FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
On September 23, 2023, PADEP published in the Pennsylvania Bulletin notice that the agency finalized its General Plan Approval and/or General Operating Permit for Coal-Mine Methane Enclosed Flares (GP-21). See 53 Pa. Bull. 6005 (Sept. 23, 2023). New or modified coal-mine methane enclosed flares in Pennsylvania are now subject to GP-21. Coal-mine methane enclosed flares with actual emission rates less than the following are exempted from GP-21’s permitting requirements:
- 4 tons per year (tpy) of carbon monoxide (CO) from a single enclosed flare or 20 tpy of CO from multiple enclosed flares;
- 1 tpy of nitrogen oxides (NOx) from a single enclosed flare or 5 tpy of NOx from multiple enclosed flares;
- 1.6 tpy of the oxides of sulfur (Sox) from a single enclosed flare or tpy 8 of the SOx from multiple enclosed flares;
- 0.6 tpy of particulate matter with a diameter of 10 microns or less (PM10) from a single enclosed flare or 3 tpy of PM10 from multiple enclosed flares;
- 1 tpy of volatile organic compounds (VOCs) from a single enclosed flare or 5 tpy of VOCs from multiple enclosed flares; and
- 0.5 tpy of a single hazardous air pollutant (HAP) from a single enclosed flare or 1 tpy of multiple HAPs from multiple enclosed flares. The HAPs may not contain Polychlorinated Biphenyls (PCBs), Chromium (Cr), Mercury (Hg), Lead (Pb), Polycyclic Organic Matter (POM), Dioxins, or Furans.
Those coal-mine methane enclosed flares that are not exempt from GP-21’s requirements will have to meet the best available technology (BAT) compliance requirements established in GP-21. These requirements include operating the enclosed flare to (1) limit NOx emissions to less than or equal to 0.08 lb/MMBtu, (2) limit CO emissions to less than or equal to 0.30 lb/MMBtu, and (3) limit visible emissions to periods not to exceed an aggregate total of 60 seconds during any 15-minute period. GP-21 also requires that permittees sample and conduct a fractional gas analysis at the “inlet gas stream to the enclosed flares” on a quarterly basis to determine VOC, methane, and ethane concentrations, and the heat content of the inlet gas stream.
The Pennsylvania Department of Environmental Protection (PADEP) issued GP-21 in accordance with section 6.1(f) of Pennsylvania’s Air Pollution Control Act, 35 Pa. Stat. § 4006.1(f), and 25 Pa. Code ch. 127, subch. H. Industry groups have appealed PADEP’s issuance of GP-21 to Pennsylvania’s Environmental Hearing Board.
Copyright © 2023, 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 November 1, 2023, the Commonwealth Court of Pennsylvania held that the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program Regulation (RGGI Rule) is an unconstitutional tax, declared the rule to be void, and enjoined PADEP from enforcing it. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 M.D. 2022, 2023 WL 7171547 (Pa. Commw. Ct. Nov. 1, 2023).
After a lengthy rulemaking process, the RGGI Rule was published in the Pennsylvania Bulletin. See 52 Pa. Bull. 2471 (Apr. 23, 2022). The RGGI Rule would have linked Pennsylvania’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), which is the regional, market-based cap-and-trade program designed to reduce carbon dioxide emissions from fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.
Two days after the RGGI Rule was published, a group of stakeholders filed a petition for review of the rule and an application for preliminary injunction in the commonwealth court. The court held a hearing on the preliminary injunction on May 10 and 11, 2022, and in a July 8, 2022, opinion, the court preliminarily enjoined the regulation as an unconstitutional tax.
In its November 1 decision on the merits, the court reaffirmed its earlier July 8, 2022, opinion, holding that the RGGI Rule constitutes a tax imposed by PADEP in violation of the Pennsylvania Constitution. Undisputed facts of record established that only 6% of RGGI auction proceeds are necessary to cover the cost of administering the program and that the annual revenue anticipated from RGGI would be three times greater than the total amount allocated to PADEP from the General Fund in a single year. The court found that the money to be generated by Pennsylvania’s participation in RGGI would be “grossly disproportionate” to the costs of overseeing participation in the program and PADEP’s annual needs, and thus was an illegal tax. In coming to its ruling, the court relied on the Pennsylvania Supreme Court’s opinion in Flynn v. Horst, 51 A.2d 54, 60 (Pa. 1947), which found that it is a firmly established principle of Pennsylvania law that a revenue tax cannot be constitutionally imposed upon a business under the guise of a police regulation, and that if the amount of a “license fee” is grossly disproportionate to the sum required to pay the cost of the due regulation, it should be struck down. The commonwealth court concluded that Pennsylvania’s participation in RGGI may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through a rulemaking promulgated by PADEP and the Environmental Quality Board. The Commonwealth has not publicly stated whether it will appeal the decision, but would have until November 30, 2023, to do so.
Copyright © 2023, 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 Shapiro administration recently released its Interim Final Environmental Justice Policy (Interim Final Policy) and latest Environmental Justice Mapping and Screening Tool (PennEnviroScreen). The Policy took effect on September 16, 2023, when official notice of the interim final rulemaking was published in the Pennsylvania Bulletin. See 53 Pa. Bull. 5854 (Sept. 16, 2023).
The Commonwealth first adopted an environmental justice policy (EJ Policy) in 2004 to provide citizens in EJ communities enhanced public participation opportunities during certain Pennsylvania Department of Environmental Protection (PADEP) permit application processes. In 2018, PADEP circulated a draft revised policy for public comment, but ultimately withdrew the proposed revisions in 2020 following receipt of public comments. After conducting further outreach in 2021, PADEP proposed an updated policy that would refine and expand the scope of the withdrawn 2018 revisions. On March 12, 2022, PADEP released a draft of the EJ Policy for public comment, and subsequently received more than 1,200 comments during the comment period.
The Interim Final Policy is the latest version of the EJ Policy to have been released by PADEP since the comment period closed last spring. Although PADEP had previously indicated that it was working to prepare a Comment Response Document in tandem with the Interim Final Policy, it has yet to release such a document. The Interim Final Policy will likely have a tangible impact on permitting and enforcement processes for various industries going forward.
The Interim Final Policy requires use of the PennEnviroScreen tool, which will replace PADEP’s current EJ Areas Viewer tool. PennEnviroScreen is currently live and fully accessible to the public. PADEP began using the tool on September 16, 2023, to determine whether facilities are located in EJ areas based on 32 environmental, health, socioeconomic, and demographic indicators. Industry should be aware that PADEP plans to regularly update the criteria used to evaluate areas where the Interim Final Policy applies (EJ areas). To allow for a level of certainty, however, the Interim Final Policy states that “the EJ Areas in effect at the key decision point of the project will follow that project.” Interim Final Policy § III; see also id. at Appendix B, “Environmental Justice Area Criteria.”
