PIOGA Press
(by Christian Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
By now, you have likely heard about the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) Beneficial Ownership Information Reporting Rule (the “Rule”) from your accountant, attorney, or business colleagues. Promulgated under the Corporate Transparency Act (“CTA”), the Rule requires most business entities to disclose information to FinCEN about their ‘beneficial owners’: individuals who directly or indirectly own or control such entities.
Enacted as part of the Anti-Money Laundering Act in 2021, the CTA is intended to “prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity.” The Rule aims to enhance transparency and support the mission of the CTA by requiring domestic and U.S. registered foreign entities to report information about their beneficial owners to FinCEN. Most entities in the U.S. will likely be required to comply with the Rule, and FinCEN estimates approximately 32 million business will be required to make a filing. The Rule exempts 23 types of entities from reporting requirements, primarily large or regulated entities already subject to various reporting requirements, such as banks, SEC-reporting companies, insurance companies, and ‘large operating companies’, as well as wholly owned subsidiaries of the foregoing. Entities formed before January 1, 2024, have until 2025 to comply, while entities formed in 2024 have a 90-day compliance period.
Under the Rule, reporting companies must provide detailed personal identifying information for each individual beneficial owner, including name, date of birth, residential street address, and unique identifying number (such as a passport or driver’s license number). A ‘beneficial owner’ is a natural person who directly or indirectly owns or controls at least 25% of the ownership interests of a reporting company or who exercises ‘substantial control’ over the reporting company. Both ‘substantial control’ and ‘ownership interests’ are defined broadly to prevent loopholes allowing corporate structures to obscure owners or decision-makers. Companies formed after January 1, 2025, must also provide this information for ‘company applicants’, the individuals who make or direct the filing of a reporting company’s formation or foreign registration documents. The Rule also requires supplemental filings to be made within 30 days of any change to any of the reported information, for example, a change in residential address. Businesses will need to monitor changes in ownership and management throughout the year for compliance purposes.
FinCEN is authorized to disclose the reported information upon request under specific circumstances to federal agencies engaged in national security, intelligence or law enforcement activities and to state local and tribal law enforcement agencies, as well as certain other limited entities. Failure to comply with the requirements may result in potential civil and criminal consequences, including civil penalties of up to $500 per day a violation has not been remedied and criminal penalties of $10,000 and/or up to two years in prison for willful noncompliance.
The future of enforcement is uncertain as the Rule is currently being challenged in the courts on constitutional grounds. Reporting requirements have been paused for certain entities following an injunction issued by the Northern District of Alabama on March 1, 2024, which ruled the CTA unconstitutional because it exceeds Congress’s enumerated powers. With this and other cases challenging the validity of the Rule making their way through the courts, what should companies do in the meantime? Given the uncertainty about the constitutionality of the Rule and future enforcement, we recommend the following:
- New entities formed or registered on or after January 1, 2024, and before January 1, 2025, should comply with the applicable reporting requirements and make their filings within 90 calendar days after formation or registration.
- Existing entities formed or registered prior to January 1, 2024, should begin their reporting analysis now to ensure compliance in advance of the New Year’s deadline.
Every entity organized under U.S. law or registered to do business in the U.S. will need to determine (i) whether it is exempt from reporting requirements and (ii) if not, what information it must report. Companies with simple management and ownership structures may be able to navigate the filing on their own. However, where complex management or ownership structures or uncertainty about determinations of beneficial ownership or substantial control exist, an attorney can help you avoid missteps.
To view the full article, click here.
Reprinted with permission from the October 2024 issue of The PIOGA Press. All rights reserved.
The Legal Intelligencer
(By Max Junker and Morgan Madden)
Ordinance enforcement is an essential function for a municipality to keep its residents and community functioning efficiently. Indeed, the goal of zoning enforcement is to “ensure compliance with [an] ordinance such that the community is protected. Borough of Bradford Woods v. Platts, 79 A.2d 984 (Pa.Cmwlth. 2002). The Pennsylvania Municipalities Planning Code (“MPC”) sets forth a straightforward mechanism to enforce a municipality’s zoning ordinance, but what happens when that enforcement process goes haywire? Small and seemingly innocuous departures from the specific requirements of the enforcement process and the provisions of the MPC can have significant and cascading consequences. Crossing and dotting the proverbial “t’s” and “i’s” at each step of the process will help to ensure the effective administration of a zoning ordinance.
An Effective Ordinance
Pursuant to the MPC, zoning ordinances may contain “provisions for the administration and enforcement” of such ordinance. 53 P.S. § 10603(c)(3). Despite the apparent optional nature to include such enforcement provisions in a municipality’s ordinance, inclusion of the same is fundamental to successful enforcement and must comply with the enforcement provisions in the MPC. An effective enforcement provision will put property owners on express notice of their rights and responsibilities relative to zoning ordinance compliance, and the enforcement procedures relative thereto. Effective ordinances clearly set forth policy goals for zoning ordinance compliance, establish expectations for compliance, and lay out the steps the municipality will take to enforce said expectations (i.e., its enforcement procedure and available remedies).
The Zoning Notice of Violation
The first official step in zoning enforcement for a municipality is the issuance of an enforcement notice. Section 616.1 of the MPC sets forth explicitly what must be included in a zoning notice of violation (“ZNOV”). A ZNOV must include: (1) the name of the owner of record and any other person against whom the municipality intends to take action; (2) the location of the property in violation; (3) a description of the specific violation and the requirements in the applicable ordinance sections that have not been met; (4) a specific timeline for compliance; (5) specific appeal entitlements; and (6) notice that failure to either remedy the violation or appeal constitutes a violation with possible sanctions clearly described. 53 P.S. § 10616.1.
Although the ZNOV requirements in the MPC are seemingly straightforward, it is not uncommon for an enforcement officer to inadvertently stray from those requirements and render the enforcement process ineffective. For instance, it is important to perform due diligence in identifying the owner, or owners, of record and each of those individuals must be named on the ZNOV. Failing to list all record owners on the ZNOV could render the ZNOV invalid or hinder further enforcement avenues. A simple assessment search can help avoid this issue. Once all owners are identified, best practice is to include the names of all owners on the ZNOV and mail a copy via certified mail to the registered address of each individual owner, even if they live at the same address, and to post the property with the ZNOV.
Another common ZNOV mishap is the failure to identify the violation with sufficient specificity. The Commonwealth Court has regularly held that failure to include a citation to a specific ordinance section alleged to have been violated will render a ZNOV invalid. See, Twp. of Maidencreek v. Stutzman, 642 A.2d 600 (Pa.Cmwlth. 1994) (stating that, “as used in [S]ection 616.1(3),” the term “cite” means a “specific numerical reference to the ordinance section which the township asserts the landowners have violated”). Simply alleging that the “zoning ordinance” or even a chapter thereof has been violated is insufficient.
