Law 360
(by Mike Curley)
Babst Calland has added two shareholders and an associate to its practice, bolstering its roster in support of emerging technologies and new businesses.
The Pittsburgh-based firm announced Tuesday that Justine M. Kasznica and Carl A. Ronald joined as shareholders and Michael E. Fink joined as an associate in its Corporate and Commercial Group.
“The addition of these technology and startup-focused attorneys supports the firm’s strategy to expand its multidisciplinary team to serve the needs of clients developing new technologies, new companies and new ideas,” Managing Shareholder…
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Pittsburgh Business Times
(by Patty Tascarella)
Continuing to add lawyers focused on technology and early-stage companies, Babst Calland on Monday confirmed three hires in Pittsburgh, including two from the local office of a Philadelphia firm.
Justine Kasznica and Carl Ronald both joined Babst Calland as shareholders. They previously had worked for Baer Crossey McDemus and Kasznica had led the Philadelphia-based firm’s Pittsburgh office for the past year.
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PGHTECH FUSE
Marcellus, Utica Shale Plays Account for 41 Percent of U.S. Natural Gas Output
The law firm of Babst Calland today released its annual energy industry report: The 2018 Babst Calland Report – Appalachian Basin Oil & Gas Industry: Forging Ahead Despite Obstacles; Legal and Regulatory Perspective for Producers and Midstream Operators. This annual review of shale gas development activity in the Appalachian Basin acknowledges an ongoing rebound despite obstacles presented by regulatory agencies, the courts, activists, and the market. To request a copy of the Report, contact info@babstcalland.com.
In this Report, Babst Calland attorneys provide perspective on issues, challenges, opportunities and recent developments in the Appalachian Basin and beyond relevant to producers and operators.
According to the U.S. Energy Information Administration’s May 2018 report, the Appalachian Marcellus and Utica shale plays account for more than 40 percent of U.S. natural gas output, compared to only three percent a decade ago. Since then, the Appalachian Basin has become recognized in the U.S. and around the world as a major source of natural gas and natural gas liquids.
The industry has been forging ahead amidst relatively low natural gas prices, infrastructure building, acreage rationalization and drilling plans that align with business expectations. The policy landscape continues to evolve with ever-changing federal and state environmental and safety regulations and tax structures along with a patchwork of local government requirements across the multi-state region.
Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “This Report provides perspective on the challenges and opportunities of a shale gas industry in the Appalachian Basin that continues to enjoy a modest rebound. While more business-friendly policies and procedures are emanating from Washington, D.C., threats of trade wars are raising concerns about the U.S. energy industry’s ability to fully capitalize on planned exports to foreign markets.”
He added, “In a sustaining low price natural gas environment, operators in the Appalachian Basin continue to reduce operating costs and maximize capital and operating budgets by increasing efficiencies, employing new technologies and consolidating operations. As a result, drilling activity and production continue to be strong compared to a year or two ago. All indicators suggest continued growth prospects for Appalachian Basin shale despite the lingering obstacles facing the industry.”
The 84-page Report contains five sections, highlighted below, each addressing key challenges for oil and gas producers and midstream operators.
Business Outlook: Growth Prospects Continue
The U.S. Energy Information Administration predicts that U.S. energy consumption and production is most likely set for modest growth over the next 30 years. Henry Hub spot prices for natural gas rebounded modestly in 2017 and have tracked reasonably close in the first half of 2018. Given relatively-flat price projections, Appalachian operators’ ability to keep costs down, improve efficiency, and pursue attractive transactions remains critical. The energy industry turnaround is evidenced by the significant slowing of bankruptcy filings, from 70 in 2016 to just 24 in 2017.
Oil and Gas Regulations Continue to Evolve, Reform and Persist
Federal and state courts, legislatures and regulatory agencies are addressing various oil and gas issues and reforms. Pennsylvania’s Environmental Rights Amendment (ERA) poses a new and significant legal and novel constitutional issue for operators in the Commonwealth. Recent court challenges include a sharp rise in the total dollar amount of assessed penalties based on how PADEP calculates fines and civil penalties. West Virginia’s Governor Jim Justice issued a series of executive orders that seek broad regulatory reform.
Pipeline Outlook Positive, But More Public Pressure
The pipeline industry is continuing to experience increased scrutiny from regulators at all levels of government. Much of this scrutiny is being driven by public interest groups and environmental advocacy organizations becoming more active in the pipeline permitting process and resorting with greater frequency to litigation as a means of advancing policy initiatives that are not favorable to the energy industry. The Pipeline and Hazardous Materials Safety Administration (PHMSA) continued to make progress in finalizing the Gas Transmission and Gathering Final Rule with the intention to divide the content of the proposed rule into three separate final rules with the hope of issuing the rules by the end of 2019.
Local Government Regulation Continues to Spawn Debate and Legal Challenges
In Robinson Township, the Pennsylvania Supreme Court invalidated two sections of Pennsylvania’s updated Oil and Gas Act (Act 13) that limited the authority of local governments to regulate oil and gas operations. This was based on a reinvigorated interpretation and application of the Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA). On June 1, 2018, the PA Supreme Court published its long-awaited Gorsline opinion. In a 4-3 decision, the majority reversed the Commonwealth Court’s decision affirming the granting of a conditional use approval for an unconventional natural gas well pad. West Virginia’s Lincoln and Fayette counties have enacted forms of “nuisance ordinances” that could potentially be used to target oil and gas related operations. As Ohio Courts heard and decided several cases regarding the extent of local authority to regulate oil and gas development, anti-fracking groups pursued an alternative route to regulation through local ballot initiatives.