PADEP regulated activities that are listed as “Trigger Projects” in Appendix C of the Interim Final Policy automatically require application of the Policy’s provisions. Examples include various mining permits (bituminous and anthracite underground and surface mines), waste permits (landfills, transfer stations, commercial incinerators), and air permits (new major source of hazardous pollutants or criteria pollutants). Id. at Appendix C, “Public Participation Trigger Projects.” While the 2022 Draft Policy had classified oil and gas unconventional well permits as Trigger Projects, the Interim Final Policy does not; however, various types of unconventional oil and gas projects are listed as “Opt-In Projects.” Other Opt-In Projects include resource recovery facilities, scrap metal facilities, and “other projects as identified by the community.” Id. After receiving a request from the community or a PADEP staff member to apply the Interim Final Policy to Opt-In Projects, PADEP may decide to do so using its “discretion and expertise.” Id. § V(A)(2).
PADEP plans to form an Enforcement and Compliance Team to
prioritize inspection and monitoring at sites which have multiple authorizations, multiple on-record complaints, habitual violations sites with high volume generation or unique permit conditions, EJ communities, and sites of significant geographic location and to ensure timely and appropriate responses to violations, implement an efficient criminal referral protocol, and ensure effective collaboration.
Id. § VI(B)(1). The Interim Final Policy also indicates that PADEP interprets impacts to the environment or the public health and safety at an EJ area to be a relevant factor in the calculation of penalties for violations, and may include a dollar figure in the penalty amount for such a violation “provided there is adequate evidence to support a factual finding that the violation caused harm and the penalty amount fits within the statutory limits.” Id. § VI(B)(2).
The Interim Final Policy’s publication date was also the start of a formal public comment period that ran until November 30, 2023. Receipt and review of public comments on the Interim Final Policy will be yet another “critical benchmark towards the final EJ Policy,” which is due from PADEP in 2024.
Copyright © 2023, 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)
Prior to the Commonwealth Court of Pennsylvania’s ruling discussed above, on September 29, 2023, Governor Shapiro’s office released the RGGI Working Group Memorandum and a corresponding press release announcing that the RGGI Working Group had concluded its work. See Press Release, “RGGI Working Group Concludes Its Work, Co-Chairs Hail Collaborative Process That Brought Diverse Group Together & Reached Consensus on a Number of Key Issues” (Sept. 29, 2023). Governor Shapiro established the RGGI Working Group in April 2023 and tasked it with evaluating the merits of the commonwealth’s participation in Regional Greenhouse Gas Initiative (RGGI) in the context of a three-part test: (1) protect and create energy jobs, (2) take real action to address climate change, and (3) ensure long-term, reliable, affordable power to consumers.
The RGGI Working Group was chaired by Jackson Morris of the Natural Resources Defense Council and Mike Dunleavy of the International Brotherhood of Electrical Workers Local 5 in Pittsburgh. Other members included representatives from organized labor, the energy industry (including fuel production, electric utilities, and coal, natural gas, and nuclear generation), environmental groups, and consumer advocates.
The Working Group reached a consensus that (1) greenhouse gas (GHG) emissions reductions are both necessary and inevitable and (2) a revenue-generating cap-and-invest carbon regulation for the power sector supporting the commonwealth’s energy transition would meet Governor Shapiro’s emissions reduction goals. The memorandum did not include a recommendation as to the form that a cap-and-invest program should take.
The Working Group further reached a consensus on the following recommendations:
- Maximizing job creation and other benefits of federal funding from the Inflation Reduction Act and other appropriations;
- Initiating dialogue and cooperation with neighboring states and other PJM states;
- Legislative codification as the preferred method of implementing any initiatives;
- Creating new councils and collaboratives to guide policymaking;
- Utilizing the RGGI program to satisfy proposed federal Clean Air Act GHG emission reduction standards if the program is otherwise adopted;
- Convening a bipartisan process to evaluate the recommendations of the new collaboratives to develop a statewide energy and climate plan that addresses jobs, reliability, consumer protection, and tangible emissions reductions;
- Implementing this energy and climate plan and seeking a PJM-wide cap-and-invest program through legislation;
- Ensuring the preservation of existing nuclear generation and other clean energy resources in the commonwealth; and
- Protecting Pennsylvania energy jobs and ensuring that consumers do not unreasonably shoulder cost associated with the clean energy transition.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Babst Calland today announced the opening of its office in Harrisburg, Pa., and the addition of two experienced litigation attorneys, Michael Libuser and Stefanie Pitcavage Mekilo.
Led by Shareholder Casey Alan Coyle, who joined the firm in August 2022, the Harrisburg office provides legal counsel for local, regional, and national businesses, industry sectors, and trade associations with focused practices in litigation, energy and natural resources, environmental, and legislative and regulatory affairs, among others.
The Harrisburg team of attorneys offers deep litigation experience in matters pending before state and federal appellate courts, with a particular emphasis on appeals before the Pennsylvania Supreme Court. They also represent clients in disputes pending before the U.S. District Court for the Middle District of Pennsylvania and state trial courts throughout Central Pennsylvania and matters brought before the Pennsylvania Commonwealth Court as part of its original jurisdiction.
“It is an exciting time for Michael and Stefanie to join Babst Calland and open a new office in Harrisburg,” said Mr. Coyle. “The Harrisburg office is uniquely poised to offer its clients the best of both worlds—pairing the service and pricing of a litigation boutique with the deep-bench expertise and resources of a law firm with more than 35 years of experience serving clients ranging from Fortune 100 companies to small and mid-sized businesses nationwide.”
Mr. Libuser represents clients in state and federal trial and appellate courts, with a particular emphasis on cases before the United States District Court for the Middle District of Pennsylvania. He served as a law clerk to the Honorable Yvette Kane, Senior United States District Judge for the Middle District of Pennsylvania, where he drafted opinions for the Third and Ninth Circuit Courts of Appeals and handled a wide range of district court matters involving complex civil litigation, commercial contracts, administrative law, trade secrets, and various statutory claims. Before that, he served as a law clerk to the Honorable Karoline Mehalchick, Chief United States Magistrate Judge for the Middle District of Pennsylvania, and previously served as the Principal Law Clerk to the Honorable Jeanette Rodriguez-Morick, an Acting Supreme Court Justice and Judge of the New York State Court of Claims.