Keeping in line with specificity requirements, direct references to the timeline for compliance and a property owner’s appeal rights are necessary in a valid ZNOV. It is strongly encouraged that ZNOV drafters avoid phrases like “in two weeks” or “by the end of the month,” and instead provide a property owner with a (reasonable) date by which to remedy the violation. Similarly, simply informing a property owner of an entitlement to an appeal of a ZNOV does not pass muster. The law requires that a property owner be informed of the right to appeal a ZNOV to the Zoning Hearing Board and the time period to do so. Such a notification should relate directly to the appeal procedure laid out in the municipality’s ordinance.
The Magistrate Action
If a (valid) ZNOV is issued and no appeal is timely lodged, the municipality may continue its enforcement efforts before a Magisterial District Judge (“MDJ”). Prior to 1988, municipalities could charge violating property owners with a criminal summary offense and zoning violations could be met with jail time for failure to pay fines. Following a 1988 amendment to the MPC, however, the available remedies for zoning violations were limited to civil penalties of $500 per day. Thus, if judicial intervention is necessary for a municipality to achieve compliance with its zoning ordinance, the proper avenue for doing so is via the initiation of a civil complaint.
Civil complaints filed with an MDJ should be completed using the state-wide civil complaint form. At first glance, the form requires straightforward information – names and addresses, the amount of the judgment sought, and a citation to the ordinance violated. It is not uncommon for zoning officers to simply fill out the “blanks” on the civil complaint form and submit it; however, engagement with the municipal solicitor is likely worth the effort (and fees) to produce a sound and comprehensive complaint. While unnecessary, a detailed narrative setting forth the enforcement proceedings to date and attaching copies of the subject ordinance sections, ZNOV(s), and other relevant documents not only provides the MDJ with a thorough picture of the circumstances surrounding the violation and enforcement efforts, but also helps to develop a record that may become valuable if further Court involvement becomes necessary.
For instance, in the event the MDJ issues a judgment against the property owner, and that property owner continues to flout the requirements of the zoning ordinance by failing to remedy the underlying violation, a municipality may want to seek injunctive or declaratory relief from a Court of Common Pleas. In those cases, having a well-established record, complete with documentary evidence of the municipality’s prior enforcement efforts, will pave a path to more likely success.
Appeal and/or Further Enforcement
If, on the other hand, a property owner does timely appeal a ZNOV, the matter will be heard by the municipality’s Zoning Hearing Board (“ZHB”). Often, particularly if a municipality’s administration is confident that a ZNOV will be upheld by the ZHB, it will send just one individual (likely the zoning officer) to the hearing. Simply put, that is almost always a mistake. ZHB hearings should be taken seriously and prepared for as if they were high-stake court cases because, well, they could ultimately become just that. Many landmark cases that drive how municipalities craft and manage their zoning ordinances originated from challenges heard before ZHBs.
Solicitor involvement in the preparation and litigation of ZHB matters is, again, not necessary but often worth the expense. The MPC requires the municipality to present its evidence first. Best practice is to prepare to present the most comprehensive case possible before the ZHB. This includes the preparation and presentation of demonstrative exhibits, including the ordinance sections at issue, copies of any correspondence with the property owners, the applicable ZNOV, photographs, etc. When considering how to present exhibits, it is also important to contemplate who would best serve as a witness. Most often, the zoning officer is most poised to walk through the pertinent exhibits, but not always. Sometimes a municipal manager or board member has a good grasp on why a particular ordinance section was adopted or the property standard it was intended to uphold, other times a neighbor may be able to comment on how the alleged violation is detrimental to the health and welfare of the municipality.
Like with matters that appear before an MDJ, the establishment of a robust record may seem tedious, but the implications of not taking the additional preparatory steps may ultimately lead to a harder row to hoe when compliance with the zoning ordinance is not achieved.
Zoning enforcement can be a straightforward process, but straightforward should not mean lax. Accurate and thorough documentation, including ZNOVs that comply with the requirements of the MPC, and complete records built before either the MDJ or ZHB, is the best way to avoid falling victim to the oft-repeated pitfalls in Pennsylvania zoning enforcement. Moreover, this procedure is specific to zoning ordinances and there is an entirely different procedure for enforcing other ordinances regulating property maintenance, grading, or stormwater. Our team of well-experienced attorneys regularly assists municipal and private clients in navigating all these processes.
Robert Max Junker is a shareholder in the public sector, energy and natural resources, and employment and labor groups of Babst Calland. Contact him at rjunker@babstcalland.com . Morgan M. Madden is an associate in Babst Calland’s Public Sector, Energy and Natural Resources, and Employment and Labor Groups and focuses her practice on land use, zoning, planning, labor and employment advice, and litigation. Contact her at mmadden@babstcalland.com.
To view the full article, click here.
Reprinted with permission from the October 10, 2024 edition of The Legal Intelligencer© 2024 ALM Media Properties, LLC. All rights reserved.
The Wildcatter
(by Nikolas Tysiak)
All the cases of interest this time around are from Ohio’s 7th Circuit Court of appeals. Only a couple directly involve the Marketable Title Act and Dormant Mineral Act, so more to digest this time.
Hogue v. PP&G Oil Company, LLC, 2024-Ohio-2938 (7th Dist.), involved a dispute arising from operations under different depths associated with a single oil and gas lease following a leasehold depth severance. PP&G held 4 traditional, vertical oil and gas wells in Monroe County. PP&G assigned a 2.5% working interest in the wells and 20-acre squares around the units to the Hogues in 2007, “from the surface to the bottom of the deepest producing geological formation.” The wells bottomed out around 2,500 feet. In 2011, PP&G subleased various of its lands, including the lands affected by the above wells, to HG Energy LLC as to depths from the top of the Clinton formation to the basement. The sublease was later amended to exclude the land around certain wells, and eventually became vested in Gulfport Appalachia LLC. The Hogues allege that the assignment of working interests to them do not contain express depth restrictions, that they held rights to the land itself surrounding the several wells, and that the sublease of the deep rights under the lands therefore violated the Hogues’ property rights. The 7th District Court found that, at the time of the assignment to the Hogues, there was an inherent depth limitation to unitized vertical wells under Ohio law of 4000 feet. Consequently, the Hogues received no rights deeper than 4000 feet and had no inherent interest in any depths or wells subleased to Gulfport. The appeals court remanded the suit to the trial court for further proceedings accordingly.
Henderson v. Stalder, 2024-Ohio-3037 (7th Dist.). This is a case involving the Dormant Mineral Act (“DMA”). Specifically, the Henderson heirs, successors to the last known mineral owner before abandonment proceedings by the surface-owning Stalders, claimed that the Stalders search for the purposes of providing notice of the Henderson heirs rights to preserve, were insufficient. The Hendersons claim that key records were locatable via the internet at the time the surface owners’ title examiner undertook its search and should have utilized such records to perform additional research to locate the Henderson heirs. The Appeals Court disagreed with this argument, finding that notice by publication was the appropriate course of action in this instance. However, the Appeals Court also determined that the publication notice requirements under the DMA require reference to the name of a last known holder. Because the Stalders notice by publication did not include such a reference, the abandonment was not completed, and the court sustained the complaint of error by the Hendersons. As a natural outgrowth of this determination, the Appeals Court found that claims under the Marketable Title Act by the Hendersons that were avoided by the trial court now had to be subjected to trial, and so remanded the case accordingly.
