The PIOGA Press
The oil and gas industry in Pennsylvania has made significant strides in recycling water in recent years. Since 2010, wastewater recycling has increased from 4.6 million barrels to more than 7.8 million barrels per year, according to a 2015 Pennsylvania Department of Environmental Protection, Bureau of Waste Management presentation on water recycling and oil and gas waste.
Given fluctuating market conditions, alternatives to recycling and reuse are also necessary. These alternatives include treatment and disposal both within and outside Pennsylvania. The wastewater disposal options in Pennsylvania have been limited in recent years by a variety of state and federal factors.
DEP asked unconventional operators to voluntarily stop sending wastewater to publicly owned treatment works (POTW) in 2010. EPA finalized a new regulation in 2016 banning unconventional oil and gas operators from sending wastewater to POTWs, a practice the federal Environmental Protection Agency noted as “current” industry practice.
Historically, there have been few injection wells constructed and permitted in Pennsylvania, and some operators have sent wastewater to Ohio and other states where injection wells are more common. Under the Safe Drinking Water Act, EPA issues the federal Underground Injection Control (UIC) permits in Pennsylvania, and then DEP issues a well permit under the Oil and Gas Act to construct a new well or alter an existing well for injection. The Common – wealth has not taken primacy over the federal UIC program. DEP, however, has recently revised its permitting process for the state permit needed to construct and operate UIC wells, revisions made in the midst of legal challenges in both state and federal courts.
EPA identified 15 UIC disposal wells in Pennsylvania, including plugged and abandoned wells and two wells pending permit approval, in its 2016 UIC well inventory. DEP’s 2016 annual oil and gas report listed eight active UIC disposal wells, two inactive wells and two wells under DEP technical review. Bear Lakes Properties in Warren County operates two commercial disposal wells, and it is anticipated that Windfall Oil & Gas in Clearfield County will operate commercial wells upon the approval of its pending permit application. The remaining UIC wells are not currently in commercial operation for use by third parties.
The UIC permitting process in Pennsylvania
Receiving approval to drill a new injection well or alter a depleted well for injection is a lengthy process that involves agency technical review at both the federal and state levels. Regarding the federal permit, EPA Region III reviews UIC permit applications for various engineering and geological points, including injection pressure and volume, the competency of the targeted injection zone, and the risk of seismicity. If the application passes technical review, EPA publishes public notice of and invites comments on the proposed permit. EPA often holds public hearings on a proposed UIC permit. Once EPA approves the final UIC permit, the operator may apply to DEP for the state well permit. The final federal UIC permit must be included in the state permit application. DEP reviews other technical aspects of the proposed well, including the construction of the well site and surface activities needed to convert existing wells. The state application process also has recently included a public comment component.
It can take several years to obtain both the federal and state permits for an injection well. This delay results, in part, from DEP regulations that require the applicant to include the final federal UIC permit in the state well permit application package. In a recent example, Penneco Oil Company applied for a federal UIC permit for a well in Plum Borough, Allegheny County, on March 9, 2016. EPA held the first public hearing over a year later, on July 26, 2017. If approved, the well can accept up to 54,000 barrels of wastewater per month, which would be the highest volume of any permitted UIC disposal well in Pennsylvania. Permitting by DEP will follow.
In another example, the Sammy-Mar LLC’s state permit application was filed with DEP on May 10, 2016. DEP held a public hearing on June 28, 2016 and approved the permit 11 months later in May 2017. This state permit approval followed two other recent well permit approvals for UIC disposal wells on March 27, 2017, when DEP approved well permits for Seneca Resources Corporation in Highland Township, Elk County, and Pennsylvania General Energy Company in Grant Township, Indiana County. Seneca applied for the DEP permit in November 2014; PGE applied to DEP in March 2015.
There is no indication that either federal or state permitting procedures will be streamlined any time soon.
The controversy
UIC wells can be utilized to inject thousands of gallons of oil and gas wastewater into underground strata below underground sources of drinking water. The wells are cased to ensure that the wastewater reaches only the targeted formation. Targeted formations are contained by low permeability formations that prevent migration from the formation. The UIC permitting program has been developed to protect sources of drinking water.
Some recent concern with UIC disposal wells has been related to induced seismicity. Induced seismicity is seismic activity that originates from anthropogenic activity rather than from the natural movement of the Earth’s plates. DEP confirmed in early 2017 that it recorded the first earthquakes in the Commonwealth related to completion of Utica wells in Lawrence County.[2] The five earthquakes were tremors of 1.8 and 2.3 on the Richter scale. Earthquakes of that magnitude cause no physical surface damage and cannot be felt aboveground.
Oklahoma has experienced seismic activity related to its 3,200-plus injection well industry. In 2011, residents were injured and 200 buildings were damaged by a 5.7 magnitude earthquake experts say could be linked to wastewater disposal wells. Studies found the strongest correlation between induced seismicity and UIC disposal wells where high volumes of fluid—around 300,000 barrels a month—are injected quickly. No UIC wells permitted or pending in Pennsylvania are permitted to inject more than 54,000 barrels a month.
DEP has taken two recent steps related to seismicity concerns. First, it expanded its seismic monitoring network to thirty realtime seismic stations throughout the Commonwealth, as well as five rapid response temporary stations to be deployed to events of significant interest. Second, the department included seismic monitoring conditions on the three most recently issued state well permits for UIC wells in Elk, Clearfield and Indiana counties. These permit conditions include the installation of a seismometer and continuous recorder at the disposal well, incorporation of the data into the Incorporated Research Institutions for Seismology network, and a seismic contingency plan with monitoring, reporting and mitigation provisions. The contingency plan includes a mandatory termination of injection if a seismic event of a magnitude 2.0 or greater occurs within three miles of the UIC well.
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The Legal Intelligencer
Under the Family and Medical Leave Act (FMLA), employees may take an unpaid, job-protected leave of absence for certain family and medical reasons. Employers often find it challenging to keep track of their obligations under the FMLA. This article will help employers to avoid common problems by reviewing 10 of the top dos and don’ts.
• Do provide employees with proper notice of their rights. The FMLA applies to “covered employers.” Private companies meet this definition if they have at least 50 employees, in at least 20 weeks during the current or previous calendar year. Public agencies, elementary schools and secondary schools are also covered employers.
Covered employers are required to notify employees of their FMLA rights in two ways. First, employers should post a notice explaining the FMLA’s provisions and how to file a complaint. This posting can be electronic. Second, employers should provide written FMLA information to new employees. This information can be included in an employee handbook. Employers also may distribute this information electronically. The Department of Labor has a sample poster and notice on its website. (29 Code Fed. Regs. Section 825.300(a)).
• Don’t create new forms from scratch. The Department of Labor publishes sample FMLA forms on its website. While these forms are optional, the regulations establish a “safe harbor” for employers that choose to use them. (See 29 Code Fed. Regs. Section 825.310(d).)
• Do confirm when a rehired employee becomes eligible. FMLA leave is available to “eligible employees,” meaning employees who: work for a covered employer; have been employed for at least 12 months; have worked at least 1,250 hours within the past 12 months; and work at a location where the employer has at least 50 employees within 75 miles.
Rehired employees may combine multiple periods of service to satisfy the 12-month minimum. For example, if an employee works five months in 2012 and seven months in 2017, the employee will become eligible once he or she meets the other criteria. The only limitation of this rule is that an employer doesn’t need to “look back” at previous employment that occurred more than seven years before the employee most recently was hired.
• Don’t limit leave to work-related conditions. Some employers believe employees may only exercise FMLA rights if they are hurt on the job. In fact, the FMLA applies to any “serious health condition,” meaning a condition that involves inpatient care or continuing medical treatment. It doesn’t matter where, when, or how an employee was injured.
• Do attach the employee’s job description to a designation notice. After an employee requests FMLA leave, an employer responds with a designation notice, which explains whether the request has been approved. This notice typically advises employees that before returning to work, they will need to provide a fitness-for-duty certification from a health care provider.
Employers should attach the employee’s job description, or a list of essential functions of the employee’s position, to the designation notice. This will require the health care provider to comment on whether the employee can perform these functions. In other words, the provider’s opinion will be measured against a meaningful standard. If the provider is unsure of the essential functions of the position, the provider may rely on the employee’s own report. For example, the employee could fail to mention lifting or driving requirements, in which case the fitness-for-duty certification might be inaccurate.
• Don’t require that medical information must come from a doctor. Under the FMLA, a “health care provider” may supply medical information. A medical doctor meets this definition, but health care providers also include clinical psychologists, nurse practitioners, physician assistants, Christian Science Practitioners, and (in limited circumstances) chiropractors. (See 29 Code Fed. Regs. Section 825.125.)
• Don’t second-guess a completed fitness-for-duty certification. A fitness-for-duty certification expresses the opinion of an employee’s health care provider that he can perform the essential functions of the position. In general, employers must allow employees to return to work once they supply a completed certification. The employer may contact the employee’s health care provider to clarify or authenticate the certification, but this communication should not delay the employee’s return to work.
Employers cannot require a second or third opinion. If an employer believes an employee needs to be seen by a health care provider of the employer’s choice, the employer’s remedy is to restore the employee to work, and then to arrange this examination. Under the Americans with Disabilities Act (ADA), an employer may only follow this procedure if the examination is job-related and consistent with business necessity.
• Don’t require that employees return to work without restrictions. The ADA requires employers to make an individualized assessment of when an employee is capable of returning to work. Most courts have concluded the same assessment is needed under the FMLA. Therefore, an employer’s policies may violate the FMLA if they require employees to return to work without restrictions. For instance, if a full-time employee provides a fitness-for-duty certification stating that she can return to part-time work, the employer must assess whether this schedule change would be a reasonable accommodation. A blanket policy that refuses even to consider this arrangement would be problematic.
