Smart Business
(by Sue Ostrowski featuring Donald Bluedorn)
A business continuity plan helps protect your business both today and into the future in a way consistent with your goals and culture. But it’s not just about planning for contingencies this time. The pandemic has changed the way businesses need to approach their plans, says Attorney Donald C. Bluedorn II, managing shareholder at Babst Calland.
“Things are much different than a year ago, and along with business and operational contingencies, companies should review their legal and regulatory risks and opportunities as well,” he says.
Smart Business spoke with Bluedorn about how to ensure your business continuity plan moves your business seamlessly forward.
What changes during the pandemic are now either beneficial or detrimental to Business operations?
Businesses need to reimagine how they operate and create a proactive mindset around challenges the business or industry is facing. Are there any advantages or savings in how you operated last year that are sustainable or should be adopted?
Concerns with significant legal and contractual commitments are likely to emerge. And as people re-enter the physical workplace, or not, there may be employment issues. In addition, new leadership at the federal level could pose legal challenges and create evolving tax issues. In the Western Pennsylvania region, this could result in changes to energy regulations, a risk for some but an opportunity for others. Environmental compliance and regulatory obligations are also likely changing, and trusted advisers can help you navigate these challenges and incorporate them in your plan.
It’s an opportune time to review your plan from a business risk or legal and regulatory perspective. Are vendors fulfilling their commitments and are you fulfilling your own contractual obligations? Look at your real estate needs going forward. Will you need as much space? Will it be configured the same way? If you need to change your footprint, begin reviewing your leases now.
Audit your environmental and regulatory obligations to see if you can reduce spending while maintaining the same level of compliance. It goes without saying that your inside or outside legal counsel is integral to this entire process. In addition, litigation has changed dramatically. With court closures, re-evaluate litigation to determine whether there is an opportunity to change your strategy with a more cost-effective, faster way to achieve your goals.
What should you be thinking about with your business continuity plan?
Think about the impacts on the business, as well as your employees, that were prompted by the challenges of the pandemic. Revisit and reanalyze your plans in light of the pandemic and its impact on achieving your business goals. Consider your challenges and opportunities, keeping one eye on protecting people and the other on positioning and maintaining and growing the business.
How should a business continuity plan address technology issues?
It should address whether you have enough licenses and sufficient infrastructure to have everyone work at the same time and whether you have protocols to address issues, making sure you have the capability to seamlessly transfer work and recover data.
The second concern is data and cybersecurity. The pandemic has created new risks for companies — and new opportunities for cyberhackers. Rethink and aggressively address security. Keep an eye on potential risks and continue assessing the need to make changes relevant to legal, regulatory and insurance matters that may have greater costs and risk to the business if they aren’t promptly addressed.
How should a plan incorporate the importance of people?
Be aware of your employees’ concerns and be sensitive to ways to protect them. Then think creatively about how to safely re-enter the workplace while achieving your business goals, incorporate what you will do if people get sick and be flexible on schedules.
Remember that, as uncertain, fearful and anxious as you may be about the future of your business, your people are just as fearful. If you can help them through it, you will emerge with a much better culture.
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RMMLF Water Law Newsletter
(By Lisa M. Bruderly)
On September 15, 2020, the U.S. Army Corps of Engineers (Corps) published proposed revisions to certain nationwide permits (NWPs) under section 404 of the Clean Water Act (CWA), 33 U.S.C. § 1344, for discharges of dredged and fill material into waters of the United States. See Proposal to Reissue and Modify NWPs, 85 Fed. Reg. 57,298 (proposed Sept. 15, 2020). At that time, the Corps proposed to reissue all NWPs, rather than only reissuing those with proposed changes. However, on January 13, 2021, the Corps published the final NWP rule, reissuing only 12 existing NWPs, issuing four new NWPs, and reissuing the NWP general conditions and definitions with limited modifications. See Reissuance and Modification of NWPs, 86 Fed. Reg. 2744 (Jan. 13, 2021). The 16 reissued/issued NWPs are effective on March 15, 2021, and will expire on March 14, 2026.
Of particular interest to the oil and natural gas industry is the Corps’ decision to divide the existing NWP 12 (utility line activities) into three NWPs, depending on the type of utility line: oil and natural gas pipeline activities (NWP 12), electric utilities and telecommunications (NWP 57), and utility lines for water and other substances (NWP 58).
State/Regional NWP Conditions
On September 30, 2020, the Corps’ Baltimore, Philadelphia, and Pittsburgh Districts proposed, in SPN-20-62, draft state/regional conditions for the proposed NWPs, as well as a list of “Final 2020 Nationwide Permit Suspensions” for Pennsylvania, among other states/geographic locations. The proposed regional conditions for Pennsylvania pertained to 22 NWPs and six general conditions, including the requirements for completing a pre-construction notification (PCN). The Corps’ Districts asked for comments on the proposed regional conditions and on the need for additional regional conditions to help ensure that the adverse environmental effects of authorized activities would be no more than minimal. The public comment period closed on November 16, 2020. When finalized, the final regional conditions will likely not include the proposed regional conditions pertaining to NWPs that were not reissued in January 2021.
Changes to Regional Conditions for NWP 12. The proposed regional conditions for the reissued NWP 12 differ in notable ways from the regional conditions for the 2017 NWP 12. Many of the 2017 regional conditions have been removed. For example, the proposed regional conditions would eliminate the prohibition from using NWP 12 in Pennsylvania for projects involving the permanent loss of more than 300 linear feet of stream bed for a single and complete project. Among other changes, the proposed regional conditions would also introduce the requirement for pipeline projects completed by horizontal directional drilling or other boring methods to include in their PCN a plan to address the prevention, containment, and cleanup of sediment or other materials caused by inadvertent returns of drilling fluids to waters of the United States.
Change in Scope of NWP Suspensions. Typically, the Pennsylvania State Programmatic General Permit (currently, PASPGP-5) is the mechanism that the Pennsylvania Department of Environmental Protection (PADEP) and the Corps rely upon to permit projects in Pennsylvania with impacts to regulated waters, which do not trigger the need for individual section 404 permitting. With the availability of the state programmatic permit, 34 NWPs (including NWP 12) have typically been suspended in Pennsylvania, except in certain section 10 waters and, for certain NWPs, when the regulated activity or indirect impacts extend across state boundaries. (“Section 10 waters” are waters that are considered as navigable under section 10 of the River and Harbor Act of 1899, 33 U.S.C. § 403.)
The “Final 2020 Nationwide Permit Suspensions” for Pennsylvania, issued with SPN-20-62, however, could significantly expand the use of these 34 NWPs by adding a provision that the suspensions do not apply for “Areas within Pittsburgh District’s area of responsibility in the Commonwealth of Pennsylvania.” This exception to the NWP suspensions could significantly increase the use of NWPs in the western part of Pennsylvania. However, reliance on the NWPs is not certain because the Pittsburgh District will still have discretion to utilize the most efficient and effective permitting tool in its evaluation of a specific action.
Conditional State Water Quality Certification for NWPs
On October 15, 2020, the Corps’ Baltimore District, on behalf of the Corps’ Baltimore, Philadelphia, and Pittsburgh Districts, requested that PADEP provide State Water Quality Certification (SWQC) under section 401 of the CWA, 33 U.S.C. § 1341, for discharges of dredged and fill material into waters of the commonwealth that are authorized by the proposed NWPs. PADEP published its proposed conditional SWQC on October 31, 2020. See 50 Pa. Bull. 6062 (Oct. 31, 2020). The public comment period for the proposed SWQC closed on November 30, 2020. One comment letter was received.
Pennsylvania’s conditional SWQC became effective on December 15, 2020. See 51 Pa. Bull. 238 (Jan. 9, 2021). The three conditions of the SWQC are summarized below:
- All necessary environmental permits or approvals must be obtained and all necessary environmental assessments must be submitted to PADEP before beginning any activity authorized by the Corps under a NWP.
- Fill material may not contain any waste as defined in the Solid Waste Management Act, 35 Pa. Stat. §§ 6018.101–.1003.
- Applicants and projects eligible for these NWPs must obtain all necessary state permits and/or approvals to ensure that the project meets the state’s applicable water quality standards, including any project-specific SWQC.
PADEP’s SWQC is conditional because it is based on the Corps’ September 15, 2020, proposed NWPs. PADEP has reserved the right to amend or withdraw this conditional SWQC if the language set forth in the final NWPs, Pennsylvania suspensions, or regional conditions published by the Corps “differs so substantially from the language in the proposed NWPs, Pennsylvania suspensions or regional conditions that the conditions contained herein can no longer insure compliance with Pennsylvania’s State Water Quality Standards Program.” 51 Pa. Bull. at 239. PADEP has not indicated whether it will revise the conditional SWQC based on the changes in the scope of the final NWPs.
Proposed Rulemaking—Revisions to Dam Safety and Water Management Regulations
On December 5, 2020, the Pennsylvania Department of Environmental Protection’s (PADEP) proposed amendments to 25 Pa. Code ch. 105 were published in the Pennsylvania Bulletin. See 50 Pa. Bull. 6863 (Dec. 5, 2021). Among other purposes, chapter 105 regulates obstructions and encroachments along or within waters of the commonwealth, similar to the U.S. Army Corps of Engineers’ section 404 permitting program under the Clean Water Act. The public comment period for the proposed rulemaking closed on February 3, 2021. The amendments will become effective upon final publication in the Pennsylvania Bulletin.
In addition to adding and/or amending at least 20 definitions, the proposed rulemaking would make several other changes to chapter 105. Among other revisions, the proposed rulemaking would (1) clarify existing waivers and add permit waivers for certain low impact structures and activities; (2) add antidegradation and cumulative impacts subsections to the applicant information requirements; (3) amend the environmental assessment provisions to add application information requirements specific to environmentally beneficial projects; (4) update provisions relating to compensatory mitigation obligations for proposed aquatic resource impacts that cannot be avoided, including the addition of siting criteria for mitigation projects, compensation factors, and monitoring and performance standards; (5) add new structures and activities that may be exempt from submerged lands licensing charges; and (6) provide further specificity regarding application requirements, such as the cumulative impact analysis, a water dependency demonstration, a stormwater management demonstration, alternatives analysis, antidegradation analysis, impacts analysis, and mitigation plan for projects seeking to discharge dredged or fill material into aquatic resources.
More detailed analysis of the proposed changes was reported in Vol. LIII, No. 2 (2020) of this Newsletter.
Copyright © 2021, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Legal Intelligencer
(by Krista-Ann Staley and Anna Jewart)
This year marks the 20th anniversary of the Religious Land Use and Institutionalized persons Act of 2000 (RLUIPA), 42 U.S.C. Sections 2000cc et seq, a federal statute that protects the rights of individuals and institutions to use land for religious purposes, in addition to protecting the rights of persons confined to institutions to exercise their faiths. Coincidentally, the anniversary comes at a time when the COVID-19 pandemic and related restrictions have severely limited our ability to gather safely, causing many churches, synagogues, temples, mosques and other places of worship to close or limit attendance. This context provides a unique opportunity to review two decades of RLUIPA’s application.
One key component of RLUIPA is the protection of the ability to gather and congregate without government intrusion. While earlier legislation, such as the Church Arson Prevention Act, 18 U.S.C.A. Section 247, protected places of worship against arson, vandalism, or other violent interference, RLUIPA protects the ability to establish or build those places of worship. To do so, it specifically addresses local land use regulations, including the application of zoning regulations and permitting practices.
Congress enacted RLUIPA in the late 1990s, following nine hearings over three years. Those hearings examined religious discrimination in land use decisions. They revealed what Congress described as “massive evidence” of widespread discrimination by state and local officials in cases involving individuals and institutions seeking to use land for religious purposes. This discrimination most often impacted minority faiths and newer, smaller or unfamiliar denominations, and could be coupled with racial and ethnic discrimination. RLUIPA, drafted with bipartisan support, unanimously passed both houses of Congress and was signed into law by President Bill Clinton in 2000. The Civil Rights Division of the Department of Justice, tasked with enforcing RLUIPA, reports the statute has had a “dramatic impact on protecting individuals and institutions seeking to exercise their religions through construction, expansion, and use of property” since its enactment. See “Twentieth Anniversary of the Religious Land Use and Institutionalized Persons Act” (Sept. 22, 2020).
In general, RLUIPA provides that a land use regulation cannot substantially burden religious exercise, unless the government can show the regulation furthers a compelling government interest and is the least restrictive means of furthering that interest, 42 U.S.C.A. Section 2000cc(a). Subsection (b) then provides for four specific protections as follows:
No government shall impose or implement a land use regulation in a manner that treats a religious assembly or institution on less than equal terms with a nonreligious assembly or institution.
