the assessments were not “singular” as required under existing caselaw regarding these producer’s well assessments because a monetary average effectively creates a sliding scale for valuation (an idea that had been previously rejected by the Supreme Court). The real value of the additional oil well deductions equates to millions of dollars in Doddridge and Ritchie Counties. The Supreme Court concluded that the valuation of the “mixed” oil and gas wells was reasonable and not in violation of fairness, upholding the Tax Commissioner’s valuations.
Alyssa Golfieri is a shareholder in the firm’s public sector and energy and natural resources groups. Her practice focuses primarily on municipal and land use law, with an emphasis on zoning, subdivision, land development and municipal ordinance enforcement.
Practice Profile:
Golfieri is a shareholder in the firm’s public sector and energy and natural resources groups. Her practice focuses primarily on municipal and land use law, with an emphasis on zoning, subdivision, land development and municipal ordinance enforcement.
She represents the firm’s municipal clients on a wide array of local government issues, including the preparation of zoning and land development ordinances pursuant to the Pennsylvania Municipalities Planning Code, the processing of land development applications, responses to record requests submitted under the Pennsylvania Right-to-Know Law, navigation of public bidding matters, abatement of property maintenance issues, defense of notices of violations before zoning hearing boards and magisterial district judges, and compliance with both the Pennsylvania Sunshine Act and the Pennsylvania Public Official and Employee Ethics Act.
Leadership Activity:
Golfieri is an active leader within the firm, having served on the associates, summer associates, recruiting, technology and carpetmaster’s committees. She also serves as a mentor to future generations of attorneys outside the firm.
Pro Bono and Civic Work:
She frequently volunteers as an alumni judge for Duquesne University School of Law 1L appellate oral arguments, a juror for Allegheny County High School Mock Trial Competition, a panelist for Allegheny County Bar Association’s young lawyer’s division roundtable discussion titled “Preparing for the Bar Examination,” and a coordinator for Allegheny County Bar Association’s young lawyer division holiday toy drive.
Experience:
Current employer, May 2011-present, summer associate, 2011, associate, September 2012-December 2020, shareholder, Jan. 1, 2021-present.
Education:
The Pennsylvania State University, B.S. in crime, law and justice, 2009; Duquesne University School of Law, J.D., 2012.
The Pennsylvania Department of Environmental Protection on March 12 shared an updated draft of its Environmental Justice (EJ) Policy for public comment. Among the many changes, the draft EJ Policy expands the role of the Office of Environmental Justice (OEJ), creates new requirements for unconventional oil and gas, and creates new enforcement priorities for the department. Comments were accepted through May 11.
Pennsylvania’s Environmental Justice Policy
The OEJ oversees environmental justice initiatives and policies in the state. The primary goal of the OEJ is to increase communities’ environmental awareness and involvement in DEP’s permitting process. In 2004, the department created the Environmental Justice Public Participation Policy to provide citizens in environmental justice communities enhanced public participation opportunities during certain permit application processes. The EJ Policy is a critical part of DEP’s environmental justice initiatives, providing guidelines for the agency’s approach to public engagement for permit application reviews in environmental justice areas as defined under the current EJ Policy.
In 2018, DEP circulated a draft revision to the current EJ Policy for public comment. Ultimately, the department withdrew the proposed draft revisions after public comments were received, and the current 2004 version of the EJ Policy remained in effect. DEP continued to evaluate revisions to the EJ Policy and in 2021 proposed to update the policy by incorporating, refining and expanding upon the withdrawn 2018 revisions. On March 12, DEP released the draft EJ Policy for a 60-day public comment period with several public meetings and informational webinars.
Significant revisions and additions to the draft EJ Policy
The draft EJ Policy proposes to make significant changes to the current policy. Below are some of the most significant changes recommended by DEP:
Incorporation of executive order on EJ
The draft EJ Policy cites and incorporates the requirements Governor Tom Wolf ’s Executive Order on Environ mental Justice (Executive Order 2021-07), which was issued in October 2021 and formally established the OEJ. This contextualizes the draft EJ Policy into the broader effort to address environmental justice across the state executive agencies and federal EJ initiatives. The draft EJ Policy has been altered throughout to ensure OEJ will meet the requirements of the order.
OEJ expanded roles and responsibilities
The draft EJ Policy describes the purpose and responsibilities of the OEJ. The draft policy gives DEP new roles and responsibilities and dictates how OEJ will engage with stakeholders and communities going forward. This marks a large expansion of the responsibilities of the OEJ, including coordinating an interagency council on environmental justice for the Commonwealth. By way of example, OEJ will provide training to DEP staff, maintain and reassess every two years the EJ Area Viewer, issue an annual report, develop strategic plans every five years, and help create and implement a Language Access Plan for the department.
DEP maintains broad discretion on opt-in permits
While listed trigger permits automatically trigger the application of the current policy, DEP maintains the adverse cumulative environmental or public health stressors” shall be denied a permit. The New Jersey EJ law does not define “cumulative environmental or public health stressors.”
Without a definition of “cumulative impacts” in the draft EJ Policy, or under Executive Order 2021-07, it is unclear whether DEP will interpret that phrase similar to the New Jersey law. However, the department’s broad discretion under a subjective standard (“warrant special consideration”) and an undefined cumulative impacts standard make the applicability of the opt-in permit process hard to predict.
