American Oil & Gas Reporter
WASHINGTON–A pipeline safety regulation published in April by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration goes beyond traditional natural gas transmission to have serious implications for onshore gas gathering.
PHMSA published its long-awaited notice of proposed rule making for natural gas transmission and gathering pipelines on April 8. Under development for more than four years, the NOPR proposes significant changes to the regulations for gas pipeline facilities in 49 CFR Part 192, including regulations for onshore gas gathering lines.
Adopted a decade ago, the current regulations rely, in large part, on American Petroleum Institute Recommended Practice 80, Guidelines for the Definition of Onshore Gas Gathering Lines, which is a voluntary consensus standard for classifying onshore production operations and gas gathering lines. Current regulations contain an exemption for gas gathering lines in rural, Class 1 locations–i.e., areas where 10 or fewer buildings intended for human occupancy are located in the vicinity of a gathering line.
The NOPR proposes to change these regulations by:
• Modifying the requirements for determining whether a pipeline qualifies as an onshore gas gathering line;
• Applying portions of the Part 192 regulations to certain previously unregulated Class 1 gas gathering lines; and
• Applying federal reporting requirements to all gas gathering lines (whether regulated or not). Read more ›
The PIOGA Press
Three years after the Pennsylvania Supreme Court rendered its controversial decision in Robinson Township v. Commonwealth, the plurality opinion is still front-and-center in battles over local regulation of oil and gas activities. The 2013 Robinson Township case, in which a three-justice plurality of the Supreme Court relied on a new and much more extensive interpretation of the Pennsylvania Environmental Rights Amendment (ERA) to invalidate certain provisions of Act 13, made its way back to the Supreme Court for consideration of new issues in 2016. In the intervening time, the Commonwealth Court, county courts of common pleas and local zoning hearing boards grappled with the meaning of the 2013 decision and its impact on local zoning authority. These cases continue to work their way through the appeals process.
Robinson Township Returns to the Pennsylvania Supreme Court
In March 2016 the Supreme Court heard argument in the Robinson Township challenge to Act 13, the General Assembly’s 2012 comprehensive update to the former Oil and Gas Act. When it first decided the case in 2013, a three-justice plurality of the Supreme Court relied on a novel and broad interpretation of the ERA (i.e. that the ERA imposes on the Commonwealth and its municipalities a fiduciary duty to “conserve and maintain” natural resources) to invalidate several sections of Act 13, including two key sections of Chapter 33 which placed limits on local government authority to regulate the oil and gas industry.
The Court remanded several undecided issues to the Commonwealth Court, including whether the remaining local government provisions of Act 13 could stand alone as “severable” from the invalidated ones, or whether they must fail alongside them. The remanded sections address the conferral upon the Pennsylvania Public Utility Commission (PAPUC) and Commonwealth Court of original jurisdiction to review local ordinances regulating the industry (as opposed to having such challenges filed with local zoning hearing boards or governing bodies), the imposition of attorney’s fees to prevailing parties in ordinance challenges in certain instances, and a municipality’s loss of its Act 13 impact fees if its ordinance was invalidated. The Supreme Court also remanded the issues of: (1) whether notice by the Pennsylvania Department of Environmental Protection (DEP) to only owners of public drinking water systems, but not of private water supplies, following a drilling-related spill was unconstitutional; (2) whether prohibiting disclosure of the identity and amount of hydraulic fracturing additives claimed to be proprietary information was unconstitutional; and (3) whether Act 13 unconstitutionally conferred the power of eminent domain for gas storage or reservoir protective areas on a private party for a private purpose.
The Commonwealth Court rendered its decision in July 2014, invalidating the balance of the Chapter 33 local government provisions, with limited exceptions.[1] The definitions in Section 3301 and general preemption language in Section 3302, which essentially preserved the preemption language of Section 602 of the former Oil and Gas Act, appear to remain in effect. The Court upheld the remaining non-local government provisions of Act 13. The PAPUC and the participating municipalities appealed the decision to the Supreme Court, where the case is currently pending.