No government shall impose or implement a land use regulation that discriminates against an assembly or institution on the basis of religion or religious denomination
No government shall impose or implement a land use regulation that:
- Totally excludes religious assemblies from a jurisdiction; or
- Unreasonably limits religious assemblies, institutions, or structures within a jurisdiction.
RLUIPA’s land use provisions specifically address discrimination in state and municipal land use decisions. It enables aggrieved persons to bring suit under both the land use and institutionalized person provisions. In addition, the attorney general is authorized to bring suit to enforce RLUIPA, and the Department of Justice may bring suit for declaratory or injunctive relief, but not monetary damages. See 42 U.S.C.A. Section 2000cc-2. This leads to the typically rare occurrence of cases in which the U.S. government sues local municipalities over what is traditionally a local prerogative, zoning.
As is well-detailed in the 20th anniversary report, extensive litigation under the land use provisions of RLUIPA has not resulted in any U.S. Supreme Court decisions. However, the federal courts of appeal and district courts have ruled on numerous RLUIPA issues. The majority of RLUIPA litigation has focused on the substantial burden and equal terms provisions found in subsections (a) and (b)(1), above. The courts are of general agreement that the question of what constitutes a “substantial burden” should be determined by a totality-of-the-circumstances test, examining whether the government’s actions substantially inhibit religious exercise, rather than merely inconveniencing it. This assessment considers factors such as the actual need of the congregation for the proposed site, whether the government action imposed delay, uncertainty or expense and whether the government acted arbitrarily. See 20th Anniversary Report at 8, citing Brief of the United States as Amicus Curiae, Thai Meditation Association of Alabama v. City of Mobile, No. 19-12418 (11th Cir. Filed Oct. 23, 2019) at 17.
Although there is no national consensus regarding the interpretation of the “equal terms” provision contained in subsection (b)(1), a plaintiff asserting a claim under this provision in the U.S. Court of Appeals for the Third Circuit must show “it is a religious assembly or institution, subject to a land use regulation, which regulation treats the religious assembly on less than equal terms with a nonreligious assembly or institution that causes no lesser harm to the interests the regulation seeks to advance.” See United States v. Bensalem Township, 220 F.Supp. 3d 615, 621 (E.D. Pa. 2016).
The nondiscrimination and exclusion provisions have not been the targets of frequent litigation, however federal courts in Pennsylvania have addressed them. In Bensalem Township, cited above, the court noted that the nondiscrimination provision is rooted in First Amendment establishment clause jurisprudence, and intended to prevent governmental bodies from treating groups differently on the basis of their religious denomination. This includes disparate treatment in the implementation of zoning regulations. For example, a RLUIPA nondiscrimination claim can be based on allegations that a plaintiff religious group faced a more rigorous approval process to obtain a conditional use than a secular group.
Pennsylvania jurisprudence suggests that the “total exclusion” provision is difficult to prove. In Adhi Parasakthi Charitable, Medical, Educational, and Cultural Society of North America v. Township of West Pikeland, 721 F.Supp.2d 361 (E.D. Pa. 2010), the court held a zoning ordinance requiring conditional use approval for a Hindu temple did not rise to the level of a total exclusion as “religious use was not entirely zoned out” of the township.
Furthermore, in Lighthouse Institute for Evangelism v. City of Long Branch, 510 F.3d 253 (3d Cir. 2007), the Third Circuit held that, unlike the substantial burden section contained in 42 U.S.C.A. 2000cc(a), the equal terms, nondiscrimination, and exclusion provisions contained in 2000cc(b) do not provide for strict scrutiny analysis of offending land use regulations. Rather, they operate under a strict liability standard, making any discriminatory regulations automatically invalid. As analyzed in Adhi, under this section, if the discrimination occurred, the government does not have the opportunity to justify the conduct by showing a compelling interest.
It is critical to note that RLUIPA’s land use provisions do not prohibit local governments from regulating religious uses. RLUIPA requires local governments to draft and apply local regulations so that they do not place substantial burdens on religious uses, absent a compelling government interest, and do not exclude, unreasonably limit, discriminate against, or treat on less than equal terms any religious use, regardless of government interest. Municipalities would be well-advised to enact and apply local regulations based on neutral terms, such as the number of seats available at a place of assembly or anticipated parking demands. In addition, municipal governments must be cognizant of what constitutes a religious use. It should also be noted that Pennsylvania’s Religious Freedom Protection Act, (RFPA) requires that a law or regulation in the commonwealth, that has an effect on the exercise of religion has to establish that the agency did not substantially burden a persons’ free exercise of religion. See 71 P.S. Sections 2401-2407; Ridley Park United Methodist Church v. Zoning Hearing Board of Ridley Park Borough, 920 A.2d 953 (Pa. Cmwlth. 2007).
Krista-Ann M. Staley is a shareholder in the public sector services and energy and natural resources groups of the Pittsburgh law firm of Babst Calland Clements & Zomnir. In these capacities, Staley focuses her practice on representation of diverse private and public sector clients on land use and other local regulatory matters. Contact her at kstaley@babstcalland.com.
Anna S. Jewart is an associate in the firm’s public sector services group and focuses her practice on zoning, subdivision, land development, and general municipal matters. Contact her at ajewart@babstcalland.com.
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Reprinted with permission from the December 17, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
The PIOGA Press
(by Kevin Garber and Jean Mosites)
As of the date of this article, Joe Biden is likely to become the 46th president of the United States. Assuming that stands, the Biden-Harris administration will try to implement dramatically different environmental and energy policies than the Trump administration. Whether Congress enacts many or all those policies depends heavily on the outcome of the two January U.S Senate special elections in Georgia. The Biden administration can impart significant changes through executive orders and agency actions despite the outcome of those elections, while states and regional governmental bodies will continue to play a significant role in shaping policy. This article reviews some of the implications of the 2020 election for the energy industry.
2020 election summary
National elections. Republicans cut into the Democrat’s majority in the House but Democrats still hold a 222-205 margin as of the date of this article. Republicans hold 50 Senate seats to 46 for the Democrats and two for independents pending the outcome of the Georgia special elections for Senate in January. If Democrats pick up both seats, Vice President-Elect Kamala Harris would cast the deciding vote on matters which divide the Senate 50-50. Shelley Moore Capito (R-WV) is likely to succeed John Barrasso (R-WY) as the top Republican on (and possibly become the chair of) the Senate Environmental and Public Works Committee when Senator Barrasso moves on to head the Energy and Natural Resources Committee. Both are positive developments for the energy industry.
Mr. Biden has chosen individuals from non-governmental environmental organizations and academia to lead his transition teams to staff the Environmental Protection Agency, Council on Environmental Quality, the Department of Interior and the Department of Energy. The teams themselves are largely comprised of those of similar background. Notably absent are representatives from the energy industry, which portends the nominations of more environmental-activist agency heads than served in the Trump administration. For example, the Wall Street Journal has criticized Mr. Biden’s choice of John Kerry as a cabinet-level special envoy for climate (i.e., a “climate czar”) as reflecting that climate will be a special negotiating priority rather than one issue among many in foreign policy. Mr. Biden has already committed to rejoining the Paris Climate Agreement on his first day in office or within his first 100 days, depending on which report you read.
State elections. At the state level, Republicans retained their majority in the state houses in seven of the 10 states critical to energy extraction and production, including Pennsylvania. There are Republican governors in six of those states. The following table summarizes the makeup of the state houses and executive offices
The Biden Energy Plan
The president-elect’s environmental and energy teams say climate change is an “existential threat” to the environment. The Biden Energy Plan commits the U.S. to an irreversible path to net-zero carbon emissions economy-wide by 2050. Although the plan does not propose to tax carbon emissions, impose a carbon cap and trade program or ban hydraulic fracturing on private land, and therefore is not as far-reaching as the Green New Deal, it is an unsettling departure from the Trump administration’s policy of reducing regulatory overreach in favor of less burdensome regulations on the fossil fuel industry. The Biden Energy Plan essentially is a $2 trillion infrastructure plan. It emphasizes an interconnectivity between clean energy and the economy. Highlights include the goal of zero net emissions from power plants by 2035 and economy-wide by 2050. The federal government would use its procurement power to build 500,000 e-vehicle charging stations, convert all 500,000 school buses to electric and provide all Americans in municipalities of more than 100,000 population with “quality public transportation” (in the plan’s words) by 2030. The Biden plan promises to upgrade four million commercial buildings to become more energy efficient and weatherize two million (mostly low income) homes within four years. It intends to induce the construction of 1.5 million homes and public housing units to address a stated affordable energy crisis and increase energy efficiency. Environmental justice principles feature prominently in the plan.
The road to the Biden Energy Plan
How green we go and how fast we get there depends on congressional and executive branch action.
The January special elections in Georgia will dictate the extent to which Congress passes legislation to implement the Biden Energy Plan. Republicans in Congress see themselves largely in a defensive posture for the upcoming 117th Congress, acting to temper or block far-reaching energy bills the more environmentally active House might contrive.
In the short term and apart from legislation, if both Senate seats go to Democrats, Congress could use the Congressional Review Act (CRA) to invalidate late-term Trump administration regulations. Adopted in 1996, the CRA allows Congress to invalidate, by a simple majority vote, final agency regulations adopted by the previous administration in the 60 legislative days before the previous Congress adjourned. It is a simple, expedite procedure―a joint resolution to invalidate a regulation is presented to committee, then, if approved, is presented to the legislative bodies for majority vote. Trump administration pro-energy regulations at risk to CRA invalidation, depending on the date of adjournment, include the September 14 and 15 EPA final oil and gas Review Rule and the ReconsiderationRule (i.e., the Quad O and Quad Oa rules that exclude transmission and storage from the O&G Production Source category and do not regulate methane emissions); the final October 15 Coal Combustion Residuals rule (extending the deadline to close landfills and surface impoundments and allowing owners of surface impoundments (of which approximately 520 currently are in operation) to demonstrate that an unlined impoundment is as safe as a lined one); and the final July 13 Clean Water Act Section 401 water certification rule (limiting the review of section 401 certifications to water quality impacts rather than far-reaching potential climate change effects).
If the Senate remains in Republican hands, the Biden administration and its agencies can take several steps to undo Trump administration regulations they believe would impede the Biden Energy Plan. Litigation abeyance is one such tactic. For pending litigation involving Trump-era regulations, a new EPA and Department of Justice can ask courts to place cases in abeyance to postpone briefing and arguments until the new administration reviews and potentially revises or withdraws the regulations.
For example, litigation concerning the oil and gas Review Rule and the Reconsideration Rule is pending in the D.C. Circuit Court. The new administration could ask the court to suspend further proceedings until it reevaluates those two rules. Litigation involving a major regulatory revision to the National Environmental Protection Act (which is intended to streamline the Environmental Impact Statement process) is pending in federal courts in Virginia, California and New York for which the Biden administration could employ the same tactic. The same is true of the CCR and 401 Certification rules mentioned above as well as many others.
For Trump-era rules that have not been finalized yet, such as the proposed definition of “habitat” under the Endangered Species Act and the proposed reevaluation and reissuance of the Army Corps’ Nationwide Permit 12, the Biden administration could simply direct EPA to stop work on these rules and withdraw others that are sitting with the Office of Management and Budget for review. And of course, the Biden administration could revoke the presidential permit granted to the Keystone XL Pipeline and take similar actions. Thus, despite how the Georgia special election plays out, many avenues are available to the Biden administration to remove perceived obstacles to the implementation of the Biden Energy Plan.
In the states
State environmental law can significantly affect the energy industry. Discussing the many state programs and how the 2020 elections will influence them is beyond the scope of this article. However, to highlight a few key points, 23 states have specific executive or legislative (or both) programs with specific greenhouse gas reduction targets. Twenty-nine states have renewable portfolio standards including Pennsylvania’s Alternative Energy Portfolio Standard. California, New York, Nevada, Washington, Maine and Virginia each has enacted state laws to eliminate carbon emission from electric power plants.
Several regional initiatives relate to carbon pricing and carbon cap and trade. These include the Transportation Climate Initiative, for which 12 northeastern states signed a memorandum of understanding in 2019 to reduce carbon emissions from transportation; the Western Climate Initiative, a California economy-wide cap and trade program; and the Regional Greenhouse Gas Initiative (RGGI), for which the Pennsylvania Environmental Quality Board’s proposed regulations are open for comment until January 14.