Cardinal Minerals, LLC v. Miller, 2024-Ohio-3121 (7th Dist.). This case is directly connected to a similar case from earlier this year, addressed in the last update, but covers different lands owned or claimed by the same parties. Cardinal Minerals LLC brought suit claiming that a severed mineral interest had been preserved in contradiction to a Dormant Mineral Act claim by the surface owners, the Millers. Cardinal Minerals purchased the severed mineral interests from the Pfalzgrafs, heirs of the original severing parties, and claimed that the DMA action of the surface owners was improper for failing to serve notice on the Pfalzgraf heirs.
The Court of Appeals sidestepped the claim of Cardinal Minerals that the notice requirement under the Dormant Mineral Act was not properly adhered to, instead determining that Cardinal Minerals unlawfully “purchased a lawsuit” under the Doctrine of Champerty (Champerty being defined as “assistance to a litigant by a nonparty, where the nonparty undertakes to further a party’s interest in a suit in exchange for a part of the litigated matter if a favorable result ensues . . .”). The court further stated that the assignment of rights to a lawsuit is void as champerty. For these reasons, Cardinal Minerals’ claims were denied; the Court of Appeals effectively ignored the question of whether the surface owners followed the Dormant Mineral Act requirements by providing notice to the known successors to a reserving title interest holder pursuant to wills and intestate succession. It appears that the 7th District is, once again, doubling down on reasons to validate DMA procedures of questionable value, so it is suspected that additional appeals will follow.
Myers v. Vandermark, 2024-Ohio-3205 (7th Dist.). Another Marketable Title Act case was decided in the 7th Circuit (MTA). Myers owns surface rights to a tract of land in Harrison County, Vandermark is the current holder of severed oil and gas rights under the same. Myes claimed that root of title was a deed dated November 19, 1953, and that for the 40-year period following root of title there was nothing that preserved Vandermark’s severed oil and gas interest, resulting in the same extinguishing to the benefit of Myers on November 18, 1993. According to representations by both parties, the same land and interests had been subject to a lawsuit determining that Myers had somehow failed to properly claim ownership of the minerals at issue through the Dormant Mineral Act (DMA) per a prior court order from 2017. In the prior case, Vandermark claimed ownership had been settled and the instant suit was barred under res judicata, and his title had been quieted, while Myers claimed that the prior suit had no bearing on the current, as the MTA issues had not been the subject of litigation. The doctrine of res judicata is broadly the concept that, once an issue has been determined by a court order, the same issue cannot be the subject of another suit based on the same facts. The trial court agreed with Vandermark and found that the new attack on Vandermark’s property interest was “without standing and lacks merit.” The Appeals court found the trial court’s determination to be erroneous – Myers had standing because he was a party with an interest or claim in the land at issue, so he had a real interest in the outcome of the case. The Appeals Court also found that res judicata MAY apply, but that such a determination had been made prematurely. It should have been done through a motion for summary judgment because it required information not then of the record. Instead, the case had been dismissed pursuant to a motion to dismiss, which is generally reserved for situations where, taking all the parties’ allegations as true, there is no actual issue to be resolved. The Appeals court remanded the case back to trial for further determinations along these lines.
EAP Ohio, LLC v. Sunnydale Farms LLC, 2024-Ohio-4522 (7th Dist.). Landowners brought suit against EAP Ohio, LLC, current leaseholder and operator of wells affecting the lands at issue, for improperly deducting costs from royalty payments. The trial court had made several determinations and then issued a summary judgment in favor of EAP, effectively allowing the deductions. The landowners appealed, making various arguments, including that deductions for trucking and fuel (related to trucking) were not specifically referenced in the lease as acceptable deductions, which only mentioned “compression, transportation, gathering, and dehydrating” as deductible costs. The Appeals Court determined that the trial court had improperly made factual determinations in its summary judgment order, which is supposed to include a decision based solely on issues of law, not issues of fact. The Appeals Court stated that the language at issue was ambiguous as to its meaning, requiring interpretation and possible reliance on extrinsic evidence as to the parties’ intent.
The Appeals Court further stated that, EAP Ohio LLC should not be allowed to rely on “custom and usage” as extrinsic evidence for its interpretation of the lease because “custom and usage” only applies within a trade or industry. Because the landowners were not part of the oil and gas trade or industry, custom and usage was not an appropriate type of extrinsic evidence to use for interpreting the lease. Additionally, the Appeals Court found that EAP should not be allowed to rely on statutory definitions as extrinsic evidence of the lease meaning because Ohio law has different definitions for seemingly similar concepts, which are context dependent. As such, reliance by the trial court for the definition of “gathering” or “transportation” found in a pipeline statues was inappropriate in the context of an oil and gas lease interpretation issue. Overall, the Appeals Court reversed the summary judgment in favor of EAP and remanded the case to the trial court.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the MLBC October 2024 issue of The Wildcatter. All rights reserved.
TEQ Hub
(by Christian Farmakis, Susanna Bagdasarova, Kate Cooper and Dane Fennell)
Reminder – Upcoming January 1, 2025 compliance deadline for the Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information Reporting Rule (the “Rule”).
By now, you have likely heard about the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) Beneficial Ownership Information Reporting Rule (the “Rule”) from your accountant, attorney, or business colleagues. Promulgated under the Corporate Transparency Act (“CTA”), the Rule requires most business entities to disclose information to FinCEN about their ‘beneficial owners’: individuals who directly or indirectly own or control such entities.
Enacted as part of the Anti-Money Laundering Act in 2021, the CTA is intended to “prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity.” The Rule aims to enhance transparency and support the mission of the CTA by requiring domestic and U.S. registered foreign entities to report information about their beneficial owners to FinCEN. Most entities in the U.S. will likely be required to comply with the Rule, and FinCEN estimates approximately 32 million business will be required to make a filing. The Rule exempts 23 types of entities from reporting requirements, primarily large or regulated entities already subject to various reporting requirements, such as banks, SEC-reporting companies, insurance companies, and ‘large operating companies’, as well as wholly owned subsidiaries of the foregoing. Entities formed before January 1, 2024, have until 2025 to comply, while entities formed in 2024 have a 90-day compliance period.
Under the Rule, reporting companies must provide detailed personal identifying information for each individual beneficial owner, including name, date of birth, residential street address, and unique identifying number (such as a passport or driver’s license number). A ‘beneficial owner’ is a natural person who directly or indirectly owns or controls at least 25% of the ownership interests of a reporting company or who exercises ‘substantial control’ over the reporting company. Both ‘substantial control’ and ‘ownership interests’ are defined broadly to prevent loopholes allowing corporate structures to obscure owners or decision-makers. Companies formed after January 1, 2025, must also provide this information for ‘company applicants’, the individuals who make or direct the filing of a reporting company’s formation or foreign registration documents. The Rule also requires supplemental filings to be made within 30 days of any change to any of the reported information, for example, a change in residential address. Businesses will need to monitor changes in ownership and management throughout the year for compliance purposes.