Updated definitions of “EJ Area” and “Area of Concern”
Under the current EJ Policy, an EJ Area was defined as census tract with 30 percent or greater minority population or 20 percent or greater population below the poverty line. The draft policy defines an EJ Area as “the geographic location where Department’s EJ Policy applies.” Further, it states that the methods for identifying EJ Areas will be specific outside the policy for easier amendment. Because the definition of an EJ Area will live outside the policy, it will be more frequently amended to reflect recent data and definitions used in other agencies and community groups. Thus, the draft EJ Policy’s application and scope are not clearly defined or entirely predictable.
The draft EJ Policy simplifies the current definition of Area of Concern, which now is defined as the area within a half-mile of the proposed permit activity. The draft directs applicants to use the new EJ Area Viewer mapping tool to determine if a project is in an EJ Area and the project’s Area of Concern.
Unconventional oil and gas now included
Oil and gas unconventional well permits (and change in use) are now considered trigger permits and the draft EJ Policy includes new, specific provisions for unconventional oil and gas public engagement. Under the draft policy these permits will automatically trigger the policy requirements. Unconventional well permits are included in the draft EJ Policy’s list of trigger permits, at Appendix A. While permits listed in Appendix A trigger Sections II (“Permit Review Process”) and III (“Community Input”) of the draft EJ Policy, unconventional well permits will only trigger the application of Section IV (“Oil and Gas Public Engagement”). The draft policy’s Section IV proposes unique public participation requirements for unconventional oil and gas operations. The requirements of Section IV will apply retroactively to unconventional well permits already issued by DEP and create continuing obligations such as annual reports on active and anticipated drilling operations—even though such operations are not subject to an actual permit application submitted to the department.
EJ Areas Viewer mapping tool
The draft policy requires the use of the new EJ Areas Viewer, which is available at pa.gov/EJViewer. The EJ Areas Viewer is an interactive mapping tool that contains environmental and demographic indicators, which can be updated and modified by DEP at any time based on new environmental justice related data. Along with other mapping tools, the department should use the EJ Areas Viewer to assist in decisions regarding all aspects of environmental justice, including determining if a potential opt-in permit should fall under the draft EJ Policy. Overall, the use of this and other mapping tools will allow DEP and OEJ to consider much more data—environmental, demographic, health, etc.—than under the existing policy.
Climate initiatives
New requirements will push OEJ and DEP to harmonize the environmental justice initiatives with climate change initiatives. This focus will cut across the department―programs, rulemaking, policies and enforcement. DEP commits in the draft policy to ensure climate-related initiatives will consider and prioritize communities disproportionately impacted by climate change. The department also will ensure the Climate Action Plan addresses environmental justice and the impact of climate change on EJ Areas. Further, DEP will implement strategies for outreach and engagement with environmental justice and climate change vulnerable communities.
Babst Calland will be tracking the draft EJ Policy as the department responds to comments and moves to finalize the policy this year. If you have questions about the environmental justice developments described above, please contact Sean McGovern at 412-394-5439 or smcgovern@babstcalland.com.
On April 6, the U.S. Environmental Protection Agency (EPA) published in the Federal Register a proposed rule that, if finalized, would establish a federal implementation plan (FIP) to address regional ozone transport under the Clean Air Act (CAA). The proposed rule is noteworthy based on the numerous adjustments it makes to existing nitrogen oxides (NOx) emissions budgets for a number of states, including Pennsylvania, as well as marking the first time that the EPA has used the regional ozone transport provision under the CAA to regulate sources other than electricity generating units (EGUs).
Background
Section 109 of the CAA directs the EPA to establish federal National Ambient Air Quality Standards (NAAQS) for certain pollutants deemed appropriate by the EPA. One of these pollutants is ozone, which is formed in part by photochemical reactions involving NOx and volatile organic compounds (VOCs). The most recent NAAQS for ozone was promulgated by the EPA in 2015, which establishes an eight-hour 70 parts per billion ambient standard. Section 110 of the CAA also directs states to submit to the EPA “state implementation plans” (SIPs), to detail how emissions from facilities in each state will attain the NAAQS. SIPs are also required to demonstrate that emissions from facilities in the state will not “contribute significantly” to nonattainment or interfere with continued attainment of the NAAQS by other states (often referred as the CAA’s “Good Neighbor” provision). If a state fails to submit a satisfactory SIP to achieve these requirements, the EPA is required under the CAA to develop and implement a FIP for that state.
The EPA’s approach to implementing the CAA’s Good Neighbor provision began in 2011 with enactment of the Cross-State Air Pollution Rule (CSAPR) (76 Fed. Reg. 48208), designed to address the 1997 ozone NAAQS among other things. Under this rulemaking, the EPA established a NOx emission budget and trading system for EGUs. The emission budgets, developed on a state-by-state basis, were based on a four-step process involving: identification of receptors in downwind states with demonstrated issues achieving the ozone NAAQS; determining those upwind states contributing to downwind nonattainment through ambient air quality modeling; identifying and quantifying the amount of emissions that significantly contribute to downwind nonattainment and the amount of emissions reductions needed to prevent such downwind nonattainment; and development and implementation of an emission budget. Based on each state’s budget, affected EGUs in each state would be allocated one allowance per ton of NOx emissions, which would be debited from their account at the end of each ozone season. Those sources with a shortfall of NOx allowances would need to purchase additional allowances.