Mr. Libuser earned his J.D. from Benjamin N. Cardozo School of Law in 2012. He graduated with honors from Stony Brook University in 2006.
Ms. Mekilo is a civil litigator who concentrates her practice in state and federal trial courts, with particular emphasis on cases before the U.S. District Court for the Middle District of Pennsylvania. Ms. Mekilo draws on more than a decade of trial-court experience in the federal judiciary to guide clients through all aspects of the litigation process. She focuses her practice on complex commercial disputes involving theft of trade secrets; breach of noncompete and nonsolicitation agreements and other restrictive covenants; breach of fiduciary duties, tortious interference, and related business tort claims; labor and employment; and emergency injunction litigation. Ms. Mekilo also has experience in antitrust, environmental, securities, trademark infringement, product liability, class action, and multidistrict litigation. Prior to joining Babst Calland, Ms. Mekilo served as a judicial law clerk in the United States District Court for the Middle District of Pennsylvania for 12 years—first as a term law clerk to Judge John E. Jones III, then as the managing law clerk to Judge Christopher C. Conner.
Ms. Mekilo received her J.D. from Widener University Commonwealth Law School in 2011, graduating summa cum laude at the top of her class. She earned her B.A. in Business Administration from Bloomsburg University of Pennsylvania in 2008. Ms. Mekilo is an active member of the greater Harrisburg community. She currently serves as Secretary of the Middle District Chapter of the Federal Bar Association, as well as Vice President and President-Elect of the Junior Board of the YWCA of Greater Harrisburg.
Commenting on these moves and the opening of the Harrisburg office, Managing Shareholder Donald C. Bluedorn II said, “We are very pleased to welcome this fine team of attorneys to Babst Calland and are thrilled to open a new office in Harrisburg to work collaboratively across our other offices to serve the needs of existing and new clients in the region.”
Pretrial Practice & Discovery
American Bar Association Litigation Section
(by Joseph Schaeffer)
Whether attorneys have encountered an inadvertently produced privileged document in their own practice, it is a common enough occurrence that the procedure is well established: Suspend further review, sequester the document, and notify opposing counsel. What is not well-established is what attorneys should do when they encounter inadvertently produced non-privileged documents. A New York trial court recently dealt with this situation in a case of first impression.
In Pursuit Credit Special Opportunity Fund, L.P. v. Krunchcash, LLC et al., No. 615070/2022 (N.Y. Sup. Ct. Oct. 4, 2023), the plaintiff’s financial consultant had responded to a subpoena from the defendants by producing multiple emails with a Dropbox link in the message body. As the defendants discovered early in their review, the Dropbox link not only was “live,” it provided access to a bevy of the plaintiff’s sensitive internal files—including folders named “Legal,” “Tax,” and “Financial.” Rather than immediately notify plaintiff’s counsel, though, the defendants reviewed the Dropbox (with the exception of the “Legal” folder) and sent the plaintiff a letter about a week later that referenced the internal documents as part of a demand for voluntary dismissal of the litigation. The plaintiff responded by moving the trial court to order the defendants to show cause why they should not be sanctioned for accessing the Dropbox files.
The trial court granted the plaintiff’s motion and entered a sanction against the defendants of nearly $156,000, representing the plaintiff’s costs in bringing the motion. Though acknowledging the absence of directly applicable authority, the trial court found guidance in Rule 4.4 of the New York Rules of Professional Conduct. That rule imposes a notification obligation on New York attorneys who receive documents, writings, or electronically stored information that they reasonably should know to have been inadvertently produced—notably without providing for any limitation to privileged documents. The trial court found that the defendants should reasonably have known that the plaintiff could not have intended to provide access to its internal file system through a Dropbox link contained in email messages found by a third party. From there, the trial court concluded fairly easily that the defendants had failed to properly notify the plaintiff of the inadvertent production and, in fact, exacerbated matters by leveraging the inadvertent production as the basis for demanding voluntary dismissal of the litigation.
There are several lessons to be drawn from this case. One lesson is that the entire matter could have been avoided had the plaintiff implemented stronger security measures from the outset. Indeed, the plaintiff’s maintenance of internal files on an “open” Dropbox, which it then shared with third parties using non-expiring links, seems nothing short of negligent. But another lesson is that attorneys have a duty to notify opposing parties of documents that reasonably appear to have been inadvertently produced—no matter how negligent the inadvertent production. The parties’ failure to follow those respective lessons here led to an expensive (and embarrassing) series of events that they now surely wish to have avoided.
Joseph Schaeffer is a shareholder at Babst Calland in Pittsburgh, Pennsylvania.
To view the article published online by the American Bar Association Litigation Section, click here.
© 2023. A Quick Lesson on Responding to (and Avoiding) Inadvertent Document Productions, Pretrial Practice & Discovery, American Bar Association Litigation Section, October 31, 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Pretrial Practice & Discovery
American Bar Association Litigation Section
(by Andy DeGory)
The process of researching and identifying an expert witness can be a daunting task in a complex commercial litigation setting. However, securing the appropriate expert tailored to your needs can be a critical component of a successful litigation strategy. While there is no exact formula for expert witness selection, the following pointers can help lead your team towards the right witness and a favorable outcome:
- Utilize your colleagues and network. When starting your search for an expert witness, polling your colleagues and other connections in the legal field can instantly provide you with multiple favorable candidates. Furthermore, your network may be able to significantly narrow your search down to a few options that will fit the needs of your case. This option is also particularly helpful for lesser-experienced attorneys who might be starting an expert search for the very first time.
- Google is your friend. Litigation attorneys may joke about relying on Google for legal research, however, an expert-witness search is actually an appropriate opportunity to fire up the search engine. Google (or another search engine) allows you to cast a wide net to build your list of expert candidates prior to a more formal vetting of your options.
- Vet your candidates with Westlaw or Lexis. Once you have narrowed your search down to your favorite expert candidates, Westlaw and Lexis provide excellent tools for vetting your candidates’ background and history serving as an expert witness. In particular, these legal databases allow you to examine past cases in which the candidate has provided expert testimony, prior expert reports submitted in those cases, deposition transcripts (if available), and any motions in limine/to exclude the candidate’s testimony.
- Interview your top choices. An in-person or web-conference interview is the last critical step in selecting your top choice to serve as an expert witness. The interview provides you with an opportunity to explain the case in deeper detail, as well as ask the candidate key questions to evaluate their understanding of the subject matter and ability to handle the particular issue for which expert testimony is required. Additionally, the interview allows you to evaluate the witness’s presentation skills, speaking style, and poise when answering questions. Ultimately, you will want your candidate to excel in each of these categories if you need to call them to the stand to testify at trial.