Litigation Trends
West Virginia continues to see private nuisance suits filed against both upstream and midstream companies. In the last few years, civil suit filings alleging property contamination and nuisance claims from unconventional natural gas development have diminished significantly in Pennsylvania. Articles related to claims of alleged health effects from unconventional natural gas development continue to be published in scientific journals and in the media in even greater numbers, resulting in increasing controversy and polarization.
Many of the current opportunities and challenges facing the industry are described in the pages of this Report. Babst Calland’s multidisciplinary team of energy attorneys have chronicled the legal and regulatory landscape to help inform the energy industry operating in the Appalachian Basin.
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Pittsburgh Business Times
(by Mark Mensheha)
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PGHTECH FUSE
Babst Calland announced the addition of William L. Godfrey as Director, Mobility, Automation and Safety. The Firm is expanding its capabilities to support the developing needs of companies with emerging technologies. It provides strategic leadership with business and legal advice for manufacturers, suppliers, start-ups, technology companies and government entities in the full-spectrum of transportation regulatory, safety, product quality, and automation matters, including those related to automated/autonomous driving systems.
“Will Godfrey’s expertise and creativity deepens our unique vision to deliver full-stack solutions to clients’ problems that integrate technical and engineering know-how with legal insight to expand business opportunities,” said Tim Goodman, Chair of Babst Calland’s Mobility, Transport and Safety Group, and former National Highway Traffic Safety Administration Assistant Chief Counsel for Enforcement and Federal Senior Executive.
A former General Motors vehicle engineer, production manager and senior U.S. federal regulatory chief at the National Highway Traffic Safety Administration (NHTSA)/U.S. Department of Transportation (DOT), Will Godfrey will assist clients in achieving their business goals and navigating obstacles by applying a current and detailed understanding of the federal government’s approach to transportation safety regulation (particularly motor vehicles), including its programs, processes, and personnel.
Godfrey spent nearly a decade at NHTSA/DOT, where he served in various leadership capacities. Among other things, as NHTSA’s Trends and Analysis Division Chief, he led the oversight, analysis, and investigation of more than 1,100 vehicle, equipment, tire, motorcycle, and child car seat manufacturers globally, including TREAD Act/Early Warning Reporting Program and the integration of new, data-driven techniques. As a senior policy advisor to the NHTSA Administrator, he led the agency’s comprehensive reorganization of the NHTSA Office of Defects Investigation (ODI).
“Will Godfrey is well-regarded and uniquely qualified to serve clients with emerging technologies as a senior technical and strategic advisor, integrated with our best in class legal and technical team,” said Donald C. Bluedorn II, Managing Shareholder of Babst Calland. “We’re thrilled to have him join us.”
Prior to his federal service, Godfrey worked at General Motors as a vehicle engineer and production manager for various vehicle and equipment platforms. Among other things, he led programs in quality control, research and development, production, distribution, licensing, sales and service.
Godfrey received his Bachelor of Science in Automotive Engineering and Technology from Southern Illinois University. He earned a certificate from the Graduate School USA, Washington D.C. in the Federal Senior Executive Leadership Development Program in Management.
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Pittsburgh Business Times
(by Patty Tascarella)
Lawyers Journal
(by Blaine A. Lucas and Amie L. Courtney)
In 2008, Pennsylvania enacted the current Right-to-Know Law with the intent to promote transparency between the public and state and local agencies by establishing that records held by state and local agencies are accessible to the public, unless subject to an exception.
One exception is receiving increased scrutiny due to proposals submitted to Amazon by Pittsburgh and Allegheny County, through a company created by the city and county – PGHQ2, LLC – for the location of the company’s second headquarters. The exception is for trade secrets and confidential proprietary information. Records subject to this exception must involve documents that have been protected, subject to secrecy, the release of which would affect the competitive position of the owner of such records.
Numerous news outlets submitted requests to the city and county for a copy of the proposal. Those requests were all denied, but the state Office of Open Records reversed on appeal. The Office of Open Records found that the proposal was not a trade secret because the city and county were not engaged in any business or commerce that could be impacted by the release of the information. Additionally, the records were not confidential proprietary information because the information was submitted, not received, by the government, as required by the definition in the Right-to-Know Law. PGHQ2 submitted the proposal to Amazon, a factor dismissed by the Office of Open Records because the city and county claimed the proposal contained confidential proprietary information of the governmental agencies and because they found PGHQ2 to be an alter ego of the city and county. The city and county recently appealed the decisions to the Allegheny County Court of Common Pleas, and the requested records have not yet been released. However, based on the Office of Open Records decisions, the Amazon HQ2 proposal is not protected as a trade secret or confidential proprietary information due to the position of the city and county as a public entity.
Although public entities may have limited protections under the trade secret and confidential proprietary information exception, private third parties engaged in work with governmental bodies and agencies can use this exception to protect their information that, when turned over to a public entity, would otherwise become a public record. Private companies must take certain steps to avail themselves of the protections afforded to trade secrets and confidential proprietary information, and state and local agencies must take certain steps when receiving a record request for third-party records potentially protected by the exception.