Political makeup in the states will play an important role in the Biden administration’s implementation of the Biden Energy Plan. For example, the Wolf administration is committed to adopting final RGGI regulations to reduce CO2 emissions which the General Assembly is trying to thwart, the most recent example being bipartisan House Resolution 1088, which urges the Independent Regulatory Review Commission to disapprove the proposed RGGI regulations. In Louisiana, Governor John Bel Edwards established a new Climate Initiatives Task Force through executive action to develop a blueprint to meet aggressive CO2 emission reductions despite Republicans controlling the legislature.
Conclusion
It remains to be seen how the 2020 elections will play out for the energy industry. Courts undoubtedly will be asked to resolve the tension between the executive (President-Elect Joe Biden and some governors) and the legislature (possibly a Republican-controlled U.S. Senate and Republican state general assemblies) regarding legal authority for critical policies affecting the energy industry. Overarching these legal issues are the economic fallout from the COVID pandemic and a growing social sentiment to reduce the use of fossil fuels to respond to climate change. They may be as much or more important to the long-term composition of the energy industry.
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Smart Business
(by Sue Ostrowski featuring Moore Capito)
West Virginia scored a huge win when it landed the contract for the high-tech Virgin Hyperloop Certification Center in October. Now the state — and the region, including Pittsburgh — are looking to build on that success.
“We’re hoping this is going to be a jumping off point,” says Moore Capito, a shareholder at Babst Calland who also serves in the West Virginia House of Delegates. “Any time you can lend a huge name like Virgin, it certainly gives the region an increased amount of credibility.”
Smart Business spoke with Capito about what the project means for the region and how its success could attract other big projects — and jobs — to West Virginia and Pennsylvania.
What is the Virgin Hyperloop Project?
In general, a hyperloop is an experimental, next-generation mode of transportation that will transport passengers through a network of under- and above-ground tubes, capable of reaching speeds of 670 mph. The goal is to transform transportation, and the broader economy, so that travel that previously took hours will instead take minutes.
More specifically, the Virgin Hyperloop Project, with substantial investments from Sir Richard Branson and DP World Ports, is headquartered in Los Angeles and has been primarily testing the technology in Las Vegas. As part of its growth, Virgin sought a location for a certification center to serve not only as a venue for moving the technology forward but as a place where they could create a regulatory framework.
Regulations cover other modes of transportation — air, rail, sea, cars, trucks — but hyperloop is a grey area. This center will build out that regulatory framework around this new mode of transportation to certify that it is viable for commercial use.
What does the project entail?
The project is located on 800 acres where, in addition to the center, Virgin plans to build a six-mile hyperloop track. The undulation of the West Virginia landscape made it an attractive location to test how robust the pods must be to traverse such terrain.
At this point, the timeline is very broad, with 2021 focused on design, planning and feasibility of facilities. The goal in 2022 is to begin construction on the facilities. That construction will be rolled out in phases, with an end goal of certification by 2025.
How will this project benefit not only West Virginia, but the entire region?
Directly, the project is expected to create somewhere between 150 to 200 engineering and technician jobs, with thousands of additional indirect jobs in areas that could include maintenance, construction and manufacturing. It allows firms that have expertise in emerging technology — including businesses in the Pittsburgh area — to showcase that expertise and focus on mobility.
It’s been such an uplifting dialogue. There have been conversations, for instance, on how to increase regional entrepreneurship to modernize the economy to attract and retain new talent. We want people who want to jump in, but they need a pool to jump into.
This project gives people another reason to talk about the region’s capabilities. This is a fertile region for developing emerging technologies, and it’s exciting to see it move in this direction and to see more eyes on our region.
West Virginia is showing its commitment to modernizing and growing and engaging. Its technology movement is on the march.
This is a sign of more things to come as West Virginia continues to grow in this emerging technology, benefiting not just the state, but the greater region, as well.
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The PIOGA Press
(by Keith Coyle and Varun Shekhar)
On October 14, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) containing potential changes to the federal gas pipeline safety regulations and reporting requirements. Citing PHMSA’s experience administering special permits, as well as the information provided in earlier studies and from various stakeholders, the NPRM proposed to amend the regulations to allow operators to apply integrity management (IM) principles to certain gas transmission line segments that experience class location changes. Comments on the NPRM are due December 14.
PHMSA relied heavily on the conditions included in class location special permits in developing the proposed rules. The IM alternative only would be available to pipeline segments that experience an increase in population density from a Class 1 location to a Class 3 location, subject to certain eligibility criteria. Operators using the IM alternative would be required to conduct an initial integrity assessment within 24 months of the class location change and apply the IM requirements in 49 C.F.R. Part 192, Subpart O to the affected segment. Operators also would be required to implement additional preventative and mitigative measures for cathodic protection, line markers, depth-of-cover, right-of-way patrolling, leak surveys and valves.
PHMSA’s decision to propose an IM alternative for managing class location changes is a significant step forward for pipeline safety. The class location regulations are based largely on concepts established decades ago, and the pipeline industry long has advocated for an approach that reflects modern assessment tools and technologies. While the NPRM does not necessarily satisfy all of the industry’s objectives, PHMSA’s proposal sets the stage for the next phase of the rulemaking process and potential development of a final rule.
Background
In July 2018, the agency published an advance notice of proposed rulemaking (ANPRM) asking for public comment on potential amendments to the class location regulations in 49 C.F.R. Part 192. As PHMSA explained in the ANPRM, Part 192 generally requires operators to respond to class location changes by (1) reducing the maximum allowable operating pressure (MAOP), (2) conducting a new pressure test or (3) replacing the pipe in the affected segment. The agency asked whether those requirements should be updated to allow operators to address certain class location changes through the use of IM measures. PHMSA also asked for public comment on several related questions, including whether the availability of the IM alternative should be limited to segments that meet certain eligibility criteria and whether the agency should incorporate the conditions included in prior class location special permits in the regulations.
What’s in the NPRM?
PHMSA is proposing to establish an IM alternative for pipeline segments that experience a class location change from Class 1 to Class 3. The key features of the proposed IM alternative include:
- Designating the area affected by the class location change as a high consequence area (HCA) and applying the IM program requirements in 49 C.F.R. Part 192, Subpart O to the segment. Performing an initial integrity assessment within 24 months of the class location change.
In performing the initial and subsequent integrity assessments of the affected segment with inline inspection (ILI) tools, inspecting all pipe between the nearest upstream ILI tool launcher and downstream ILI receiver.
Replacing pipeline segments with discovered cracks exceeding 20 percent of wall thickness or a predicted failure pressure of less than 100 percent specified minimum yield strength (SMYS) or less than 1.5 times MAOP.
- Installing remote-control or automatic shutoff valves or upgrading existing mainline block valves downstream and upstream of the affected segment to provide that capability. The valves would need to be able to close within 30 minutes of rupture identification.
- Implementing additional preventive and mitigative measures, including conducting close interval surveys (CIS) every seven years, performing leak surveys on a quarterly basis, conducting monthly right-of-way patrols and performing cathodic protection test station surveys.
- Complying with more stringent repair criteria, including treating additional anomalies as “immediate” repair conditions and requiring remediation of conditions reaching a 1.39 safety ratio and 40 percent wall loss (as opposed to a 1.1 safety ratio and 80 percent wall loss under the current IM regulations).
The agency is proposing to limit the IM alternative to segments that experience a class location change after the effective date of the final rule, subject to a 60-day notification requirement. PHMSA is also proposing to prohibit the use of the IM alternative for pipeline segments with the following conditions or attributes:
- Bare pipe, wrinkle bends, missing material properties records, certain historically problematic seam types (including DC, LF-ERW, EFW, and lapwelded pipe or pipe with a longitudinal joint factor below 1.0) and body, seam or girth-weld cracking;
- Pipe with poor external coating, tape wraps or shrink sleeves;
- Leak or failure history within five miles of the segment;
- Pipe transporting gas that is not of suitable composition and quality for sale to gas distribution customers;
- Pipe operated at MAOP determined under the grandfather clause (49 C.F.R. § 192.619(c)) or under an alternative MAOP (49 C.F.R. § 192.619(d)); and
- Segments that do not have a documented successful eight-hour Subpart J pressure test to at least 1.25 times MAOP.
What’s not included in the NPRM?
The agency did not propose an IM alternative for Class 2 to Class 4 location changes. PHMSA reasoned that given the high population density associated with Class 4 locations, there would not be adequate, feasible measures that could be used to provide Class 4 locations with an equivalent level of public safety instead of replacing pipe.
Although raised in industry comments on the ANPRM, PHMSA did not propose any amendments to the so-called “cluster rule.” That rule allows operators to adjust endpoints of a Class 2, 3 or 4 location based on the presence of a “cluster” of buildings intended for human occupancy. Industry commenters had asked the agency to either clarify or revise the existing clustering methodology. PHMSA declined that request and simply noted that the NPRM contained provisions that would apply to segments covered under the cluster rule.
PHMSA did not propose to limit the availability of the IM alternative based on pipeline diameter, operating pressure or potential impact radius (PIR) size. Some of the commenters who responded to the ANPRM asked the agency to include a more conservative PIR-based limitation, but industry commenters had opposed that provision as unnecessary.
What’s next?
After the public comment period closes, the agency will consider the information provided and decide whether to present the NPRM to the Gas Pipeline Advisory Committee (GPAC) for consideration. GPAC is a 15-member federal advisory committee that reviews and provides non-binding recommendations to PHMSA on proposed changes to the gas pipeline safety regulations. Once the GPAC process is complete, the agency can develop a final rule for consideration by the Office of the Secretary and Office of Management and Budget and eventual publication in the Federal Register. Completion of these steps is not likely to occur until 2021 or later.
The NRPM can be found at www.federalregister.gov/documents/2020/10/14/2020-19872/pipeline-safetyclass-location-change-requirements.
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RMMLF Mineral Law Newsletter
(By Joseph K. Reinhart, Sean M. McGovern, Danial P. Hido and Gina N. Falaschi)
The Pennsylvania Department of Environmental Protection (PADEP) continues to move forward with its rulemaking to limit carbon dioxide (CO2) emissions from fossil fuel-fired electric generating units (EGUs) consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule and Governor Tom Wolf’s Executive Order No. 2019-07, 49 Pa. Bull. 6376 (Oct. 26, 2019), as amended, 50 Pa. Bull. 3406 (July 11, 2020) (which extended the deadline for PADEP to present the regulations to the Pennsylvania Environmental Quality Board (EQB) from July 31, 2020, until September 15, 2020). See Vol. XXXVII, No. 3 (2020) of this Newsletter.
As part of PADEP’s public outreach efforts, PADEP hosted an informational webinar on August 6, 2020, regarding the benefits of Pennsylvania’s participation in RGGI. See PADEP, “RGGI 101: How It Works and How It Benefits Pennsylvanians” (Aug. 6, 2020), https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx. The webinar focused on the structure of the RGGI program and how participation will lower greenhouse gas and other air pollution emissions from electric power plants, as well as a discussion of the health and economic benefits from participation in the program.
Consistent with Governor Wolf’s amended Executive Order 2019-07, PADEP presented its proposed cap-and-trade rule to the EQB, the independent body responsible for adopting proposed PADEP regulations, on September 15, 2020. Following significant debate and opposition to the rule, the EQB voted 13-6 to adopt the proposed regulation. As proposed, the regulation would amend 25 Pa. Code ch. 145 (relating to interstate pollution transport reduction) and add subchapter E (relating to a budget trading program) to establish a program limiting CO2 emissions from a fossil fuel-fired EGU with a nameplate capacity of 25 megawatts or greater that sends more than 10% of its annual gross generation to the electric grid. The rule would officially link Pennsylvania to the RGGI program, in which 10 Northeastern and Mid-Atlantic states already participate. RGGI establishes an emissions cap for each participating state that declines annually to reduce power sector CO2 emissions from the region. The proposed initial emissions cap for Pennsylvania is 78 million tons of CO2 in 2022, which gradually declines to 58 million in 2030. The emissions cap translates into “allowances,” each representing one ton of CO2, which are auctioned quarterly. Facilities subject to the regulation would be required to purchase and submit to the state an allowance for each ton of CO2 they emit. Currently, the proposed rulemaking intends for compliance obligations to begin in 2022.
The proposed rulemaking was published in the Pennsylvania Bulletin on November 7, 2020, initiating a 60-day public comment period during which time PADEP will hold at least five public hearings. See 50 Pa. Bull. 6212 (proposed Nov. 7, 2020). PADEP is expected to continue to meet significant opposition, as it did during the September 15 EQB meeting and numerous advisory committee meetings during the spring and summer.