Supreme Court Considers Arguments Based on 2013 Robinson Township Plurality Opinion in Pennsylvania Environmental Defense Foundation v. Commonwealth
Pennsylvania Environmental Defense Foundation v. Commonwealth (PEDF) presents the Supreme Court with its first opportunity to interpret and apply the 2013 Robinson Township decision. PEDF had challenged Fiscal Code amendments that permitted the transfer of monies from the Oil and Gas Lease Fund, which is traditionally used to maintain and conserve public natural resources, to fund the Pennsylvania Department of Conservation and Natural Resources’ operations, the Treasury, and the General Appropriations Act of 2014. After the Robinson Township decision, PEDF added an argument that these amendments violated the ERA because they fail to fulfill the duty to conserve and maintain the public natural resources for the benefit of the people.
The Commonwealth Court rejected PEDF’s constitutional challenges and clarified the legal weight to be given to the Robinson Township plurality decision.[2] In a critical footnote, the Commonwealth Court stated that the Robinson Township decision is not binding precedent, but merely persuasive authority. The Court also acknowledged the remaining legitimacy of the pre-existing test for constitutionality under the ERA established by the Commonwealth Court in Payne v. Kassab[3]. Payne emphasized the need for the Commonwealth to balance its duties under the ERA against other duties owed by the Commonwealth to its citizens and acknowledged that the protections of the ERA are not absolute. PEDF appealed the decision to the Pennsylvania Supreme Court.
Commonwealth Court Rejects Robinson Township-based Argument that Oil and Gas Uses are Incompatible with Agriculture, Upholds Approval of Compressor Station in Agricultural District
In January 2016, the Pennsylvania Commonwealth Court in Kretschmann Farm, LLC v. Township of New Sewickley upheld the conditional use approval of a Cardinal PA Midstream, LLC natural gas compressor station located in New Sewickley Township’s A-1 Agricultural District.[4] Owners of an adjacent organic farm objected to the application and appealed its approval to both the trial court and Commonwealth Court.
During the initial public hearing before the Township Board of Supervisors, Cardinal presented evidence of compliance with all ordinance requirements. The owners of the organic farm then expressed concern over potential impacts of the compressor station on their produce, water and air, and the compatibility of natural gas drilling operations with agricultural uses. Township residents also questioned the potential placement of pipelines in the Township, light pollution from flares, the compatibility of compressor stations with uses in residential/agricultural areas, and the potential long-term effects of emissions generated by oil and gas operations.
The Board found that Cardinal complied with all of the zoning ordinance’s express standards and criteria. It approved the application subject to 33 conditions, several of which were in response to the farmers’ and others’ concerns. The adjacent farmers appealed the decision to the trial court, which affirmed the approval, as did the Commonwealth Court.
The adjacent farmers’ arguments included one based on the Robinson Township plurality opinion, namely that the zoning ordinance violated their constitutional rights by permitting a compressor station in the A-1 District. Specifically, the farmers argued that: (1) the zoning ordinance was not tailored to the local conditions within the community; and (2) the ordinance’s 750 foot setback provision was invalid because it is the same as the uniform setback invalidated in Act 13 by Robinson Township.
The Commonwealth Court rejected these arguments. The Court noted that the status of the cited Robinson Township opinion as a plurality rendered the opinion binding only on the parties to that case. The Court also explained that the Robinson Township decision did not nullify the zoning ordinance’s 750 foot setback because the decision invalidated a state law; it did not discuss whether a municipality could choose to adopt a 750 foot setback, as New Sewickley Township did. The Court also found that the adjacent farmers did not follow the procedure necessary to challenge the validity of a zoning ordinance (which the adjacent farmers previously initiated, but later withdrew in a separate action before the Township Zoning Hearing Board). Rather, they incorrectly tried to raise validity arguments in the context of a conditional use appeal. Accordingly, the Commonwealth Court rejected the adjacent farmers’ constitutional argument.
The Commonwealth Court found that applicant proved compliance with the zoning ordinance and, therefore, “it established that its proposed use was presumptively consistent with the public welfare.”[5] Although there is no automatic right to appeal, the adjacent farmers have filed a petition for allowance of appeal with the Pennsylvania Supreme Court.
The Commonwealth Court’s ruling in Kretschmann Farm is consistent with its previous decision in Gorsline v. Board of Suprvisors[6], upholding a local decision to permit oil and gas wells in a Residential Agriculture zoning district. The Gorsline case is summarized in the October 2015 issue of the PIOGA Press.