CSAPR and its periodic updates—including the “CSAPR II” rulemaking in 2016 (81 Fed. Reg. 74504) which was developed in response to the promulgation of the 2008 ozone NAAQS—have been subject to litigation over the years. In particular, in Wisconsin v. EPA, 938 F.3d 303 (D.C. Cir. 2019), the U.S. Court of Appeals for the D.C. Circuit found that the emission budgets established by the EPA were not sufficient to fully eliminate upwind states’ significant contributions to downwind nonattainment, in violation of the CAA’s Good Neighbor provision. As a result, the EPA promulgated a subsequent revision to CSAPR and CSAPR II in April 2021 (86 Fed. Reg. 23054) to further reduce the emission budgets allocated to each state. The proposed rule implements further reductions to emission budgets, based on implementation of the 2015 ozone NAAQS which is more stringent than the 2008 ozone NAAQS.
Notable Features of the Proposed Rule
In the proposed rule, the EPA would continue to find that interstate transport of NOx emissions from EGUs in several states, including Pennsylvania, significantly contribute to downwind nonattainment of the 2015 ozone NAAQS. However, the proposed rule would expand the number of states subject to this finding and would also find that NOx emissions from certain non-EGU sources also are significant contributors to downwind nonattainment. Finally, the proposed rule would issue a FIP for these states, imposing a revised NOx emissions trading program among these states.
While the proposed FIP would not appreciably change the types of EGUs subject to the existing NOx trading program, it would, among other things, expand the trading program under the current iteration of CSAPR to include EGUs from eight other states. It would also reduce the amount of NOx emissions budgets for states by varying amounts between 2023-2025, and by roughly 25% beginning in 2026, reflecting an emissions level based on installation of post-combustion selective catalytic reduction (SCR) or noncatalytic reduction (SNCR) controls at 30% of coal-fired power plants. The proposed FIP’s NOx emissions trading program would also include a “recalibration” provision, such that a surplus of banked allowances among all sources in a state beyond a 10.5% target bank amount would be subject to downward adjustment.
Moreover, the proposed rule would establish additional emissions limits beyond a strict trading program for certain affected EGUs. Coal-fired EGUs with greater than 100 MW nameplate capacity would be subject to a daily emissions limit of 0.14 lbs NOx/MMBTU. If a facility exceeds this limit, it would be charged allowances at a penalty rate of three times the normal rate (i.e., three allowances surrendered per excess ton NOx emitted). In addition, the proposed rule establishes a 50-ton limit for NOx over the emissions level at 0.1 lbs NOx/MMBTU, for EGUs that are found to be responsible for contributing to a state’s exceedance of its “assurance level,” i.e., 121% of the state’s emissions budget. These limits have potentially significant implications for facilities with a seasonal operating pattern.
Finally, the proposed rule would establish NOx emissions limits for several types of industrial sources other than EGUs (including reciprocating internal combustion engines in pipeline transportation of natural gas, cement kilns, boilers and furnaces in iron and steel mills, glass furnaces, paper mills and other equipment for chemical, petroleum and coal product manufacturing). These limits would be established on a source category basis. However, sources in these categories would not be required to participate in the trading program established for EGUs. If finalized, this would mark the first iteration of CSAPR in which EPA would use the Good Neighbor provision of the CAA to establish emission limits for specific source categories.
Key Takeaways
The proposed rule not only represents increased stringency in the existing NOx emissions trading program among EGUs under the CSAPR, it also reflects a substantial expansion in the scope of industries regulated under the CAA’s Good Neighbor provision. Sources may want to consider whether the proposed rule will establish limitations that are more stringent than those arising under other provisions of the CAA (for example, the “new source performance standards” under Section 111, or “reasonably available control technology” standards developed by states under Section 182). It also remains to be seen whether future iterations of CSAPR rulemaking will further expand the types of sources covered by the rule.
The proposed rule will remain open for public comment under docket number EPA-HQ-OAR-2021-0668 until June 21, (which includes a 15-day extension granted by the EPA). Given the wide array of industries that may be affected by the proposed rule, it is expected that it will elicit a substantial number of comments from industry, nonprofit organizations, and state and local agencies.
Varun Shekhar is a senior associate in Babst, Calland, Clements and Zomnir’s environmental and transportation safety groups. His environmental practice focuses on compliance matters arising under the Clean Air Act and implementing regulations. Contact him at vshekhar@babstcalland.com.
When conducting corporate or real estate transactions, prospective buyers need to be aware of the environmental risks of the proposed acquisition, or they could find themselves on the hook for millions of dollars in remediation and compliance liabilities.
“Buyers need to work closely with an experienced environmental transactional attorney, sometimes in tandem with an environmental consultant, to ensure they are not acquiring environmental liabilities they didn’t intend to acquire,” says Ben Clapp, shareholder in the Environmental, Corporate and Commercial, and Energy and Natural Resources groups at Babst Calland. “Sellers also need to ensure they do not remain saddled with liabilities they didn’t intend to retain after a sale.”