Pennsylvania’s participation in RGGI has also met legislative opposition. In November 2019, members of the Pennsylvania House and Senate referred bipartisan companion bills, House Bill 2025 (HB 2025) and Senate Bill 950 (SB 950), both known as the Pennsylvania Carbon Dioxide Cap and Trade Authorization Act, to their respective Environmental Resources and Energy (ERE) committees for consideration. See HB 2025, 203d Leg., Reg. Sess. (Pa. 2019); SB 950, 203d Leg., Reg. Sess. (Pa. 2019). The legislation would have prohibited PADEP from adopting any measure to establish a greenhouse gas cap-and-trade program unless the general assembly specifically authorizes it by statute.
The House ERE committee voted on June 9, 2020, to move HB 2025 to the full House for consideration, and the House passed the bill with a vote of 130-71 on July 8, 2020. The Senate approved the bill on September 9, 2020, by a vote of 33-17. Governor Wolf vetoed HB 2025 on September 24, 2020, and released a veto message stating that the legislation is “extremely harmful to public health and welfare as it prevents [PADEP] from taking any measure or action to abate, control or limit [CO2] emissions, a greenhouse gas and major contributor to climate change impacts, without prior approval of the General Assembly.” Governor Wolf’s Veto Message for HB 2025 (Sept. 24, 2020).
GOVERNOR WOLF COMMITS TO ESTABLISH A REGIONAL CO2 TRANSPORT INFRASTRUCTURE PLAN
On October 1, 2020, Governor Tom Wolf announced that he had signed a memorandum of understanding (MOU) along with six other states—Kansas, Louisiana, Maryland, Montana, Oklahoma, and Wyoming—committing to establish and implement a regional carbon dioxide (CO2) transport infrastructure plan. Under the MOU, the signatory states will establish a coordination group, facilitated by the Great Plains Institute and informed by additional and ongoing work by the State Carbon Capture Work Group and the Regional Carbon Capture Deployment Initiative, that will develop an action plan that will include policy recommendation for and barriers to CO2 transport infra-structure deployment. This action plan is set for release in October 2021.
PADEP’S PROPOSED MANGANESE RULEMAKING UNDERGOING CONTENTIOUS PROCEDURAL REVIEW
As reported in Vol. XXXVII, No. 3 (2020) of this Newsletter, on July 25, 2020, the Pennsylvania Department of Environmental Protection’s (PADEP) Environmental Quality Board (EQB) published proposed revisions to the state’s water quality standards for manganese in 25 Pa. Code ch. 93. See 50 Pa. Bull. 3724 (proposed July 25, 2020). The proposed rule would change the numeric water quality criterion for manganese from 1.0 to 0.3 mg/L. The EQB also solicited comments on whether to set the point of compliance for the revised criterion at the point of discharge or the point of surface potable water supply withdrawals.
The 60-day public comment period closed on September 25, 2020. Approximately 950 comments were submitted, which can be viewed on PADEP’s eComment website. The EQB held virtual public meetings on the proposed rulemaking on September 8, 9, and 10, 2020. The state Senate Environmental Resources and Energy (ERE) Committee also held a hearing on the proposed rulemaking on September 9. The hearing included testimony of witnesses from PADEP, operators of surface water treatment systems, and the coal and non-coal mining industries. Testimony reportedly largely focused on the two proposed alternative points of compliance, but witnesses also presented arguments regarding the proposed revision of the numeric criterion from 1.0 to 0.3 mg/L. Expert witnesses testified both in support of and in opposition to the revised numeric criterion. See David E. Hess, “Senate Environmental Committee Hearing Pits Mining Industry Against Water Suppliers on Manganese Standard,” PA Env’t Digest Blog (Sept. 9, 2020). A recording of the hearing is available at https://environmental.pasenategop.com/090920/.
On September 30, 2020, Representative Daryl Metcalfe, Chairman of the House ERE Committee, sent a letter to the Independent Regulatory Review Commission (IRRC) on behalf of Republican members of the Committee expressing disapproval of the proposed rulemaking and asking the IRRC to disapprove the regulation. See Letter from Rep. Daryl Metcalfe, to IRRC (Sept. 30, 2020). On October 15, 2020, Senator Gene Yaw, Chairman of the Senate ERE Committee, sent a letter to the EQB on behalf of the Republican members of the Committee encouraging EQB to withdraw the proposed regulation. Letter from Senator Gene Yaw, to Hon. Patrick McDonnell, Chairman, EQB (Oct. 15, 2020).
The House and Senate letters both argue that the proposed rulemaking is contrary to Act 40 of 2017, which, as discussed in previous updates, directed PADEP to propose regulations setting the point of compliance at the point of surface potable water withdrawals. See Vol. XXXVII, No. 3 (2020); Vol. XXXVII, No. 1 (2020); Vol. XXXVI, No. 3 (2019) of this Newsletter. The letters, therefore, argue that the proposed rulemaking runs afoul of this statutory requirement by merely proposing such point of compliance as one of two potential alternatives for the final rulemaking. In addition, the letters state that proposing two alternatives in a single rulemaking is contrary to the Regulatory Review Act (RRA). The letters also challenge the legal and scientific basis for the proposed lower numeric water quality criterion.
On October 26, 2020, the IRRC issued comments on the proposed rulemaking that raise many of the same concerns identified by the House and Senate ERE committees. See Comments of the IRRC, EQB Regulation #7-553 (IRRC #3260): Water Quality Standard for Manganese and Implementation (Oct. 26, 2020). Regarding the proposed rule’s compliance with Act 40, the IRRC noted that “the mandate of Act 40 is clear and does not provide discretion to the EQB,” and requested that the EQB explain why the proposed rulemaking is consistent with Act 40. Id. at 2. Regarding the EQB’s decision to propose two alternative points of compliance in a single rulemaking, the IRRC asked the EQB to explain why it took this approach and why it is consistent with the RRA. Id. at 3.
The IRRC also requested that the EQB review the data provided by commenters and explain why the proposed lower criterion is necessary and justified, and explain why it is reasonable to regulate manganese at a lower level than other states and in a different manner from the U.S. Environmental Protection Agency. Id. The IRRC also noted that the EQB did not provide information regarding the cost of the proposed rulemaking sufficient to allow the IRRC to determine if the regulation is in the public interest, and directed the EQB to further evaluate the costs associated with the proposed rulemaking. Id. at 4.
The EQB is now required to review and respond to comments received from the IRRC, the ERE committees, and the public before issuing a final-form regulation. 71 Pa. Stat. § 745.5a(a).
PADEP PUBLISHES DRAFT REVISED POLICY ON CIVIL PENALTY ASSESSMENTS FOR COAL MINING OPERATIONS
On October 3, 2020, the Pennsylvania Department of Environmental Protection (PADEP) published a draft revision to Technical Guidance Document (TGD) No. 562-4180-306, titled “Civil Penalty Assessments for Coal Mining Operations.” See 50 Pa. Bull. 5545 (Oct. 3, 2020) (draft TGD). The current version of the TGD was last updated in 2005 (2005 TGD). PADEP first published draft revisions to the TGD on May 4, 2019. See 49 Pa. Bull. 2312 (May 4, 2019). However, PADEP republished an updated draft because substantial changes were made to the 2019 version in response to public comments.
One of the most notable changes in the draft TGD is the addition of new procedures for assessing civil penalties for water quality violations under section 605 of the Clean Streams Law (CSL), 35 Pa. Stat. § 691.605. These procedures would generally follow the 2005 TGD’s existing formula applicable to all violations, which is based on seriousness of the violation, culpability of the operator, costs to the commonwealth, savings to the violator, violation history, and speed of compliance. However, the application of these factors will evaluate components specifically relating to water quality, such as impacts to water resources or degree of exceedance of effluent limitations.
For instance, the “seriousness” component is based on several subcomponents. First, the “magnitude” of the violation will be calculated in one of two ways. If physical evidence is available, such as impacts to fish or invertebrate communities, sediment deposition, impacts to water use, or damage to land or water resources, the magnitude of the violation will be calculated using Method 1. If physical evidence is not available, the magnitude of the violation will be determined using Method 2, which is based on the degree of exceedance of applicable effluent limitations. There are five categories of seriousness under both Method 1 and Method 2: severe, significant, moderate, low, or de minimis.
The second subcomponent of the seriousness component, the “resource” component, evaluates the impact to aquatic life and recreation. In applying this factor PADEP will first examine the use of the impacted waterbody. There are five categories of use under the draft TGD: special protection, high use, moderate use, low use, and all other uses. PADEP will then examine the level of impact on aquatic life, water supply, recreation, and the extent of impacts. The draft TGD includes a matrix that provides a base penalty based on the results of the magnitude and resource components factors. This base penalty amount for the seriousness component may then be further adjusted based on the duration of the violation and the operator’s failure to report the violation.
The “savings to the violator” component may include costs associated with treating water to meet effluent limitations and the cost to construct and maintain treatment systems. The remaining factors (culpability, speed of compliance, costs to the commonwealth, and history of violations), will be calculated using the same procedures in the draft TGD applicable to all violations, as discussed below.
For violations other than those related to water quality, the draft TGD provides guidance to PADEP in assessing civil penalties based on the factors in 25 Pa. Code § 86.194. The draft TGD would make several changes to the application of these factors from the 2005 TGD, the biggest being with respect to assessment of penalties for high seriousness violations under the seriousness component. The draft TGD would instead allow PADEP to assess penalties of up to the statutory maximum for high seriousness violations. In contrast, under the 2005 TGD, penalties for high seriousness violations are to be assessed up to$2,000, and only violations meeting “extraordinary circumstances” criteria warrant a penalty up to the statutory maximum.
The draft TGD breaks the “culpability” component down into willful, reckless, negligent, or no culpability categories. The 2005 TGD only includes negligent and reckless categories. Under the 2005 TGD, penalties for negligent violations could be assessed up to $1,200, and penalties for reckless violations could be assessed up to the statutory maximum. Under the draft TGD, the maximum penalty of $1,200 for negligent violations remains unchanged; however, penalties for reckless violations would only be assessed up to $1,500, rather than the statutory maximum. The criteria for what constitutes a reckless violation would also be revised. For example, violations pertaining to situations previously identified in inspection reports or notices of violations, which are currently considered negligent violations under the 2005 TGD, would become reckless violations under the draft TGD.
Under the new willfulness criteria, a penalty up to the statutory maximum may be assessed if “[t]he operator made a conscious choice to engage in certain conduct with knowledge that a violation will result.” Finally, the draft TGD would create a new no culpability category, which would warrant no penalty assessment under the culpability component where the operator’s conduct was consistent with the standard of conduct to foresee and prevent the violation that a reasonable person would observe under the circumstances.
The other penalty components, speed of compliance, costs to the commonwealth, savings to the violator, and history of violations, remain generally the same as compared to the current 2005 version of the TGD.
The TGD may be further revised in response to public comments. The public comment period closed on November 2, 2020.
THIRD CIRCUIT VACATES EPA APPROVAL OF PENNSYLVANIA SIP PROVISIONS SPECIFIC TO COAL-FIRED EGUS
On August 27, 2020, the U.S. Court of Appeals for the Third Circuit vacated the U.S. Environmental Protection Agency’s (EPA) approval of an addition to Pennsylvania’s state implementation plan (SIP) specific to coal-fired electric generating units (EGUs), holding that EPA’s approval was arbitrary and capricious. Sierra Club v. EPA, 972 F.3d 290 (3d Cir. 2020). In April 2016, Pennsylvania promulgated a reasonably available control technology (RACT) requirement for coal-fired combustion units controlled by selective catalytic reduction (SCR) systems, requiring such units to meet a limit of 0.12 lb nitrogen oxide (NOx) per million Btu (MMBtu) heat input when the SCR inlet temperature is equal to or greater than 600 degrees Fahrenheit. 25 Pa. Code § 129.97(g)(1)(viii). Pursuant to the Clean Air Act, EPA approved the requirement as part of Pennsylvania’s SIP in May 2019. See 84 Fed. Reg. 20,274 (May 9, 2019) (to be codified at 40 C.F.R. pt. 52). On July 8, 2019, the Sierra Club filed a petition for review with the Third Circuit, challenging EPA’s approval of 25 Pa. Code § 129.97(g)(1)(viii) as part of Pennsylvania’s SIP.