Sometimes an expert witness search may begin with only a handful of candidates, and other times you may need to narrow the list down from several dozen options. The foregoing tools should provide practitioners with a good template for conducting a thorough and effective expert witness search when preparing for success in their next big case.
Andy DeGory is an associate at Babst Calland in Pittsburgh, Pennsylvania.
To view the full article, click here.
To view the PDF, click here.
© 2023. Quick Tips for Selecting an Expert Witness, Pretrial Practice & Discovery, American Bar Association Litigation Section, October 31, 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Litigation Alert
(By Kip Power and Joseph Schaeffer)
Recently, the Court of Appeals of North Carolina confirmed that limited liability companies (LLCs) formed in other states must obtain a certificate of authority to transact business in North Carolina to prosecute lawsuits in the state’s Superior Court. JDG Environmental, LLC v. BJ & Associates, Inc., et al., Appeal No. COA21-692 (N.C. App. Oct. 17, 2023) (click here for the opinion). As addressed in an Alert released earlier this year, the issue raised in JDG Environmental involves yet another gloss on the question of how state business registration may be mandated and the implications for foreign LLCs and other foreign entities of registering to conduct business in other states. (See “Where Can a Corporation Be Sued for, Well, Anything? (An Evolving Test),” August 2023 Litigation Alert, click here.)
The Court of Appeals decision addressed a civil action filed in North Carolina Superior Court by JDG Environmental, LLC (JDG), an Oklahoma LLC, against BJ & Associates, Inc. (BJ), a general contractor that engaged JDG to perform cleanup work in a residential community in Newport, North Carolina, damaged by Hurricane Florence. During oral arguments on JDG’s motion for summary judgment, counsel for BJ made a cross-motion for summary judgment against JDG on the grounds that it had failed to comply with N.C. Gen. Stat.§ 57D-7-02. That statute provides that “no foreign LLC transacting business in this State without permission obtained through a certificate of authority may maintain any proceeding in any court of this State unless the foreign LLC has obtained a certificate of authority prior to trial.” (A similar statute (N.C. Gen. Stat.§ 57D-15-02(a)) applies to foreign corporations.) Since JDG had not obtained a certificate of authority from the North Carolina Secretary of State, the Superior Court orally granted BJ’s motion and later entered judgment against JDG.
The Court of Appeals reversed the Superior Court’s ruling on two grounds.
First, the statute at issue requires only that a foreign LLC obtain a certificate of authority “prior to trial.” Applying the plain meaning of this phrase that is not otherwise defined in the law, the Court held that JDG could have obtained a certificate and complied with this requirement any time prior to the empanelment of a jury in the case (i.e., prior to the time a jury trial is generally considered to have “commenced”). JDG Environmental, at 5-6. By granting judgment against JDG at the summary judgment stage, the Superior Court improperly cut short its opportunity to comply with the statute.
Second, the Court addressed the last sentence in N.C. Gen. Stat.§ 57D-7-02, which states that “[A]n issue arising under this subsection must be raised by motion and determined by the trial judge prior to trial.” Observing that motions for summary judgment in North Carolina courts are commonly heard by a judge who will not be the judge presiding over the trial of the case, the Court of Appeals also held that BJ had raised its motion with the wrong judge. Again, taking the statutory language at face value, such a motion must be heard and determined by the “trial judge,” not the judge hearing pre-trial motions.
As a result of the Court of Appeals’ decision, JDG will have its day in court (it had obtained its certificate of authority even before the Superior Court issued its written opinion in the case). But the time and expense associated with litigating this issue could have been avoided had JDG complied with the certificate requirement before filing suit. That decision, though, is not always without its own consequences. In the August 2023 Litigation Alert referenced above, we discussed how the United States Supreme Court upheld a Pennsylvania statute that requires foreign corporations registering in the Commonwealth to consent to the jurisdiction of its courts over any dispute, not just those involving in-state activities.[1] The North Carolina statute at issue in this case does not attach such onerous conditions, but registration can trigger other obligations—ranging in significance from annual reporting and fees to other regulatory burdens. It may therefore be prudent to seek legal counsel before registering to do business in a new jurisdiction, even if it is just to prosecute a single lawsuit.
For questions about the North Carolina law related to this decision, please contact Christopher B. (Kip) Power (licensed to practice in North Carolina, West Virginia and Kentucky) at (681) 265-1362 or cpower@babstcalland.com. For questions concerning the federal and state constitutional and procedural aspects of corporate registration and jurisdiction to sue or be sued, please contact Joseph V. Schaeffer (licensed to practice in Pennsylvania, District of Columbia, Virginia and West Virginia) at (412) 394-5499 or jschaeffer@babstcalland.com.
____________
[1] The Supreme Court limited its consideration to a constitutional due process challenge and remanded the case to the Supreme Court of Pennsylvania to consider challenges under the dormant commerce clause. Meanwhile, other challenges to the Commonwealth’s business registration statute are working their way through Pennsylvania courts.
Click here for PDF.
Smart Business
(By Adam Burroughs featuring Michael Fink)
A company’s capitalization table, simply put, details who has what ownership within a company. That’s straightforward when the company has a single owner. But as other equityholders are introduced, it can become much more complicated.
While an accurate cap table is crucial for determining who gets paid what when a company is sold, it’s also important every day of the company’s life.
“Companies should start dealing with their cap table from day one and will need to stay on top of it throughout the entire life of the enterprise,” says Michael E. Fink, a shareholder at Babst Calland. “An orderly, up-to-date cap table is central to well-informed business decisions.”
Smart Business spoke with Fink about the role of the cap table and how failing to accurately maintain it can be costly.
How are cap tables used?
Cap tables are critical when a company seeks new investment, such as via a private placement of preferred stock. That’s because every investor — both new ones as well as current investors, who typically need to approve new investment — needs to know its position on the cap table post-investment and what impact a contemplated investment would have on its position.
As companies get new funding and prior owners see their positions diluted, a cap table tracks who has how much equity and what type. Introducing multiple equity series often imposes multiple voting thresholds, so the cap table allows management and stakeholders to see what sort of voting blocs serve to approve any corporate action. Such actions can range from mundane to fundamental, such as approving a merger or replacing somebody on the board of directors.
What issues arise with cap tables?
One of the biggest challenges regarding the cap table is simply maintaining it. Any action impacting the company’s capitalization needs to be memorialized correctly. The cap table is supposed to be a factual reflection on the state of affairs; without an accurate record of the facts, it can’t be used to make informed decisions. It also makes policy discussions and other issues regarding the direction of the company — taking on more debt, issuing more shares, or bringing new investors into the fold — difficult. Unfortunately, poorly maintained cap tables are more common than many would expect.