Smart Business spoke with Clapp about the environmental diligence process in a sale and how to address environmental risks in contractual provisions.
What should potential buyers be aware of regarding environmental risk?
Purchasing a property without proper safeguards could put a buyer at risk of substantial liability should environmental contamination or compliance issues be discovered after purchase. Property owners are generally responsible for contamination, regardless of whether they caused it, including contamination that existed prior to taking ownership. Acquiring a business with undiscovered compliance issues can result in significant capital outlays for corrective actions and raises the possibility of becoming subject to enforcement actions and fines.
Environmental diligence is key to assessing the scope of environmental risk associated with a given transaction. However, the extent of diligence a buyer is permitted to perform can differ based on transaction structure and relative leverage of the parties.
How can buyers identify potential environmental issues?
A Phase I Environmental Site Assessment, performed by an environmental consultant, is often a good place to start. A Phase I combines a noninvasive investigation with a review of publicly available records and interviews of key personnel to determine whether contamination is likely to exist.
If a Phase I identifies the presence or likely presence of hazardous substances, a Phase II investigation may be performed, which involves environmental sampling. Phase IIs can also provide some insight into the extent of contamination, whether it is migrating from the property, and the cost and timing of remediation that may be required. If a Phase II is recommended, the seller and their counsel must consider whether it is in its best interest to allow one.
When assessing environmental compliance, attorneys generally evaluate materials provided by the seller in response to a diligence request, review public records and conduct interviews of EHS personnel and management. This can be supplemented by a formal compliance review, usually performed by an environmental consultant.
How can contractual provisions help address risks?
It is critical that the purchase agreement allocates the responsibility for environmental risks clearly and with specificity so there is no confusion or ambiguity that could lead to litigation. Environmental representations and warranties can play an important role, as they require the seller to disclose known environmental issues. The scope of these provisions is often a key negotiation point. Depending on the transaction structure, other considerations include determining whether the seller will retain responsibility for pre-closing environmental issues, and whether, and to what extent, the seller will indemnify the buyer for environmental liabilities for events that occurred before closing. Because environmental laws establishing cleanup liability generally have no statute of limitations, sellers often want a sunset provision for the indemnity so they don’t remain on the hook in perpetuity for liabilities. Buyers, however, may seek an indemnity that survives as long as possible.
All it takes is one undiscovered environmental issue to significantly impact the economics of a transaction. Thorough diligence and thoughtful drafting and negotiation of contractual provisions can go a long way toward mitigating the risk of a party incurring unintended environmental liabilities.
Regardless of the outcome of the Dobbs case, key employment discrimination standards on the topics of pregnancy and abortion will remain unchanged absent significant legislative amendment to Title VII.
By now, most of us have heard of the infamous U.S. Supreme Court draft opinion leak in the case of Dobbs v. Jackson Women’s Health Organization. The Supreme Court is expected to officially issue its opinion in early July, and if the leaked opinion is an accurate foreshadowing, the court will overturn Roe v. Wade and Planned Parenthood v. Casey to abolish the previously held constitutional right to pre-viability abortions. The leaked opinion, and the larger topic of abortion generally, are often considered third-rail topics in many workplaces, given the strongly held opinions on both sides of the issue. For the same reasons, current U.S. Court of Appeals for the Third Circuit law concerning pregnancy- and abortion-related discrimination, also tends to be an avoided topic. However, attorneys are likely to see a marked uptick in questions from employer-clients concerning their current legal obligations toward pregnant employees or employees who have sought or obtained an abortion. Regardless of the outcome of the Dobbs case, key employment discrimination standards on the topics of pregnancy and abortion will remain unchanged absent significant legislative amendment to Title VII.
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of sex. The Pregnancy Discrimination Act of 1978 (PDA) amended Title VII to prohibit sex discrimination on the basis of pregnancy. Specifically, the PDA extended the definition of “on the basis of sex” to include—but is not limited to—pregnancy, childbirth or related medical conditions. See 42 U.S.C. Section 2000e(k). Courts have interpreted “related medical conditions” to include postpartum medical complications as well. Courts are currently split as to whether breastfeeding or its complications are protected under the PDA, but the current trend tends to hold that they are PDA-covered conditions. The Third Circuit has not yet ruled on the issue.
It is less widely known, however, that the PDA also prohibits discrimination against an employee because she has elected to have an abortion. The Equal Employment Opportunity Commission (EEOC) guidelines interpreting the PDA state that the statute protects against adverse employment action “merely because [an employee] is pregnant or has had an abortion.” EEOC guidelines are not binding authority, but the Third Circuit has adopted this interpretation of the PDA.