The Third Circuit vacated EPA’s approval of 25 Pa. Code § 129.97(g)(1)(viii) as part of Pennsylvania’s SIP, finding EPA’s approval arbitrary and capricious on three grounds. First, the court ruled that there was inadequate justification for the selection of a 0.12 lb NOx/MMBtu pollution limit. Sierra Club, 972 F.3d at 302–03. The court noted that the limit is the “average pollution output of the three plants that are already compliant over the last five years.” Id. at 300. Second, the court ruled that the addition of a 600-degree temperature threshold for SCR was not adequately explained. Id. at 305–06. EPA justified the threshold by arguing that SCR systems become less effective at lower temperatures. Id. at 303. However, the court found that reduced effectiveness did not adequately justify not requiring the use of the control technology at lower temperatures. Id. at 304. Third, the court ruled that the SIP also lacked a reporting requirement on power plant inlet temperatures. Id. at 309. The SIP did not contain specific requirements to report plant inlet temperatures. EPA and the Pennsylvania Department of Environmental Protection (PADEP) relied on existing language that requires plants to keep records that adequately demonstrate compliance and states that such records only have to be available to PADEP, not EPA or the public. Id. at 308–09. The Third Circuit held that this requirement was insufficient to meet the CAA’s requirement that EPA be able to bring an enforcement action. Id. at 307 (citing 42 U.S.C.
- 7502(c)(6)). The court found that, when coupled with the temperature threshold, this lack of reporting requirement creates a loophole that allows EGUs to avoid using an SCR system by claiming to have operated under 600 degrees without requiring data reporting that would verify that operation status. See id. at 306, 308–09.
On remand, EPA must either approve a revised SIP from PADEP within two years or formulate a new federal implementation plan (FIP) under 42 U.S.C § 7410(c)(1) (which provides two years for EPA to promulgate a FIP if a state does not make a sufficient submission or if EPA disapproves of a SIP and the state does not correct the deficiency). Sierra Club, 972 F.3d at 309. Either approach must be technology-forcing, in accordance with the RACT standard, and lack the loophole noted in this decision. Id.
Copyright © 2020, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Smart Business
(by Sue Ostrowski featuring Sara Antol)
Corporate venture capital (CVC) funds are gaining in popularity as established companies seek a competitive advantage in the marketplace.
“More large public and private companies are investing in startups, frequently with an end goal of making an acquisition,” says Sara Antol, a shareholder at Babst Calland PC.
Smart Business spoke with Antol about the rewards — and challenges — of these investments.
What is the difference between a venture capital fund and a CVC fund?
With a venture capital fund, the fund is formed with the sole purpose of investment and is looking for a positive financial return within a relatively short period of time.
With a CVC fund, an operating company puts funding into a startup, generally in its market space or a space the company wants to enter. It still seeks a financial return, but the investment is more likely strategically driven. The end goal is frequently to eventually acquire the startup, but the CVC fund can hedge its bets by first making an investment.
CVC investors want to know the startup’s strategy and be involved, and they may want a bigger voice than a typical venture fund would expect. The CVC fund generally avoids legal control — it wants the ability to make a difference but not to affect the company’s overall growth curve.
Recent reports have shown that CVC funds have accounted for almost 25 percent of all venture investments in 2020. It could be because technology companies have rebounded during the pandemic, giving them more access to capital. It may be that private equity has pulled back, creating more capacity for CVC investment.
Whatever the reason, it’s becoming more common for forward-thinking companies to make these types of investments as part of their strategy.
What are the challenges of this type of investment?
There can be a struggle between operating a larger business and being a startup. The investing companies have to understand how startups operate and the risks that go with that, without the controls in place that a large corporation will have.
Because of that gap, the investing companies should work with seasoned professionals who understand the ecosystem of startup financing, who can help them navigate the playbook of what their equity investment entitles them to. Larger companies tend to be risk-averse, and they have to understand there is a greater risk of losing their investment in this context. The investment must be small enough that it’s not a game-changer and that they are willing to risk losing it.
In addition, larger companies may face strict regulations on the kinds of investments they can make, and there may be issues with board representation. If the investment is large enough that the investor wants a board seat, it runs the risk of learning something that could benefit its business. You need to be aware of your fiduciary responsibility, and it needs to be very clear what information can be used by the investing company, if any.
How important is due diligence?
It is critical. Even with a very small investment, the larger company can face risks that can seem like a minor issue to the startup but that can have big impacts on the overall compliance of the larger company. It is imperative to do adequate due diligence, and an outside professional can help before you move ahead.
What advice would you give to companies considering a CVC fund-type investment?
Really think through working with another company and what it’s going to mean for the longer term. It can get ugly when a startup fails, so understand what that would mean for the investing company.
The key is to get experienced advisers. If you decide to engage in these types of investments — and more companies are doing so as part of their day-to-day strategy — understand the process and consider what issues it could create for the overall business.
For the full article, click here.
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The Legal Intelligencer
(by Ben Clapp)
In September, the Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission (CFTC) issued a significant, yet perhaps under-publicized, report titled “Managing Climate Risk in the U.S. Financial System.” The report identified several key findings, including that: climate change “poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy;” “financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economywide price on carbon is in place at a level that reflects the true social cost of those emissions; and “disclosure of information on material, climate-relevant financial risks … has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators.” CFTC, Managing Climate Risk in the U.S. Financial System at i-iv (Sept. 2020). The report recommends that the U.S. establish a price on carbon that is consistent with the Paris Agreement’s goal of limiting global temperature rise this century to less than two degrees Celsius above pre-industrial levels.
The report is particularly notable for its blunt assessment of the risks posed by climate change to the underpinnings of the U.S. economy, and its conclusion that comprehensive federal climate change legislation is required to mitigate these risks. (For those wondering at the unlikelihood of a report such as this being published by a federal agency in a presidential administration that has demonstrated a marked tendency toward deregulation, the report was not voted on by the commissioners of the CFTC and has been characterized as representing the perspective of private sector committee members.) Other federal agencies have been reluctant to take additional steps to address climate change investment risks. The Securities and Exchange Commission, for example, resisted calls to incorporate prescriptive climate change disclosure requirements when adopting final rules modernizing Regulations S-K, choosing instead to retain the principles-based materiality standard currently governing climate change disclosures. See Commissioner Allison Herren Lee, SEC, Regulation and ESG Disclosures: An Unsustainable Silence (Aug. 26, 2020)
The future of federal climate change regulation in the U.S. remains murky. Obviously, much depends on the results of the upcoming election, but even in the event of a shift in the balance of power to the Democratic party, it may be several years before climate change legislation is enacted, and the scope of such legislation is far from certain. Notably, however, even in the absence of federal action on climate change, private sector initiatives—in particular those of global investment firms, institutional investors, and insurers—to compel greenhouse gas intensive industries to reduce emissions and to disclose the climate change-related impacts of their operations, continue to gather momentum.
In the United States, a watershed moment occurred in January 2020, when BlackRock, Inc., the world’s largest asset manager, announced that it was asking the companies that it invests in to meet certain standards for disclosing the risks posed by climate change. Letter from Larry Fink, chairman and CEO, BlackRock, Inc. to CEOs (Jan. 2020) (BlackRock letter). BlackRock’s goal is “to ensure that companies are effectively managing the risks and opportunities presented by climate change and that their strategies and operations are aligned with the transition to a low-carbon economy—and specifically, the Paris Agreement’s scenario of limiting warming to two degrees Celsius or less.” See BlackRock, Our Approach to Sustainability (July 2020) (Sustainability Report). BlackRock believes that climate change presents a “defining factor in companies’ long-term prospects,” requiring a “fundamental reshaping of finance.” To that end, the asset manager has called for a global price on carbon and requested that the companies it invests in disclose their climate-related risks, including their greenhouse gas emissions and the expected impact of those emissions, the impact of climate change on their own facilities, and the “transition,” or business risk associated with operating under a scenario where the Paris Agreement’s goals are fully realized. The latter requirement is especially challenging for companies with greenhouse gas-intensive operations, as it requires an evaluation of how future operations and financial results will be impacted by legislation designed to fundamentally alter, and even restrain, the industries in which these companies operate. In July, BlackRock announced that it had placed 244 companies on watch and taken “voting action” against 53 companies, including 37 energy companies, for, in BlackRock’s opinion, failing to take sufficient action to incorporate climate risk into their business models or disclosures. Sustainability Report at 11.
BlackRock is not alone in its efforts to leverage its influence in financial markets to combat climate change. Numerous financial institutions, including Goldman Sachs, have echoed BlackRock’s call for a global price on carbon. Investment banks, such as Morgan Stanley, Citigroup, and Bank of America, have committed to publicly disclosing the greenhouse gas emissions from projects and investments that they finance. In early October, JP Morgan Chase announced that it would adopt “a financing commitment that is aligned to the goals of the Paris Agreement,” see press release, “JP Morgan Chase Adopts Paris-Aligned Financing Commitment” (Oct. 6, 2020). In so doing, the investment bank intends to evaluate the carbon intensity of its investments and establish intermediate emission targets for 2030.
The movement extends beyond Wall Street. More than 500 institutional investors, with more than $47 trillion in assets under management, belong to the Climate Action 100+ initiative, which has the goal of ensuring that the world’s largest corporate greenhouse gas emitters take necessary action on climate change. The organization has a focus list of 100-plus companies (oil and gas, mining and minerals, transportation, industrials), that face investor pressure to create long‑term energy transition plans and quantitative targets for reducing emissions. Insurers, recognizing that climate risk equals insurance risk, have taken similar steps. For example, Swiss Re has announced it will stop providing insurance to, and investing in, the top 10% most carbon-intensive oil and gas companies by 2023, see press release, “Swiss Re takes further steps towards net-zero emissions” (Feb. 20, 2020). In addition, some major U.S. insurers, such as The Hartford, Chubb and AXIS Capital, are starting to restrict, or eliminate, insurance coverage for coal and tar sands companies, see Axis Capital, Thermal Coal and Oil Sands Policy (effective Jan. 1, 2020); press release, The Hartford Announces Its Policy on Insuring, Investing in Coal, Tar Sands (Dec. 20, 2019); Chubb, Chubb Coal Policy.
Some of these efforts, BlackRock’s in particular, have been met by a fair degree of cynicism from climate activists. In early October, five Senate democrats sent a letter to BlackRock chairman and CEO Larry Fink, asserting that the asset manager’s proxy voting record was inconsistent with its professed goal of incorporating climate change risk into its investment stewardship, including BlackRock’s failure to vote in favor of initiatives identified as key objectives by Climate Action 100+. The letter requests that BlackRock respond to several pointed questions that appear aimed at forcing BlackRock to provide more transparency on what, precisely, the firm aims to do in support of its climate change strategy.
The impact of these private sector initiatives can only be assessed over time. It is clear, however, that there is a growing certainty in the financial sector that climate change poses a serious risk to the U.S. financial system and the global economy as a whole. The current focus on requiring more robust climate change disclosures reflects investors’ desire to assess such risks sooner rather than later so that they can take appropriate actions. If investment firms, institutional investors, and insurers conclude that limiting global temperature rise to two degrees Celsius above pre-industrial levels will significantly limit their long-term exposure to risk, it is reasonable to conclude that these entities will determine that limiting the flow of capital into carbon-intensive industries, or declining to insure projects occurring within those industries, is the prudent course of action, thereby accelerating a transition to a low-carbon economy.
For the full article, click here.
Reprinted with permission from the October 29, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
The Legal Intelligencer
(by Molly E. Meacham)
It is a familiar scene to many employers. After searching for the right individual to fill an important position, a promising candidate emerges. The new employee will have top-level access to confidential information and customers, and their offer letter anticipates that the employee will sign restrictive covenants including noncompetition and nonsolicitation agreements as a condition of employment. Current operations are a bit chaotic—including some remote work—so the agreement isn’t provided prior to the first day of employment. The employee knows they will have to sign eventually, but the employer doesn’t press the issue and allows time for the new employee to review the terms. Is this a valid and enforceable restrictive covenant agreement? According to the Pennsylvania Supreme Court’s June 16, decision in Rullex v. Tel-Stream, the answer is no.
A restrictive covenant such as a noncompetition or nonsolicitation agreement is a contract that must be supported by adequate consideration to be enforceable in Pennsylvania. Pennsylvania views starting a new job as sufficient consideration, provided that the agreement is executed at the start of the employment relationship. In Rullex, the subcontractor in question was aware that a non-competition agreement would be required as part of the relationship, in which the subcontractor would be performing cellphone tower work for a telecommunications company. Although the subcontractor was given a copy of the agreement on his first day of work, he was allowed to take time to review it and did not return a signed copy until at least two months later. The subcontractor later performed cellphone tower work for a competitor of the telecommunications company, resulting in a lawsuit seeking to prevent him from working with that competitor or any other competitors of the telecommunications company.