The first step any private company must take to protect its information is to include a written statement with any records provided to a public agency, signed by a company representative, stating that the record contains confidential information. If such a statement is provided, then the public agency is required to notify the third-party when it receives a request for the information, allowing the third-party an opportunity to provide input on the potential release of the information.
Inclusion of such a statement requires the public entity to contact the third party prior to responding to the request, but it does not guarantee the protections of the trade secret and confidential proprietary information exception. Courts have analyzed the exception and have set out factors to determine whether information may be a trade secret. Those factors include: (1) the extent to which the information is known outside of the business; (2) the extent to which the information is known by employees and others in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to the business and to competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Confidential proprietary information is defined by the Right-to-Know Act as information received by an agency: (1) which is privileged or confidential; and (2) the disclosure of which would cause substantial harm to the competitive position of the person who submitted the information.
Third parties should have internal policies in place that will provide the public agency with evidence to support any conclusions that the records contain confidential information. Although state and local agencies may be limited in protecting records generated by themselves under the trade secret and confidential proprietary information exception, those same agencies must be aware of the steps they are required to take before releasing any potential third-party confidential information in their possession.
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Pittsburgh Business Times
(by Paul J. Gough)
Under the 2011 Act 13 that established the impact fee, stripper wells are exempt from the impact fee.
The collection of the shale impact fee — the hundreds of millions of dollars that go to local, county and state coffers due to Marcellus and Utica drilling — is itself being impacted by an estimated $6 million due to a legal spat between drillers and the Pennsylvania Public Utility Commission.
The issue is over so-called stripper wells, which are unconventional natural gas wells that fall under a threshold of less than 90,000 cubic feet per day. Under the 2011 Act 13 that established the impact fee, stripper wells are exempt from the impact fee. One driller, Snyder Bros. Inc., and the Pennsylvania Independent Oil & Gas Association (PIOGA) challenged in Commonwealth Court the PUC’s decision denying exemptions; they received a favorable ruling in 2017 but it is on appeal with the Pennsylvania Supreme Court.
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The PIOGA Press
(by Kevin J. Garber and Jean M. Mosites)
The Pennsylvania Environmental Hearing Board has issued several adjudications and opinions regarding challenges brought under Pennsylvania’s Environmental Rights Amendment (ERA) since the Pennsylvania Supreme Court decision in Pennsylvania Environmental Defense Foundation v. Commonwealth (PEDF) last June. PEDF set aside the long-standing three-part test in Payne v. Kassab used to analyze claims brought under the ERA and replaced it with a standard based on the text of the ERA and principles of Pennsylvania trust law. The PEDF decision addressed the allocation and use of royalties generated by leasing publicly owned oil and gas interests and did not provide a definitive test to be applied in the permitting context.
The board has addressed the obligations imposed by the ERA in Friends of Lackawanna v. DEP and Keystone Sanitary Landfill, (FOL), Center for Coalfield Justice and Sierra Club v. DEP, (CCJ) and Center for Coalfield Justice and Sierra Club v. DEP. The most recent opinion, issued on May 11 in the Delaware Riverkeeper case, reflects a continuation of the analysis provided by these earlier decisions.
Delaware Riverkeeper Network v. DEP
In The Delaware Riverkeeper, et. al. v. DEP and R.E. Gas Development, LLC the board upheld well permits and renewals issued by the Department of Environmental Protection in an appeal based in part on the ERA. Two citizens groups, the Delaware Riverkeeper and the Clean Air Council, along with several residents of Middlesex Township (collectively, Delaware Riverkeeper), appealed unconventional gas well permits and subsequent renewals issued to R.E. Gas Development, LLC (Rex). Among other arguments, Delaware Riverkeeper argued that the department violated its constitutional obligations under the ERA.
The department reviewed whether the permit applications complied with Act 13 and other relevant statutes and regulations, considered objections from a group of concerned citizens, Mars Parent Group, and held a Section 3251(a) conference with Mars Parent Group and Rex. Rex agreed to take several actions to address the objections, and the department issued the permits on September 12, 2014, with special conditions to address the public concerns. After Rex applied to renew the permits in August 2015, the department became aware of potential abandoned wells near the proposed wellsite and requested additional information from Rex. Rex provided a report summarizing its investigation of abandoned wells, and the department renewed the permits.
Analysis
Writing for the board, Judge Steven Beckman reiterated the standard for analyzing ERA challenges to permit actions set out in CCJ and FOL. According to these precedents, the board must first determine whether the department considered the environmental effects of its permitting action and, second, whether the department correctly concluded that its action will not result in unreasonable degradation, diminution, depletion or deterioration of the environment. Finally, the board must determine whether the department satisfied its trustee duties of prudence, loyalty and impartiality toward the beneficiaries of the natural resources affected by the permitting decision.
The Delaware Riverkeeper argued the department’s review of Rex’s application fell short of this standard of review because the department did not properly consider the environmental effects of drilling authorized by the permits. The board disagreed and also clarified that the:
discussion in CCJ was not intended to suggest that there was some minimum requirement under Article 1, Section 27 governing the amount of review time that must be undertaken by the Department and the amount of information that must be considered by the Department. The Department’s consideration of the environmental effect of its permitting actions is, we believe, intended to be a flexible standard based on the nature of the activity and the potential impact of the activity on the environmental interests protected under Article 1, Section 27.