FinCEN is authorized to disclose the reported information upon request under specific circumstances to federal agencies engaged in national security, intelligence or law enforcement activities and to state local and tribal law enforcement agencies, as well as certain other limited entities. Failure to comply with the requirements may result in potential civil and criminal consequences, including civil penalties of up to $500 per day a violation has not been remedied and criminal penalties of $10,000 and/or up to two years in prison for willful noncompliance.
The future of enforcement is uncertain as the Rule is currently being challenged in the courts on constitutional grounds. Reporting requirements have been paused for certain entities following an injunction issued by the Northern District of Alabama on March 1, 2024, which ruled the CTA unconstitutional because it exceeds Congress’s enumerated powers. With this and other cases challenging the validity of the Rule making their way through the courts, what should companies do in the meantime? Given the uncertainty about the constitutionality of the Rule and future enforcement, we recommend the following:
- New entities formed or registered on or after January 1, 2024, and before January 1, 2025, should comply with the applicable reporting requirements and make their filings within 90 calendar days after formation or registration.
- Existing entities formed or registered prior to January 1, 2024, should begin their reporting analysis now to ensure compliance in advance of the New Year’s deadline.
Every entity organized under U.S. law or registered to do business in the U.S. will need to determine (i) whether it is exempt from reporting requirements and (ii) if not, what information it must report. Companies with simple management and ownership structures may be able to navigate the filing on their own. However, where complex management or ownership structures or uncertainty about determinations of beneficial ownership or substantial control exist, an attorney can help you avoid missteps.
To view the full article, click here.
Pennsylvania Business Central
(by Kevin Douglass, Carla Castello, and Stephen Antonelli)
Today’s businesses are subject to increasing workplace scrutiny concerning possible misconduct of their owners, officers, management, and personnel. When faced with an allegation that can potentially expose the company to legal, financial and reputational harm, it is critical that the company promptly investigate the facts and assess the business risk in order to make an informed decision on the best course of action.
Is an Internal Company Investigation Warranted?
Employee complaints, or even allegations from third parties, concerning improper workplace conduct should always be taken seriously. Whether the claims involve an entry level employee, a manager, a corporate officer, or anyone in between, the company should assess whether the allegations, if true, would constitute violations of law or company policies, or otherwise materially impact the company’s finances, culture, reputation, or workforce.
Workplace investigations are often sensitive. Employees may be reluctant to step forward and become the center of an investigation. They may also fear backlash from the individual(s) being investigated, particularly if they carry significant clout within the company. The company can assuage those concerns by reminding employees involved in the investigation of the company’s obligation to comply with applicable anti-retaliation laws and company policies. The company should also explain that it will perform the investigation with impartiality and (as much as possible) confidentiality, and that it will comply with the organization’s policies and procedures while minimizing business disruption.
Planning for and Conducting the Investigation
At the outset, the company must define the scope and purpose of the investigation (i.e. identify the allegations and the reasons for undertaking the investigation), select an investigation team, and determine a timeline for the investigation. It is important to recognize that the scope may shift as the investigation progresses and information is gathered. The team needs to implement measures designed to protect the attorney-client privilege and the attorney work product doctrine, including defining the roles of both internal and/or external attorneys and determining whether counsel will lead the investigation. The company should also identify the employees who will serve as the points of contact with the investigation team and the frequency and manner in which they will be kept informed of the investigation’s progress.
Another critical consideration is the preservation, collection, and review of key documents, including e-mails and text messages. In that regard, the organization’s document retention policy must be reviewed, and a notice issued to ensure the preservation of relevant communications and other documents that could become evidence in potential subsequent litigation. The team should also evaluate whether to engage a third-party to collect documents in a forensically sound manner from company-issued electronic devices. It is helpful to compile at the outset a list of potential people to be interviewed, including current and former employees, consultants, and any other individuals with pertinent information, including the person(s) who is the target of the investigation. Typically, the target of the investigation will be interviewed near the conclusion of the other interviews.
When planning for interviews, the investigation must balance the need for a thorough investigation while maintaining confidentiality and meeting timelines. How many interviews should be conducted and which interviews are critical to the investigation? It is recommended that the investigation team explain during the interviews the importance of confidentiality and, if counsel is conducting the interview, also emphasize that counsel represents the company, not the individual being interviewed. It is critical to exercise care concerning the manner in which the records witness statements or facts in interview notes, as those notes may become discoverable in potential subsequent litigation. Moreover, attorneys’ impressions or communications of the interviews should be separately recorded and protected.
Concluding the Investigation
As the investigation proceeds, the company should determine whether to prepare a written or verbal report, or materials for a presentation. If issuing a written report, the company should take appropriate steps to ensure confidentiality and privilege where appropriate. The company must then decide whether the investigation team will simply report its findings or take the additional step of recommending a course of action, up to and including disciplinary measures. Ultimately, management, the board of directors, or other decision makers must act in the best interests of the organization and decide what, if any, action is necessary to address the allegations that led to the investigation. At the investigation’s conclusion, the company should inform the complaining employee(s) as well as the target(s) of the outcome while reminding them of the company’s interest in maintaining confidentiality.
Kevin Douglass is a shareholder in the Litigation, Energy and Natural Resources, and Emerging Technologies groups. He is a complex commercial litigator with significant trial and arbitration experience. He also provides counseling and litigation services to businesses, business owners, managers, directors and officers. On behalf of companies, he has managed confidential internal investigations concerning the conduct of officers and employees.
Carla Castello is a shareholder in the Litigation, Emerging Technologies, and Employment and Labor groups. She has a broad range of range of litigation experience in several areas including commercial, labor and employment, consumer protection, antitrust, energy, and toxic tort. She represents corporate clients in defending a variety of matters, including environmental and toxic tort disputes, commercial contract disputes and conflicts between shareholders in closely held businesses.
Stephen Antonelli is a shareholder in the Employment and Labor, Litigation, and Energy and Natural Resources groups. He represents employers of all sizes, from Fortune 500 companies and large healthcare organizations to non-profit organizations and family-owned businesses. His practice focuses on all phases of employment and labor law, from complex class and collective actions and fast-paced cases involving the interpretation of restrictive covenants, to single-plaintiff discrimination claims and day-to-day human resources counseling.
To view the full article, click here.
Published in the Pennsylvania Business Central on September 27, 2024.