In its decision, the Pennsylvania Supreme Court considered whether these factual circumstances constituted an enforceable non-competition agreement. The court rejected a bright-line approach in favor of examining the timeline and circumstances of the inception of the relationship, finding that the test for whether or not an enforceable agreement has been reached is not whether it is physically signed on the first day. Instead, the facts must show that as part of beginning the employment relationship the parties contemplated and intended that the employee would be bound by the substantive terms. This means that the restrictive covenant agreement is not presented as an afterthought as the employee begins employment. Instead, there must be objective manifestations of consent. For example, under the reasoning in Rullex, a meeting of the minds is likely present if an employee receives the substantive terms of a non-competition or nonsolicitation agreement in advance of their first day and manifests assent by beginning the employment relationship under those known and accepted terms. Then, even if there is a brief delay in obtaining a physical signature, the agreement is still likely enforceable. If there was no meeting of the minds on the essential terms, then a restrictive covenant agreement signed after the first day of employment is not enforceable absent additional consideration.
The day before the Pennsylvania Supreme Court addressed the issue of how the onboarding process impacted the enforceability of a restrictive covenant, a federal court considered how the circumstances surrounding termination of employment can impact enforceability.
On June 16, in Schuylkill Valley Sports v. Corporate Images, the U.S. District Court for the Eastern District of Pennsylvania examined the enforcement of restrictive covenant agreements when the employees in question were let go as part of a COVID-19 temporary business closure.
A sporting goods retailer in the Philadelphia area temporarily closed in March 2020 as it was not considered to be a life-sustaining business. In doing so, it did not guarantee any employee continued employment upon its anticipated reopening. A group of the retailer’s employees therefore joined a screen-printing and embroidery company that competed against the sporting goods store in that it also produced and sold custom athletic apparel. The language in the restrictive covenant agreements at issue contained noncompetition and nonsolicitation clauses that, and by their plain terms, applied only after resignations or terminations for “just cause,” without mention of terminations without cause or layoffs. Under those circumstances the court denied the former employer’s request for a temporary restraining order and preliminary injunction, finding that the sporting goods retailer did not establish that the agreements were enforceable because the employees were laid off without cause.
Although the court’s analysis could have ended at enforceability, it went several steps further in the analysis and considered how the circumstances of the pandemic impacted the request for an injunction. To obtain injunctive relief, the party seeking the injunction must demonstrate that it will experience greater harm if denied an injunction, than will be caused to the other party if an injunction is granted. The court considered the stay-at-home orders issued by the governor of Pennsylvania and the resulting business closures, as well as the 70-year high in the national unemployment rate. The court found that the harm that would result by granting an injunction to prevent the employees from working at their new employer would be great, leaving them without jobs and income. In contrast, the harm to the former employer was much more limited, as it had laid off the employees and it was therefore no longer expecting to profit from their sales efforts. In balancing the equities, the court did not ignore the larger issues caused by the pandemic, but instead was careful to take them into account when examining the facts of the case.
Businesses and individuals alike continue to adapt to the unprecedented challenges and distractions that arise from the COVID-19 pandemic. However, the Rullex and Schuylkill Valley Sports decisions are reminders that, when dealing with restrictive covenant agreements, attention to detail is key to ensuring that the parties have achieved a meeting of the minds no later than the first day of employment when a new job is serving as the agreement’s consideration, and that the specific terms of the agreement are important to later enforceability. If a noncompetition or non-solicitation agreement will be part of the employment relationship, employers should provide a copy well in advance, making sure that a new employee understands that execution of the agreement as written is a condition of starting employment. Employees with questions regarding the terms of a restrictive covenant agreement or a desire to negotiate its terms should handle that circumstance before their first day, to avoid any delay in beginning employment. In the event that a party seeks enforcement of a restrictive covenant agreement and litigation results, all parties are well-served to remember that judges may consider global circumstances—not just those unique to the individual parties involved—when balancing the harms that may result from a requested injunction.
For the full article, click here.
Reprinted with permission from the October 25, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
The Legal Intelligencer
(by Gary Steinbauer)
Lawsuits pending before the U.S. Court of Appeals for the D.C. Circuit are likely to shape the U.S. Environmental Protection Agency’s (EPA’s) authority to regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act (CAA). These legal challenges involve two high-profile CAA deregulatory actions: The EPA’s Affordable Clean Energy rule (“Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations,” 84 Fed. Reg. 32520 (July 8, 2019)) (ACE Rule) and the EPA’s rule eliminating the transportation and storage segments from and rescinding methane requirements in the new source performance standards for the oil and gas industry (“Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review Rule,” 85 Fed. Reg. 57,018 (Sept. 14, 2020)) (policy Amendments rule) (collectively referred to as the rules). The rules repeal and replace Obama-era GHG emission regulations promulgated pursuant to Section 111 of the CAA, 42 U.S.C. Section 7411.
Section 111 of the CAA grants the EPA authority to establish national performance standards for categories of sources that cause or significantly contribute to “air pollution which may reasonably be anticipated to endanger public health or welfare.” Section 111 of the CAA establishes separate regulatory tracks for new, reconstructed and modified sources and existing sources that would otherwise qualify as regulated new sources. For new, reconstructed, or modified sources, the CAA requires the EPA to establish new source performance standards (NSPS), representing the “best system of emission reduction” (BSER), that apply directly to the particular source category. See 42 U.S.C. Section 7411(b). For existing sources, the EPA is to establish BSER-based emission guidelines that are to be applied through state-issued performance standards. See 42 U.S.C. Section 7411(d).
- The Policy Amendments Rule—Regulating GHG Emissions From New Sources Under Section 111(b) of the CAA Background
The Policy Amendments Rule revised an Obama-era NSPS for the oil and gas industry located at 40 C.F.R. Part 60, Subparts OOOO and OOOOa. There are three inter-related components of the policy amendments rule: the removal of the transmission and storage segments of the oil and natural gas sector from the category of sources regulated in NSPS OOOO and OOOOa; the rescission of NSPS OOOOa’s methane requirements for the production and processing segments of the oil and natural gas sector (i.e., the sources remaining within the category after removing the transmission and storage segments); and a legal determination that Section 111 of the CAA must or should be interpreted to require a finding that a pollutant causes or significantly contributes to dangerous air pollution before it can be added to an existing NSPS.
The EPA’s rationale for rescinding the NSPS OOOOa methane requirements is that methane-specific controls are redundant. Notably, methane emission controls from the production and processing segments are no different than the VOC-specific controls, and the same was true for the VOC and methane emission controls that previously applied to the transmission and storage segment. The consequence of this determination is that the EPA will no longer be required to regulate methane emissions from existing sources in the industry’s production and processing segment. The EPA also justifies the rescission of methane requirements by finding that, contrary to Section 111 of the CAA, the Obama administration failed to find that methane contributes significantly to dangerous air pollution when it added the methane requirements to NSPS OOOOa in 2016.
What’s at Stake?
Opponents wasted no time filing lawsuits challenging the policy amendments rule. Environmental groups, 20 democratic states attorney general (including Pennsylvania), the District of Columbia, and two municipalities have challenged the policy amendments rule. These consolidated actions are moving forward on an expedited schedule. The D.C. Circuit has issued an order temporarily staying the policy amendments rule, while the court considers the merits of the challenges. The court was careful to note that its temporary stay order “should not be construed in any way as ruling on the merits.” The court has issued an expedited schedule for briefing on the challengers’ motions to stay and summarily vacate the Policy Amendments Rule, with final briefs due Oct. 5.
At issue in the policy amendments rule litigation is what the EPA must do to expand an NSPS source category to include sectors beyond those included in the original category of sources. In addition, the D.C. Circuit will be deciding what the EPA must do to add pollutants to those already regulated in its approximately 90 existing NSPSs. More specifically, the D.C. Circuit must determine whether Section 111 of the CAA requires the EPA to find that a proposed new pollutant, such as a GHG, significantly contributed to dangerous air pollution or merely that there is a rational basis for regulating such a pollutant. If the D.C. Circuit adopts the interpretation of Section 111 advanced by the EPA by in the policy amendments rule, it decreases the likelihood that both new and existing sources within the oil and natural gas industry sector and many other industry sectors will be subject to GHG emission standards under an NSPS.
- The ACE Rule—Regulating GHG Emissions From Existing Sources Under 111(d) of the CAA
Background
The ACE rule is comprised of three separate regulatory actions: the repeal of the Obama-era Clean Power Plan; the replacement of the CPP with the new ACE rule emission guidelines; and a set of revisions to the rules implementing Section 111(d) of the CAA. As compared to the Obama-era CPP, the ACE Rule’s definition of BSER from existing coal-fired power plants or electricity generating units (EGUs) is far more limited. The ACE rule adopts a carbon dioxide (CO2) emission rate comprised of heat rate improvement measures for existing coal-fired EGUs. States are responsible for adopting plans to establishing performance standards on a unit-by-unit basis, based on candidate technologies identified by the EPA, source-specific factors, and the remaining useful life of the source. States will have three years, or until 2022, to submit these plans to the EPA.
The BSER in the ACE rule is the product of the Trump administration’s more limited view of Section 111(d) of the CAA. More specifically, the CO2 emission rates adopted in the ACE rule apply solely within the plant sites at issue. In sharp contrast, the Obama administration interpreted its Section 111(d) more broadly, establishing emissions guidelines that would have required states to direct coal-fired EGUs offset their CO2 emissions by obtaining credits from lower-or zero-emitting power generation sources.
What’s at Stake?
Public health groups challenged the ACE rule the same day it was finalized. In addition, 22 states (including Pennsylvania), the District of Columbia, and six municipalities filed a separate challenge, and environmental groups have also joined the fray with a third challenge. These now-consolidated lawsuits are pending in the D.C. Circuit, with numerous industry groups, power companies and others intervening to support and oppose the ACE rule. Oral argument on the ACE rule challenges is scheduled for Oct. 8.
The D.C. Circuit will be tasked with interpreting the scope of the EPA’s authority to regulate GHG emissions from existing sources under 111(d). Because the U.S. Supreme Court stayed the CPP before it became effective and the lawsuits challenging the CPP were subsequently dismissed as moot after the ACE rule was promulgated, the ACE rule lawsuits will be the first time a court has ruled on the merits of the Trump and Obama administration’s competing views of the scope of Section 111(d).
Conclusion
Based on the current litigation schedules, it is expected that the D.C. Circuit will decide the fate of the rules through the lens of the Trump administration’s narrower interpretation of Section 111 of the CAA. It remains to be seen whether the ACE rule and policy amendments rule survive the D.C. Circuit Court challenges and whether the challenges will ultimately reach the Supreme Court. In the meantime, the EPA’s authority to regulate GHG emissions from stationary sources under the CAA hangs in the balance.
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Reprinted with permission from the October 6, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Smart Business
(by Sue Ostrowski featuring Carl Ronald)
When the economy started shutting down in March as a result of COVID-19 and employees began working remotely, keeping intellectual property and proprietary information safe didn’t top the list of companies’ concerns.
“Some businesses didn’t put procedures in place or have appropriate training classes because no one really thought the pandemic would extend as long as it has,” says Carl Ronald, shareholder at Babst Calland. “They didn’t instruct employees on how to identify important confidential information or safeguard certain proprietary documents when working from home.”
Smart Business spoke with Ronald about how to keep your company’s proprietary information safe when employees are working outside the office.
What approach should employers take to protect proprietary information?
There are different levels of confidentiality with different information, so I like to begin by identifying the information you have and classifying it accordingly. Some things are sensitive and you’d prefer them not to be disclosed, such as manufacturing schedules, production forecasts, or discounts for specific customers. But while those are things you don’t want your competitors to know, it isn’t going to be disastrous to the company if they are inadvertently disclosed.
Other information, such as a trade secret or the development of a new process that gives you a competitive advantage can devastate your business if it gets out. So, the first step is to identify the information you have and label it appropriately.
Second, businesses should train employees on the different categories of information and make sure they are treating each properly. Make sure everyone understands the importance of keeping information safe and reiterate basic steps to create barriers to access, such as not sharing passwords and using privacy screens when laptops are used in public.Third, identify employees who have access to confidential information and make sure they are bound by confidentiality agreements. While those may not ultimately prevent someone from disclosing, it makes it easier to claw back information that was improperly disclosed and it does strengthen your defense to allegations that you didn’t properly safeguard your trade secrets.