The board stated that “[t]he fact that the consideration did not involve a full blown risk assessment and was not as extensive as Delaware Riverkeeper believes was necessary does not, in our opinion, violate the requirements of Article 1, Section 27.”
Finally, the board addressed the department’s trustee duties under the ERA, finding the department’s pre-action analysis to be consistent with its duties of prudence and impartiality. The board stated:
Our understanding of the trustee responsibility does not require the Department to deny permits to any and all activity that will negatively impact the public natural resources and/or the people who use those resources. To hold otherwise would essentially prevent any permitting activity since it is nigh impossible to have development without some environmental impact.
The Delaware Riverkeeper also argued the department breached its duty of impartiality by “treating this wellsite as if it were no different than any other wellsite” because it failed to consider the children in proximity to the wellsite and the local air quality that was already degraded. The board found the department did not violate its duty of impartiality because it considered the interests of various beneficiaries of the public natural resources near the proposed site.
Siri Lawson v. DEP and Hydro Transport LLC
On May 17, the board dismissed an appeal of a brine spreading plan approval as moot. Lawson v. DEP, EHB Dkt. No. 2017-051 B (May 17, 2018). Siri Lawson, a township resident, appealed the department’s approval of Hydro Transport LLC’s plan to spread brine from conventional oil and gas operations for dust control and stabilization on dirt roads in Sugar Grove and Farmington townships in Warren County. Among her arguments, Lawson claimed the department violated the ERA when it failed to impose adequate operating requirements to protect the waters or the air of the Commonwealth. Both Lawson and Hydro Transport filed motions for summary judgment, including arguments related to the applicability of and obligations under the ERA.
The May 17 decision, however, dismissed the appeal as moot without addressing the legal merits of the appeal because the approval had expired at the end of 2017. The board found that there was no effective relief it could grant and that this type of approval was not capable of repetition. In its motion to dismiss, the department repudiated its authority to issue brine spreading approvals to haulers such as Hydro Trans – port. The board declined to reach or opine on the department’s authority under the Solid Waste Management Act or otherwise.
What’s next?
In Delaware Riverkeeper, the board followed the ERA analytical approach taken in CCJ and FOL, examining the record to evaluate both the department’s consideration of the effect of the permitted activity on public natural resources, as well as the actual or potential adverse effects of the permitted activity on the environment. Consistent with board decisions issued before PEDF, as well as the 2013 Pennsylvania Supreme Court decision in Robinson Township v. Commonwealth, the board’s opinion reaffirms that the ERA “should not be read as preventing all impacts to the environment nor does it call for a stagnant landscape.”
Several other ERA questions remain pending before the board.
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Pittsburgh Business Times
(by Patty Tascarella)
Pittsburgh’s seventh-largest law firm, best known for its energy and environmental practices, is preparing for a potential surge in work linked to advancements with autonomous vehicles.
Babst Calland is building a foundation through its mobility, transportation and safety practice, capitalizing on emerging technologies and synergies between its downtown headquarters and fast-growing office in Washington, D.C.
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The Legal Intelligencer
(by Sean R. Keegan)
The U.S. Supreme Court’s recent decision in Epic Systems v. Lewis is a win for employers who have included or wish to include class action waivers in arbitration agreements that employees are required to sign as a condition of employment. On May 21, the Supreme Court rejected the existing position of the National Labor Relations Board (NLRB), which had held that arbitration agreements waiving the right to pursue class or collective actions violated federal labor law. The Supreme Court overturned the NLRB and held that the Federal Arbitration Act (FAA) requires such mandatory arbitration agreements to be enforced according to their terms. Following this decision, individual arbitration provisions may preclude employees from pursuing class or collective actions to resolve employment disputes.
The Supreme Court held that Congress has instructed in the Federal Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Federal Arbitration Act’s saving clause nor the National Labor Relations Act suggests otherwise. Prior to Epic Systems, the NLRB had interpreted Section 7 of the National Labor Relations Act to encompass the right to bring a class or collective action, as it gives employees the right to organize, bargain collectively and engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. Consequently, the NLRB’s position was that an employment agreement that required employees to resolve their workplace disputes (such as wage and hour and discrimination claims) by arbitration on an individual basis was an unfair labor practice under Section 8 of the National Labor Relations Act.
Before the Epic Systems decision there was a split in the circuit courts. Some circuits agreed with the NLRB’s interpretation or thought themselves obliged to defer to it under Chevron, while others, including the Fifth Circuit, disagreed with the interpretation. To clear the confusion, the Supreme Court granted certiorari in three consolidated cases—the U.S. Court of Appeals for the Seventh Circuit’s Epic Systems, the U.S. Court of Appeals for Ninth Circuit’s Ernst & Young v. Morris and the U.S. Court of Appeals for the Fifth Circuit’s NLRB v. Murphy Oil USA.
The employment agreements in each of the three consolidated cases required the employees to arbitrate their work-related disputes on an individual basis. The Supreme Court, noting that the three cases differed in factual detail but not in substance of the legal question presented, specifically examined the facts in Ernst & Young. The employment agreement at issue in Ernst & Young provided that a junior accountant and Ernst & Young were required to arbitrate any disputes between them and specified individualized arbitration “with claims pertaining to different employees to be heard in separate proceedings.”