Zoning Ordinances Continue to Survive Validity Challenges
Municipal zoning hearing boards in three of the five Pennsylvania municipalities facing Robinson Township-based zoning ordinance substantive validity challenges have upheld those ordinances. All of the cases generally rely on the theory that the regulations in the challenged zoning ordinances are insufficient to protect the environment to the extent required by Robinson Township and the ERA. Objectors commonly argue that zoning ordinances cannot permit oil and gas uses in agricultural or residential districts and that the municipalities must engage in extensive environmental assessments when enacting regulations.
- In Middlesex Township, Butler County four residents, the Clean Air Council of Philadelphia, and the Delaware Riverkeeper Network challenged the local zoning ordinance and issuance of a well permit. The Middlesex Township Zoning Hearing Board rejected the challenge, and the Butler County Court of Common Pleas upheld that decision on appeal.[7] This case is currently on appeal before the Commonwealth Court.
- Three residents challenged Allegheny Township, Westmoreland County’s zoning ordinance and the issuance of a gas well pad approval. The Allegheny Township Zoning Hearing Board rejected the challenge and the Westmoreland County Court of Common Pleas upheld that decision on appeal. An appeal in this case is pending in the Commonwealth Court.
- Pulaski Township, Lawrence County faced a zoning ordinance validity challenge from four residents, which the Pulaski Township Zoning Hearing Board rejected. An appeal from that decision is currently pending before the Lawrence County Court of Common Pleas.[9]
The remaining two Robinson Township-based zoning ordinance validity challenges filed in Pennsylvania have not been decided on the merits at the local level. As referenced with respect to the Kretschmann Farms summary above, objectors in New Sewickley Township, Beaver County withdrew their case after presenting their witnesses, and before ordinance proponents presented their cases. A validity challenge filed in Robinson Township, Washington County is pending in the Court of Common Pleas, on appeal from the Robinson Township Zoning Hearing Board’s dismissal of the case on standing and ripeness grounds.
If you would like additional information about developments in this article, please contact Krista Staley at (412) 394-5406 or kstaley@babstcalland.com, or Blaine Lucas at (412) 394-5657 or blucas@babstcalland.com.
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Employment Bulletin
On May 18, 2016, the United States Department of Labor (DOL) published a longexpected final rule that more than doubles the salary threshold required for employees to qualify for the executive, professional, or administrative exemptions allowed by the Fair Labor Standards Act (FLSA).
Under the current law, for an employee to be exempt from the FLSA’s overtime provisions, he or she must earn at least $23,660 per year ($455 per week) on a “salary basis” and perform the job duties described in the Executive, Administrative, Professional and other exemption categories recognized by DOL. Effective December 1, 2016, however, that salary threshold will rise to $47,476 ($913 per week). The job duties tests will not change. This salary increase will mark the first increase in the salary threshold since 2004. The updated final rule is expected to enable approximately 4.2 million additional employees to earn overtime pay.
In addition to doubling the overtime salary threshold, the final rule also:
• increases the total annual compensation requirement for highly compensated employees (HCE) from $100,000 to $134,004;
• establishes a mechanism for automatically updating the salary and compensation levels every three years, beginning on January 1, 2020; and
• amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The full text of the final rule can be accessed beginning May 23, 2016 at http://federalregister. gov/a/2016-11754.
Babst Calland’s Employment and Labor Group will continue to keep employers apprised of further developments related to this and other employment and labor topics. If you have any questions or need assistance in addressing the above-mentioned area of concern, please contact John A. McCreary, Jr. at (412) 394-6695 or jmccreary@babstcalland.com, or Stephen A. Antonelli (412) 394-5668 or santonelli@babstcalland.com.
Read more.
Law360
Babst Calland Clements & Zomnir PC announced on Thursday that it’s building out its new Washington, D.C., office with the addition of a third shareholder in its pipeline and hazmat safety practice who used to be an attorney for the Pipeline and Hazardous Materials Safety Administration.
After three years as a regulatory counsel to the Interstate Natural Gas Association of America, Brianne Kurdock told Law360 on Friday she’s happy to once again be working with James Curry and Keith Coyle, two attorneys she worked with as a senior attorney at the PHMSA.
“To have three of us together with that kind of agency expertise was really compelling,” she told Law360 on Friday. “I enjoyed my days at INGA but this is an opportunity I just had to take.”
Kurdock plans to help clients with strategic and compliance counseling, audit preparation, incident response, enforcement proceedings, regulatory comment preparation and litigation.