• Do consider whether to extend an employee’s leave under the ADA. The FMLA provides 12 weeks of leave within a 12-month period. Once an employee has exhausted this leave, some employers believe the employee must return to work or face termination. This analysis overlooks the employer’s obligation, under the ADA, to make reasonable accommodations. Depending on the circumstances, it could be a reasonable accommodation to extend the employee’s leave beyond 12 weeks.
• Do keep in mind limitations on an employee’s right to reinstatement. While the FMLA generally requires employers to reinstate employees at the conclusion of their leave, this protection is not absolute. An employer is not required to reinstate employees whose employment would have ended anyway during their leave. For example, if the employee would have been laid off during the leave, he or she does not need to be reinstated. An employer may reinstate an employee to a different shift if his usual shift was eliminated during the leave.
Hopefully, these dos and don’ts clear up some common misconceptions about the FMLA. Employers with additional questions should consult the FMLA regulations (which are cited in this article), The Employer’s Guide to The Family and Medical Leave Act (which is on the Department of Labor’s website), or an employment lawyer.
*Reprinted with permission from the 8/10/17 issue of The Legal Intelligencer. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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The Legal Intelligencer
Immigration services firm Fragomen recently announced that it’s opening a new center in Pittsburgh, staffed with up to 50 employees, where it will develop or redevelop much of its software and cybersecurity technology in-house.
Fragomen’s aggressive do-it-yourself approach to technology sets it apart in the industry. But leaders at several Pennsylvania-born law firms insisted it isn’t all that different from what they’re doing themselves—even if their firms only plan to tackle so much tech innovation on their own.
“What Fragomen is attempting to do, we have it,” said David Pulice, manager of practice innovation at Reed Smith. “That’s pretty common among law firms.”
Reed Smith has created multiple apps with specific applications. Most recently, the firm launched Breach RespondeRS, which walks clients through the basic steps to take following a cyberbreach. If the problem seems complicated, the app suggests they seek legal counsel.
Duane Morris trademarked its original analytics software last year. The firm created the tool several years ago, and updates it continually to include new case data.
Blank Rome said it creates about 40 percent of its software in-house, including client-facing portals and internal applications, like a matter-tracking tool for the consumer finance group and a database for accessing information on any other platform.
Morgan, Lewis & Bockius has developed more than 50 custom applications, according to chief information officer Michael Shea, and holds a competition in which teams can suggest new technical solutions to client problems. And K&L Gates has several proofs of concept in the works to apply technology such as blockchain and artificial intelligence, said CIO Neeraj Rajpal. Dechert; Buchanan Ingersoll & Rooney; and Fox Rothschild also have developers working on various applications.
And it’s not just large firms getting creative with technology. Babst Calland has been in the game for more than 15 years, through its sister company Solvaire. It started as a due diligence management project, and grew as developers created systems for various Babst Calland clients. The software is legal-related, but business-focused, said Chris Farmakis, Babst Calland partner and Solvaire president.
Competitive Advantage
All of these firms gave two simple reasons for their in-house tech investments: cost and differentiation. By using their own staff to make a tool, they can tailor it to the needs of a particular practice or client. And taking the DIY route is often less costly than outsourcing the job.
“With purchased applications … you’re really at the mercy of the vendor,” said Don White, Blank Rome’s director of application systems. Having in-house developers lessens the firm’s reliance on vendors, he said, and gives the firm more detailed knowledge of how the technology and its security features work.
Steve Agnoli, Reed Smith’s chief information officer, said his staff has a better understanding of client needs than an outside vendor would, so they create more useful tools.
“We’re in the space, we live and breathe the stuff, and we’re part of this firm,” Agnoli said.
Reed Smith has tried to create technology in commercially available platforms, Pulice said, but it wasn’t always ideal. That approach limited the ability to customize, and it was expensive, he said.
“If the client needs it, we want to focus on it and build it, which is going to make their lives easier, which in turn is going to make our attorney’s lives easier,” he said. “We’ll never do all the technology, all the software in the firm, but we have been doing more and more of it.”
Farmakis said Babst Calland developed Solvaire as a way to compete with large law firms on the East Coast, by offering clients a unique and specialized set of tools.
“Our advantage will last as long as we continue to be innovative … we’re already focused on what’s next,” he said.
Eventually, offering tailored technology, including client-facing applications, will be the standard, said David Cybulski, Blank Rome’s director of business intelligence.
“You wouldn’t go to a bank that didn’t offer online banking,” he said. “How that’s going to show up for a law firm isn’t known yet.”
Going to the Experts
While they are eager to create certain technology from scratch, no Pennsylvania firm said it’s planning to forsake outsourced technology anytime soon.
“There’s a lot of great products out there and we don’t want to go and reinvent the wheel,” said White, of Blank Rome. “You have to weigh the number of programmers and analysts in-house who can support it at that same cost.”
Fox Rothschild CIO Michael Rinehart said his small team of developers places a priority on partnering with vendors when possible, rather than creating technology from scratch.
“We’re more valuable being partners to the firm and experts on legal services we provide,” he said. “We’ll still continue to extend our solutions and differentiate ourselves.”
Pulice, of Reed Smith, said his group has been successful outsourcing less customized technology, such as time-recording software.
“I don’t know that we, or frankly any firm or any company, would get to that point” of insourcing all technology, said Agnoli of Reed Smith. “Our job is to find the best tool and apply it … sometimes in-house and sometimes something created by a software provider.”
Even with a sister company focused on development, Farmakis said Babst Calland will continue to use third-party vendor software.
“We know where we’re good at our internal development stuff, and we know when we need to source it externally,” he said. “If someone can do it better than us and it’s a solution that benefits our clients, we’ll source it.”
And that leaves time to focus on the future. The next big development is artificial intelligence, he said, and Solvaire is looking into ways to apply and license that technology.
“It’s just starting to come onto the landscape. It’s the next five to 10 years before this stuff becomes ubiquitous,” Farmakis said. “It’s not going to eliminate the need for people but it’s going to allow us to be cheaper and more efficient.”
*Reprinted with permission from the 7/13/17 issue of The Legal Intelligencer. © 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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The Critical Path
Insurance coverage issues on commercial construction projects are complex. Add in the contractual requirement of providing additional insured status and problems can arise when tendering and accepting a defense.
This article discusses a unique insurance coverage issue which may arise in a multi-defendant property damage action involving additional insured requirements among contractors. It is common in a property damage action for a carrier to provide a defense and later file a declaratory judgment when evidence discerned in discovery establishes that no coverage existed. In these situations, the policy language and jurisdiction determines whether the insured owes defense costs to the carrier.
But what is the duty of an additional insured to reimburse the carrier for defense costs when it is subsequently determined that coverage did not exist? The additional insured has no written contract with the carrier. Moreover, what if the additional insured was provided a defense from its own carrier, only to have the defense tendered to a
different carrier based upon additional insured status? What is the obligation of the primary insurer? Let’s address this through a factual example.
The Owner hires Contractor to construct a mixed-use building and the Contractor subsequently hires a Subcontractor. The contract between Contractor and Subcontractor calls for Subcontractor to add and recognize Contractor as an additional insured to its policy.
Substantial completion is achieved and the Owner takes possession of the building despite a payment dispute between Contractor and Owner. The Contractor files suit against the Owner. The Owner claims major structural issues with the building. The Owner then files a Counterclaim for breach of contract and negligence against the Contractor and joins the Subcontractor under a negligence theory.
Contractor and Subcontractor each turn the claims over to their respective carriers, and each provide a defense under a reservation of rights. Contractor’s carrier recognizes its insured is entitled to additional insured status under the Subcontractor’s policy. On this basis, Contractor’s carrier tenders the claim to Subcontractor, who accepts the tender under a reservation of rights.
Subcontractor’s carrier provides a defense to both Contractor and Subcontractor under a reservation of rights. In the middle of discovery, it is determined that the allegations against Contractor and Subcontractor are not covered by the policy.
The carrier for Subcontractor files a declaratory judgment against both Contractor and Subcontractor, seeking a determination that it does not owe a duty to defend and seeking to be reimbursed for the defense costs expended on behalf of the Contractor, the additional insured. The Subcontractor’s carrier relies on policy language which states:
“If we initially defend an insured or pay for an insured’s defense but later determine that none of the claims, for which we provided a defense or defense costs, are covered under this insurance, we have the right to reimbursement of the defense costs we have incurred.”
First, let’s discuss the Subcontractor, the insured who is a party to the contract with the carrier. The Subcontractor was provided a defense under the policy. The issue regarding the right to reimbursement from an insured has existed for some time, with the majority position holding that an insurance carrier has no right to reimbursement. Both sides of the argument are understandable.
The insured argues the “duty to defend” is a critical element in the insurance carrier’s obligation to it policyholder. The cost of defense then is a business risk to the insurer, even if it is later determined that the claim is not covered. The carrier argues it should be able to recover the cost of defense when it becomes clear that a claim is not covered and would not have been covered if all the facts were known at the time the Complaint is filed. The carrier’s argument is that the insured is unjustly enriched by a defense when it was contractually not entitled to one.
In these situations, some states have held the carrier is entitled to a full reimbursement, while other states have held there is no reimbursement. Pennsylvania took a different approach.
In American and Foreign Insurance Company v. Jerry’s Sports Center, Inc., 606 Pa. 583 (Pa. 2010), the Pennsylvania Supreme Court held that insurers are not eligible for defense cost reimbursement which is not provided for or made clear within the policy contract itself. This opened the door for insurance carriers to modify policy language to make clear a carrier’s right to recovery.
Many PA carriers adopted new policy language which expressly stated their rights to recover. Endorsement Pennsylvania Changes- Defense Costs- IL 20 2013 generally states:
“If we initially defend an insured or pay for an insured’s defense but later determine that none of the claims, for which we provided a defense or defense costs, are covered under this insurance, we have the right to reimbursement of the defense costs we have incurred.”
Under Pennsylvania law, the Subcontractor in our example above is obligated to repay its carrier for the defense costs. But what about the Contractor? There are two interesting legal issues which arise out of the situation.