In 2008, the Third Circuit decided in Doe v. C.A.R.S. Protection Plus, 527 F.3d 358 (3d Cir. 2008) that the protections of the PDA extend to women who have elected to terminate their pregnancies. In C.A.R.S., a female employee’s doctor recommended that she terminate her pregnancy due to severe health issues of the fetus. Immediately after Doe’s pregnancy was terminated, she requested a one-week leave period from employment to hold a funeral. Doe was terminated while on leave, and after her supervisor made a remark in which he indicated that Doe “did not want to take responsibility.” This statement’s exact meaning was unclear, but the court determined that the remark may raise a reasonable inference that the abortion was a factor in terminating Doe’s employment. After reviewing the PDA, its legislative history and EEOC interpretive guidance, the Third Circuit construed the phrase “related medical conditions” to mean that discrimination against a woman who opts to undergo an abortion constitutes sex discrimination under Title VII. The Sixth Circuit has held similarly. See Turic v. Holland Hospital, 85 F.3d 1211 (6th Cir. 1996).
Because the pending Supreme Court decision will likely only affect the constitutional right to pre-viability abortion, it will not likely affect the statutory language of the PDA or its interpretation. In order for current Third Circuit precedent on the matter to change, Congress would likely have to further amend Title VII to explicitly state that abortion is excluded from the definition of a pregnancy- or childbirth-“related medical condition.”
Most often, the PDA is implicated when a pregnant employee is treated differently than a nonpregnant employee due to the pregnancy itself. For example, pregnant employees may not be singled out to require medical clearances to perform their job duties if such clearances are not required of employees who are not pregnant and have similar work abilities. Similarly, if an employee is absent for pregnancy-related reasons, the employer must hold her job open for the same length of time that jobs are held open for employees on sick or temporary disability leave.
If an employer allows temporarily disabled employees to take disability leave or unpaid leave, the employer must allow an employee who is temporarily disabled due to pregnancy to do the same. Impairments resulting from pregnancy, such as gestational diabetes or pregnancy-related sciatica, may be disabilities under the Americans with Disabilities Act depending on the particular circumstances. Therefore, employers may have to provide a reasonable accommodation for pregnancy-related disability absent an undue hardship. Often, such accommodations are in the form of modified duties such as weight-related lifting restrictions or alternative work assignments.
Notably, the PDA requires that employer-provided health insurance cover expenses for pregnancy-related conditions on the same basis as expenses for other medical conditions, but the PDA specifies that insurance coverage for expenses arising from abortion is not required unless the life of the mother is endangered, or medical complications arise from the abortion.
Employers should review their policies to ensure they contain adequate protections against discrimination. Specifically, employers should consider all practices that may implicate PDA-covered employees to ensure that no disparate impact will result. Such policies most often include sick leave policies, doctor’s note requirements, remote work policies, short-term disability leave and light duty availability. If the leaked Dobbs opinion becomes the official decision of the Supreme Court, eliminating the constitutional right to pre-viability abortions, some state legislatures and governors are likely to follow suit by passing legislation expanding abortion prohibition in their states. If this occurs, employers with multi-state operations should monitor their policies to ensure that pregnant employees traveling to another state to obtain an abortion are treated no differently than employees traveling out-of-state for any nonpregnancy-related reason.
Alexandra Faroneis an associate in the litigation and employment and labor groups of Babst, Calland, Clements and Zomnir. 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. Contact her at at 412-394-6521 or afarone@babstcalland.com.
Jessica Altobelliis an associate in the firm’s litigation and employment and labor groups. Altobelli has a broad range of litigation experience in several practice areas including employment, general liability, transportation, and school district defense. Contact her at 412- 394-6557 or jaltobelli@babstcalland.com.
Under Pennsylvania law, the question of where certain uses are permitted to occur is fundamentally a local issue. By delegation of the police power through the Municipalities Planning Code, 53 P.S. §§10101 et seq., local governments are vested with the power to adopt zoning ordinances and zoning maps outlining what uses are allowed in what areas within their boundaries. Zoning ordinances are presumed to be valid, and the decision as to where specific uses are permitted is largely within the discretion of the local governing body.
A party challenging the substance of a zoning ordinance bears a heavy burden of proving the provisions are “arbitrary, and unreasonable, and have no substantial relationship to promoting its public health, safety, and welfare.” When reviewing these types of challenges, courts are required to balance the public interest to be served with the confiscatory or exclusionary impact of the ordinance on individual property rights. Although property owners frequently challenge the substantive validity of ordinances they feel are too confiscatory, objectors have also challenged ordinances for being too permissive of a certain use―alleging that they fail to have the required connection to public health, safety or welfare.
Act 13, Robinson II and challenges under the ERA
In 2012, the Pennsylvania General Assembly enacted Act 13, a comprehensive update to the former Oil and Gas Act. Shortly thereafter, the Pennsylvania Supreme Court was tasked with considering the impact of the Article I, Section 27 of the Pennsylvania Constitution, known as the Environmental Rights Amendment (ERA) on Act 13, in which a plurality of the court ultimately invalidated certain provisions of Act 13 limiting the authority of local governments to regulate oil and gas development.[1] This decision triggered a wave of challenges from objectors arguing local ordinances are substantively invalid because they fail to place sufficient restrictions on oil and gas uses or allow them in allegedly incompatible zoning districts. To date, these types of claims have been consistently rejected by local zoning hearing boards, Common Pleas Courts and the Pennsylvania Commonwealth Court. The body of case law following Robinson II makes it clear that―as is the case with any type of use regulated by local zoning―where oil and gas development occurs is squarely within the purview of the municipality, while how it occurs is a state regulatory matter.