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Brianne K. Kurdock has joined law firm Babst Calland as a shareholder in its Energy and Natural Resources Group and newest member of its Pipeline and Hazardous Materials Safety practice in Washington, D.C.
Ms. Kurdock joins Babst Calland from the Interstate Natural Gas Association of America (INGAA), the national trade organization for interstate gas pipelines, where she served as the primary regulatory attorney. Kurdock is reuniting with her former colleagues, energy attorneys James Curry and Keith Coyle, all of whom previously worked together at the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency that oversees the safety of the country’s vast network of gas and hazardous liquids pipelines. Attorneys Curry and Coyle joined Babst Calland in January of this year when the firm opened its new Washington, D.C. office.
At PHMSA, Ms. Kurdock handled regulatory, enforcement, and litigation matters involving the federal regulation of oil and gas pipelines and liquefied natural gas facilities. She also served as regional counsel in administrative enforcement cases and incident investigations. While at PHMSAMs. Kurdock served as lead attorney for special permit applications and rulemaking initiatives and represented PHMSA in inter-agency meetings with the Department of Justice, the Federal Energy Regulatory Commission, the Environmental Protection Agency and the Department of the Interior.
Ms. Kurdock previously represented clients in connection with land use and environmental issues as an associate in a private law firm in New Jersey. She also served as a law clerk in the Superior Court of New Jersey. Ms. Kurdock is admitted to practice in New Jersey and New York. She received her J.D. from Seton Hall University School of Law, and a B.A. in Government from the University of Virginia.
“Brianne Kurdock’s addition to our nationally-recognized energy and environmental practice further demonstrates our firm’s commitment to providing industry experience and value to our clients,” said Chester R. Babst III, managing shareholder of Babst Calland. “Together, Attorneys Kurdock, Curry and Coyle add to our energy and environmental capabilities and bring focused training and work experience in compliance, regulatory and legislative affairs, strategic counseling, enforcement, litigation, and audit preparation in the area of pipeline and hazardous materials safety ,” said Babst.
The firm’s new office in the nation’s capital is located at The Southern Building at 805 15th Street NW, Suite 601, Washington, D.C.
The Legal Intelligencer
On Jan. 13, the Commonwealth Court rendered a decision in Honey Brook Estates v. Board of Supervisors of Honey Brook Township, 2016 Pa. Commw. LEXIS 52 (Pa. Commw. Ct. 2016), that reaffirmed a municipality’s obligation to act in good faith when processing subdivision and land development plans. The Commonwealth Court originally articulated the elements of this obligation in Raum v. Board of Supervisors, 370 A.2d 777 (Pa. Commw. Ct. 1977).
In Raum, a landowner submitted a subdivision plan for review and approval approximately 80 days before the township was scheduled to act on a proposed rezoning of the landowner’s property. Upon receipt of the landowner’s plan, the township did nothing but attempt to derail the landowner’s approval. Specifically, the township waited until the last possible moment (i.e., two days before enacting the proposed rezoning) to raise objections to the plans, then claimed there was insufficient time to consider modifications made in response to the township’s objections. Finding the township had a “deliberate, pervasive plan and intent to thwart” the landowner’s development and thus acted in bad faith, the Commonwealth Court ruled that the landowner was entitled to plan approval. In reaching this conclusion, the court stated: “A municipality has a legal obligation to proceed in good faith in reviewing and processing development plans. The duty of good faith includes discussing matters involving technical requirements or ordinance interpretation with an applicant, and providing an applicant a reasonable opportunity to respond to objections or to modify plans where there has been a misunderstanding or difference.”
Nearly 40 years later, in Honey Brook Estates, the court revisited the parameters of a municipality’s obligation to review development plans in good faith. There, a landowner purchased property in Honey Brook Township with the intent of constructing a 78-unit residential development. However, approximately five months after purchasing the property the landowner learned that the township planned to rezone, among other things, its property from residential to agricultural. In order to vest its right to use its property for residential purposes, the landowner quickly submitted preliminary subdivision and land development plans to the township, which rejected the plans as incomplete. In doing so, the township engineer noted five deficiencies in the plans. The landowner remedied these deficiencies and resubmitted amended plans to the township a few days before the proposed rezoning was enacted. The township manager again rejected the amended plans as incomplete, noting, for the first time, that the landowner failed to submit a sewage planning module, a certification of sewer and water facilities, and a traffic study. The township manager also informed the landowner that because the plans were deemed incomplete, the plans would not be forwarded to the planning commission for review and comment.