Frequently, issues discovered in a cap table are used as leverage when negotiating — by a dissatisfied investor, for example, or by a potential acquirer who may, if the problems are significant, walk away from a deal. Occasionally, actual legal disputes can arise from missteps with a cap table. For instance, an investor may believe that it did not receive the return on investment from the company that it should have, and press for a legal resolution.
How might companies address these issues?
Often the problem of a poorly maintained cap table stems from having either too many people making changes, or no one at all. Especially with startups, management may not be aware of the level of diligence needed to maintain their cap table. It’s of utmost importance that companies take steps to prevent errors from creeping in and compounding in the cap table.
Every company should appoint someone to be the ultimate authority on its cap table — one person with the final authority for maintaining and signing off. Ideally, they’d have a business or legal background. If that expertise doesn’t exist within an organization, it could work with an external partner who stays in communication with the company, ensuring that timely and correct updates are made. In any case, the executive officers need to understand who has that authority and when they need to inform that person of any changes.
Cap tables must be maintained accurately and in a timely manner. Those who aren’t familiar with cap tables shouldn’t try to wing it. A half-hour phone call with a knowledgeable attorney can save weeks of aggravation down the road.
To view the PDF, click here.
To view the full article, click here.
Environmental Alert
(By Jean Mosites and Ben Clapp)
Pennsylvania Department of Environmental Protection (PA DEP) Secretary Rich Negrin submitted his resignation on October 26. Negrin’s resignation is effective December 9, 2023, and he will be taking a medical leave of absence until his resignation becomes effective. Former Executive Deputy Secretary Jessica Shirley will serve as Interim Active Secretary, effective immediately. Prior to serving as Executive Deputy Secretary, Shirly held the position of PA DEP Policy Director.
Babst Calland will continue to track these developments and provide further updates as additional information becomes available. If you have any questions regarding this change of leadership at PA DEP, please contact Jean Mosites at (412) 394-6468 or jmosites@babstcalland.com, or Ben Clapp at (202) 853-3488 or bclapp@babstcalland.com.
Click here for PDF.
FNREL Water Law Newsletter
(Lisa M. Bruderly, Mackenzie M. Moyer and Jessica Deyoe)
On January 28, 2023, the Pennsylvania Department of Environmental Protection (PADEP) released an updated draft of the Pennsylvania Post-Construction Stormwater Management Manual (Manual or PCSM Manual). This Manual is intended to establish guidance standards for the management of stormwater through the implementation of stormwater control measures (SCMs) and other measures to comply with the regulatory requirements under 25 Pa. Code ch. 102.
This Manual was developed to update and replace the Pennsylvania Stormwater Best Management Practices Manual that PADEP published in December 2006 in order to reflect and incorporate the advancements in stormwater processes since that time. The Manual now extends beyond the avoidance and minimization of historic stormwater problems to include mitigation through the regulation of municipal separate storm sewer systems and combined sewer systems. It also includes an increased focus on the resilience and maintenance of SCMs.
In the Manual, SCMs are synonymous with “best management practices” (BMPs) as defined in 25 Pa. Code § 102.1. This term is intended to reflect the improved understanding of stormwater management. The use of the term SCM is also intended to clarify the functions of stormwater BMPs, consistent with a national trend to do so.
Ultimately, the objective of the PCSM Manual remains the same as the 2006 Stormwater BMP Manual: “to protect, maintain, reclaim and restore water quality and the existing and designated uses of the waters of the Commonwealth.” Similar to other guidance documents, this Manual serves as a supplement to federal and state regulations, providing numerous examples of SCMs that can be employed to meet regulatory requirements. It is intended to be used as a technical reference for planning concepts and design standards that will satisfy Pennsylvania’s regulatory requirements and stormwater management policies. Alternative SCMs not listed in the Manual may also be used to satisfy regulatory requirements if they provide the same or a greater level of protection. Permittees whose activities and PCSM plans were authorized under Chapter 102 prior to the effective date of the Manual are not required to modify their PCSM plan to conform to the procedures and standards in the Manual.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Legal Intelligencer
(by Blaine Lucas and Anna Hosack)
A frequent, if folksy, recitation of the purpose behind zoning and land use restrictions is to prevent problems caused by the “pig in the parlor instead of the barnyard.” In other words zoning regulations recognize sometimes a nuisance can be caused by putting the right thing in the wrong place. Therefore, zoning ordinances attempt to keep more “offensive uses” away from more sensitive uses. However, prohibiting a use on paper is one thing, ensuring ordinance compliance is another. The Commonwealth Court in Township of Cranberry v. Randy J. Spencer, Nos. 568, 569, and 570-CD-2022 (Pa. Cmwlth. Aug. 30, 2023) (Spencer II)[1] recently considered one municipality’s decades long battle over operation of a junkyard in violation of its zoning ordinance. A review of the history of this case provides the opportunity to consider the pros and cons of different enforcement options available to municipalities when faced with ongoing violations.
In Spencer, the owner of six parcels located in Cranberry Township, Butler County had been storing a multitude of junk vehicles (117 cars, 11 box trailers, 7 motorhomes, and 8 travel trailers) on his properties in violation of the Township zoning ordinance. The Township had been trying for over a quarter century to induce the property owner to remove the junk vehicles, and he had even paid fines related to the same in the past – yet he never removed the vehicles. In 2019, as authorized by Section 616.1 of the Pennsylvania Municipalities Planning Code, 53 P.S. §616.1 (“MPC”) the Township served five “enforcement notices” (referred to herein as “notices of violation” or “NOVs”) against five of the properties for the unlawful operation of a junk yard in the Township’s A-1 Conservation District. The NOVs ordered the removal of the vehicles and notified him of his right to appeal. In addition, a sixth NOV was issued for one property located in a different district, which asserted that the property owner was in violation of the Township property maintenance code’s (“PMC”) limit on the number of abandoned or junk vehicles allowed on a property. The Second Class Township Code authorizes the Township to enact a PMC to regulate the upkeep of the exterior of properties and structures. 53 P.S. §66704-A.