Recently, the Commonwealth Court reiterated these principles in Murrysville Watch Committee v. Municipality of Murrysville Zoning Hearing Board.[2] On January 24, the court affirmed the decisions of the Westmoreland County Court of Common Pleas and the Murrysville Zoning Hearing Board, denying a challenge to the oil and gas regulations in the municipality’s zoning ordinance. On February 23, the objectors filed a petition for allowance of appeal with the Pennsylvania Supreme Court. As we await a decision from the court on whether it will hear the appeal, Murrysville Watch offers an opportunity to revisit the courts’ treatment of substantive validity challenges to oil and gas zoning ordinances, an issue which they have addressed with remarkable consistency.
Where to permit oil and gas development remains a local issue
As noted above, Robinson II opened the door to ERA-type substantive validity challenges, resulting in the Supreme Court’s decisions in Gorsline v. Fairfield Township [3] and Robinson IV [4] and several Commonwealth Court decisions including Frederick v. Allegheny Township Zoning Hearing Board,[5]Delaware Riverkeeper Network v. Middlesex Township Zoning Hearing Board [6] and Protect PT v. Penn Township. [7] A brief overview of the decisions in these cases is helpful in analyzing how courts can be expected to treat these types of challenges moving forward.
A. Frederick v. Allegheny Township Zoning Hearing Board:
The ordinance: The zoning ordinance in Allegheny Township, Westmoreland County allowed oil and gas wells as a use by-right in all zoning districts, with some additional requirements. While it did not expressly require any setbacks for oil and gas development, application of the state-mandated 500-foot setback between a well-head and an existing building left less than 50 percent of the township available for development. Objectors brought a validity challenge, arguing the ordinance violated substantive due process and the ERA.
The analysis: The challenge was denied by both the local zoning hearing board and Westmoreland County Common Pleas Court. The en banc Commonwealth Court affirmed on appeal. In analyzing the ERA claim, the Commonwealth Court addressed the Supreme Court’s 2017 ruling in Pennsylvania Environmental Defense Foundation v. Commonwealth, [8] in which the Supreme Court held challenges raised under the ERA should be decided in accordance with its text. Noting the precise duties imposed upon local governments by the ERA are unclear, the Commonwealth Court decided the relevant standard to be whether the governmental action “unreasonably impairs” the environmental values implicated. However, it also found the Supreme Court’s holding in Robinson II did not authorize municipalities to act beyond the scope of their enabling legislation and that they were not authorized to replicate the environmental oversight the General Assembly conferred upon the Department of Environmental Protection or other state agencies.
B. Delaware Riverkeeper Network v. Middlesex Township Zoning Hearing Board:
The ordinance: The Middlesex Township, Butler County zoning ordinance allowed oil and gas well site development as a use by-right in some zoning districts and as a conditional use in other zoning districts. However, when other ordinance limitations were applied, less than 30 percent of the township was available for drilling.
The analysis: After a complicated procedural history, the Commonwealth Court, in an unpublished opinion, affirmed the decisions of the zoning hearing board and Common Pleas Court. The Commonwealth Court quoted liberally from its earlier decision in Frederick, and similarly concluded that the ordinance violated neither substantive due process nor the ERA.
C. Protect PT v. Penn Township:
The ordinance: The Penn Township, Westmoreland County zoning ordinance established an overlay district in which natural gas operations were authorized by special exception. The overlay district covered 55 percent of the township’s land mass and, after the application of setbacks, left 9.64 percent of the township available for development. The challengers argued that unconventional natural gas drilling was a heavy industrial use incompatible with the underlying agricultural and residential zoned areas, rendering the zoning ordinance invalid.
The analysis: On appeal, the Commonwealth Court held the objectors failed to establish that unconventional natural gas development posed any substantial actual risk to the environment or health of township residents. The court found the trial court properly determined that the ordinance, which permitted oil and gas development in specific and targeted areas of the township that are rural and not densely populated, did not violate the ERA or due process.
D. Murrysville Watch Committee v. Municipality of Murrysville Zoning Hearing Board
The ordinance: The Municipality of Murrysville, Westmoreland County zoning ordinance authorized oil and gas wells as a conditional use in an overlay district, which encompassed portions, but not all, of the rural residential zoning district. The ordinance also imposed a setback of 750 feet from the edge of a well pad to “protected structures.” Application of these geographic limitations, along with the ordinance’s steep slope restrictions, left only five percent of Murrysville’s land mass available for unconventional oil and gas development. Objectors argued the ordinance violated substantive due process because unconventional oil and gas drilling allegedly is an industrial land use incompatible with the stated purpose of the underlying residential zoning district. In a related argument, objectors contended that the overlay constituted an unconstitutional spot zone because certain portions of the rural residential zone were included in the overlay, while other portions were not.