The landowner objected to the township’s decision and requested reconsideration, arguing the township was imposing requirements on it that had never been imposed on a preliminary plan applicant. The township, upon advice from its solicitor, who agreed that the township “has [previously] been far less technical in its objections to completeness of plans,” decided, unbeknown to the landowner, to forward the plans to the planning commission. In its cover letter to the planning commission, the township: (1) listed 93 critical comments on the merits of the plans; (2) disclosed that it believed the plans were incomplete; (3) noted that the commission’s review would not invalidate the earlier finding that the plans were substantially incomplete and should be rejected; and (4) explained the plans were only being forwarded for review and comment out of an abundance of caution. The planning commission, after noting the absence of the landowner, voted to recommend disapproval of the amended plans.
Unaware that the planning commission had reviewed and recommended disapproval of the plans, the landowner submitted to the township supplemental documentation related to its sewage planning module, certification of sewer and water facilities and traffic study. Since the planning commission had already recommended disapproval of the plans, the township returned the supplemental documentation. The township board of supervisors then rejected the landowner’s amended plans, citing 59 reasons for its decision. Neither the planning commission nor the board of supervisors reviewed the landowner’s supplemental documentation.
Asserting that bad faith and irregularities in the township’s review deprived it of the opportunity to have its plans reviewed objectively on the merits, the landowner appealed the board of supervisors’ decision. On appeal, the trial court granted the parties permission to present evidence on the township’s alleged bad faith. Part of the evidence presented consisted of depositions from the township engineer and the township manager. The township engineer testified that the township was concerned that developers, after learning of the proposed rezoning, would rush to beat its enactment and file preliminary development plans haphazardly. In reaction to this concern, the township revised its plan review policy to prohibit incomplete preliminary plans from entering the township’s review cycle.
The township engineer further testified that the township did not advise the public of this policy change. In addition, the township manager testified that prior to the implementation of the township’s new review policy, he could not recall a single instance where a preliminary plan was not submitted to the planning commission as a matter of course or a landowner was not present during a meeting at which the planning commission considered its plans.
Finding the landowner’s allegation of bad faith lacked merit, the trial court affirmed the board of supervisors’ decision. The landowner appealed to the Commonwealth Court, which reversed. In doing so, the court reiterated the Raum principle that a municipality is obligated to act in good faith when processing subdivision and land development plans.
Analyzing the township’s actions under the Raum standard, the Commonwealth Court found that the township acted in bad faith when it: (1) continued to find new reasons to object to the plans after the landowner revised the same in response to township comments; (2) denied the landowner the opportunity to present supplemental documentation to the planning commission and board of supervisors; (3) told the landowner the plans would not enter the township’s review cycle, then did an about-face and sent the plans to the planning commission for review and comment without notifying the landowner; and (4) offered the planning commission volumes of additional materials and new reasons why the landowner’s plans should be denied. The Commonwealth Court remanded the matter back to the township board of supervisors with instructions that it review the landowner’s plans under the zoning ordinance in existence at the time the plans were submitted, provide input on technical requirements and ordinance interpretation, identify objections to and deficiencies in the plans, and provide the landowner the opportunity to respond to the same.
The Commonwealth Court’s decision in Honey Brook Estate is an important reminder to municipalities that they must review and consider land-use applications in good faith. Local land-use officials cannot use the process to thwart development plans, and indeed they have an affirmative obligation to work with applicants to identify ordinance requirements and give them a reasonable opportunity to respond to objections.
Blaine A. Lucas is a shareholder, and Alyssa E. Golfieri an associate, in the public sector services and energy and natural resources groups of the Pittsburgh law firm of Babst, Calland, Clements and Zomnir. Lucas coordinates the firm’s representation of energy clients on land use and other local regulatory matters. He also teaches land use law at the University of Pittsburgh School of Law. Golfieri focuses her practice on zoning, subdivision, land development, code enforcement and public bidding matters.
*Reprinted with permission from the 4/24/16 issue of The Legal Intelligencer. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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Midstream Business
Stunned by a judge’s advisory ruling in early March that could put many contracts with upstream partners up for renegotiation, midstream operators warily await a more definitive ruling in the Sabine Oil & Gas bankruptcy case as the realization sets in that a key advantage in putting deals together could be lost. The ruling by U.S. Bankruptcy Judge Shelley Chapman authorized Sabine to reject gathering and processing contracts with two midstream companies, Nordheim Eagle Ford Gathering LLC and HPIP Gonzales Holdings LLC because the E&P could not meet minimum production requirements and faced substantial financial penalties of up to $35 million.