The property owner did not avail himself of his right to appeal the NOVs to the Township Zoning Hearing Board as authorized by Section 616.1 of the MPC, 53 P.S. §10616.1, or to the Township Uniform Construction Code Appeals Board as authorized by the PMC. Consequently, the Township filed six civil complaints with the local Magisterial District Judge (“MDJ”) as authorized by Section 617.2 of the MPC, 53 P.S. §10617.2. While the violation of most ordinances, including a PMC, is subject to summary criminal penalties and typically will be brought to the MDJ as a “non-traffic citation,” the MPC contains no authority for the imposition of criminal penalties for a zoning violation and matters are brought before the MDJ as a “civil enforcement complaint.” The property owner’s failure in Spencer to appeal the notices to the appropriate boards rendered the violations “unassailable” under both zoning and property maintenance jurisprudence, and the MDJ was not permitted to consider whether or not the property owner was guilty of the violations, but could only impose sanctions – up to the statutory limits of $500 per day under Section 617.2 of the MPC, 53 P.S. §10617.2, for the zoning violations, and up to $1,000 per day under the Second Class Township Code, 53 P.S. §66601, for the PMC violation. In addition to the limits imposed by the MPC and relevant municipal enabling statutes, the Judicial Code, 42 Pa.C.S. § 1515(a)(3), limits the MDJ’s jurisdiction in civil matters to disputes not exceeding $12,000. The MDJ entered six judgments in the amount of $609.25 each in the Township’s favor. The property owner appealed each separately to Common Pleas Court. The lower court adjusted the aggregate award in penalties imposed by the MDJ to $2,437.00.
The property owner’s further appeal led to the Commonwealth Court’s decision in Spencer I, which predominantly addressed the procedural issue surrounding the property owner’s failure to file a separate appeal from each MDJ docket. Ultimately, in Spencer I the Commonwealth Court concluded it could only review the appeal for one single docket concerning one of the six properties. Specifically noting the property owner’s lack of cooperation in resolving the violations, the Court affirmed the lower court order, noting once the Township offered evidence of the property owner’s failure to appeal the NOV, the trial court only possessed discretion to determine the amount of civil penalties.
Despite the finality of the Court’s decision in Spencer I, the property owner persisted in failing or refusing to remove the junk vehicles from his properties. Consequently, in 2021, the Township filed three new civil enforcement actions with the MDJ seeking to collect additional civil penalties for the period following the Spencer I decision. The MDJ entered a judgment in his jurisdictional maximum of $12,000, plus costs in each case. The property owner again appealed to the lower court, which determined it was not subject to the magisterial jurisdictional limit of 42 Pa.C.S. § 1515(a)(3), and imposed the maximum civil penalties allowed by the MPC: $500 per day per violation, which amounted to $92,500 in each case, for a total of $277,500. The property owner appealed again to the Commonwealth Court, resulting in Spencer II, where the Court reviewed the timeliness of the property owner’s appeal (finding it was), as well as his allegations of bias by the lower court judge (rejecting this contention) and affirming the lower court’s judgment in its entirety.
Although the Township ultimately prevailed on the merits, Spencer I and Spencer II offer a clear example of something most municipal solicitors and zoning officers already know – even when a municipality takes aggressive action against a violative use, an obstinate property owner can draw out the enforcement process for a long period of time. While the typical enforcement path outlined in the MPC – (1) issuance of a notice of violation, (2) if no appeal is filed, issuance of citation before the MDJ, and, ultimately, (3) the MDJ’s assessment of civil penalties and costs – may result in compliance in some instances, it often can take years and still may not result in correction of the violation.
Municipalities struggling with persistent offenders who will not comply with MDJ orders requiring the payment of civil penalties, who will not remediate the violations, and/or who will file repeated appeals, should consider filing equitable actions directly with Common Pleas Court. In addition to the authority to seek civil penalties from the MDJ under Section 617.2 of the MPC, Section 617 authorizes the municipality to “institute any appropriate action or proceeding to prevent, restrain, correct or abate” the offending use. 53 P.S. §10617. Similar provisions are found in most municipal enabling statutes, including the Second Class Township Code, 53 P.S. §66601(c.1)(1), and can be used for violations of a property maintenance or other municipal ordinances. Courts routinely find that the violation of a municipal ordinance constitutes irreparable harm entitling the municipality to an injunction, even a preliminary one, mandating correction of the violation. See, e.g., Pa Cent. Realty Invest. v. Middlesex, 566 A.2d 931, 934 (Pa. Cmwlth. 1989). This method also allows the municipality to seek its costs associated with the enforcement matter. This avenue works particularly well when a property owner does not appeal the initial NOV to the municipality’s zoning hearing board. A failure to do so renders an ordinance violation determination “unassailable.” Johnston v. Upper Macungie Twp., 638 A.2d 408, 412 (Pa. Cmwlth. 1994).
In addition, when a property owner fails to comply with a property maintenance ordinance, a municipality can complete the work necessary to effectuate compliance and then file a municipal lien with the Common Pleas Court. See, e.g., Borough of Walnutport v. Dennis, 13 A.3d 541 (Pa. Cmwlth. 2010) (Borough entitled to attorney fees and reimbursement for the cost of work associated with cutting down trees and removing tree stumps to bring a property into compliance). However, this option does not guarantee that the municipality will successfully recoup the funds expended and should generally be used when the benefit of remedying the violation outweighs the financial cost.
In summary, in many instances, pursuit of civil penalties under the MPC and fines under other statutes and ordinances may result in ordinance compliance. However, in other situations other alternatives may be necessary such as filing an equitable action or opting for self-help options under a property maintenance code.
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[1] Spencer II is the culmination of a procedurally complicated saga, originally considered by the Commonwealth Court in Township of Cranberry v. Spencer, 249 A.3d 9 (Pa. Cmwlth. 2021)(“Spencer I”) from which certain facts addressed in this article have been drawn.
Blaine A. Lucas is a Shareholder in the Public Sector Services and Energy and Natural Resources groups of the Pittsburgh law firm of Babst, Calland, Clements & Zomnir. Anna R. Hosack is an associate in Babst Calland’s Public Sector Services group and focuses her practice on zoning, subdivision, land development, and general municipal matters.
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Reprinted with permission from the October 12, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
Former transportation executive and veteran regulatory and environmental attorney, James C. Chen, has joined Babst Calland as a Shareholder in the Emerging Technologies practice in the law firm’s growing Washington, D.C. office.
Mr. Chen brings his deep experience in strategic planning and managing legal, policy and regulatory affairs for public and private companies with a focus on emerging technologies in the transportation sector, particularly electrification and sustainable energy.
“A revolution is occurring in the transportation and energy industries – from how we generate and store energy to power various modes of transportation to how those modes are operated with autonomous and artificial intelligence systems to the way we source, process and recycle the minerals needed to enable those modes,” said Mr. Chen. “Moreover, the challenge facing this revolution is not just figuring out how to best power new transportation technology, it’s also about how to best operate the factories that manufacture them.”