The analysis: Relying heavily on both Frederick and Protect PT, the Commonwealth Court concluded the objectors failed to introduce any evidence of incompatibility and instead observed the municipality, through the multi-year efforts of a task force, had balanced its goal of economic development with its obligation to protect the health, safety and welfare of property owners within the overlay district. The court also noted the ordinance contained extensive additional substantive regulations and review processes applicable to oil and gas development. The court denied the objectors’ ERA claim, looking again to Frederick and Protect PT, concluding that the objectors did not prove that the challenged ordinance “unreasonably impairs” citizens’ rights under the ERA. Finally, the objectors asserted that the overlay violated the equal protection rights embodied in Article III, Section 32 of the Pennsylvania Constitution, on the basis that only the oil and gas industry was granted an overlay in residentially zoned areas and that residents of the rural residential district are not treated equally. The court rejected this claim, finding that the municipality had a rational basis for creation of the overlay district, based on available acreage and population density. [9]
Via Frederick, Delaware Riverkeeper, Protect PT and Murrysville Watch, the Pennsylvania Commonwealth Court has developed a cohesive body of case law affirming the authority of Pennsylvania municipalities to authorize oil and gas development within their boundaries. To date, the Pennsylvania Supreme Court has declined to hear appeals in Frederick, Delaware Riverkeeper and Protect PT. The industry would hope to see a similar result from the Supreme Court in Murrysville Watch.
Blaine A. Lucas is a Shareholder in the Public Sector and Energy and Natural Resources groups of Pittsburgh Law Firm Babst Calland. Anna S. Jewart is an associate in Babst Calland’s Public Sector group and focuses her practice on zoning, subdivision, land development and general municipal matters.
[1]Robinson Twp. Washington County v. Com., 83 A.3d 901 (Pa. 2013) [2] No. 579 C.D. 2020 (Jan. 24, 2022) [3] 186 A.3d 375 (Pa. 2018) [4] 147 A. 3d536 (Pa. 2016) [5] 196 A. 3d 677 (Pa. Cmwlth. 2018) [6] No 2609 C.D. 2015, 2019 WL 2605850 (Pa. Cmwlth. Nov. 14, 2019) [7] Protect PT v. Penn Twp. Zoning Hearing Bd, No. 1632 C.D. 2018, 2019 WL 5991755 (Pa. Cmwlth. Nov. 14, 2019) [8] 161 A.3d 911 (Pa. 2017). [9] The Commonwealth Court also found that the objectors failed to demonstrate the challenged ordinance violated the Pennsylvania Municipalities Planning Code. 53 P.S. §§10101 et seq., or that it was inconsistent with the municipality’s comprehensive plan.
Reprinted with permission from the May 2022 issue of The PIOGA Press. All rights reserved.
Around 2019, Edward Saxon, CEO of Conco Systems, and his four siblings were running the business as equal partners when they recognized it was nearing time for a change.
“All of a sudden we woke up one day and realized we are all in our 60s and the runway was getting short,” Saxon says. “And first I said, ‘I’ll be happy to go. I’ve been running it. You guys can have a shot.’ They got together and said, ‘We don’t want the shot.’ Two of them wanted to go and do their own thing.'”
Having heard stories of deals run without professional help that fell apart, Saxon decided to enlist the help of an investment banker. That was a big help, he says, because not only do they bring buyers to the table but they do a lot of work getting the business prepared, putting a CIM (confidential information memorandum) together, helping owners understand where the real value is in their business and adding value beyond what the owners recognize.
Kevin Wills, an attorney with Babst, Calland, Clements and Zomnir, says when someone is looking to sell a business, one of the first things they should do is look into the potential impediments to doing a deal. That could include a shaky organizational structure, a complicated cap table, issues with unanimous consent, any convertible notes that need to be dealt with, or any rights of refusal.
“A fundamental transaction, like the sale of the business, usually triggers rights in people that aren’t operating day-to-day, and you don’t always think of those people,” Wills says. “So, if you got a family-run business with three family members mainly running it but the next generation of grandkids have trusts that are already in there and they have to consent to everything, you want to make sure you don’t have rogue holdouts that could hijack your deal or leverage better terms for themselves. You want to make sure that you’re in a position to sell, from a structural standpoint.”
Wills says customer contracts should be in place, even when business has been continuing without one in place, and that consent for any IP or software that’s licensed is obtained so that it can travel with the deal.
“You want to make sure that before you start going to people and saying, ‘Hey, we’re ready to talk about business,’ that you understand what could prevent you from being able to do your transaction,” he says.
Conco Systems did its roadshow, bringing potential buyers to Pittsburgh. The company received 15 good offers. Saxon says they interviewed nine that met or exceeded the minimum, and chose a group that wasn’t the highest but had made a solid offer. That began the next stage of the process.
“We started repeating everything we did with the broker,” Saxon says. “The data room stuff just makes you crazy because you got it from stuff we had originally put together, then you got the attorneys for the buyer and then you’ve got the quality of earning guys from the buyer and none of them like to look to the room to see what’s there, so you’re getting four and five requests for the same pieces of data. And every time you’re sending it you’re thinking, ‘I’m just giving them another reason to cut the price.'”
The deal was getting close to close and then Saxon says things unexpectedly started to turn south.
“It wasn’t that they were ghosting us or anything, but it was constant nitpicking — ‘What are you going to do here,’ and, ‘This value isn’t what we thought this was at,'” he says.