The ruling by U.S. Bankruptcy Judge Shelley Chapman authorized Sabine to reject gathering and processing contracts with two midstream companies, Nordheim Eagle Ford Gathering LLC and HPIP Gonzales Holdings LLC because the E&P could not meet minimum production requirements and faced substantial financial penalties of up to $35 million.
The argument by the midstream companies that the “covenant running with the land” language in the contracts would preclude rejection by the debtor was put aside for another day, but the judge made it clear in a non-binding ruling that the agreements in question do not “run with the land” in her interpretation of Texas law.
“From a practical standpoint, what it says is, all these contracts that rely on acreage dedications are in play,” bankruptcy attorney David Ross of Babst Calland told Hart Energy. The hard line that midstream companies had assumed they could take, that the “covenant” language assured them of payment because the agreement was tied to the land and not to the owner, is now open to be challenged. Read more ›
The PIOGA Press
On March 17, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) released a pre-publication version of its long-awaited notice of proposed rulemaking (NPRM) for gas transmission and gathering pipelines. Under development for more than four years, the NPRM proposes significant changes to the regulations for gas pipeline facilities in 49 C.F.R. Part 192.
Read more.
Marcellus Business Central
On March 17, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed new regulations to update critical safety requirements for natural gas pipelines. The prior legislation, the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, expired at the end of FY 2015 but called for PHMSA to evaluate the need for additional damage prevention and inspection regulations.
The 549-page, pre-publication edition of the proposed regulations for gas transmission and gathering lines took over four years to make and includes four congressional mandates, one recommendation from GAO, and six recommendations from the National Transportation Safety Board (NTSB).
PHMSA’s new proposals include a climate action plan to reduce methane emissions and inspections for previously exempt gas pipelines built before 1970, such as the PG&E pipeline that exploded and started fires in San Bruno, CA in 2010, killing eight people and leveling 35 houses, and the pipeline explosion in 2011 in Allentown, Pa., which killed five people including a 4-month-old child. Both explosions were caused by leaks from old cast-iron natural gas distribution pipelines. NTSB’s investigation of the PG&E natural gas pipeline failure concluded that hydrostatic testing of grandfathered pipelines would have likely have prevented the explosion.
The proposed regulations would also broaden the scope of safety coverage by adding new assessment and repair criteria for gas transmission pipelines, including pipelines that pass through areas of medium population density where a failure could pose a serious risk to residents.
The significant growth in the nation’s production, usage and commercialization of natural gas is placing unprecedented demands on the nation’s pipeline system,” said U.S. Transportation Secretary Anthony Foxx.
“This proposal includes a number of commonsense measures that will better ensure the safety of communities living alongside pipeline infrastructure and protect our environment.”
The U.S. DOT stated it expects the proposed changes to result in fewer incidents, which could lead to a reduction in greenhouse gases, with average annual reductions of 900-1,500 metric tons of carbon dioxide and 4,600-8,100 metric tons of methane.
The new regulations will affect the 16 new “greenfield” transmission pipelines planned for the region over the next three years.
“The new regs should have little impact on the construction schedule and total cost of the 16 proposed greenfield projects,” said Dave Messersmith, Penn State extension educator, whose expertise includes natural gas pipeline siting and regulations.
“One of the most costly aspects of the new regulations may be hydrostatic testing of pipelines built prior to 1970, because there are many of these previously exempt pipelines in operation in the Commonwealth, and it will be a significant undertaking to hydrostatically test all of them.”
In addition to interstate pipeline operators being able to invoke the “right of condemnation” or “eminent domain” on private land through which the pipelines run, state owned lands are also not exempt from hosting a natural gas transmission line; however, they are avoided in favor of alternative routes if feasible. The cost of rerouting pipelines is about $5 million per mile, but it can vary significantly, depending on the diameter of the pipeline.
The Babst Calland Pipeline and HazMat Safety team at the law firm’s new Washington, D.C. office, which is led by energy attorneys James Curry and Keith Coyle, reviewed the proposed regulations and issued a three-page white paper outlining several areas that pipeline operators may wish to investigate further.