For the past decade, in his executive leadership roles for several new transportation technology companies, Mr. Chen was instrumental in the commercialization of modern electric vehicles and the way they are distributed and sold. Most recently, he was Vice President of Public Policy & Chief Regulatory Counsel for Rivian Automotive, LLC and previously, was Vice President of Regulatory Affairs & Deputy General Counsel at Tesla, Inc.
“We are delighted that Jim Chen is now a part of our firm and our Washington, D.C. office,” said Babst Calland Managing Shareholder Donald C. Bluedorn II. “Jim is a great person, and he has an outstanding reputation and track record as a leader in the electric transportation and sustainable energy space. His industry experience and focused approach to providing strategic and creative solutions utilizing new technologies will be a tremendous resource for our clients.”
In addition to managing his own private practice, Mr. Chen previously held other corporate executive positions and was a prominent Washington D.C. attorney in environmental and natural resources law for two different law firms. During his private firm sector tenure of nearly 15 years, he represented a number of established automobile and truck manufacturers, as well as various industry suppliers on environmental and safety regulatory and policy issues affecting the transportation sector. He started his career as an attorney-advisor in the U.S. Environmental Protection Agency’s Office of Regulatory Enforcement.
James Chen is admitted to practice in New York and the District of Columbia. He earned his Juris Doctorate from Case Western University and a Bachelor of Arts in Psychology from the State University of New York at Buffalo.
Allegheny County Bar Association- Lawyers Journal
(By Peter Schnore)
The “Common Level Ratio” (CLR) is a figure calculated by a state administrative body every year for every county. It is calculated upon data that each county’s assessment office is to regularly provide to the state. It is expressed as a percentage – “ratio” is a misnomer.
The CLR is very significant in Pennsylvania tax assessment appeals, because Pennsylvania counties rely on irregularly-conducted “base year” assessments. By statute, the CLR is applied to a Board of Assessment or Court’s determination of current fair market value of a property at issue on appeal to set its assessment, with the intention that by doing so, the assessment will be sufficiently uniform with that county’s base year assessments.
Attention has been drawn to Allegheny County’s most recent CLRs following a challenge to how it was calculated for Tax Year 2022. The details of that case are very interesting, but are not germane to this article. This challenge ultimately resulted in a significant drop in that CLR, from 81.1% to 63.5%. The implications of this were significant: A property fairly assessed for 2022 based on the original CLR was suddenly more than 27% over-assessed (.811/.635 = 1.277). Allegheny County Council afforded property owners a second opportunity to appeal based on this development, and as one might expect, many property owners (those who were informed, and who had sufficient money at stake to make it worthwhile to appeal) took advantage of that opportunity. It is noted that the CLR applicable to Tax Year 2024 is 54.5%, further increasing the possibility that a given property is over-assessed.
Below are four observations regarding the Common Level Ratios. The first relates to Allegheny County, the others are points applicable statewide.
- A similar challenge remains pending for Tax Year 2023. A case quite similar to the 2022 challenge is pending in relation to the CLR to be used to set assessments in tax year 2023 appeals. It remains to be decided. If this attorney were betting on the outcome, he would bet upon a reduction of this CLR, and that this will lead to a re-opening of the opportunity to file Tax Year 2023 appeals.
- The CLR is well behind current market conditions. The CLR is calculated upon data from the calendar year two years prior to the Tax Year at issue. As an example, the “2020 CLRs” are based on data gathered upon sales occurring in 2020, calculated and published by the state by mid-2021, and used in connection with Tax Year 2022 appeals. Inflation or deflation of a county’s recent market activity will not be “picked up” by the CLR in use for tax assessments for close to a year at best. In Allegheny County, where we have retrospective assessment appeals (i.e., Board of Assessment appeals being filed and disposed of during, rather than before, the given Tax Year), the sales data behind the applicable CLR is well more than a year old at the time of the Board hearing.
- The CLR is not precisely the mathematical reciprocal of the Common Level Ratio Real Estate Valuation Factors. Transactional real estate attorneys are familiar with the Common Level Ratio Real Estate Valuation Factors (the CLR Factor), published by the PA Department of Revenue each year, as they are used to calculate realty transfer taxes in certain circumstances. As an example, the CLR Factor for Allegheny County in place for July 1, 2023, to June 30, 2024, is “1.84.” It is the counterpart to the CLR to be used in Allegheny County tax appeals for Tax Year 2024 of 54.5%. While the Department of Revenue declares that the CLR Factors “are the mathematical reciprocals of the actual common level ratios,” they are not truly reciprocals due to rounding differences. (E.g., 1/1.84 = .54645, or 54.645%.) In an assessment appeal, do not rely on the CLR Factor. Rather, find and apply the applicable CLR as required by the assessment statutes.
- The uniformity that the CLR provides is very, very rough. Every state assesses real estate property taxes, and every state’s constitution contains a uniformity clause applicable to the collection of these taxes. However, the particulars of the protections that are offered to preserve uniformity vary considerably from state to state. As an example, in Pennsylvania, all property must be treated as the same class, and as such, under judicial law, it is a violation of the Commonwealth’s uniformity clause to assess different property types at different tax rates. Many states’ interpretations of their uniformity clauses do not require this, and permit taxing jurisdictions to assess different tax rates for commercial vs. residential property.
Another area where Pennsylvania’s assessment system attempts to achieve uniformity across all property types is through blanket use of one equalization ratio – the CLR – for all property in a county, regardless of whether it is residential or commercial; office or industrial; and whether it is in a desirable or undesirable neighborhood. In other words, the sole applicable CLR is applied in an appeal regardless of whether the property type at issue is faring well or poorly relative to other property types since the base year values went into effect.
To be sure, residential property values have fared significantly better than downtown office complexes over the course of the last three years. But the law affords property owners use of one CLR calculated on all arm’s length sales in the county in a given year, giving equal weight to each of those sales, despite its calculation upon property types and locations often faring much better or worse. Pennsylvania’s appellate courts have observed that property owners are not entitled to perfect uniformity in assessments, but rather rough uniformity. The use of the CLR as the primary mechanism to establish uniform assessments through the appeals process is very, very rough.
Ultimately, despite being the primary way to unify assessments under the law, it is a poor mechanism to maintain uniformity both for individual properties, and countywide.
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Reprinted with permission from the October 6, 2023 Allegheny County Bar Association’s Lawyers Journal.