How does having employees working remotely change the equation?
Leadership should consider where employees are working and who may have access to proprietary information of the company. If an employee shares a computer at home with a child — whether a work-issued device or an employee-owned device — it is possible the child could accidentally install a key logger or some other malware that could compromise the security of the company’s infrastructure and information. Employees should use a dedicated work computer and family members should not use it without adequate safeguards.
For example, if an engineer is working from home and developing new technology on behalf of the company, who has access to that workspace? If the product may be patentable, it’s vital to keep that work from being disclosed, because disclosure could jeopardize a potential patent. It’s harder when employees are working remotely to monitor them, and you need to ensure information is treated appropriately.
It’s important to consistently remind employees to protect information and reinforce basics such as being cautious about printing documents, not leaving screens open and ensuring sensitive information isn’t shared on unsecured networks.
What other steps can companies take to protect IP?
Have a VPN connection to a secure server maintained by the company. If employees are working in a public place, have them use their phones to create hotspots that no one else can access. Involve your IT staff in talking about device use. And designate a point person for employees if they have questions about how a document should be treated.
Good information hygiene requires diligence on the part of both management and employees. It’s really important to consistently identify information you want to protect, determine how it should be protected and communicate that to employees, both through written guidance and virtual training.
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The Legal Intelligencer
(by John McCreary)
This is the third installment of the author’s episodic examination of the employment law implications of the legalization of medical marijuana. The first installment appeared in The Legal Intelligencer’s Feb. 9, 2017, online edition—shortly after Pennsylvania’s Medical Marijuana Act (MMA) became effective—and described some of the ambiguities of and practical difficulties with the MMA’s employment provisions. This was followed by an article in the March 21, 2019, edition of The Legal surveying how jurisprudence from other jurisdictions had addressed some of the issues identified in the first article. There now have been a few Pennsylvania decisions on the subject, which along with the courts elsewhere are slowly creating a body of law defining rights and obligations under the medical marijuana laws. From review of these recent cases we can conclude that the courts are sympathetic to medical marijuana patients, but to this point they have yet to squarely address the significant job safety issues likely to be encountered in the workplace, issues recognized in the Pennsylvania MMA as well as in the analogous legislation from other states.
Pennsylvania cases
Two Pennsylvania decisions of note provide insight into the approach of the commonwealth’s courts to the issues raised by the use of medical marijuana.
Palmiter v. Commonwealth Health Systems, No. 19-CV-1315 (Lackawanna Cty. 2019) found an implied cause of action to enforce the MMA’s antidiscrimination provision. That section of the MMA creates a protected class of employees “certified to use medical marijuana,” who are protected against employment discrimination because of such “status” as a certified user. See 35 Pa.C.S.A. Section 10231.2103(b)(1). But uniquely among the commonwealth’s employee-protective laws, the MMA does not provide statutory remedies, nor does it explicitly confer jurisdiction on the courts to address violations. This statutory insufficiency is in marked contrast to, for example, the Pennsylvania Human Relations Act, which provides a comprehensive procedure for addressing employment discrimination claims including resort to the courts, and sets forth available remedies such as reinstatement to employment, back pay, and attorney fees. The failure of the legislature to prescribe similar remedies in the MMA suggested to Commonwealth Health Systems that perhaps there was no private cause of action for employment discrimination available under Section 2103(b). The court, however, rejected the contention, ruling that Section 2103(b) implicitly creates a cause of action for employment discrimination motivated by the use of medical marijuana:
However, nothing in the MMA or the promulgated regulations vests the department or any other state agency with the authority to enforce Section 2103(b)(1) against private employers that have not chosen to voluntarily take part in that program, and those anti-discrimination provisions would be rendered meaningless if an aggrieved employee could not pursue a private cause of action and seek to recover compensatory damages from an employer that violates Section 2103(b)(1). Recognition of an implied right of action under Section 2103(b)(1) is consistent with the MMA’s stated purpose of providing safe and effective access to medical marijuana for eligible patients, while simultaneously protecting them from adverse employment treatment in furtherance of the legislative intent in Section 2103(b)(1). Therefore, the employers’ demurrer to the employee’s private cause of action based upon Section 2103(b)(1) will be overruled. See Palmiter v. Commonwealth Health Systems, slip op. at 2-3.
The Pennsylvania Supreme Court in Gass v. 52nd Judicial District, Lebanon County, No. 119 MM 2019 (June 18, 2020) decided that the MMA overrode a Lebanon County court policy prohibiting the use of medical marijuana by individuals under court supervision. The Lebanon County Probation Office policy at issue declared that the “medical marijuana card issued under the MMA is not a prescription for medication, but rather a recommendation by a physician as to a form of treatment” and concluded that because marijuana remained illegal under federal law “the court and the Probation Department should not knowingly allow violations of law to occur, the prohibition against such use is required.” Rejecting the policy in the face of the district’s argument that permitting medical marijuana use would make the supervision of probationers more difficult, a unanimous Supreme Court invoked the “remedial nature” of the MMA, which “should be accorded liberal construction,” and declared that Section 2103(a)(1), which provides that no medical marijuana patient “shall be subject to arrest, prosecution or penalty in any manner, or denied any right or privilege … solely for lawful use of medical marijuana … or for any other action taken in accordance with this act,” 35 Pa.C.S.A. Section 0231.2103(a), actually meant what it said. Ultimately, the court concluded that the potential problems caused by the MMA were beyond its authority to remedy:
As we have observed previously: “The concern that unintended consequences may unfold are prevalent relative to the promulgation of experimental, remedial legislation.” See Williams v. City of Philadelphia, 647 Pa. 126, 150, 188 A.3d 421, 436 (2018). Nevertheless, “where the language of the governing statute is clear (or clear enough) … the solution is legislative—and not judicial—adjustment.”
Together these two decisions signal that the Pennsylvania courts will likely embrace a “liberal construction” of the MMA, one that favors medical marijuana patients attempting to overcome resistance to marijuana use by their employers. A cautious, proactive approach to medical marijuana employment issues would therefore seem to be warranted.
Cases From elsewhere
The trend of liberal construction is also seen in decisions from other jurisdictions. The New Jersey Supreme Court earlier this year ruled that the state’s Compassionate Use Medical Marijuana Act (Compassionate Use Act), N.J.S.A. 24:6I-1 to -16 must be read in para materia with the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, holding that when medical marijuana is prescribed for a condition qualifying as a disability under the LAD, a New Jersey employer has a duty to reasonably accommodate such marijuana use. See Wild v. Carriage Funeral Holdings, 241 N.J. 285, 227 A.3d 1206 (2020). New Jersey thus joins Massachusetts in recognizing that prohibitions against disability discrimination require employers to consider whether prescribed marijuana use is a reasonable accommodation under state disability laws. See Barbuto v. Advantage Sales & Marketing, 477 Mass. 456, 78 N.E.3d 37 (2017), discussed in the 2019 installment. And as also discussed in the 2019 piece, it is likely that the Pennsylvania courts will come to the same decision when presented with the issue.
In Whitmire v. Wal-Mart Stores, 359 F.Supp.3d 761 (D. Ariz. 2019) the court addressed an employer’s affirmative defense under Arizona’s Medical Marijuana Act (AMMA). In addition to holding as a matter of first impression that AMMA’s anti-discrimination provision created a private right of action for alleged violations, the court sua sponte issued summary judgment in favor of the plaintiff on that claim. The court’s reasoning presents a cautionary tale for employers defending such claims. AMMA provides that “[A]n employer may not discriminate against a person in … termination … based upon … a registered qualifying patient’s positive drug test for marijuana components or metabolites, unless the patient used, possessed or was impaired by marijuana on the premises of the place of employment or during the hours of employment.” The plaintiff suffered an injury at work and pursuant to Wal-Mart policy underwent a drug screen. She tested positive for marijuana, but explained in mitigation that she was a registered medical marijuana patient. Wal-Mart nevertheless terminated her employment, contending that the high level of marijuana metabolites discovered by the test (more than 1000 ng/ml of urine) indicated impairment at work. The court found as a matter of law that Wal-Mart could not demonstrate impairment without “expert testimony establishing that the level of metabolites present in the plaintiff’s drug screen demonstrates that marijuana was present in her system in a sufficient concentration to cause impairment.” Thus, “in the absence of any expert testimony or evidence demonstrating impairment, the court will, pursuant to Rule 56(f), sua sponte grant summary judgment in part to the plaintiff solely on the question of liability on the U.S. Court of Appeals for the Second Count of her complaint alleging discrimination under the AMMA.”
The Whitmire decision highlights the importance of establishing an admissible evidentiary basis for the affirmative defenses available to employers under Pennsylvania’s MMA. Recall that the MMA contains provisions permitting employers to exclude employees who are “under the influence” from “life threatening” tasks and duties “which could result in a public health or safety risk.” It is therefore essential that employers relying on these “safety sensitive” defenses present expert evidence about impairment, or risk having their defense rejected out of hand.
Although the reported cases in Pennsylvania and elsewhere certainly seem plaintiff-friendly, plaintiffs do not always win. Lambdin v. Marriott Resorts Hospitality, (D. Hawaii 2017) demonstrates the importance of examining the bona fides of a plaintiff’s claim. After the plaintiff suffered a panic attack at work that necessitated his transportation to the hospital, he was required under Marriott’s policy to undergo a drug screen, which was positive for marijuana. Marriott policy required termination for a positive drug screen administered following an on-the-job accident. The plaintiff’s reliance on Hawaii’s medical marijuana law in opposition to his termination failed because at the time of the drug test he had only applied for certification under the law; it had not yet been issued and he therefore failed “to show that he was lawfully using marijuana pursuant to Hawaii state law.” The court granted summary judgment to Marriott on this basis.
Conclusion
To date, the courts of the commonwealth and elsewhere have interpreted medical marijuana laws in a manner friendly to medical marijuana patients, but have yet to address the legitimate safety issues presented by their presence in the workplace. It can be safely predicted, however, given what our Supreme Court has acknowledged is the remedial nature of the MMA and the Whitmire court’s decision that employers that intend to defend a claim on the basis of safety, impairment or “under the influence” will be required to provide more than anecdotal evidence in support of the defense. Indeed, it is likely that such defenses will require expert testimony.
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Reprinted with permission from the September 17, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
The PIOGA Press
(by Julie Domike, Michael Winek, Gina Falaschi and Gary Steinbauer)
On August 13, the U.S. Environmental Protection issued two prepublication final rules related to the New Source Performance Standards for the Crude Oil and Natural Gas Industry at 40 C.F.R. Part 60, Subparts OOOO and OOOOa (NSPS). The two rules―the “policy amendments” and “technical amendments”―arise from EPA’s review of the NSPS pursuant to President Trump’s 2017 Executive Order 13782, “Promoting Energy Independence and Economic Growth,” which directs the agency to review existing regulations that potentially “burden the development or use of domestically produced energy resources” and to revise or rescind regulatory requirements if appropriate. The rules become effective 60 days after publication in the Federal Register.
Policy amendments
The agency’s policy amendments revise NSPS Subpart OOOO (promulgated in 2012), regulating volatile organic compound (VOC) emissions from certain new, reconstructed, and modified sources in the oil and natural gas industry, and NSPS Subpart OOOOa (promulgated in 2016), regulating VOC and methane emissions from specified new, reconstructed, and modified sources in the oil and gas industry.[1] This rule provides that:
(1) The transmission and storage segments are no longer included in any source category regulated by the NSPS. These excluded emissions sources include transmission compressor stations, pneumatic controllers and underground storage vessels. To regulate a source category under the NSPS, the agency must first make a finding that the emissions of air pollutants from that source cause or contribute significantly to air pollution. These segments were not included in the original NSPS, and no such finding was made when these segments were added to the NSPS in the 2012 and 2016 final rules, making the regulation of the segments improper under the Clean Air Act (CAA). Accordingly, EPA amended the NSPS to remove these sources fromthe source category and rescinded the NSPS (including both the VOC and methane requirements) applicable to them.
(2) Methane emission limits for the production and processing segments are rescinded. Sources in the production and processing segments include well completions, pneumatic pumps, pneumatic controllers, gathering and boosting compressors, natural gas processing plants, fugitive emissions and storage tanks. EPA found that because the controls to reduce VOC emissions for these segments also reduce methane, separate methane limitations for these segments of the industry are redundant. EPA determined that the rescission of these limits will not affect methane emissions from the production and processing segments.