For example, Curry and Coyle suggested operators assess the scope of materials verification. While the new provision appears to apply only to pipelines in certain locations, cross references to the materials verification rule in several other proposals from PHMSA apply to all transmission lines. The team’s report stated the new regulations would create new materials verification requirements for certain onshore gas transmission lines, modify maximum allowable operating pressure (MAOP) requirements for all gas pipelines and impose strict requirements for verifying the MAOP of certain pipelines.
The proposed regulations would also impact gathering lines.
“While the new proposal for determining whether a pipeline qualifies as a gathering line appears to draw on many of the concepts in the existing regulations, two important changes are notable,” Curry and Coyle state in the report.
“First, the gathering function would begin at a point closer to the wellhead in many cases, thereby narrowing the extent of exempt production operations. Second, new restrictions would be imposed on the use of the incidental gathering designation, potentially expanding the universe of transmission lines in the midstream sector.”
R. Brock Pronko, Regional Business Analyst
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Pittsburgh Business Times
On March 17, 2016, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) released a long-awaited rulemaking proposal that could have a dramatic impact on the gas pipeline industry. More than four years in the making, the proposed rules would make significant changes to PHMSA’s pipeline safety standards by imposing new requirements for gas transmission and gathering lines. This ambitious proposal, issued in the waning days of the Obama Administration, seeks to address a number of issues raised by the Congress, other federal agencies, and the rapid development of energy infrastructure in the nation’s shale plays, particularly in the Marcellus and Utica regions.
Read more.
Breaking Ground
On three different occasions over the past year, the Pennsylvania appellate courts have recently elaborated on the potentially broad reach of negligent misrepresentation claims a contractor may have against a design professional for a faulty design, despite the absence of a contract between them.
Read more.
Natural Gas Intelligence
One week after the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a pre-publication version of proposed rules governing natural gas transmission and gathering lines, experts agree that it will take some time for producers, pipeline companies, trade associations, state regulators and other stakeholders to sort through the federal agency’s proposals.
But early indications are that stakeholders will focus on the cost of implementing the proposed new rules, and determining how they affect existing state and federal regulations. Read more ›
Employment Bulletin
February 25, 2016 the United States Department of Labor (DOL) published a notice of proposed rule making to implement Executive Order 13706 (found at: https://www.gpo. gov/fdsys/pkg/FR-2015-09-10/pdf/2015-22998.pdf), “Establishing Paid Sick Leave for Federal Contractors,” which requires certain federal contractors to provide their employees with up to seven days of paid sick leave annually, including paid leave allowing for family care (the “Proposed Rule”).
The 80-page proposal (found at: https://www.gpo.gov/fdsys/pkg/FR-2016-02-25/ pdf/2016-03722.pdf) will only be open for public comment through March 28, 2016. Thus, contractors or other interested parties are encouraged to act quickly if they wish to provide the agency with comments before the rule is finalized. To aid in this process and to preview the requirements soon to be imposed on federal contractors, we are providing an overview of the proposal’s key provisions.
Contracts Covered. The Proposed Rule lists four major contract categories to which the executive order applies: (1) procurement contracts for construction covered by the Davis-Bacon Act (the “DBA”), (2) services contracts covered by the McNamara-O’Hara Service Contract Act (the “SCA”), (3) concessions contracts, and (4) contracts in connection with federal property or lands and related to offering services for federal employees or the public. The Proposed Rule states the Order does not apply to contracts worth $3,000 or less, where wages are governed by the Fair Labor Standards Act (the “FLSA”) – nor will it apply to contracts for the manufacturing or furnishing of materials, supplies or equipment.
The rule will apply to new contracts or replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2017. And the “contractors” covered by the rule include not only the prime contractor, but “all of its subcontractors of any tier on a contract with the Federal Government.”
Employees Covered. The employees covered by the rule are individuals who work directly on covered contracts or conduct work “in connection” with covered contracts and whose wages are governed by DBA, SCA or the FLSA, regardless of the employer’s characterization of its contractual relationship with the individual.
The Rule exempts from coverage any employee working 20 hours or less per week “in connection” with the covered contract; which means completing work necessary to complete performance of the contract, but not performing the work directly called for in the contract.
Notably, even if an employee is exempt under the Fair Labor Standards Act or is designated by the employer as an independent contractor, that employee may be entitled to accrue leave.