Despite the arbitration provisions, the junior accountant sued Ernst & Young in federal court for violations of the Fair Labor Standards Act and California law. The junior accountant sought to litigate the federal claim on behalf of a nationwide class under the Fair Labor Standards Act’s collective action provision. The district court granted Ernst & Young’s motion to compel arbitration, but the Ninth Circuit reversed the district court’s decision holding that the Federal Arbitration Act’s saving clause removed the obligation to enforce arbitration agreements if it violates some other federal law. Consistent with the NLRB’s position, the Ninth Circuit concluded that an agreement requiring individualized arbitration proceedings violates the National Labor Relations Act by barring employees from engaging in the concerted activity or pursuing claims as a class or collective action.
Accordingly, the issue before the Supreme Court was whether the Federal Arbitration Act’s mandate to enforce arbitration agreements according to their terms was displaced by Section 7 of the National Labor Relations Act. The Supreme Court, in an opinion by Justice Neil Gorsuch, rejected the NLRB’s approach that had been adopted by the Ninth Circuit (and the Seventh Circuit) and held that in the Federal Arbitration Act, Congress has clearly instructed federal courts to enforce arbitration agreements according to their terms—including terms providing for individualized proceedings.
According to the court, the Federal Arbitration Act’s saving clause, which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract,” recognizes only defenses that apply to “any” contract. The employees failed to suggest their arbitration agreements were extracted in a way that would render any contract unenforceable, such as an act of fraud or duress, and instead relied on Section 7 of the National Labor Relations Act which only targeted individualized arbitration. The court held that the saving clause offers no refuge for defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue, and “this means the saving clause does not save defenses that target arbitration either by name or by more subtle methods, such as by interfering with fundamental attributes of arbitration.”
The Supreme Court also held that the National Labor Relations Act does not reflect a clearly expressed and manifest congressional intention to displace the Federal Arbitration Act and to outlaw class and collective action waiver. According to the court, the National Labor Relations Act does not express approval or disapproval of arbitration, and it does not even hint at a wish to displace the Federal Arbitration Act.
Federal courts are already starting to apply the holding of Epic Systems. Three days after the Supreme Court’s opinion was issued, a judge in the Eastern District of Michigan applied the ruling to split a proposed class action and send one of the two plaintiffs into arbitration. Judge Nancy Edmunds held that following Epic Systems, “courts must enforce arbitration agreements providing for individualized proceedings like the one at issue in this case,” and the class waiver in question was enforceable in Williams v. Dearborn Motors 1, No. 17-12724 (E.D. Mich. May 24, 2018).
As a result of the Supreme Court’s decision, employers now know that individual arbitration provisions that require an employee to waive their right to collective and class actions are facially permissible, subject to other considerations such as the particular language of the agreement and the defenses that apply to any contract. Employers that use such a provision are more likely to be able to resolve disputes individually outside of court, even if the situation affects many employees, effectively preventing its non-union workers from banding together in disputes over pay and conditions in the workplace.
Although facially the decision appears to protect employers from costly litigation and uphold their expectations, it remains to be seen whether individualized arbitration will offer a net benefit to employers. The decision may protect employers from the costs of litigation, but arbitration has its own costs and an increase in demand for the services of arbitrators may cause a related increase in arbitration costs. Employers that use an individual arbitration provision can avoid expensive class action suits in state or federal court, but a wave of related individual arbitration claims may bring its own challenges, including inconsistent results.
Even considering Epic Systems, not all employers will want to include individual arbitration provisions in their employment agreements going forward. Employers that include such provisions may subject themselves to multiple one-on-one arbitrations rather than one collective action. Based on their company size, employers will have to consider whether the costs of one-on-one arbitrations versus a single collective action makes financial sense. In addition, prospective employees may exercise their right to seek employment elsewhere if they find individual arbitration provisions an unacceptable condition of employment. Epic Systems holds that these class action waivers are an option, but individual employers will still have to determine whether such a waiver is the best choice for their business.
Sean R. Keegan is an associate in the litigation and employment and labor services groups of Babst Calland Clements & Zomnir. Contact him at 412-773-8721 or skeegan@babstcalland.com.
*Reprinted with permission from the 6/7/18 issue of The Legal Intelligencer. © 2018 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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The PIOGA Press
(by Kevin Garber, Jean Mosites and Esther Mignanelli)
In a case of first impression, the Pennsylvania Supreme Court rejected the Department of Environmental Protection’s untested legal theory that penalty liability under the Clean Streams Law continues as long as any constituents of a release remain in waters of the Commonwealth—days, months and years after the release has been stopped.
On March 28, the Supreme Court held “[t]he mere presence of a contaminant in a water of the Common – wealth or a part thereof does not establish a violation of Section 301, 307, or 401 of the Clean Streams Law, since movement of a contaminant into water is a predicate to violations.” EQT Prod. Co. v. Com., Dep’t of Envtl. Prot., 6 MAP 2017, slip op. at *37 (Pa. Mar. 28, 2018) (emphasis in original). In other words, a violation of these sections of the Clean Streams Law is based on the initial entry of pollutants into waters of the Commonwealth, not the presence or movement of constituents within such waters.