TEQ
(by Kristen Petrina)
Artificial Intelligence (AI) is advancing at unprecedented speeds. AI relies on vast amounts of datasets for processing and model training, creating the challenge of balancing the benefits of AI, while protecting data privacy. As a result of improper data processing and usage, organizations are facing harsh penalties including AI usage prohibition, algorithm disgorgement, and multibillion dollar fines. When considering how to introduce AI into any organization, one of the first questions to consider is, “How can AI be utilized to drive innovation without violating privacy and misusing collected data?”
AI governance analysis should be under a privacy lens, as personal data is at the core of many opportunities that come with AI development. Privacy risks may result in societal and ethical impacts on individuals which speaks to the heart of responsible AI usage. Incorporating responsible AI practices is user specific to each organization and it is possible to protect privacy and drive innovation. In order to achieve both goals, organizations should consider data protection preventative measures before implementing AI into its processes.
- Data privacy should be addressed at the onset of AI implementation. Organizations should conduct risk assessments and consider data enablement through AI from the beginning before it becomes an issue. Generative AI in particular is self-learning, the more data fed into the model, the harder it will be to unwind or remove data if improperly used.
- AI and data privacy governance teams must work together from the beginning to address any risks that may arise. Organizations may consider forming an ethical AI committee engaging diversified team members to reduce potential bias in the development and design.
- Contemplate data inputs by asking questions such as what the existing and potential future data sources may be, what data will be collected, what are in the datasets, how to categorize the types of data, will the data modeling receive personal or sensitive data, should those things be included.
- Consider data outputs by asking questions such as what information will be displayed after processing, what is the impact of the processing, is there any potential for harm from the processing and results, what controls are needed at the data layer to mitigate the risks.
- Review regulatory and data privacy requirements that impact and influence AI to assess and address any privacy policy gaps as a result of the introduction of AI into the organization’s processes. Policies can include but are not limited to addressing transparency into training data origins, acceptable use policies, data quality, validation of algorithms to confirm the AI model meets the organization’s AI and data policies, and sharing or transfer of data with third parties.
- What consent did the data owner give, particularly what purpose did the owner agree to? When implementing AI, organizations can get ahead of consent issues by educating the data owner of the intended purpose and use of the data.
- Build privacy measures into the system’s architecture to guarantee alignment with purpose consent given by the data owner and careful treatment of the data.
- Is the value provided to the organization proportional to the data owners risk? If data is used, should it be minimized to strip identifying features, or is it essential to include information such as sensitive data to determine if the model is biased?
- Determine the permanence of the data, depending on how it is incorporated into the AI model, an enforcement action can result in the loss of years of data. Additionally, some states allow data owners to be forgotten. If data is not de-identified it is possible to remove it from the datasets, however, if the data is de-identified it will not be possible to determine how the data was used and for the data to be removed from the datasets, potentially requiring a retraining of the model.
- Implement data security and privacy controls for stored decommissioned AI systems and associated data.
Organizations must safeguard data and ensure privacy compliance within AI systems, however, that does not mean innovation cannot thrive. An organization that considers privacy from the onset of AI implementation can drive innovation while also protecting privacy and reducing the risk of future penalties.
To view the full article, click here.
The Legal Intelligencer
(by Steve Antonelli and Alex Farone)
Changes in the world of non-competition agreements (“non-competes”) have been particularly prevalent in recent weeks, most notably including court activity barring the Federal Trade Commission’s new non-compete ban and Pennsylvania’s new law restricting the use of certain non-competes for healthcare practitioners.
In May of this year, the Federal Trade Commission (FTC) published a final rule that would ban nearly all new non-competes with employees, independent contractors, and volunteers nationwide, with the exception of non-competes entered into pursuant to certain business sales, on the basis that non-competes are an unfair method of competition and therefore a violation of Section 5 of the FTC Act.
The final rule would also void all pre-existing non-competes except (1) those made with senior executives earning more than $151,164 annually who are in a policy-making position, and (2) those that have been breached and for which a cause of action accrued prior to the final rule’s effective date of September 4, 2024.
The final rule would additionally require employers to provide “clear and conspicuous notice” to all current and former workers, other than senior executives, with existing non-competes by September 4 stating that the non-compete will not be, and cannot legally be, enforced. Immediately after the final rule was published, legal challenges to the ban were quickly filed in various federal courts across the country. As the September 4 deadline approached without a decisive ruling from any of these courts, employers wondered whether the non-compete ban would be ultimately enforceable and began to make strategic plans on whether to proactively change their non-compete practices.
Two weeks before the ban went into effect, on August 20, 2024, the U.S. District Court for the Northern District of Texas ruled against the FTC, finding that the non-compete ban exceeded the FTC’s statutory authority. In Ryan LLC, et al. v. Federal Trade Commission, the court determined that the creation of substantive rules like the non-compete ban stretched beyond the FTC’s power, and that the ban was unreasonably overbroad.
The Ryan decision sets aside the non-compete ban nationally, meaning the ban cannot be enforced or take effect on September 4. All requirements of the FTC rule—including banning the use of new non-competes and notifying workers and former workers with existing non-competes of the unenforceability of those agreements, with few exceptions—are no longer in effect. Employers may continue to utilize non-competes, in the manner prescribed by state statutes and case law. Despite being somewhat overshadowed by the FTC rule and the various legal challenges to it, on July 17, 2024, Governor Josh Shapiro signed one such Pennsylvania state statute into law.
Act 74, which is known as the Fair Contracting for Health Care Practitioners Act, takes effect on January 1, 2025. As of that date, most new non-competes between an employer and a health care practitioner shall be void and unenforceable as contrary to Pennsylvania public policy if the length of the agreement lasts longer than one year. If the time period of a non-compete entered after January 1, 2025 is one year or less, the non-compete will be enforceable, unless the employer dismisses the practitioner. The act will not impact existing non-competes entered before January 1, 2025, regardless of the length of the agreement. Additionally, employers may still enforce non-competes that are entered “as a direct result of” a sale or other transaction (such as a merger) of the health care practitioner’s ownership interest, or substantial ownership interest of, the assets of a business.
Non-competes covered by the act are agreements between an employer and a health care practitioner that prohibits the health care practitioner from treating patients or accepting new patients, whether independently or through the employment of a competitor after the term of the practitioner’s employment. The term “health care practitioner” is defined as medical doctors, doctors of osteopathy, certified registered nurse anesthetists, certified nurse practitioners, and physicians’ assistants, as those terms are defined by applicable laws.
Following the departure of a health care practitioner from their employer, the act also requires employers to take certain steps relative to patients who had been seen by the practitioner within the year before their departure (or two years for ongoing outpatient relationships). The employer must notify patients of: (1) the practitioner’s departure; (2) the manner in which the patient may transfer their health records to a different health care practitioner; and (3) the fact that the patient may be assigned to a new health care practitioner with the employer, if the patient chooses to continue receiving care from the employer.
Employers should continue to monitor the status of the now-barred FTC non-compete ban, as well as Pennsylvania’s newly enacted Fair Contracting for Health Care Practitioners Act. If you have questions about either, please contact Stephen A. Antonelli at 412-394-5668 or santonelli@babstcalland.com, or Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com.