Saxon set up a meeting with the potential buyers in Atlanta and unexpectedly met someone new. Through the negotiations, he was told he had been talking with the decision-makers, but it was clear that the person he just met was “the man behind the curtain.” That meant being re-asked many of the questions he had answered before but without a firm commitment, so he decided to walk away from the potential deal and regroup.
He connected a second group of potential buyers with much better chemistry, which led to a deal that closed. Now the company is growing, having recently made an investment in a small testing company, is adding more people and expanding.
Mike Livanos, managing director at Stellex Capital, says a well-prepared seller makes for a much smoother process with fewer surprises along the way. That happens in part by preparing for as many potential questions as possible that could come from a buyer.
“Put yourself in the perspective of the person across the table and anticipate,” Livanos says.
Additionally, while many buyers will want to know what has happened over the business’s recent past, as well as the story that goes with the numbers, they also want to know what’s expected to happen next.
“We’re looking for the next five to 10 years,” he says. “In my ownership period, usually five to seven years. And then for the next person that I’ll sell it to, I’ve got to sell them the next story. So, I’m looking 10 to 15 years out. A family business is usually prepared for what they know, but they’re not yet prepared for what comes next. It’s the best family sellers that prepare for that.”
Every business, no matter how big or small, faces the risk of a cyberattack.
“If you are on the internet or have networked assets — and almost every business does — you are at risk,” says Justine Kasznica, a shareholder in Babst Calland’s Emerging Technologies, Corporate and Commercial, Mobility, Transport and Safety, and Energy and Natural Resources groups. “The current geo-political climate and the Russia-Ukraine war underscore the paramount importance of cybersecurity to our national security, as Russia has threatened to counter any action the U.S. may make in support of Ukraine with cyberattacks.”
Adds Ember Holmes, an associate in the Corporate and Commercial and Emerging Technologies groups of Babst Calland, “It is prudent that all business owners assess their current situation regarding cybersecurity threats, address areas that are lacking and shore up policies.”
Smart Business spoke with Kasznica and Holmes about the Biden administration’s response to the threat, and how business owners can minimize risk and stay compliant with regulatory requirements.
Who should be concerned about cyber threats?
Threats to cybersecurity impact every business, and ignoring these is irresponsible and dangerous. Small business owners may not think they are at risk, but they are often perceived as not having the resources larger businesses have, making them targets of malevolent attacks. This is especially true for businesses storing or processing personal or sensitive information.
There are also regulatory issues. Small businesses may be prevented from working in certain industries or with certain customers if their systems don’t meet compliance requirements.
How can a business reduce the risk of cyberattacks?
Start with a privacy security assessment. Experts ask standard questions and walk through the company’s structure and systems to get a baseline assessment of the business’s cybersecurity health and its awareness of regulatory requirements. They can then work within the company’s budget to propose a streamlined path to compliance and shore up practices that are proactive.
Younger companies need a strategic pathway to become compliant with regulations and best practices and create cybersecurity policies and develop disaster recovery and business continuity plans.
For larger companies, issues often stem from a broad base of operational functions that don’t work in concert. Focus on creating consistent, cohesive practices and policies across the organization. It is vital that those dealing with critical infrastructure services adopt a proactive security culture, and evaluate and address their vulnerabilities.
There’s not a one-size-fits-all approach because there aren’t overarching regulations, only industry-specific advisories and guidance, making it difficult to know how to best tackle cybersecurity. Technology is changing rapidly, and owners who think they are not at risk and fail to take steps to protect themselves are leaving their businesses wide open to a potential attack.
How is the federal government responding to threats to American cybersecurity?
On March 21, 2022, President Biden released a statement advising that the Administration has received intelligence suggesting that Russia is planning to engage in malicious cyberattacks in retaliation for sanctions imposed in response to its invasion of Ukraine. It alerted business owners, especially those in the critical infrastructure realm, of the potential attacks and make them aware of Shields Up, a campaign to help prepare for, respond to and report cybersecurity incidents. All organizations must be prepared to defend against cyberattacks and to immediately respond if one should occur. The statement outlined steps the Administration has taken to strengthen defenses and strongly urged private business owners in the infrastructure sector to improve their efforts to prevent, detect and respond to cyberattacks by taking advantage of public-private partnerships.
It is critical that all business owners act before an incident occurs, when they are best positioned to secure their systems. Deal with it now — spend the resources, gain cybersecurity literacy in your operations and be ready, because it’s not if, but when an attack will occur.
Babst Calland Attorney Christina Manfredi McKinley, selected to Super Lawyers, part of Thomson Reuters, 2022 Rising Stars for Business Litigation. Only a few attorneys from each state are selected to Super Lawyers designation for any given year. The multi-factor selection process includes independent research, peer nominations and evaluations, as well as professional achievement in legal practice.
Babst Calland Attorney Gina Falaschi, selected to Super Lawyers, part of Thomson Reuters, Rising Stars for 2022. Based in the Firm’s Washington, DC office, she provides legal services for issues involving Environmental law. Only a few attorneys from each state are selected to Super Lawyers designation for any given year. The multi-factor selection process includes independent research, peer nominations and evaluations, as well as professional achievement in legal practice.
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The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