The Supreme Court’s opinion provides necessary clarification concerning the scope of liability for penal – ties under the Clean Streams Law for all persons, entities, businesses and industries that are responsible for remediation, those who would redevelop brownfield properties for reuse under Act 2, as well as any property owner with an historic contamination in groundwater that it did not cause. The decision reaffirms that penalty liability is distinct from cleanup liability and recognizes that penalties are neither appropriate nor effective in altering the time that may be necessary for full remediation.
The parallel proceedings between EQT and the department
The court’s statutory construction stemmed from a controversy between EQT Production Company and DEP regarding the liability and penalties that could be imposed for a release from an onsite pit at a Marcellus Shale well pad in Tioga County in 2012.
After the department presented EQT with a penalty demand of $1.2 million for the release, EQT filed a declaratory judgment action in the Pennsylvania Commonwealth Court in September 2014 to challenge the department’s use of a “continuing violation” theory to support its penalty calculation. EQT asked the court to rule on two issues: first, that a violation of the Clean Streams Law occurs only on a day in which a person allows an industrial waste to actually enter into waters of the Commonwealth, and second, that the mere presence of an industrial waste in waters of the Commonwealth does not, in and of itself, constitute a violation.
The department opposed EQT’s application for relief and argued that a violation of the Clean Streams Law occurs when industrial waste or a substance resulting in pollution flows from one water of the Commonwealth into another. The Supreme Court would later call this the department’s “water-to-water” theory. In earlier pleadings, the department also alleged that industrial waste from the pit remained in bedrock and soil beneath the impoundment’s liner for a period of time longer than the “actual discharge;” industrial waste can bind to the soil or perch above an aquifer, “continually polluting new ground water;” and this would continue for months or years at the site. EQT Prod. Co., 6 MAP 2017, slip op. at *5. The Supreme Court called this the department’s “soil-to-water” theory.
After EQT filed its declaratory judgment action, the department filed a civil penalty complaint with the Pennsylvania Environmental Hearing Board (EHB), seeking a penalty of $4.5 million for the release. EQT stopped the source of the release within 12 days of reporting it on May 30, 2012, and then entered the Act 2 program to clean up soil and groundwater. The post-hearing memo the department filed following a two-week hearing before the EHB in July 2016 asserted that a penalty of nearly $470 million could be assessed under DEP’s interpretation of the Clean Streams Law. On May 26, 2017, the board assessed a civil penalty of $1.1 million, including the department’s costs. The EHB found that “active releases” from the impoundment continued to the date of the hearing in July 2016, violating the Clean Streams Law daily, but assessed a penalty only through September 27, 2012 (i.e., the date of the excavation of the soils beneath the impoundment’s liner). Both parties appealed the adjudication for the Commonwealth Court to review. That appeal has been briefed and oral argument is scheduled for May 9.
Earlier, in the declaratory judgment case, on January 11, 2017, the Commonwealth Court held that Section 301 of the Clean Streams Law “prohibits acts or omissions resulting in the initial active discharge or entry of industrial waste into waters of the Commonwealth and is not a provision that authorizes the imposition of ongoing penalties for the continuing presence of an industrial waste in a waterway of the Commonwealth following its initial entry into the waterways of the Commonwealth.” EQT Prod. Co. v. Com., Dep’t of Envtl. Prot., 153 A.3d 424, 437 (Pa. Cmwlth. 2017), aff’d in part, vacated in part sub nom. EQT Prod. Co. v. Com., Dep’t of Envtl. Prot., 6 MAP 2017 (Pa. Mar. 28, 2018). The Commonwealth Court did not delineate the contours of the department’s multiple theories of continuous liability. The department appealed the January 11, 2017, decision.
By clarifying that civil penalties may only be assessed under the Clean Streams Law for the days of actual movement of a pollutant into waters of the Commonwealth, this precedential decision prevents the imposition of indefinite penalty liability for spills after the discharge into groundwater or surface water ends.
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The PIOGA Press
(by Jean M. Mosites and Abigail F. Jones)
On June 28, 2016, the U.S. Environmental Protection Agency (EPA) published a rule entitled “Effluent Limitation Guidelines and Standards for the Oil and Gas Extraction Point Source Category,” which prohibits the discharge of unconventional wastewater to publicly owned treatment works (POTWs). The rule went into effect on August 29, 2016.
The prohibition, now codified in 40 C.F.R. §§ 435.33 and 435.34, applies to “wastewater pollutants associated with production, field exploration, drilling, well completion or well treatment for unconventional oil and gas extraction.” The phrase “unconventional oil and gas extraction” (UOG) is defined in the rule to mean oil and natural gas produced from “a shale and/or tight formation (including, but not limited to, shale gas, shale oil, tight gas, tight oil).”
Subsequently, the rule was challenged in court and has been remanded to EPA for review and possible revision. The legal challenge to the rule, described in detail below, relates to its applicability to Pennsylvania-defined “conventional” oil and gas operators. However, EPA’s administrative review of the rule could affect oil and gas wastewater disposal options for both conventional and unconventional operators in Pennsylvania.
Implementation deadline extension
In the preamble to the publication of the final rule, EPA stated that no operators subject to the rule were currently discharging to POTWs. Based on this understanding, the rule was to go into effect within 60 days of publication. Following promulgation of the rule, EPA received letters indicating that there were facilities likely discharging UOG wastewater to POTWs in Pennsylvania. As a result, EPA issued a final rule on December 7, 2016, to extend the implementation deadline for existing sources that were lawfully discharging wastewater to POTWs between April 17, 2015, and June 28, 2016. For such existing sources, the compliance date for the rule is now August 29, 2019.