Contractor vs. Subcontractor’s Carrier
Is the Contractor obligated to repay defense costs incurred by a carrier which it had no contract with? An insurance policy is a contract. How can the Contractor, who isn’t a party to the insurance contract, be bound to the terms of the contract between Subcontractor and its policy?
The Subcontractor’s carrier will likely argue that the Contractor accepted the defense, received a benefit, and was unjustly enriched by a defense it was not entitled to. While there are no cases directly on point in Pennsylvania, it would appear the ruling in Jerry’s Sports Center, Inc., would support the Contractor’s argument- since the policy language/contract was not made clear to Contractor, the carrier cannot recoup such costs from the Contractor.
Contractor vs. Contractor’s Carrier
The more salient analysis is the relationship between the Contractor and its own carrier. The Contractor was provided coverage from its own carrier pursuant to the insurance contract.
The Contractor’s carrier then tendered the claim to the Subcontractor’s carrier because of Contractor’s additional insured status on the Subcontractor’s policy. If the Contractor is required to repay defense costs to the Subcontractor’s carrier, should the Contractor’s carrier be responsible? While no case is on point in Pennsylvania, it certainly seems like a probable outcome.
The analysis takes a different turn if the Contractor and Subcontractor’s policy language provides different levels of protection.
Suppose the Contractor’s policy does not include Endorsement Pennsylvania Changes- Defense Costs- IL 20 2013 while the Subcontractor’s policy includes the endorsement. In this instance, Contractor’s policy provides more protection than the Subcontractor policy- the Contractor is provided a defense without worrying about an obligation of repayment of defense costs under its own policy, while it may be responsible for repaying defense costs as an additional insured under the Subcontractor policy.
By tendering the claim to Subcontractor’s carrier as an additional insured under an inferior policy rather than assuming the defense, what is the Contractor’s carrier’s obligation to Contractor?
It would certainly appear that tendering an insured’s claim to another carrier under an inferior policy would constitute a breach of the duty to defend and potentially bad faith. At the very least, the Contractor’s carrier would have to agree upon tender to reimburse the Subcontractor’s carrier for defense costs if it were later determined coverage did not exist.
Practical Considerations for Clients
Many of these issues can be dealt with preemptively while negotiating the contracts for the Project, or at the very least upon tender to the carrier as an additional insured.
When representing a general contractor and requiring subcontractors to add your client as an additional insured, consider the following actions:
1. Have a thorough grasp of your client’s insurance policies and the protections they provide.
2. When requiring a subcontractor to add your client as an additional insured to its policy, request a copy of the policy before executing the contract. Make sure the policy provides for at least as much protection as your own.
3. If the subcontractor’s policy does not provide the same level of protection as your own but meets the minimum requirements of the Owner, put your carrier on notice of the weaknesses in the subcontractor’s policies. This will create a paper trail in the event your carrier attempts to tender a claim to the subcontractor’s carrier later.
4. Prior to your carrier’s tender of the claim to the subcontractor as an additional insured, thoroughly evaluate the underlying claim and the protections provided by each policy. If you believe your client’s interests will be better served by its own carrier, make that known in writing to the carrier. At the very least, require that your client’s carrier fill the gaps of any weaknesses provided to your client as an additional insured.
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The PIOGA Press
The Pennsylvania Supreme Court has rejected the long-standing test for analyzing claims brought under Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA). In its June 20, decision in Pennsylvania Environmental Defense Foundation (PEDF) v. Commonwealth, the Supreme Court set aside the test from Payne v. Kassab that has been used since 1973, and held that the Commonwealth’s oil and gas rights are “public natural resources” under the ERA and that any revenues derived from the sale of those resources must be held in trust and expended only to conserve and maintain public natural resources.
The Supreme Court’s opinion in PEDF is an important step in the ongoing judicial reexamination of the ERA. However, the impact of the court’s decision on environmental and land use issues beyond the relatively narrow facts of this case remains unclear.
Factual background
A statutory special fund in Pennsylvania known as the Oil and Gas Lease Fund holds all rents and royalties from oil and gas leases of Common wealth land. The lease fund was originally required by statute to be used “exclusively used for conservation, recreation, dams, or flood control.” In 1995, the Pennsylvania Department of Natural Resources (DCNR) became the entity responsible for making appropriations from the lease fund for projects. Between 2009 and 2015, the Pennsylvania General Assembly made a number of budgetary decisions related to the lease fund, including the enactment of Sections 1602-E and 1603-E of the Fiscal Code, which transferred control over the royalties from oil and gas leases from the DCNR to the General Assembly and required that there could be no expenditures of money in the lease fund from royalties unless that money was transferred to the General Fund by the General Assembly.
PEDF brought claims challenging Sections 1602-E, 1603-E, and the General Assembly’s transfer/appropriations from the lease fund, among other things, in the Commonwealth Court. The basis of these claims was the ERA, which provides: “The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. Pennsylvania’s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.”
The Commonwealth Court held the Fiscal Code provisions or the appropriations by the General Assembly of lease fund money to the General Fund did not violate the ERA, and PEDF appealed to the Supreme Court. The Supreme Court heard oral argument on two “overarching issues”: (1) the proper standards for judicial review of government action and legislation under the ERA, and (2) the constitutionality of Section 1602-E, Section 1603-E and the General Assembly’s transfers/ appropriations from the lease fund under the ERA. The Supreme Court reviewed these pure questions of law de novo.
Standard of judicial review for challenges under the ERA
In the 1973 decision Payne v. Kassab, the Commonwealth Court set out a three-part balancing test to be applied when determining whether a Commonwealth action violates the ERA. While the Pennsylvania Supreme Court affirmed the Common – wealth Court’s decision in that case without adopting the Payne v. Kassab test, it has been used by courts since 1973 to analyze constitutional challenges brought under the ERA.
In its landmark 2013 decision in Robinson Township v. Commonwealth (Robinson II), the Supreme Court discussed the application of the ERA with respect to a number of challenges to Act 13 of 2012, the updated version of Pennsylvania’s Oil and Gas Act, and strongly criticized the three-part Payne v. Kassab balancing test. However, the Robinson II opinion was a plurality, and courts have subsequently treated the plurality opinion as persuasive only, including the Commonwealth Court in PEDF.
In PEDF, the Supreme Court, in an opinion authored by Justice Christine Donohue and joined by Justices Debra McClosky Todd, Kevin M. Dougherty and David N. Wecht, rejected the Payne v. Kassab test as the standard to be used when analyzing challenges under the ERA, finding that the test “is unrelated to the text of Section 27 and the trust principles animating it” and “strips the constitutional provision of its meaning.” The Supreme Court instead determined that the “the proper standard of judicial review lies in the text of Article I, Section 27 itself as well as the underlying principles of Pennsylvania trust law in effect at the time of its enactment.”
The Supreme Court went on to more fully develop a new standard in the context of PEDF’s challenge to legislative action, and in doing so frequently relied on the three-justice plurality decision in Robinson II. The court found that the text of the ERA grants citizens of the Commonwealth two separate rights: (1) the right to “clean air and pure water, and to the preservation of natural, scenic, historic and esthetic values of the environment”, and (2) the right of “common ownership by the people, including future generations, of Pennsylvania’s public natural resources.”
The trust doctrine
In its discussion of the second right granted under the ERA, the Supreme Court also found that the ERA establishes a public trust, with Pennsylvania’s natural resources as the corpus of that trust and the Commonwealth as the trustee. The trustee obligation is vested in “all agencies and entities of Commonwealth government, both statewide and local,” and the people are the named beneficiaries of the trust.
Relying again on the Robinson II plurality, the court reiterated that this trust requires the government to “conserve and maintain the corpus of the trust” and that as trustee, the Commonwealth has duty to act “with prudence, loyalty and impartiality” toward the corpus of the trust. The court found that the trust imposes “two basic duties on the Commonwealth as the trustee”: (1) a “duty to prohibit the degradation, diminution, and depletion” of public natural resources, and (2) a duty to “act affirmatively via legislation to protect the environment.”
Appropriations from the lease fund
Pursuant to these duties imposed on the Commonwealth by the ERA, the court found that trust assets may be used “only for purposes authorized by the trust or necessary for the preservation of the trust,” and further held that the assets of the trust created by the ERA “are to be used for conservation and maintenance purposes.” The court further held that the General Assembly has discretion to determine how the revenue generated from the sale of the trust assets is directed when used for those purposes.
Regarding the use of royalties from leased oil and gas on Commonwealth property, the Supreme Court reversed the Commonwealth Court and held that Sections 1602-E and 1603-E of the Fiscal Code, both of which relate exclusively to royalties, were unconstitutional because they permit the trustee to use the trust for “non-trust purposes.” The court further found unconstitutional any further Fiscal Code amendments which transfer the “proceeds from the sale of trust assets to the General Fund.” The Supreme Court remanded the case to the Commonwealth Court to determine whether up-front bonus payments (and other revenue streams) are also part of the corpus of the trust, because the record was insufficiently developed regarding the purpose of these payments. The court indicated that the Commonwealth Court must first determine whether these other revenue streams belong in the corpus of the ERA trust under “Pennsylvania trust principles.”
Justice Max Baer issued a concurring and dissenting opinion, joined in the dissenting portion by Justice Thomas G. Saylor. Justice Baer would have found that the ERA does not impose private trust duties on the Commonwealth, but rather creates a public trust which would not require money from the sale of natural resources to remain in an environmental trust, but could be used “for the general benefit of the public.” He asserted that the focus of ERA is “on the natural resources themselves, not the money gained from those resources.” The dissent argued that although proceeds from the sale of natural resources may be used for public purposes other than conservation, “the Common – wealth must act in a trustee-like capacity” in regard to natural resources.
Is the ERA self-executing?