Stephen A. Antonelli is a shareholder in the Employment and Labor and Litigation groups of Babst Calland. His practice includes representing employers in all phases of labor and employment law, from complex class and collective actions and fast-paced cases involving the interpretation of restrictive covenants, to single-plaintiff discrimination claims and day-to-day human resources counseling.
Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations.
To view the full article, click here.
Reprinted with permission from the September 17, 2024 edition of The Legal Intelligencer© 2024 ALM Media Properties, LLC. All rights reserved.
Firm Alert
UPDATE: Babst Calland Stands Ready to Advise All Clients on FinCEN Matters
(by Chris Farmakis, Susanna Bagdasarova, Kate Cooper, and Dane Fennell)
Following up on our May 2024 Alert, Babst Calland would like to remind you of the upcoming January 1, 2025 compliance deadline for the Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information Reporting Rule (the “Rule”). Although it is currently being challenged in the courts, the compliance requirements and deadlines remain in effect for the majority of entities at this time.
The Rule requires most business entities to disclose personal information to FinCEN about their “beneficial owners”: individuals who directly or indirectly own or control such entities. Most entities in the U.S. will likely be required to comply with the Rule, and FinCEN estimates approximately 32 million businesses will be required to make a filing. The Rule exempts 23 types of entities from reporting requirements, primarily large or regulated entities already subject to various reporting requirements, such as banks, SEC-reporting companies, insurance companies, and ‘large operating companies’, as well as wholly owned subsidiaries of the foregoing. Every entity organized under U.S. law or registered to do business in the U.S. will need to determine (i) whether it is exempt from reporting requirements and (ii) if not, what information it must report.
Babst Calland is ready to help with all aspects of compliance, from legal analysis of your reporting obligations or exemption therefrom, through the report preparation and filing process using our firm’s secure technology platform. We recommend beginning the process of analysis and information gathering well in advance to ensure compliance by the below deadlines:
- January 1, 2025, for existing entities formed or registered prior to January 1, 2024
- Within 90 calendar days after formation or registration for new entities formed or registered on or after January 1, 2024, and before January 1, 2025
Babst Calland will continue to monitor regulatory and judicial updates and inform you of any significant changes affecting your compliance obligations. Please reach out to fincenassist@babstcalland.com or your Babst Calland client relationship lawyer if you would like Babst Calland to assist you with your company’s compliance obligations under the Rule.
To be clear, Babst Calland will only provide advice related to Rule compliance when explicitly requested to do so. We look forward to servicing your needs on this developing area of the law.
Thank you for your continued trust and partnership.
Babst Calland and our affiliated Alternative Legal Service Provider, Solvaire, are pleased to present PIPES TRACKER™ – the most comprehensive and easy-to-use pipeline safety regulatory database search and tracking tool available on the market today.
With PIPES TRACKER™ you can:
√ Quickly search and identify cases, interpretations, and other guidance documents involving a particular citation
√ Easily search and verify data for counsel, operators and consultants
√ Track pipeline safety cases by citation, region, date, operator name, or current status
Unlike our competitors, PIPES TRACKER™ is:
√ Fully keyword searchable
√ Updated monthly
√ Affordable
√ The only pipeline safety regulatory database search and tracking tool developed, managed and operated by lawyers
Explore PIPES TRACKER™ today! Please contact Brianne Kurdock at (202) 774-7016 or bkurdock@babstcalland.com for a customized demonstration of PIPES TRACKER™.
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Matthew C. Wood)
On June 29, 2024, the Pennsylvania Department of Environmental Protection (PADEP) published notice in the Pennsylvania Bulletin that the proposed Erosion and Sediment Control General Permit for Earth Disturbance Associated with Oil and Gas Exploration, Production, Processing or Treatment Operations or Transmission Facilities (ESCGP-4) was available for public comment. 54 Pa. Bull. 3717 (June 29, 2024). The current ESCGP-3 is scheduled to expire on January 6, 2025. PADEP issues ESCGPs under the authority of the Pennsylvania Clean Streams Law, 35 Pa. Stat. §§ 691.1—.1001.
In the Pennsylvania Bulletin notice, PADEP stated that it was not proposing “significant changes” to the ESCGP-4 as compared to the ESCGP-3, but there are several noteworthy differences between the two permits. First, as a threshold matter, the ESCGP-4 contains a requirement that in discharges approved under the ESCGP-4 that exhibit a condition rendering it ineligible for coverage, “the permittee promptly shall take action to restore eligibility, to notify the Department in writing of the condition, and, if eligibility cannot be restored, to submit an individual erosion and sediment control permit (Individual E&S Permit) application to the Department.”
Next, the ESCGP-4 proposes to now require operators to submit a notice of intent (NOI) for coverage under the ESCGP-4 at least 60 days prior to the planned date for commencing any new discharge. The ESCGP-3 did not contain an NOI submission deadline. Further, PADEP has removed the expedited review option that was available under the ESCGP-4 for projects meeting specific criteria.
PADEP is also proposing new substantive requirements in the ESCGP-4. Under the ESCGP-3, weekly inspections of controls were required, as well as inspections following stormwater events. The ESCGP-4 adds an inspection requirement following “snowmelt sufficient to cause a discharge” and requires that inspections be documented using PADEP’s Chapter 102 Visual Site Inspection Report form (Doc. ID No. 3800-FM-BCW0271d) or a similar form that contains the same information. The ESCGP-4 also requires that the inspections be completed by “qualified personnel, trained and experienced in erosion and sediment control and post-construction stormwater management” and outlines requirements for such qualifications. Further, where the ESCGP-3 required “immediate” action to restore controls, the ESCGP-4 requires the initiation of repair or replacement within 24 hours of discovery of an issue.
Finally, the ESCGP-4 also proposes to require that any stormwater control measure (SCM) implemented by an operator that is not in PADEP’s Erosion and Sediment Pollution Control Manual (No. 363-2134-008) or the Water Quality Antidegradation Guidance (No. 391-0300-002) must be approved by PADEP. The ESCGP would also require confirmation testing for infiltration capacity of SCMs that must be reviewed by a licensed professional. Operators will also have to document the implementation of each structural SCM using a PADEP form and submit this documentation to PADEP within 30 days of completion of construction.
Comments on the ESCGP-4 were due by July 29, 2024.
Copyright © 2024, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Matthew C. Wood)
At the May 16, 2024, Water Resources Advisory Committee (WRAC) meeting, the Pennsylvania Department of Environmental Protection (PADEP) presented a revised draft proposed rule that would amend and clarify certain existing spill reporting requirements. The regulation, 25 Pa. Code § 91.33 (Existing Rule), governs notification requirements for unauthorized releases of substances into waters of the commonwealth. Specifically, the Existing Rule requires immediate notification to PADEP if the release of a substance “would endanger downstream users of the waters of this Commonwealth, would otherwise result in pollution or create a danger of pollution of the waters, or would damage property.” 25 Pa. Code § 91.33(a). The party responsible for initiating the notification is “the person at the time in charge of the substance or owning or in possession of the premises, facility, vehicle or vessel from or on which the substance is discharged or placed.” Id. Notably, the Existing Rule, which was adopted in 1971, offers no clear guidance on determining whether notification is required.