Legal challenge to the rule
At the time of publication, EPA stated that the rule was not intended to address standards for conventional oil and gas extraction facilities and that EPA would consider standards for the conventional industry in a future rulemaking.
In Pennsylvania, the rule’s definition of UOG (i.e., including “tight gas” and “tight oil”) likely draws in the majority of conventional oil and gas operations because EPA identified the Berea-Murrysville, Bradford-Venango Elk and Clinton/Medina-Tuscarora formations as “UOG resources.” Pennsylvania’s conventional operators have been extracting oil and natural gas from these formations for more than 100 years and are not considered to be part of the “unconventional oil and gas extraction” industry by the Pennsylvania Department of Environmental Protection (DEP). Conventional operators suddenly risked violating EPA’s effluent limitations for discharging to POTWs, despite the fact that such discharges were never considered by EPA during rule development and were being lawfully conducted under the oversight of DEP.
In November 2016, the Pennsylvania Grade Crude Oil Coalition (PGCC) filed a petition for review of the rule in the U.S. Court of Appeals for the Third Circuit. PGCC sought a revision of the rule’s definition (or other form of clarification) that would exclude tight oil and gas formations in Pennsylvania from the definition of UOG resources. Such an exclusion would be consistent with Pennsylvania law, which provides separate rules for Pennsylvania-defined conventional operators and unconventional operators. It also would allow Pennsylvania-defined conventional operators to continue discharging wastewater to POTWs, consistent with past practice and DEP approvals. In the lawsuit, PGCC argued that EPA made a number of fundamental errors in the rule’s development, including incorrectly finding that there were no existing discharges to POTWs by the entities subject to the rule and failing to consider costs and burdens imposed on small businesses affected by the rule.
Pennsylvania-defined conventional operators, some of whom had ongoing discharges to POTWs at the time the rule was finalized, were the impetus for EPA’s final rule extending the compliance date in December 2016. However, because the implementation extension applies only to operators who were discharging during a certain period of time (i.e., between April 17, 2015, and June 28, 2016), and because the ban remains in effect for those operators beginning in 2019, the extension does not address or alleviate concerns about the rule.
In August 2017, EPA filed a motion for a voluntary remand of the rule to the agency, without vacating the rule. The stated purpose of the remand was to allow EPA to “further develop the administrative record to consider new information received after the close of rulemaking.” The motion also noted that a remand would allow EPA to seek public comments on new information and “take other actions as appropriate.” Because the rule was not vacated as part of the remand, it remains in effect in its current form (with the delayed implementation date for a subset of operators) during EPA’s review.
Administrative review of the rule
According to status reports filed with the Third Circuit Court of Appeals, EPA’s administrative proceedings reviewing the rule are ongoing. In a February 2018 status report, EPA indicated that it was continuing “its data collection efforts.” In the same month, EPA sent out information request letters under Section 308 of the Clean Water Act to nine Pennsylvania conventional operators. The letters requested information about the operators’ wells, wastewater disposal methods and disposal costs. Responses are being compiled by EPA and will likely inform EPA’s review of the rule.
In addition to filing the lawsuit described above, PGCC also filed a petition with EPA in August 2017 requesting a rulemaking to reconsider and administratively stay the rule. EPA responded in December 2017, declining to commit to a rulemaking to stay the rule. Rather, EPA noted that there was “no imminent need for such a stay.” Because of the three-year compliance period allowed for existing facilities, EPA believes that it has “sufficient time to consider the new information” before compliance is required for operators currently discharging to POTWs.
PIOGA and other trade groups have also submitted requests to EPA related to the rule. In September 2017, the American Petroleum Institute, the Independent Petroleum Association of America and the American Exploration & Production Council submitted a joint letter to EPA supporting PGCC’s petition and arguing that a true pre-treatment rule is more appropriate than a ban, which forecloses the development of technologies that in the future may be more environmentally friendly than current disposal options. In December 2017, PIOGA submitted a request for rulemaking to EPA, asking that the agency reconsider the rule and administratively stay or suspend its enforcement for Pennsylvaniadefined conventional oil and gas operators. In response to all letters and petitions, EPA has engaged in meetings and conversations with various industry representatives.
The timeline for EPA’s administrative review of the rule remains uncertain, but it appears to be targeting August 2019, the extended compliance deadline, to complete its review and propose revisions, if any, to the rule. Opportunities for public comment may be forthcoming, and all stakeholders in both conventional and unconventional industries can assist or seek additional information through PIOGA’s Environmental Committee, which is closely monitoring the situation.
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Pittsburgh Post-Gazette
(by Patricia Sheridan)
The atmosphere was festive, the participants enthusiastic and the sun was shinning Sunday for the second annual UNcathlon at the Oval Sportsplex in Schenley Park.
The competitive event for athletes with intellectual disabilities supports and is presented by the Special Olympics of Pennsylvania.
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The Legal Intelligencer
(by Blaine Lucas and Alyssa Golfieri)
Preservation of the commonwealth’s historically significant natural, scenic, cultural, and architectural features and resources is a rising priority among local municipalities—and for good reason. Historic preservation not only helps cultivate an aesthetically pleasing environment for residents and business owners to live, work, and play, but it can increase property values, generate new tourism/economic development opportunities, and encourage future development with high-quality site design and architectural patterns. Municipalities are vested with several options when it comes to historic preservation. The two most common are the utilization of their authority under the Pennsylvania Historic District Act, 53 P.S. Section 8001 et seq., (Historic District Act) and the Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq., (MPC).