The court majority opinion briefly addressed whether the ERA is self-executing or whether it requires implementing legislation to be effective. Citing Robinson II, the court confirmed that the public trust provisions of the ERA are self-executing. That is, “the second and third sentences of Section 27 do not require legislative action in order to be enforced against the Commonwealth in regard to public property.” The Supreme Court did not address whether the ERA is self-executing for purposes of enforcement against private property.
What’s next?
By rejecting the Payne v. Kassab test for matters involving constitutional challenges arising under the ERA, the Pennsyl – vania Supreme Court has discarded a test that has been used for more than 40 years and replaced it with a standard based on the “text of Article I, Section 27” and “the underlying principles of Pennsylvania trust law.” The Supreme Court’s decision in PEDF deals with governmental owned assets, and it is unclear how this new standard will be applied to state and local regulation of private natural resources, including oil and gas development, which is not addressed in the opinion. Some of these issues may be resolved in Gorsline v. Bd. of Supervisors of Fairfield Twp., which is currently pending before the Pennsylvania Supreme Court. ■
Babst Calland will continue tracking developments related to the ERA and the new standard set out by the Supreme Court. For more information regarding issues relating to land use and municipal implications of the Supreme Court’s ruling, contact Blaine A. Lucas (412-394-5657 or blucas@babstcalland.com) or Krista M. Staley (412-394-5406, kstaley@babstcalland.com). For more information regarding impact of the court’s ruling on environmental regulatory matters, contact Kevin J. Garber (412-394-5404, kgarber@babstcalland.com) or Jean M. Mosites (412-394-6468, jmosites@babstcalland.com).
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Babst Calland announced that Timothy H. Goodman has joined the firm as shareholder in the Transportation Safety Group in the Firm’s Washington, D.C. office.
Goodman brings to clients a current and detailed understanding of the federal government’s approach to transportation safety regulation (particularly motor vehicles), including its programs and personnel as a former Federal Senior Executive (key positions just below top Presidential appointees). Goodman spent nearly a decade at the U.S. Department of Transportation (USDOT), where he served in various capacities, including at the National Highway Traffic Safety Administration (NHTSA) and in the Secretary of Transportation’s Office of the General Counsel. As NHTSA’s Assistant Chief Counsel for Litigation and Enforcement, Goodman was the chief legal officer for the litigation and enforcement matters of the 600-plus employee federal agency. He also served as a senior trial attorney in the Secretary of Transportation’s Office of the General Counsel, where he led teams in matters throughout USDOT and across multiple transportation modes, including pipeline safety, hazardous materials, federal environmental, urban transit, motor carrier, aviation economic regulatory, and maritime matters.
Goodman is the fourth former USDOT regulatory attorney during the past 18 months to join Babst Calland’s Washington, D.C. office where former colleagues and energy attorneys from the USDOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) maintain a national Pipeline and HazMat Safety practice. He joins us from a prominent global law firm where he focused on transportation regulatory and litigation matters.
At the DOT, Goodman was recognized for effectively working with corporate executives, senior officials and engineers to achieve practical and efficient results in high profile enforcement actions, landmark consent orders, litigations and rulemakings. He collaboratively led some of the largest civil enforcement actions and recalls in the history of NHTSA – including the largest and most complex safety recall in U.S. history – involving nearly 70 million airbag inflators and tens of millions of vehicles subject to recall by 2019.
Before joining DOT/NHTSA, Goodman litigated at various law firms on behalf of companies and individuals in various high-value matters. He was also a seagoing officer in the U.S. Navy. He is admitted to practice in the District of Columbia, the U.S. Supreme Court, the U.S. Courts of Appeal for the D.C. and Sixth Circuit, and various U.S. District Courts. Goodman earned a J.D., with honor, from Case Western Reserve University School of Law, and a B.S. in Foreign Service from Georgetown University. He also earned a Certificate of Completion from Harvard University, John F. Kennedy School of Government, Executive Education, in the Strategic Management of Regulatory & Enforcement Agencies Program.
“Tim Goodman is a strategic addition to our Washington, D.C. office and our growing federal safety regulatory capabilities,” said Chester R. Babst III, a founding shareholder of Babst Calland. “Collectively, our D.C. attorneys represent a national resource for the energy, transportation and chemical industries, with years of experience in understanding federal agency priorities and emerging business and technology trends in these sectors,” said Babst.
Best Lawyers
The call never seems to come at an ideal time. It is usually late in the workday or over a weekend, and it often starts with a question from an unusually tense client who asks, “Hey, we have a problem. Do you have a few minutes to talk?”
Perhaps none of my prior cases have been as notable or newsworthy as the January 2014 Freedom Industries, Inc., (Freedom) spill into the Elk River in Charleston, West Virginia.1
The Freedom chemical storage and distribution facility was located in Charleston on the banks of the Elk River. On the morning of January 9, 2014, inspectors from the West Virginia Department of Environmental Protection arrived at the facility in response to complaints about a chemical odor. It subsequently was determined that as much as 10,000 gallons of a mixture of crude methylcyclohexanemethanol (MCHM) and polyglycol ethers (PPH, stripped) leaked from an aboveground storage tank at the facility and that some portion of the leaked chemicals flowed into the Elk River. The facility was located approximately 1.5 miles upstream of the intake for the West Virginia American Water drinking water treatment facility. The MCHM/PPH mixture was drawn into the West Virginia American Water intake on the Elk River, thereby contaminating the drinking water system. Later, on the evening of January 9, West Virginia American Water issued a “do not use” order for 93,000 customer accounts (approximately 300,000 residents) across portions of nine counties in West Virginia. After the spill, hospitals reported a noted increase in patient visits, with complaints of a number of symptoms including nausea, rashes, vomiting, abdominal pain, and diarrhea following exposure to the water through inhalation, ingestion, and/or skin contact. Residents affected by the “do not use” order were further advised to restrict their usage of tap water for drinking, cooking, and bathing for up to nine days.
- The spill created significant issues for many citizens and businesses of West Virginia. Its aftermath was also grim for Freedom and for some of its key personnel. Among other implications of the spill:
- The United States Bankruptcy Court for the Southern District of West Virginia approved a Liquidating Chapter 11 plan for Freedom in October 2015;
- The chemical storage and distribution facility was dismantled;
- Freedom was sentenced to a criminal fine of $900,000;2 and
- Several Freedom-related individuals pled guilty to criminal charges under federal laws, including:
• Former plant manager Michael Burdette, former vice president Charles Herzing, and former environmental consultant Robert Reynolds were sentenced to three years’ probation;
• William Tis, former co-owner and officer of Freedom, was sentenced to probation and ordered to pay a $20,000 fine;
• Former owner Dennis Farrell was sentenced to 30 days in jail and a $20,000 fine; and
• Former President Gary Southern was sentenced to 30 days in jail and six months of supervised release and ordered to pay a $20,000 fine.
While every crisis and how it unfolds is unique, after handling a variety of environmental crisis matters over the years, there are a number of recurring practical points and themes that apply in most situations, including:
- Do not accept the representation if you are not prepared to handle it.
This point is axiomatic for any lawyer, but an environmental crisis is no place to be unless you are a very experienced environmental lawyer and are willing to be available 24/7 for the duration of the crisis.
- Establish clear communication protocols at the outset and stick with them.
Internal and external communication lines need to be established, centralized, and maintained throughout the crisis, therefore attempting to avoid miscommunications or inconsistent messaging during the crisis.
- Discuss the benefits of phone calls vs. emails with your team.
It is sometimes too easy to dash off a quick email in our busy, digital lives. However, these emails do not always include the proper context and may include what later is determined to be incorrect or partial information (and as such present evidentiary issues in ensuing litigation), so a phone call may be a more prudent form of communication during the crisis.
- Bear in mind long-term impacts when making short-term decisions.
A crisis often requires quick decision-making without the benefit of detailed deliberation. Regardless, bear in mind (as much as possible) the long-term possible impacts of decisions, such as post-crisis litigation and discovery, stock ownership implications (including accounting implications of cost estimates), company reputation, ongoing relationships with regulatory agencies, and community relations.
- Be empathetic and truthful when interacting with affected third party stakeholders.
If you are fortunate, you will get one chance (and only one chance) to establish credibility and develop a positive working relationship with affected third party stakeholders.
- Designate point person(s) for subsequent notices.
If the client has not already done so, establish point person(s) for making required immediate notifications if another reportable incident occurs, ensure that they know what information is required and who to call, and confirm that they will always be available to make the call if needed.
- Know when to say “I don’t know.”
No one can know everything all of the time. Admit when you do not know the answer to a question or an issue, and then follow up promptly and appropriately as time allows.
Like trying a large, complex case or handling a major transaction, managing an environmental crisis can be an incredibly challenging and rewarding career experience for an environmental lawyer. These days, most organizations employ a best practices crisis operational/facility response plan and a corresponding crisis communications plan. The best advice is to be prepared for when you get “the call”!
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1 The exact facts surrounding the spill have been the subject of intense scrutiny and litigation. For purposes of this article, facts regarding the spill are taken from the U.S. Chemical Safety and Hazard Investigation Board’s Investigation Report – Chemical Spill Contaminates Public Water Supply in Charleston, West Virginia – Over 300 Members of the Public Sought Medical Treatment for Potential Exposure – The Spill Restricted Water Use for Nearly 300,000 Residents (Report No. 2014-01-I-WV, September 2016).
2 The criminal sentences were reported by a number of news outlets, including the Associated Press.
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SNL
Even though a court struck down the U.S. Environmental Protection Agency’s attempted 90-day pause on oil and gas industry methane regulations, the EPA may still be able to carry out plans for a longer regulatory suspension.
The 90-day stay, which went into effect June 2 but was vacated July 3, was not the only suspension in the works for the EPA rule designed to limit methane from new and modified oil and gas sources. The agency on June 16 proposed a two-year stay on the regulation’s requirements on fugitive emissions, pneumatic pumps and professional engineer certification.