To address this, PADEP has proposed a revised draft of the regulation that clarifies the requirements for notifying or not notifying the agency of an unauthorized release (Proposed Rule). See Proposed Revisions to 25 P.A. Code § 91.33. Proposed subsection 91.33(a.1) would require reporting for substances listed in 40 C.F.R. § 117.3 when released in amounts equal to or greater than their reportable quantities and subsection 91.33(a.2) states that a person who immediately notifies PADEP in accordance with subsections (a) and (a.1) has satisfied the notification requirements under section 91.33. The most substantive changes are found in proposed subsection 91.33(a.3), which sets forth the method by which a responsible party can determine that an unauthorized release does not require immediate notification to PADEP. To reach the conclusion that an unauthorized release does not require immediate notification, the responsible party must evaluate and document enumerated factors to determine that the substance(s) “does not cause or threaten pollution of the waters, endanger downstream users or cause damage to property.” Proposed Rule § 91.33(a.3). Those factors include:
- The properties of the substance(s) involved (e.g., harmful effects on human health, animal health, and the environment); persistence in the environment (and how the substance(s) might change); mobility of the substance(s) in soil and water; and the concentration and quantity of the substance(s);
- The location or locations involved, including proximity to commonwealth waters and the characteristics of such waters; land use, soils, and geology; and the presence and qualities of relevant infrastructure, e.g., spill containment systems;
- Weather conditions before, during, and after the incident;
- Presence and implementation of adequate response plans, procedures, or protocols;
- The duration of the accident or other activity or incident.
Id. Under the Proposed Rule, the responsible party would be required to provide this documentation to PADEP upon request, with a signed statement attesting to its accuracy. Id. § 91.33(a.4). The last addition, proposed subsection 91.33(a.5), confirms that not immediately reporting “an accident or other activity or incident which caused or threatened pollution, endangered downstream users or caused damage to property as described in subsection (a)” is a violation of section 91.33.
At the May 16, 2024, WRAC meeting, PADEP stated its goals for and the purposes of the Proposed Rule: (1) make notification requirements straightforward for stakeholders, including PADEP’s consistent application of the Proposed Rule; (2) provide stakeholders increased clarity and consistency regarding notification of unauthorized discharges; and (3) confirm that the Proposed Rule does not expand the set of discharges that require notification to PADEP. PowerPoint Presentation, WRAC, “Notification Requirements for Unauthorized Discharges to Waters of the Commonwealth: Revised Draft Proposed Rulemaking” (May 16, 2024) (PADEP Presentation). PADEP also offered examples of unauthorized discharges where notification would not be required (e.g., minor motor oil spill that will not reach waters), may be required (e.g., spill of non-liquid materials like soybeans into stream), and would be required (e.g., sanitary sewer overflows that reach waters of the commonwealth). See PADEP Presentation, slides 13–15. Although not required to move the Proposed Rule forward, PADEP requested WRAC’s support.
This is not the first time PADEP has attempted to revise the Existing Rule or offer clarifying guidance. In September 2023, the agency presented a draft revision to WRAC (that revision was updated by the Proposed Rule). Prior to that, PADEP published a draft technical guidance document (TGD) that offered guidance on notifying PADEP under the Existing Rule. See “Guidance on Notification Requirements for Spills, Discharges, and other Incidents of a Substance Causing or Threatening Pollution to Waters of the Commonwealth Under Pennsylvania’s Clean Streams Law,” No. 383-4200-003 (Oct. 16, 2021).
Although this TGD was never finalized, some of its elements, e.g., the factors for evaluating the risk that an unauthorized release constitutes or threatens pollution, are included in the Proposed Rule. In its recent meeting with WRAC, PADEP said it intends to revisit the October 2021 TGD when the Proposed Rule is finalized, including providing “updated practical examples of when reporting may or may not be required . . . .” PADEP Presentation, slide 16. Although PADEP has not yet indicated how it will proceed, if the agency decides to move forward with the Proposed Rule as written, the Proposed Rule will be published in the Pennsylvania Bulletin, which will begin a public comment period.
Copyright © 2024, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Matthew C. Wood)
On April 4, 2024, the Pennsylvania Public Utility Commission (PUC), in a 4–1 vote, adopted a joint motion to comprehensively review processing times of certain applications under its purview. See Press Release, PUC, “PUC Launches Comprehensive Review of Application Procedures” (Apr. 4, 2024). Specifically, the PUC proposed to analyze how to make more efficient application processes that do not have applicable regulatory or statutory deadlines (or have deadlines that the PUC has authority to extend). Joint Motion for Chairman Stephen M. De Frank and Commissioner Ralph V. Yanora (Joint Motion), at 2.
The initiative consists of two parts. First, the PUC directed each of its various bureaus that work on these types of applications to review and inventory each applicable proceeding with the following information:
- the methods by which the PUC receives the applicable filings;
- the statutory or regulatory authority underlying issued approvals;
- whether publication of an application is required;
- whether the application has a protest period, and if so, its length; and
- a description of the bureau’s tasks.
Id.
Second, the Office of the Executive Director will analyze the inventory information, examine each bureau’s average application review time and the total average processing time from application filing to a final decision, and evaluate process improvements. Id. The goal of the evaluation is to reduce processing times by at least 15% (subject to revision), while also considering the allocation of necessary resources, legal deadlines, and compliance with applicable legal requirements under the Public Utility Code, PUC Regulations, or PUC Orders. Id.
According to the Joint Motion, the PUC’s initiative was influenced by multiple Shapiro administration actions, including: (1) the February 2024 PermitConnectPA workshop, which focused on making permitting, licensing, application, and certification procedures more efficient; (2) Governor Shapiro’s creation of the Office of Transformation and Opportunity, “to position Pennsylvania as the most business-friendly state in the U.S. and to empower [stakeholders] to reignite economic growth and promote prosperity throughout the Commonwealth”; and (3) Governor Shapiro’s Executive Order 2023-07, “Building Efficiency in the Commonwealth’s Permitting, Licensing, and Certification Processes” (Jan. 31, 2023). Id. at 1. Executive Order 2023-07 directed all commonwealth agencies to catalog the types of permits, licenses, or certifications they issue (including legal authority and timeframes) and submit the information to the Governor’s office for review and recommendations to make processing times more efficient.
The Joint Motion directs the bureaus to submit their inventories within 60 days of its adoption (by June 3, 2024) and the Office of the Executive Director is tasked with reviewing and compiling the inventories into a report within six months of its adoption, unless a request for an extension is submitted and approved. Id. at 3. The PUC docket for this action is No. M-2024-3047172.