(3) Methane emission limits from existing affected sources in the oil and natural gas production and processing segments will not be required by Section 111(d) of the CAA. With rescission of the methane limits for the production and processing segments, the Agency is no longer required to issue existing source emission standards in those segments of the oil and natural gas source category pursuant to Section 111(d) of the CAA. In addition, EPA has interpreted CAA Section 111(d) to exclude VOCs from the requirement to address emissions from existing sources under this section because the section only applies to air pollutants for which air quality criteria have not been issued under CAA Section 108. VOCs, as precursor to particulate matter and ozone, are indirectly regulated as a criteria pollutant under CAA Section 108.
(4) EPA finalized its legal position that Section 111 of the CAA requires it to determine that a specific pollutant causes or contributes significantly to dangerous air pollution before the pollutant is regulated in an NSPS, unless the agency addressed the pollutant when it initially regulated the source category. As an alternative ground for rescinding the methane regulations, EPA found that its significant contribution finding for methane in the 2016 rule did not meet the statutory standard. While the policy amendments rescind federal standards, the final rule did not withdraw the 2016 Control Techniques Guidelines for the Oil and Natural Gas Industry (CTG), which provide reasonably available control technology (RACT) requirements for VOC emissions from existing oil and gas sources. Section 182 of the CAA requires states to revise their State Implementation Plans (SIP) to include RACT for sources of VOC emissions covered by a CTG if classified as moderate, serious, severe, or extreme nonattainment for ozone.[2] EPA proposed withdrawing the CTG in March 2018 but has not taken final action, meaning that states, including Pennsylvania, must amend their SIPs.
Technical amendments
In a separate rule, the agency promulgated technical amendments revising numerous substantive requirements of NSPS OOOOa. EPA issued the final technical amendments after responding to more than 500,000 comments on the proposed technical amendments published in September 2018. A summary of notable revisions is provided below:
Fugitive emissions monitoring at well sites and compressor stations
- As compared to previous quarterly monitoring requirements, semiannual fugitive emissions monitoring is required for compressor stations.
- Semiannual fugitive emissions monitoring is required for non-low production well sites (i.e., greater than or equal to 15 barrels of oil equivalent per day for the first 30 days of production).
- Fugitive emission monitoring requirements do not apply at low production well sites (i.e., less than 15 barrels of oil equivalent per day for the first 30 days of production).
- Initial monitoring must be conducted within 90, as opposed to 60, days after the startup of production.
- A new definition of “modification” for an existing source separate tank battery surface site clarifies the types of changes that trigger regulatory requirements.
Storage vessels
- Potential VOC emissions across certain controlled and manifolded storage vessels may be averaged to determine applicability.
Onshore natural gas processing plants
- The definition of “capital expenditure” uses the Consumer Price Index to calculate the percent of the replacement cost for purposes of determining whether there is a modification triggering the equipment leak standards.
- Equipment in VOC service for less than 300 hours per year is exempt from monitoring requirements.
- The initial compliance date applies 180 days after initial startup.
Well completions
- Nearby, off-site separators, including production separators, may be used to control emissions during the flowback period, and emissions during certain preflowback steps need not be controlled.
Pneumatic pumps
- The technical infeasibility exemption for pneumatic pumps is expanded to apply at all well sites, not merely greenfield sites.
Closed vent systems (CVS)
- Pneumatic pump CVS may be monitored for “no detectable emissions” using monthly audio, visual, and olfactory (AVO) monitoring or using optical gas imagery (OGI) at specified frequencies, in addition to annual Method 21 monitoring option.
- Storage tank CVS may be monitored for “no detectable emissions” using OGI at specified frequencies, in addition to annual Method 21 and monthly AVO monitoring options.
Alternative means of emissions limitation (AMEL)
- An AMEL satisfying certain criteria may be granted after notice, following an opportunity for a public hearing, “based on the Administrator’s judgment.”
- For certain individual well sites and/or compressor stations, EPA has adopted alternative fugitive emissions programs as AMEL that have been established in specific states, including Pennsylvania and Ohio.
These are some of the many revisions included in the 235-page pre-publication version of the technical amendments. The less onerous fugitive emissions monitoring requirements and other changes offering additional compliance options and flexibility included in the technical amendments are good news for many oil and natural gas producers and processors, particularly smaller operators. The changes will ease compliance burdens, and EPA estimates that the technical amendments will save the oil and natural gas industry $100 million in compliance costs each year.
Conclusion
Lawsuits challenging the rules are likely, with lawsuits challenging the policy amendments almost certain to be filed. State attorneys general and environmental groups have vowed to challenge one or both rules. The oil and natural gas industry itself is divided on the policy amendments in particular, with some large energy companies voicing opposition to EPA’s removal of methane from the NSPS. Other oil and gas producers have provided their full support for these changes, including those related to methane. Litigation and the November election may affect the future of these rules.
For questions about the Rules or air emissions regulations for the oil and natural gas industry generally, please contact Julie R. Domike at 202-853-3453 or jdomike@babstcalland.com; Michael H. Winek at 412-394-6538 or mwinek@babstcalland.com; Gina N. Falaschi at 202-853-3483 or gfalaschi@babstcalland.com; or Gary E. Steinbauer at 412-394-6590 or gsteinbauer@babstcalland.com.
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The Legal Intelligencer
(by Blaine Lucas and Anna Skipper)
Most lawsuits settle before disposition by the courts. Any settlement agreement is just that, an agreement between the parties, which to be enforceable must possess all the elements of a valid contract—offer, acceptance, and consideration or a meeting of the minds. In Pennsylvania, when one of the parties to a settlement agreement is a public entity, additional considerations come into play, most notably the Sunshine Act, 65 Pa. C.S. Sections 701-716.
Enacted by the General Assembly to facilitate more transparent means of governmental decision-making, the Sunshine Act has existed in some form since 1974, and places restraints upon a local agency’s ability to enter into contracts, including settlement agreements. Specifically, the Sunshine Act requires that all “official action,” including final decisions on the creation of liability by contract or the adjudication of rights, duties and responsibilities, must be taken at a duly advertised meeting open to the public. On the other hand, the Sunshine Act permits “deliberations” in six enumerated categories to take place in private “executive session.” One permissible reason to deliberate in private is to consult with the agency’s attorney regarding information or strategy in connection with litigation or with issues on which identifiable complaints are expected to be filed. However, any official action arising out of deliberations in executive session still must be taken at an open meeting. Thus, even if settlement of a lawsuit is discussed in executive session, it still must be voted upon at a public meeting subject to all of the Sunshine Act’s requirements.
Recently, the Pennsylvania Commonwealth Court considered the fate of a settlement agreement that was agreed upon by a public agency in executive session, but never voted upon at a public meeting. In Baribault v. Zoning Hearing Board of Haverford Township, No. 1211 C.D. 2019, (Pa. Commw. Ct. Jun. 12, 2020) the Court held that such an agreement was enforceable, despite this failure.
In Baribault, the parties had been in dispute since 1993, and had already gone through extensive litigation and settlement discussions. The Baribaults (the landowners) owned five properties, which they leased to Villanova University students. In 1989, Haverford Township (the township) amended its zoning ordinance and Home Rule Charter (the township charter) to define student housing, and to permit that use only by special exception. When the township zoning officer denied the landowners’ applications to continue the use of the properties as student housing rentals, the landowners sought a declaration from the Township Zoning Hearing Board (the ZHB) that their continued use of the properties in that manner constituted a lawful nonconforming use, and challenged the constitutionality of the amendments. The ZHB denied relief without opinion, and the Landowners filed five separate land use appeals with the Court of Common Pleas of Delaware County (the trial court). The trial court issued a stay order with regard to one property, although the parties treated it as though it applied to all five. Consequently, for the next 25 years, the Landowners were permitted to rent all five properties to students without additional proceedings or the imposition of fines or penalties.
In 2018, the parties returned to the negotiating table, and entered into settlement discussions to resolve all five outstanding appeals. In August, 2018, the trial court was advised that the parties (consisting of the landowners, the township, and the ZHB), had reached a settlement agreement in which the landowners would relinquish their right to rent two of the five properties to students in exchange for the designation of the remaining properties as nonconforming uses and special exceptions.
The parties all agreed that the township commissioners (the commissioners) had approved the terms of the agreement during an executive session of their regularly scheduled meeting on Oct. 9, 2018. At the township solicitor’s request, the landowners’ counsel drafted a settlement agreement and release (the agreement), which the commissioners reviewed and approved in a second executive session held on Nov. 13, 2018. In December, 2018, the landowners advised the trial court that the township had approved the agreement, and they were waiting on the ZHB’s approval, and the township solicitor confirmed this via email to the trial court. In February 2019, the agreement was circulated to the parties by the landowners, who signed it along with the ZHB through its legal counsel. The township never executed the agreement.
When the landowners subsequently filed a motion to enforce the agreement, the township alleged that there was never a valid agreement to enforce. The township did not dispute any of the facts alleged, but argued that any action taken by the commissioners was a nullity because they never approved or disapproved the proposed settlement terms in an official action at a public meeting, as required under the Sunshine Act as well as the township charter. Because there was no public vote, they argued there was no lawful acceptance of the terms of the settlement, and thus no settlement agreement to enforce.
The trial court consolidated the five appeals, and, in March 2019, granted the landowners’ motion, entering an order enforcing the terms of the agreement. The township appealed, contending that the trial court erred by concluding that the commissioners could approve a settlement agreement, or that the township solicitor could do so on their behalf, when the commissioners did not take official action on the settlement terms at a public meeting. The Commonwealth Court affirmed in a precedential opinion on July 13.
In its plenary review, the court noted that the enforceability of a settlement agreement is determined according to principals of contract law. The court reasoned that there must have been an offer, acceptance, and consideration or a meeting of the minds, and that oral settlement agreements may likewise be enforceable and legally binding. Reasoning that the commissioners had conveyed approval of the settlement, both to the landowners as well as to the trial court through counsel, the court found that there was a meeting of the minds regarding the material terms of the settlement that expressed the intention of the parties to settle the case and thus was valid and binding, despite the absence of any writing or formality.
Turning then to the unique issues surrounding contracting with public entities, the court considered whether the commissioners could agree to the settlement agreement even when they failed to comply with the requirements of the Sunshine Act and township charter. The court found that the commissioners failure to comply with the requirements of the Sunshine Act did not warrant the automatic nullification of the agreement. The court cited to Section 713 of the Sunshine Act, which states that if a court determines that the meeting did not meet the requirements of the act, it may in its discretion, find that any or all official action taken at the meeting is invalid, thus concluding that invalidation of official action taken in violation of the Sunshine Act is not axiomatic, but discretionary.
In invoking this discretion, the court relied upon prior Commonwealth Court decisions in which public agency decisions or agreements made in private were enforced. The court cited to Borough of East McKeesport v. Special/Temporary Civil Service Commission of Borough of East McKeesport, 942 A.2d 274, 280 (Pa. Commw. Ct. 2008) which held that a special commission’s decision to reinstate the borough police captain would not be invalidated for lack of compliance with the notice requirements of the Sunshine Act, and Keenheel v. Pennsylvania Securities Commission (PSC), 579 A.2d 1358, 1361 (Pa. Commw. Ct. 1990), in which the Securities Commission voted in executive session to accept a settlement agreement in violation of an earlier version of the Sunshine Act, and the court refused to aside the agreement.
Due to the protracted history of the case, the township solicitor’s representations to opposing counsel and the trial court regarding the status of the settlement, and the landowners’ good faith reliance on the settlement, the court held that the trial court did not abuse its discretion by enforcing the agreement and affirmed. As stated by the court “to conclude otherwise and allow the Township to unilaterally nullify the agreement under the guise of a Sunshine Act violation would perpetrate an injustice upon the landowners who have reasonably relied on the township’s representation regarding the settlement agreement.”
The court concluded by briefly disposing of the township’s argument that the township solicitor was not authorized to bind the township to the agreement. The court noted that before an attorney may agree to a settlement, he must have actual authority to settle from his clients, and here the solicitor’s authority was clearly expressed by the commissioners, as evidenced by two emails from the solicitor confirming that the commissioners had approved the settlement and agreed to the proposed language. Thus, the court found that the solicitor did not act on its own by entering the agreement, but was duly authorized by his client to do so.
The Commonwealth Court’s decision in Baribault has made it clear that a public agency cannot avoid its obligations under a settlement agreement based on its own failure to comply with the requirements of the Sunshine Act. This being said, it is in the best interest of both private parties and the governmental agency with which they are litigating to assure that any settlement agreement is approved at a public meeting, so as to avoid situations like that which arose in Baribault.
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Reprinted with permission from the September 4, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.