For the longer stay, the agency is taking 30 days of comment from the public on the hold. Importantly, that process uses different statutory authority with different legal standards than the ones at play for the shorter, recently reversed stay, according to Whit Swift, a partner with Bracewell LLP.
“I don’t think that [this ruling] is fatal to the longer stay that is presumably just citing the broader authority of the EPA administrator to promulgate rules as deemed necessary,” Swift said in a July 5 interview. “If you think of that as the authority for this longer stay, the court doesn’t determine the fate of the longer stay. But it does create … the confusing situation they were trying to avoid. … Now you’ve got these elements of the methane rule springing back into effect until EPA, assuming it moves forward, does stay the rule following notice and comment.”
For the 90-day stay attempt, EPA Administrator Scott Pruitt moved to put a hold on parts of the agency’s rule limiting methane emissions, saying stakeholders had not had enough time to discuss certain aspects of the final 2016 regulation. The rule’s supporters fired back soon after, countering that those issues were already “extensively deliberated” during the regulation’s comment period. Two out of three judges at the U.S. Court of Appeals for the District of Columbia Circuit on July 3 ruled against the EPA, blocking it from putting the rule on hold for three months while the agency reconsiders its contents.
The EPA had hoped to be able to hold off on enforcing the methane rule until it has a chance to complete the two-year stay process, possibly as soon as September, to avoid an on-again, off-again enforcement situation, Swift said. The agency could try to use its discretion in enforcing the rule for the time being, but with the regulation officially on the books and ready for implementation, the agency cannot prevent states from requiring compliance, he said.
Sparingly enforcing the rule could also trigger court action, Meredith Graham, an attorney with law firm Babst Calland Clements and Zomnir PC, said in a July 5 interview. “As a practical matter, EPA could perhaps exercise enforcement discretion and not pursue enforcement of the provisions that were stayed, [but there is] the ongoing risk of citizen suits and public interest group action,” Graham said.
While the July 3 decision has no direct implications for the legal future of the two-year stay, regulators and other stakeholders may be able to take away a more “symbolic” meaning from the court’s order, Andrew Shaw, a senior managing associate with the global law firm Dentons, said in a July 5 interview. “There’s a … symbolic importance of this court’s decision, not so much in that the decision will have a tangible impact on other cases, but it is a signal that courts are going to look at the administration’s efforts to undo Obama-era environmental rules closely and that [regulators] are going to have to meet certain administrative and statutory requirements in order to accomplish their goal of repealing a lot of these rules,” said Shaw, who is part of Dentons’ public policy and regulation practice.
He continued, “It demonstrates that courts are going to examine agency actions — whether it be EPA, [the Bureau of Land Management] or other agencies — to ensure they are consistent with the underlying statutes and the Administrative Procedure Act. And going forward, these agencies, if they do work to repeal existing rules, they’re going to have to provide a reason, a justification, and that justification is likely to be challenged in court.”
Environmental groups, including the Environmental Defense Fund, the Sierra Club and the Environmental Integrity Project, celebrated the circuit court’s verdict but also acknowledged the EPA’s plans for a longer pause.
“[T]he threats to these common sense clean air protections are far from over, and EDF will keep fighting to make sure our nation’s bedrock clean air laws are enforced to safeguard all Americans,” Vickie Patton, the Environmental Defense Fund’s general counsel, said in a July 3 statement. The Sierra Club encouraged the public to weigh in on “the importance of implementing the rule.”
The Washington, D.C.-based research group ClearView Energy Partners LLC said that if the proposed two-year stay is finalized, the policy will likely be challenged in court, with a continued focus on what the EPA did and did not include in its administrative record when finalizing the rule, along with the technical specifics of complying with the new source performance standards.
The EPA’s methane rule was finalized in May 2016 and was the first-ever rule targeting methane emissions from the oil and gas sector. At the time, the agency estimated that the regulation would reduce 510,000 tons of methane emissions in 2025, which would have the same impact as curbing 11 million tonnes of carbon dioxide emissions.
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The PIOGA Press
This article is an excerpt of The 2017 Babst Calland Report, a report which represents the collective legal perspective of Babst Calland’s energy, environmental and pipeline safety attorneys addressing the most current business and regulatory issues facing the oil and natural gas industry. A full copy is available by writing info@babstcalland.com.
The second half of 2016 was marked by several significant federal air program developments as the Environmental Protection Agency (EPA) raced to implement President Barack Obama’s Climate Action Plan before the change in administration. The final New Source Performance Standards (NSPS) for oil and natural gas production, processing, transmission and storage activities, which established first-time methane requirements, went into effect on August 2. By then, lawsuits were already well underway to challenge the 2016 NSPS and EPA’s authority to regulate methane emissions.
In October, EPA finalized the “Control Techniques Guide – lines” (CTG) directing state and local air agencies to reduce volatile organic compound (VOC) emissions from existing oil and natural gas industry sources in areas with ozone problems (including all of Pennsylvania). It is anticipated that Pennsylvania will adopt regulations to implement the CTG in the Commonwealth within the next few years.
In November, EPA issued a final Information Collection Request (ICR) to gather information for the agency to develop a federal rule to limit methane emissions from existing sources. The final ICR set in motion a flurry of activity as more than 15,000 owners and operators were tasked with submitting extensive information to EPA in a short timeframe. For many companies, the ICR presented an enormous challenge due to its broad scope, complex EPA reporting forms and significant compliance costs. Also in November, EPA finalized additional revisions to the Petroleum and Natural Gas Systems source category of its Greenhouse Gas Reporting Rule.
The Trump administration acted quickly to reverse course on climate change initiatives and reduce regulatory burdens. By early March, the new administration had withdrawn the controversial ICR and announced that owners and operators were no longer required to respond. On March 28, President Donald Trump signed an executive order entitled, “Promoting Energy Independence and Economic Growth,” to promote do mes tic energy development and avoid regulatory burdens that “unnecessarily encumber energy production, constrain economic growth, and prevent job creation.” This executive order revoked President Obama’s 2013 Climate Action Plan and 2014 Strategy to Reduce Methane Emissions and also directed EPA to review the 2016 NSPS. The same day, Administrator Scott Pruitt an nounced that EPA was initiating review of the 2016 NSPS and “providing advanced notice of forthcoming rulemaking proceedings consistent with [President Trump’s] policies.” More recently, EPA granted industry requests to reconsider certain requirements of the 2016 NSPS and announced a stay of the relevant provisions.
In light of this trend, it is foreseeable that the Trump administration could rescind other Obama-era Clean Air Act initiatives such as the CTG later this year. In a similar vein, on June 1, President Trump announced that the United States will withdraw from the Paris Agreement adopted at the United Nations Climate Change Conference in December 2015.
Pennsylvania: More stringent air permitting requirements proposed
Despite the recent trend at the federal level, Pennsylvania continues to implement the methane reduction strategy launched by Governor Tom Wolf in early 2016. On February 4, the Department of Environmental Protection announced the beginning of a public comment period for an air permitting proposal that, if finalized, would result in significant changes to the status quo for oil and gas industry sources. Among other things, the proposal would narrow the scope of a longstanding air permitting exemption known as “Exemption 38,” such that it would not apply to new or modified unconventional well sites. Instead, unconventional operators would be required to obtain an air permit prior to constructing, modifying or operating a well site.
DEP proposed a new general permit known as GP-5A to authorize the construction and operation of unconventional natural gas well site operations and remote pigging stations. DEP also proposed significant changes to the terms and conditions of the existing general permit for natural gas compression and processing facilities, known as GP-5.[x] Together GP-5A and the revised GP-5 present myriad issues for comment and debate, such as the proposed requirement to control methane emissions from pigging operations by at least 98 percent. The public comment period regarding the proposal closed on June 5.
Apart from the pending air permitting proposal, it remains to be seen whether DEP will undertake a rulemaking to reduce methane or VOC emissions from oil and natural gas facilities. Governor Wolf’s methane strategy announcement in 2016 anticipated that DEP would eventually develop such a regulation.
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The Legal Intelligencer
The Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq., authorizes municipalities to engage in land use planning and implement land use controls through a number of mechanisms, including comprehensive plans, official maps, zoning ordinances, subdivision and land development ordinances and planned residential developments. On May 9, the Commonwealth Court rendered a decision in Delchester Developers v. Zoning Hearing Board, 2017 Pa. Commw. Ct. LEXIS 192 (Pa. Commw. Ct. 2017), concluding, among other things, that stormwater management ordinances are not land use ordinances governed by the MPC.
In Delchester Developers, Delchester Developers L.P. submitted a preliminary land development plan application to the township of London Grove seeking approval to develop commercially two lots located within the township’s Groundwater Protection Overlay District. The overlay district encompasses a threatened geological formation in the township that allows water to move quickly through it. In recognition of the threat to and challenges posed by the geological formation, the township board of supervisors adopted stringent stormwater management regulations applicable in the overlay district to ensure recharge, prevent sinkhole formation and protect the groundwater from contamination.
In order to effectuate its plans, Delchester sought several variances and special exceptions from the township’s zoning hearing board, and brought challenges to the substantive validity of various township ordinances, including the township’s stormwater management ordinance (SWMO). The township zoning hearing board denied all of Delchester’s requests. The zoning hearing board rejected Delchester’s substantive validity challenge to the SWMO, concluding that because the SWMO is not a land use ordinance under the MPC, the zoning hearing board lacked jurisdiction over the challenge. The trial court affirmed.
Section 909.1(a)(1) of the MPC confers upon a zoning hearing board exclusive jurisdiction to hear and render final adjudications on “substantive challenges to the validity of any land use ordinance,” 53 P.S. Section 10909.1. On appeal to the Commonwealth Court, Delchester contended that the SWMO was a land use ordinance because it regulated the size, height, and location of stormwater facilities constructed as part of a development, and compliance with the SWMO was a prerequisite to land development approval.