Copyright © 2024, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
On June 1, 2024, the Pennsylvania Department of Environmental Protection (PADEP) issued a request for information (RFI) to anyone interested in submitting concept papers for PADEP’s consideration for the Design, Development, Commercialization and Maintenance of Clean Energy Campus (CEC) Projects on abandoned mine lands (AML) controlled by the Commonwealth. 54 Pa. Bull. 3098 (June 1, 2024) PADEP requests concept papers from project sponsors, namely clean energy project developers, asset owners, financial institutions, and other relevant parties, willing to coinvest with PADEP to transfer AML sites into CECs. PADEP notes in the notice that it owns 13 properties greater than 50 acres in size eligible for conversion.
In terms of design, PADEP requests information on the design for land reclamation and remediation to create sites ready for clean energy generation or energy storage sites. PADEP is looking for a sponsor who can provide professional design services, feasibility studies, geophysical investigations, construction oversight, and other technical services as required. Such remediation designs could require action in perpetuity. With respect to development, PADEP is looking for a project sponsor that can manage the remediation and development of the site by completing leases, conducting site preparation, securing permitting, conducting geotechnical investigations, and securing interconnection. PADEP has pointed to EPA’s Revitalization Handbook as guidance for renewable energy development on AML sites, which recommends property purchasers assess whether they should conduct all appropriate inquiries to take advantage of CERCLA liability protections. For commercialization, PADEP seeks sponsors with experience deploying grid-scale clean energy generation and storage projects. PADEP will require a project sponsor to invest capital and be responsible for “any and all risks associated with the investment.” 54 Pa. Bull. at 3099. The project sponsor must also consider the availability of tax credits under the Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818, for the project. Finally, PADEP is looking for a sponsor that can oversee the long-term maintenance of the project.
PADEP is also soliciting feedback on the possibility of using loans through the U.S. Department of Energy’s (DOE) Loan Programs Office (LPO) Title 17 Clean Energy Financing Program, specifically the DOE LPO Energy Infrastructure Reinvestment (EIR) category of the Title 17 Clean Energy Financing Program. The EIR expands the LPO’s mission to allow for the repurposing of energy infrastructure to avoid, reduce, utilize, or sequester air pollutants, including anthropogenic GHG emissions. EIR funds are available on or before September 30, 2026.
PADEP will prioritize concept papers that utilize one or more of the following technologies: solar, wind, advanced or enhanced geothermal, small modular reactor nuclear, biomass generation with carbon capture and sequestration, new manufacturing facilities for clean energy products or services, coal ash remediation with site redevelopment, critical minerals recovery (including processing, manufacturing, and recycling of mineral alternatives), hydrogen production and infrastructure, and sustainable aviation fuels or other biofuels production.
For more detail, see PADEP’s “Assessment of Solar Development on Previously Impacted Mine Lands in Pennsylvania” (May 7, 2024).
Copyright © 2024, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
The Pennsylvania Department of Environmental Protection (PADEP) has issued a revised version of the General Plan Approval and/or General Operating Permit BAQ-GPA/GP-21, Coal-Mine Methane Enclosed Flare (Revised GP-21). As reported in Vol. 41, No. 2 (2024) of this Newsletter, on March 16, 2024, PADEP announced an opportunity to submit public comments on the proposed revised permit. See 54 Pa. Bull. 1429 (Mar. 16, 2024). Industry groups appealed the previous version of the permit issued on September 23, 2023, and PADEP decided to revise the permit because it “was presented additional source and site-specific information . . . and upon review, decided certain changes were warranted to address the new information and intended use of GP-21.” Technical Support Document for the Revised GP-21, at 2.
PADEP published the final version of the revised GP-21 permit on June 15, 2024. See 54 Pa. Bull. 3493 (June 15, 2024). The Revised GP-21 incorporates the proposed changes, including an increase in the best available technology (BAT) compliance requirement to limit NOx emissions to less than or equal to 0.15 lb/MMBtu, allowing operators to install and operate methane gas monitors to continuously measure and record the coal-mine gas methane concentration, and removed the requirement to conduct quarterly gas analysis at the inlet gas stream to the enclosed flare if a methane gas monitor is used. PADEP also published a comment and response document that summarizes the comments received on the draft published in March.
The GP-21 permit, permit application, application instructions, technical support documents, and comment and response documents are available here.
Copyright © 2024, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Employment and Labor Alert
(by Alex Farone, Steve Silverman and Steve Antonelli)
A Texas federal district court has barred the Federal Trade Commission’s (FTC) ban on most non-competition agreements (“non-competes”) slated to take effect on September 4, 2024, as previously reported. This decision halts the quickly approaching requirement for employers to cease the use of most non-competes and notify workers of their unenforceability. At least for the immediate future, employers may continue to use non-competes as they did before the proposed ban.
The Court Decision
On August 20, U.S. District Judge Ada Brown granted summary judgment against the FTC in a suit brought by a tax company and the U.S. Chamber of Commerce, ruling that the non-compete ban exceeded the FTC’s statutory authority. In Ryan LLC, et al. v. Federal Trade Commission, the FTC argued that the Federal Trade Commission Act (the Act) permits it to promulgate rules prohibiting unfair methods of competition, but the court determined that the FTC’s power in this regard is limited to creating rules of agency procedure. The court held that the creation of substantive rules like the non-compete ban stretches beyond the Act, as evidenced by the fact that the Act contains no penalty provisions to allow the FTC to seek sanctions for unfair methods of competition.
The court further concluded that the non-compete ban is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation for the “one-size-fits-all approach with no end date.” The court noted that the FTC provided no evidence as to why it imposed a national, sweeping ban on nearly all non-competes rather than targeting “specific, harmful non-competes.” Further, the FTC did not adequately analyze whether there are alternative approaches that would have sufficiently addressed unfair competition other than the proposed broad, nationwide prohibition.
What this Means for Employers
The Ryan decision sets aside the non-compete ban nationally, meaning the ban cannot be enforced or take effect on September 4. All requirements of the FTC rule—including banning the use of new non-competes and notifying workers and former workers with existing non-competes of the unenforceability of those agreements, with few exceptions—are no longer in effect. Employers may continue to utilize non-competes, in the manner prescribed by state statutes and case law.
Any employer that proactively notified workers of the unenforceability of their non-competes in anticipation of the ban going into effect on September 4 should speak to its attorney promptly regarding the status of those non-competes. They may still be enforceable if the notices did not include a true invalidation or release, but legal counsel should evaluate any such notice on a case-by-case basis.
There is a reasonable likelihood of an appeal, in which case, there may be additional developments to follow. Babst Calland will continue to monitor this situation and will advise as to whether employers must take any action in the future.
If you have questions about the status of the now-barred FTC non-compete ban, use of non-competes under existing state law, or strategies to deal with the ever-changing landscape of non-competes, please contact Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com, Steven B. Silverman at 412-253-8818 or ssilverman@babstcalland.com, or Stephen A. Antonelli at 412-394-5668 or santonelli@babstcalland.com.