Accrual of Paid Sick Leave. Contractors must either allow covered employees to earn at least one hour of paid sick leave for every 30 hours of paid time on covered contracts, up to a minimum of 56 hours in a year, or provide a minimum of 56 hours of paid sick leave at the beginning of each accrual year. A contractor may choose its accrual year but must use a consistent option for all employees.
Contractors choosing the first option will have to account for all time for which an employee is or should be paid (including paid time off), and will be required to calculate accrued leave at least once every workweek. Notably, though, employees need not accrue leave in increments smaller than one hour for any fraction of 30 hours worked during the prior workweek. Also, in order to exclude time spent on non-covered work, the contractor must consistently record an employee’s covered and non-covered hours worked. Contractors will be required to notify employees of the amount of their unused paid sick leave at least once a month.
The Proposed Rule does not require employers to permit the accrual of more than 56 hours in each accrual year, and a contractor may limit the total amount of paid sick leave available at any given time to 56 hours. Although employees will be permitted to carry over unused paid sick leave from the prior year, the carried-over hours cannot be used to exceed a 56-hour maximum otherwise in place by the contractor. As a consequence, the Proposed Rule permits contractors to prevent an employee from accruing additional paid leave in a year where that employee already has 56 hours of leave available, unless and until the employee chooses to use some portion of his or her available leave. An employer may of course choose to provide more than the 56-hour minimum to its employees pursuant to its own policy.
Use of Paid Sick Leave. Employees will be permitted to use paid sick leave for a number of reasons, including: (1) their own illnesses or healthcare needs (including preventive care); (2) the care of a family member (defined as a “child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship”); or (3) for purposes related to being a victim of domestic violence, sexual assault or stalking (or to assist a family member who is a victim).
Under the Proposed Rule, if the need for sick leave is foreseeable, an employee is to provide seven days oral or written notice. If it is not foreseeable, an employee should notify his or her employer “as soon as is practicable.” Contractors can require employees to provide certification from a health care provider of the employee’s need for leave if three or more days of leave are used consecutively.
The Proposed Rule also contains specific requirements for an employer’s communication of a denial of a request to use paid sick time. Specifically, a denial must be provided “as soon as is practicable,” in writing, and with an explanation for the denial.
All of these features of the Proposed Rule are very similar to the Family Medical Leave Act.
Although contractors will not be required to pay employees for any unused paid sick leave upon termination, employees who are rehired by the contractor or a successor contractor within one year must have their accrued paid sick leave reinstated. And even if a contractor chooses to pay out accrued leave upon termination, the contractor is still required to reinstate the employee’s paid sick leave if he or she is rehired within the one-year timeframe.
Additional Responsibilities Imposed on Contractors. The Proposed Rule also prohibits the interference with an employee’s accrual or use of paid sick leave and prohibits an employer from discriminating on the basis of an employee’s use of paid sick leave.
Additionally, it contains a number of recordkeeping requirements and states that employers will have to publish a notice to affected employees upon the finalization of the rule. Especially in light of these relatively onerous recordkeeping and notice requirements, contractors and subcontractors with federal contracts or interested in federal projects should begin evaluating their policies and benefits packages to ensure their practices will conform with the requirements of the Executive Order by next year.
Babst Calland’s Employment and Labor Group will continue to keep employers apprised of further developments related to Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors, and other employment and labor topics. If you have any questions or need assistance in addressing the above-mentioned area of concern, please contact John A. McCreary, Jr. at (412) 394-6695 or jmccreary@babstcalland.com, or Esther Soria Mignanelli at (412) 394-6422 or emignanelli@babstcalland.com.
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The American Oil & Gas Reporter
PITTSBURGH—Managing flowback, produced fluids, and other oil and gas wastewater continues to be a significant industry concern in light of ongoing federal and state regulatory activity.
In the Appalachian Basin’s Marcellus Shale play, this is being exacerbated as a result of fewer newly drilled wells being available to reuse flowback and produced fluids because of low gas prices.
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The PIOGA Press
On February 5, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) published an advisory bulletin in the Federal Register on the safety of underground gas facilities. 81 Fed. Reg. 6334-6336. Citing several incidents at underground gas storage facilities, including the ongoing natural gas leak at a facility in the Porter Ranch area of Los Angeles, California, PHMSA’s advisory bulletin recommends operators of these facilities take measures to ensure public safety and the protection of the environment.
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