In addition to challenging the zoning hearing board’s rejection of its substantive validity challenge to the SWMO for lack of jurisdiction, Delchester raised the following additional issues before the Commonwealth Court: whether the zoning hearing board and trial court erred in concluding the “net out” provision in the Township’s zoning ordinance, which requires Delchester to exclude the area designated for stormwater management facilities from the building lot area for the proposed development, survives constitutional scrutiny under a takings analysis and is therefore invalid; whether the zoning hearing board and trial court erred in concluding that the word “site” as used in the township’s zoning ordinance is synonymous with the word “lot” as the term is defined in the zoning ordinance; and whether the zoning hearing board and trial court erred in concluding that one of the proposed driveways to the subject property constitutes an “internal access drive” as the term is defined under the zoning ordinance. The Commonwealth Court rejected all of these arguments. The Commonwealth Court’s ruling on Delchester’s taking argument will be analyzed in a future article.
The township, taking the position that the SWMO is not a land use ordinance, countered Delchester’s argument by citing to the definition of “land use ordinance” in the MPC. The MPC defines “land use ordinance” as “any ordinance or map adopted pursuant to the authority granted in Articles IV, V, VI and VII.” See MPC Section 107; 53 P.S. Section 107. Article IV of the MPC provides for the adoption of official maps, Article V authorizes subdivision and land development ordinances, Article VI addresses zoning ordinances and maps, and Article VII authorizes the adoption of ordinance provisions regulating planned residential developments. Since the SWMO was not adopted pursuant to Articles IV, V, VI or VII of the MPC, the township took the position that the SWMO is not governed by the MPC. Instead, the township asserted that it adopted the SWMO pursuant to Section 2704 of Second Class Township Code, 53 P.S. Section 67704, which expressly authorizes the adoption of stormwater management ordinances. Accordingly, any complaint challenging the legality of the SWMO must be filed with the court of common pleas pursuant to Section 1601(f) of the Second Class Township Code, 53 P.S. Section 1601(f), instead of with the zoning hearing board pursuant to the MPC.
The Commonwealth Court, agreeing with the township, affirmed the zoning hearing board’s and trial court’s conclusion that the board lacked jurisdiction over challenges to the substantive validity of the SWMO. The court explained that when tasked with determining whether a local ordinance is a “land use ordinance” subject to the procedural framework mandated by the MPC, courts “must look first at the purpose of the [ordinance] and then examine whether the [ordinance] stays within the limit to which that purpose extends or goes beyond its scope.” The court then analyzed the definition of “land use ordinance” under Section 107 of the MPC and the statutory authority for and stated purpose of the SWMO. In doing so, it emphasized that just because the SWMO and the township’s zoning and subdivision and land development ordinances contain provisions addressing shared concerns (e.g., the movement of water or the impact of development on the natural environment) or utilize the same regulatory techniques to achieve their goals (e.g., the regulation of the size, height, and location of stormwater facilities or the imposition of setbacks and buffer requirements) “does not make all three types of ordinances land use ordinances.”
The Commonwealth Court found that, based upon the express language of the SWMO, its primary purpose was not the regulation of land pursuant to the powers granted by Articles IV-VII of the MPC—the SWMO was not an official map, it did not divide all of the land within the township into zones or regulate specific uses permitted within each zone like a zoning ordinance, it did not provide for the division or re-division of a lot nor did it regulate the location and bulk of structures constructed on those lots like a subdivision and land development ordinance, and it did not provide for the development of a large tract of land in accordance with a plan intended to supersede the underlying zoning like a planned residential development. The court, finding the primary purpose of the SWMO to be the regulation of stormwater, concluded that the use of regulatory tools in the SWMO similar to those used in land use ordinances (e.g., size, height, location, setback and buffer regulations) did not carry the SWMO beyond the scope of its goal and into the purview of the MPC.
The Delchester decision underscores the importance of proper characterization of municipal ordinances for a variety of reasons. As the developer painfully learned there, all ordinances are not land use ordinances, the validity of which can be challenged before zoning hearing boards, as opposed to in the courts. On the other hand, municipalities must take care to appropriately classify the types of ordinances they adopt, as the MPC imposes substantially more procedural requirements in connection with the adoption of land use ordinances (e.g., public hearings, more advanced public notice, distribution and review by planning agencies) than do ordinances adopted under the Second Class Township Code and the other general municipal codes.
*Reprinted with permission from the 7/22/17 issue of The Legal Intelligencer. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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Kallanish Energy
The oil and gas industry rebounded during the past year through efficiency measures, consolidation and a resurgence of business opportunities related to shale gas development and its impact on upstream, midstream and downstream companies, according to a just-released study by Pittsburgh-based law firm Babst Calland.
As a result, many new opportunities and approaches to regulation, asset optimization and infrastructure are underway, The 2017 Babst Calland Report – Upstream, Midstream and Downstream: Resurgence of the Appalachian Shale Industry; Legal and Regulatory Perspective for Producers and Midstream Operators, found.
“This report provides perspective on the challenges and opportunities of a resurging shale gas industry in the Appalachian Basin, including: the divergence of federal and state policy that creates more uncertainty for industry; increased special interest opposition groups on new issues and forums despite their lack of success in the courts; and the expansion from drilling to midstream development and now to downstream manufacturing that demonstrates the emergence of a more diverse energy economy,” according to Joseph K. Reinhart, co-chair of Babst Calland’s Energy and Natural Resources Group.
Shale gas continues to provide Pennsylvania, Ohio and West Virginia with “significant economic opportunities through employment and related revenue from the development of well sites, building of pipelines necessary to transport gas to market, and new downstream opportunities being created for manufacturing industries due to the volume of natural gas and natural gas liquids produced in the Appalachian Basin.”
Shell’s progress from a year ago to construct an ethane cracker plant in Beaver County, Pa., represents just one example of the expanding downstream market for natural gas, according to the law firm, Kallanish Energy finds.
Many other manufacturing firms are expected to enter the region and establish businesses drawn by the energy and raw materials associated with natural gas and natural gas liquids from the Marcellus and Utica Shale plays.
For the full article, click here.
Babst Calland released its seventh annual energy industry report entitled The 2017 Babst Calland Report – Upstream, Midstream and Downstream: Resurgence of the Appalachian Shale Industry; Legal and Regulatory Perspective for Producers and Midstream Operators. This annual review of shale gas development activity acknowledges the continuing evolution of this industry in the face of economic, regulatory, legal and local government challenges. 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 .
In general, the oil and gas industry has rebounded during the past year through efficiency measures, consolidation and a resurgence of business opportunities related to shale gas development and its impact on upstream, midstream and downstream industries. As a result, many new opportunities and approaches to regulation, asset optimization and infrastructure are underway. Increased spending during the past year has led to a significantly higher rig count in the Appalachian Basin enabling growth in the domestic production of oil and gas as other shale plays across the country experience reductions.
The shale gas industry continues to provide the tri-state region with significant economic opportunities through employment and related revenue from the development of well sites, building of pipelines necessary to transport gas to market, and new downstream opportunities being created for manufacturing industries due to the volume of natural gas and natural gas liquids produced in the Appalachian Basin. Shell’s progress from a year ago to construct an ethane cracker plant in Beaver County, Pennsylvania represents just one example of the expanding downstream market for natural gas. Many other manufacturing firms are expected to enter the region and establish businesses drawn by the energy and raw materials associated with natural gas and natural gas liquids from the Marcellus and Utica shales.
The Report also highlights changes that have occurred during the past year in the political landscape that are expected to affect the energy industry. The Trump administration is signaling a fundamental shift in the energy policies established by the Obama administration. New executive orders and policies have been issued that promise to lead to more pipeline development, reduced federal oversight of the oil and gas industry and increased access to oil and natural gas reserves.
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 resurging shale gas industry in the Appalachian Basin, including: the divergence of federal and state policy that creates more uncertainty for industry; increased special interest opposition groups on new issues and forums despite their lack of success in the courts; and the expansion from drilling to midstream development and now to downstream manufacturing that demonstrates the emergence of a more diverse energy economy.”
The 74-page Report contains six sections, highlighted below, each addressing key challenges for oil and gas producers and midstream operators.
- Business Issues: Adapting to the New Price Environment as natural gas producers continue to focus on reducing costs and improving efficiencies. Recently, the number of natural gas producers in the Appalachian Basin has contracted through select merger and acquisition activity. With efficiency of operations in mind, natural gas producers continue to focus on consolidating their activities geographically. The oil and gas industry faced significant financial stress over the past year, and 2016 will go down as one of the more dramatic years in the United States’ oil and gas history. In the 2016 calendar year, primarily due to low commodity prices, 70 North American oil and gas exploration and production companies filed for bankruptcy protection.
- State and Federal Governments Remain Active in a Changing Regulatory Landscape as developments in the state environmental standards for enforcement, air, water and waste management in Pennsylvania, West Virginia and Ohio, as well as anticipated initiatives from non-governmental organizations (NGOs), will continue to have an effect on production and midstream operations. Separately, the impact of the Trump administration on various federal regulatory initiatives from the Obama era promises to be significant. President Donald Trump’s March 28, 2017 Executive Order was directed towards the development of the country’s natural resources. The order, among other things, requires agencies to review regulations that may burden the development or use of domestic energy resources.
- Pipeline Safety Legislative and Regulatory Developments Continue to Shape the Industry through the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration’s (PHMSA) pipeline safety program. It is unlikely that there will be a dramatic shift in PHMSA’s enforcement policy in 2017. “Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016” (PIPES Act) was signed into law last year with a provision allowing PHMSA to issue emergency orders if an unsafe condition or practice constitutes, or is causing, an imminent hazard. These emergency orders can impose industry-wide operational restrictions, prohibitions, or safety measures without a prior hearing.
- Litigation Trends including a number of alleged nuisance claims continue to travel through West Virginia, Ohio and Pennsylvania courts. Materials discussing alleged health effects from unconventional natural gas development continue to be disseminated at a record pace by industry opposition groups. A casual review of the material could lead to the erroneous conclusion that air emissions have not been tested; this is not, however, the case. The air quality data collected by a variety of objective parties using established monitoring and testing protocols around shale development in northeastern U.S. over the last six years demonstrate that shale operations are safe.