The Historic District Act was enacted in 1961 and confers upon counties, third class cities—First and second class cities (i.e., Philadelphia and Pittsburgh) are expressly excluded from the Historic District Act’s grant of authority—boroughs, incorporated towns, and townships the authority to designate historic districts within their geographical limits. In order to create a historic district, a municipality must do two things. First, it must adopt an ordinance. While the Historic District Act does not command in great detail what content or subject matters the ordinance must cover, it should, at a minimum, express the municipality’s intent to create a historic district pursuant to the Historic District Act, delineate the historic district’s boundaries, establish a historical architectural review board (HARB), enumerate the powers and duties of the HARB, and set forth guidelines and the approval process applicable to the issuance of a certificate of appropriateness (COA). Next, the municipality must provide the Pennsylvania Historical and Museum Commission written notice of the ordinance’s enactment. The commission must then certify, by resolution, to the district’s historical significance. Only after such certification does the ordinance become effective.
Properties that fall within historic districts are subject to preservation restrictions and criteria, which the designating municipality is charged with creating, applying, and enforcing. To assist with the application and enforcement of the restrictions and criteria, a governing body may appoint a HARB. The HARB must be composed of at least five members—the Historic District Act does not impose a maximum membership cap on a HARB—one of whom must be a registered architect, one a licensed real estate broker and one a building inspector. The remaining members must be persons with knowledge of and interest in the preservation of historic districts. Unlike members of a municipality’s governing body, planning commission, zoning hearing board, and civil service commission, members of a HARB do not need to be residents of the municipality. The HARB’s primary responsibility is to provide advice to the governing body with respect to the appropriateness of a project to erect, reconstruct, alter, restore, demolish, or raze a building, in whole or in part, within a historic district.
Upon receipt of an application for a project within a historic district, members of the HARB should carefully review the application, discuss the project with the applicant, consider the effect the proposed project will have upon the general historic and architectural nature of the district, and assess the proposed structural changes using the municipality’s ordinances and supplemental guidelines. When doing so, the HARB only may consider and pass on the appropriateness of external architectural features visible from a public street or way, including general design, arrangement, texture, material, and color of a building or structure, and their relation to similar features or structures in the district. The HARB may not consider matters unrelated to the preservation of the historic aspect and nature of the district (e.g., internal design features).
After the HARB renders a recommendation, the governing body votes on the project’s historical appropriateness, and if it concludes that the project is, it issues a COA. Receipt of a COA is a prerequisite to an applicant’s ability to apply for and receive all other necessary permits and approvals (e.g., land use, building, grading, environmental, etc.).
If the governing body concludes a proposed project is not historically appropriate, it must vote to deny a COA. Upon doing so, the governing body must set forth its denial in writing. The written decision must list the reason(s) for denial and the changes that must be made to ensure the district’s historic character is protected. All written denial letters must be forwarded to the applicant, any third-party agency implicated by the application, and the Pennsylvania Historical and Museum Commission. If the applicant disagrees with the governing body’s denial, he has the right to appeal pursuant to the law or local ordinance governing the other necessary permits and approvals.
In addition to, or in conjunction with, the powers vested by the Historic District Act, municipalities can rely on historic preservation authority granted by the MPC, the state law establishing the framework for zoning and land use development regulations in Pennsylvania. The MPC not only mandates that municipalities plan for the preservation and protection of natural and historic features and resources, it also authorizes municipalities to partner with surrounding communities to create an intergovernmental plan for historic preservation, and incorporate regulations into their zoning ordinances for the purposes of regulating, restricting, and prohibiting activity that may impact natural and historic features and resources. More specifically, the MPC provides as follows:
- Section 301 mandates that a municipality’s comprehensive plan include a plan for the protection and preservation of natural and historic resources.
- Section 603 authorizes municipalities to protect natural and historic features and resources, regardless of whether they are located within a district designated pursuant to the Historic District Act, via zoning.
- Section 605 authorizes municipalities to create zoning districts with specific classifications for the purpose of regulating, restricting or prohibiting “uses and structures at, along or near … places having unique historical [or] architectural … interest or value.”
- Article XI, titled “Intergovernmental Cooperative Planning and Implementation Agreements,” authorizes municipalities to enter into intergovernmental cooperative agreements to develop, adopt, and implement a comprehensive plan for the entire county or for any area within the county in order to, among other things plan for the conservation and enhancement of the natural, scenic, historic and aesthetic resources within the area of the plan, and provide for the continuation of historic community patters.
Due to the variety of means by which a municipality can regulate and enforce historic preservation within its borders, one thing is evident—each municipality’s historic preservation approach will vary in function and form from the next. In light of the unavoidable difference between each municipality’s approach, it remains critical that buyers, developers, real estate agents, and municipal officials remain cognizant of local historic preservation goals, the steps necessary to satisfy the historic-specific regulations/assessment criteria, and the additional time that purchasing or developing property in a historic district or a historical-preservation area will add to the overall permitting and approval process.
*Reprinted with permission from the 4/16/18 issue of The Legal Intelligencer. © 2018 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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