- Local Government Law and Regulations Continue to Spawn Debate and Legal Challenges which continue to increase throughout the Appalachian Basin. However, the industry has successfully challenged overly-restricted ordinances. In contrast to municipalities that have adopted ordinances that permit reasonable oil and gas development, some local governments continued in 2017 to test their regulatory authority by enacting strict regulations for uses ancillary to well site development. Operators impacted by these regulations likewise continued to push back on these local regulations that severely impede, if not entirely prohibit, development or operation.
- Downstream Opportunities include exciting developments for production and midstream companies with new emerging markets for consumption of natural gas and natural gas liquids, such as power generation, export, and the petrochemical and related manufacturing industries. The U.S. petrochemical industry is undergoing tremendous growth, including the Northeast which is a prime target for more niche markets, and an opportunity to repurpose industrial assets for this regionalized growth.
As market conditions evolve for the oil and gas industry in the Appalachia Basin and throughout the United States, Babst Calland’s multidisciplinary team of energy attorneys continues to stay abreast of the many legal and regulatory challenges currently facing producers and midstream operators.
The Babst Calland Report is provided for informational purposes to our clients and friends, and is not intended to constitute legal advice.
To stay on top of these developments, periodic update articles, news and regulatory information can be found on babstcalland.com or at the Firm’s Shale Energy Law Blog shaleenergylawblog.com. Subscribe to receive regular updates.
PA Law Weekly
Job interviews are tough and they can be full of awkward questions. One of the awkward questions many applicants face is a potential employer’s request for an applicant’s compensation history. Not only is that question awkward, but some have theorized that basing starting compensation on an applicant’s historical compensation perpetuates the gender and minority wage gap. As a result, a percentage increase of the current salary of an applicant who is impacted by the wage gap could result in an even wider wage gap when compared to an applicant who is not negatively impacted by the wage gap. Accordingly, there has been a recent trend in several cities and states to propose and even pass legislation banning a new employer from seeking salary history information from an applicant or basing a starting salary on an applicant’s prior salary.
In 2016, Massachusetts became the first state to pass a law prohibiting employers from asking potential candidates about their salary histories prior to making a job offer. Massachusetts Gov. Charlie Baker signed “The Act to Establish Pay Equity” on Aug. 1, 2016, with an effective date of July 1, 2018. Under this law, among other things, it is unlawful for an employer to “seek the wage or salary history of a prospective employee from the prospective employee or a current or former employer or to require that a prospective employee’s prior wage or salary history meet certain criteria,” Section 105A(c)(2). Salary history bills have also been introduced in other states such as California, New Jersey and Washington.
Cities are also getting in on the action, passing ordinances prohibiting the salary history question. On May 4, Mayor Bill De Blasio of New York City signed a bill into law prohibiting employers from asking applicants about their salary histories or relying on the salary history of an applicant to determine the salary that it will offer to an applicant. The New York City law is effective on Oct. 31.
Finally, two bills have been introduced in the U.S. House of Representatives that would impact an employer’s ability to request an applicant’s salary history if signed into law. See Fair Salary History Alternatives of Responsible Employment Act of 2016 (H.R. 6293; sponsored by Rep. Bonnie Watson Coleman, D-New Jersey) and the Pay Equity for All Act of 2016 (H.R. 6030; sponsored by Rep. Eleanor Norton, D-District of Columbia). Both of those bills are currently in House committees.
In Philadelphia, an ordinance was passed that amended the city’s “Fair Practices Ordinance: Protections Against Unlawful Discrimination” ordinance (the ordinance amendment). Citing the U.S. Census Bureau 2015 report, the ordinance amendment claims that in Pennsylvania, women are paid 79 cents for every dollar a man makes, Phila. Code Section 9-1131(1)(a). It also claims that women of color are paid even less—African-American women are paid only 68 cents to the dollar, Latina women are paid 56 cents to the dollar and Asian women are paid 81 cents to the dollar.
The ordinance amendment made it an unlawful employment practice for “an employer, employment agency, or employee or agent thereof” to “inquire about a prospective employee’s wage history, require disclosure of wage history, or condition employment or consideration for an interview or employment on disclosure of wage history, or retaliate against a prospective employee for failing to comply with any wage history inquiry.” Further, the ordinance amendment made it unlawful to rely on the wage history of a prospective employee from any current or former employer in determining wages for a prospective candidate. Violation of the ordinance amendment subjects employers to civil and criminal penalties, including up to $2,000 per violation (Phila. Code Section 9-1105(d)), as well as an additional $2,000 and 90 days in jail for repeat offenses (Phila. Code Section 9-1121).
While the ordinance amendment was pending before the Philadelphia City Council, the Chamber of Commerce for Greater Philadelphia (the Chamber) provided testimony opposing the bill. While recognizing a concern for wage equality, the Chamber raised concerns that a prohibition on wage history inquiries will negatively impact employers that use salary history to evaluate potential candidates.
Ultimately, the opposition was to no avail, as the Philadelphia City Council passed the ordinance amendment in a 16-0 vote. Mayor James Kenney signed the ordinance amendment into law on Jan. 23; it would have taken effect on May 23, and would have been the first law in effect to prohibit inquiry into an applicant’s salary history (Massachusetts’ law is not effective until July 1, 2018, and New York City’s ordinance is not effective until Oct. 31 of this year).
Prior to taking effect, however, the Chamber filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania requesting declaratory and injunctive relief, see The Chamber of Commerce for Greater Philadelphia v. City of Philadelphia, 17-cv-01548 (E.D. Pa. April 6). In the lawsuit, the Chamber argued that the amendment would have disadvantaged Philadelphia businesses. Specifically, the Chamber alleges that wage history is “important to the hiring process because employers use it, among other things, to identify job applicants they cannot afford, to set a competitive, market-based salary for their positions, and to assist in evaluating applicants’ prior job responsibilities and achievements.”
The legal bases for the Chamber’s request were three-fold. First, the Chamber argued that the ordinance amendment violates the First Amendment free speech rights of employers and is insufficiently tailored to reducing gender-based wage disparities. Second, the Chamber argued that the ordinance amendment violates the due process clause of the 14th Amendment based on the severe penalties for violating the ordinance amendment. Third, the Chamber argued that the ordinance amendment’s definition of the word “employer” is overbroad and therefore invalid because it applies to even to those employers who are located outside of Philadelphia. Specifically, it defines employers as “any person who does business in the city of Philadelphia through employees or who employs one or more employees.” Thus, the Chamber requested that the district court enter a judgment declaring the ordinance amendment as void and of no force.
In response to the complaint and motion for preliminary injunction, the city of Philadelphia has raised the issue of whether the Chamber has standing to prosecute its lawsuit and briefing on this issue is currently underway. On May 30, Judge Mitchell S. Goldberg granted the city’s motion and dismissed the complaint on the grounds that the Chamber had not shown that at least one of its members would have standing to bring the suit. Judge Goldberg did, however, grant the Chamber leave to amend its complaint on or before June 13, 2017.
Meanwhile, efforts by the Pennsylvania legislature to pre-empt the Philadelphia ordinance are underway. Sen. Thomas J. McGarrigle, a Republican serving part of Chester and Delaware counties, is the prime sponsor of SB 241, which seeks, among other things, to amend Pennsylvania’s Equal Pay Law so that ordinances, such as the one passed in Philadelphia, are pre-empted by the Equal Pay Law. SB 241 is currently making its way through the Pennsylvania House of Representatives.
While there are few answers for employers and employees regarding wage history inquiries, what is certain is that the law in this area is developing quickly. The clear trend by local and state governments is to attempt to close the wage gap through the prohibition of salary history inquiries. Thus, this may be a good time for employers to revisit their practices and procedures with respect to salary history inquiries and to keep updated on this rapidly changing legal landscape.
*Reprinted with permission from the 6/1/17 issue of The Legal Intelligencer. © 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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The PIOGA Press
The oil and gas industry has enjoyed recent successes in two types of ordinance challenges in Pennsylvania. The first victory came in another in a growing line of zoning ordinance validity challenges, this one in Mount Pleasant Township, Washington County. The second victory came in a challenge to Grant Township, Indiana County’s prohibition on underground injection wells.
Mount Pleasant Township
As we reported last year for The PIOGA Press, five municipalities faced zoning ordinance validity challenges in 2015 and 2016. The cases were inspired largely by the Pennsylvania Supreme Court’s plurality opinion in Robinson Township v. Commonwealth, and essentially argued that the ordinances did not regulate oil and gas development stringently enough, that zoning ordinances cannot permit oil and gas uses in agricultural or residential districts, and that municipalities must engage in extensive environmental assessments when enacting regulations.[1] The zoning hearing boards in Allegheny Township, Westmoreland County, Middlesex Township, Butler County, and Pulaski Township, Lawrence County, each rejected these arguments and upheld the ordinances. The remaining two challenges, in Robinson Township and New Sewickley Township, did not proceed to the merits.[2]
In May 2016, while the Allegheny and Middlesex cases were pending on appeal before the Commonwealth Court and the Pulaski case was pending before the Lawrence County Court of Common Pleas, Citizens for Pennsylvania’s Future (PennFuture), with assistance from Fair Shake Environmental Legal Services (Fair Shake), challenged the Mount Pleasant Township, Washington County, zoning ordinance on similar Robinson Township-based grounds.
Range Resources-Appalachia, LLC, MarkWest Energy Partners, L.P., and owners of a proposed well site intervened in the case. The Mount Pleasant Township Zoning Hearing Board took testimony through nine nights of hearings and ultimately decided, as did the zoning hearing boards in the previous challenges, to uphold the targeted ordinance.
Critically, in the Mount Pleasant Township validity challenge, PennFuture offered a variety of witnesses as experts on the alleged health, property value, and environmental impacts of oil and gas development. The board universally rejected this testimony:
- Ned Ketyer, M.D., a Washington County pediatrician, testified to his belief that oil and gas development can pose health risks for children. He also testified that he assumed gas development results in harmful exposures to air emissions based on what he had seen and smelled, but that he had not reviewed air emission data or monitoring studies. The board did not find his testimony to be “credible to the extent necessary to consider in this matter.”
- Dr. Thomas Daniels, a professor of city and regional planning at the University of Pennsylvania, opined that oil and gas development is an “industrial” use that should not be placed in residential and commercial districts. However, the board noted that Dr. Daniels had never observed oil and gas development, was not familiar with Mount Pleasant Township and was unaware of well setbacks imposed by state law. The board rejected Dr. Daniels’ characterization of unconventional natural gas development as an “industrial” use, his opinion that the challenged ordinance was inconsistent with the township’s comprehensive plan and his opinion that the ordinance violates basic zoning principles.
- Dr. Christopher Timmins, an economist from Duke University, described his Pennsylvania-wide regression analysis study. That study concluded that a gas well can negatively impact the value of groundwater-dependent homes within a kilometer. However, Dr. Timmins also testified that his study did not take into account the timing of a well (i.e., whether it was in the development or production phase) at the time of a sale or whether mineral rights were conveyed with the property. The board rejected the conclusions of his study. Range presented several experts in defense of the ordinance:
- Anthony Gaudlip, Range’s director of civil/environmental engineering and construction, testified about the mandatory state and local permitting procedures related to the development of an oil and gas well. The board found this testimony to be credible and directly relevant, concluding it demonstrated “that outside of the control of the Township, there are in place considerable protections of the residents of the Township relative to unconventional gas developments.”
- Ross H. Pifer, director of the Center for Agricultural and Shale Law at Penn State Law, testified to the historic compatibility of oil and gas development and agriculture, and the reflection of that compatibility in various state laws. The board recognized Professor Pifer as an expert and accepted his findings and opinions.
- Dr. Christopher Long, an environmental and health consultant with Gradient, based his testimony on his review of materials including peer-reviewed published studies on air impact analysis in the Marcellus Shale region, various governmental reports and datasets, and commissioned studies in the Marcellus Shale region. He concluded that there exists a sizeable body of ambient air monitoring studies that can be used to assess the health risks associated with oil and gas development and that these studies do not support claims of widespread air exposures of public health concern. The board found that Dr. Long is “an expert with respect to toxicology, air exposures, and human risk assessment” and accepted his opinions and findings.
- Jerry Dent, managing director with Alvarez & Marsal, testified as an expert on the impact of environmental issues on property values. Based on his analysis of local market-based sales data and related information, he concluded there was no evidence that unconventional natural gas development caused a systematic diminution of residential property values in the township. The board found Mr. Dent to be an expert on the subject matter and concluded that his opinions and findings were credible.
PennFuture presented Dr. Seth Shonkoff, executive director of PSE (Physicians, Scientists and Engineers) – Healthy Energy, in rebuttal to Dr. Long’s testimony. Dr. Shonkoff did not find error in the basic information included in Dr. Long’s report, but did criticize various aspects of Dr. Long’s testimony. However, the board noted inconsistencies among some of the studies Dr. Shonkoff relied upon, that the epidemeloigical studies Dr. Shonkoff referenced were not based on actual air monitoring data, and that his criticism of Dr. Long’s testimony was inconsistent with the data and evidence presented. The board concluded that Dr. Shonkoff’s testimony was “equivocal, not properly founded, and not credible” and thus disregarded it.
PennFuture did not appeal the board’s decision.
In addition to filing the Mount Pleasant Township challenge while the Allegheny Township and Middlesex Township cases were pending before the Commonwealth Court, PennFuture pursued the case while the Pennsylvania Supreme Court was considering two relevant cases, namely Pennsylvania Environmental Defense Foundation v. Commonwealth (argued in March 2016) and Gorsline v. Board of Supervisors of Fairfield Township (argued in March 2017). Both cases include Robinson Township arguments like those raised in Mount Pleasant Township, and, once decided, may have direct bearing on the viability of this line of validity arguments.
Despite the pendency of these appeals, Fair Shake filed another challenge—this one to the Penn Township, Westmoreland County, zoning ordinance—in April. The zoning ordinance in Upper Burrell, Westmoreland County, was also challenged in February. These new cases are substantially similar to the challenges that have already been decided.
Grant Township
Pennsylvania General Energy, L.L.C. (PGE) recently succeeded in its challenge to Grant Township, Indiana County’s underground injection well ban. In 2014, the township worked with the Community Environmental Legal Defense Fund, an antiindustry, anti-corporation Pennsylvania-based community rights organization, to enact a self-styled “Community Bill of Rights” ordinance. The ordinance specifically banned underground injection wells and purported to supersede any state or federal injection well permit. PGE, which obtained an EPA underground injection well permit in 2014 and had applied for a Pennsylvania Department of Environmental Protection (DEP) permit, filed a complaint in United States District Court for the Western District of Pennsylvania in October 2015 challenging the constitutionality, validity and enforceability of the ordinance.
The District Court initially invalided six provisions of the ordinance on state law grounds in 2015[3], and went on to grant three of PGE’s six motions for summary judgment on the remaining federal claims in March 2017. The court found that Grant Township’s ordinance violated the Equal Protection Clause of the Fourteenth Amendment because it discriminated against corporations, the Petition Clause of the First Amendment because it attempted to limit PGE’s access to the courts and the Due Process Clause of the Fourteenth Amendment because it demonstrated “irrational and arbitrary behavior, which acknowledges language contrary to existing law and takes the purpose outside of the original point of the Ordinance.” The court rejected Grant Township’s motion for summary judgment on its counterclaim, which claimed that PGE is violating the rights of Grant Township’s residents to “local community self-government.” PGE’s requests for damages, and injunctive and declaratory relief, remain viable after this ruling.
On the heels of the court decision invalidating Grant Township’s ordinance ban, DEP reissued[4] PGE’s underground injection well permit. DEP then filed actions against Grant Township and Highland Township, Elk County, asking the Commonwealth Court to invalidate and enjoin enforcement of similar provisions that both townships had added to a home rule charter. In April 2017, the Commonwealth Court issued orders in both cases, temporarily enjoining the townships from enforcing their charters, pending a final determination on the merits. ■
The law firm of Babst Calland in Pittsburgh represented Range and PGE in these cases. For more about Grant Township and Highland Township, see April’s PIOGA Press, page 6. If you would like additional information about developments in this article, contact Krista-Ann Staley at 412-394-5406 or kstaley@babstcalland.com, or Blaine Lucas at 412-394-5657 or blucas@babstcalland.com.
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American College of Environmental Lawyers
(by Chester Babst)
When President Trump issued his energy-related Executive Order in March directing further review by the EPA Administrator of, among other things, the Clean Power Plan, it signaled the death knell for what was arguably President Obama’s centerpiece domestic action on climate change. But while the Order’s likely intent to neutralize this and other rules would have appeared to pave the way for a flurry of lawsuits filed by environmental groups and States particularly concerned about global warming, the federal dockets have thus far been somewhat quiet with respect to the Trump Administration’s handling of prior climate change-related rulemaking.
A group of 10 states have begun to push back, though, by filing a petition in the Second Circuit. The rule that is requested to be reviewed? It doesn’t involve coal-fired power plants. Nor wellpads or compressors. Rather, the petition involves rulemaking aimed at the ominous … ceiling fan. The rule, enacted by the Department of Energy in January, establishes minimum energy efficiency standards for fans manufactured after January 2020 pursuant to the Energy Policy and Conservation Act. According to the DOE, the rule is projected to reduce carbon dioxide emissions by over 200 million tons and methane emissions by 17 million tons through 2049. Some 12 days after the rule was finalized, DOE delayed the effective date by 60 days with the stated intent of conducting further review and consideration of new regulations, consistent with the Freeze Memo. In March, DOE subsequently pushed back the effective date even further until September, with the basis being that DOE Secretary Rick Perry was, perhaps unsurprisingly, unable to accomplish the review and consideration of the rule within the 60-day timeframe. Additional energy efficiency rulemakings finalized but not published under the Obama Administration currently remain unpublished.
The significance of the lawsuit is not so much about its substantive impact on climate change. After all, the projected GHG reductions under the ceiling fan rule are only a small fraction of those projected as part of the Clean Power Plan, which itself left some wondering whether it could meaningfully affect climate change on a global level. Further, the Clean Power Plan’s vitality was already in question following the Supreme Court’s stay. Rather, the petition carries broader implications for the Trump Administration’s apparent strategy of stalling, as opposed to directly revising or withdrawing, environmental rulemaking that it fundamentally opposes. The strategy is not a wholly illogical one, especially considering the possible legal and practical limitations that some commentators have expressed the Administration might initially face if it were forced to provide, on-the-record, a definitive basis for full-fledged withdrawal of notable climate change regulations.
One of the key figures for the petitioners, New York Attorney General Eric Schneiderman, has contended that the DOE’s delays violate the Administrative Procedure Act in that they constitute a substantive revision to a final rule without going through proper notice and comment. He is joined by nine other states (California, Connecticut, Illinois, Maine, Massachusetts, Oregon, Pennsylvania, Vermont, and Washington) as well as New York City. If the petitioners prevail, it will likely force EPA and other agencies to confront existing rulemaking head-on, and would otherwise challenge the viability of President Trump’s energy-related Executive Order, including associated OMB guidance for implementation of the rule review procedures. Further pressure could also come as a result of a challenge to the so-called “2-for-1” Executive Order, which environmental groups have claimed also directs arbitrary repeal of rulemakings. But until then, neither industry nor environmentalists should be surprised if climate change or other significant environmental regulations carried over from the Obama Administration remain in an infinite loop of administrative review.
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