Legal Intelligencer
(by Sean McGovern and Amanda Brosy)
The Shapiro administration recently released its Interim Final Environmental Justice Policy DEP ID: 015-0501-002 (“Interim Final Policy”) (http://www.depgreenport.state.pa.us/elibrary/GetFolder?FolderID=4556 (follow link to “Environmental Justice Policy.PDF”) (last visited Sept. 23, 2023)), along with a link to the latest Environmental Justice Mapping and Screening Tool (“PennEnviroScreen”) (available online at https://gis.dep.pa.gov/PennEnviroScreen/ (last visited Sept. 23, 2023)). The Policy took effect on September 16, 2023, when official notice of the interim final rulemaking was published in the Pennsylvania Bulletin. See 53 Pa. Bull. 5854 (September 16, 2023).
Pennsylvania’s Environmental Justice Policy
The Commonwealth first adopted an Environmental Justice Policy (EJ Policy) in 2004 to provide citizens in EJ communities enhanced public participation opportunities during certain DEP permit application processes. In 2018, DEP circulated a draft revised policy for public comment, but ultimately withdrew the proposed revisions in 2020 following receipt of public comments. After conducting further outreach in 2021, DEP proposed an updated policy that would refine and expand the scope of the withdrawn 2018 revisions. On March 12, 2022, DEP released a draft of the EJ Policy for public comment, and subsequently received more than 1,200 comments during the comment period. The Interim Final Policy is the latest version of the EJ Policy to have been released by DEP since the comment period closed last spring. Although DEP had previously indicated that it was working to prepare a Comment Response Document in tandem with the Interim Final Policy, it has yet to release such a Document.
Important Features of the Interim Final Policy
The Interim Final Policy will likely have a tangible impact on permitting and enforcement processes for various industries going forward. Below are some important provisions to be aware of:
- The Pennsylvania EJ Mapping and Screening Tool – PennEnviroScreen
The Interim Final Policy requires use of the PennEnviroScreen tool, which will replace DEP’s current EJ Areas Viewer tool. PennEnviroScreen is currently live and fully accessible to the public. DEP began using the tool on September 16th to determine whether facilities are located in EJ areas based on 32 environmental, health, socioeconomic, and demographic indicators. According to DEP’s recently revised Environmental Justice Policy Revision webpage, permit applicants planning to file a permit application on or after September 16, 2023 “should consider using the new PennEnviroScreen tool to determine if the permit’s facility is in an environmental justice area.” (Emphasis added). See https://www.dep.pa.gov/PublicParticipation/OfficeofEnvironmentalJustice/Pages/Policy-Revision.aspx) (note that shortly after the Interim Final Policy’s release, this webpage had indicated that applicants “must use” the new tool on/after September 16th). A 113-page “Methodology Document,” (DEP ID: 015-0501-003) which is intended to explain the rationale behind the PennEnviroScreen tool, is also available (http://www.depgreenport.state.pa.us/elibrary/GetFolder?FolderID=4556 (follow link to “Pennsylvania Environmental Justice Mapping and Screening Tool (PennEnviroScreen) Methodology Documentation 2023.PDF”) (last visited Sept. 23, 2023)). Industry should be aware that DEP plans to regularly update the criteria used to evaluate areas where the Interim Final Policy applies (EJ areas). To allow for a level of certainty, however, the Interim Final Policy states that “the EJ Areas in effect at the key decision point of the project will follow that project.” Interim Final Policy at Section III; see also Appendix B, “Environmental Justice Area Criteria”.
- Trigger Projects v. Opt-In Projects
DEP regulated activities that are listed as “Trigger Projects” in Appendix C automatically require application of the Interim Final Policy’s provisions. Examples in the Interim Final Policy include various mining permits (bituminous and anthracite underground and surface mines), waste permits (landfills, transfer stations, commercial incinerators), and air permits (new major source of hazardous pollutants or criteria pollutants). Id. at Appendix C, “Public Participation Trigger Projects”. While the 2022 Draft Policy had classified Oil and Gas unconventional well permits as Trigger Projects, the Interim Final Policy does not; however, various types of unconventional oil and gas projects are listed as “Opt-In Projects.” Other Opt-In Projects include resource recovery facilities, scrap metal facilities, and “other projects as identified by the community.” Id. After receiving a request from the community or a DEP staff member to apply the Interim Final Policy to Opt-In Projects, DEP may decide to do so using its “discretion and expertise.” Id. at Section V(A)(2).
- Inspections, Compliance, and Enforcement
In the event there are comparable inspection and enforcement scenarios, and DEP does not have the resources to take all the necessary actions at the same time, DEP may exercise its discretion and prioritize an EJ Area. Further, DEP plans to form an “Enforcement and Compliance Team to “prioritize inspection and monitoring at sites which have multiple authorizations, multiple on record complaints, habitual violations sites with high volume generation or unique permit conditions, EJ communities, and sites of significant geographic location and to ensure timely and appropriate responses to violations, implement an efficient criminal referral protocol, and ensure effective collaboration.” Id. at Section VI(B)(1).
- Civil Penalties
The Interim Final Policy also indicates that DEP interprets impacts to the environment or the public health and safety at an EJ Area to be a relevant factor in the calculation of penalties for violations, and may include a dollar figure in the penalty amount for such a violation “provided there is adequate evidence to support a factual finding that the violation caused harm and the penalty amount fits within the statutory limits.” Id. at Section VI(B)(2).
What’s Next?
The Interim Final Policy’s publication date was also the start of a formal public comment period that will run until October 29, 2023. During the comment period, DEP will accept both written and verbal comments on both the Interim Final Policy and the Methodology Document. Starting on October 11, 2023, DEP will hold two virtual public comment meetings and seven in-person public comment meetings to gather public feedback (the full Community Public Meeting Schedule is available online at https://www.dep.pa.gov/PublicParticipation/OfficeofEnvironmentalJustice/Pages/Policy-Revision.aspx (last visited Sept. 23, 2023)). These meetings will include time for DEP to describe the Interim Final Policy and PennEnviroScreen and take questions, as well as a public hearing portion where DEP will accept public testimony.
Receipt and review of public comments on the Interim Final Policy will be yet another “critical benchmark towards the final EJ Policy,” which is due from DEP in 2024. DEP Newsroom, Shapiro Administration Expands Environmental Justice Protections with Updated Policy and Improved Mapping Tool (Aug. 29, 2023), https://www.ahs.dep.pa.gov/NewsRoomPublic/articleviewer.aspx?id=22337&typeid=1.
Babst Calland’s energy and environmental attorneys will be tracking the EJ Policy as DEP responds to comments and moves to finalize the policy next year. If you have any questions about the environmental justice developments described in this article, please contact Sean McGovern at 412-394-5439 or smcgovern@babstcalland.com or Amanda Brosy at 202-853-3465 or abrosy@babstcalland.com.
Sean McGovern is a shareholder in the Environmental and Energy and Natural Resources practices of Babst Calland. His practice involves counseling clients on a variety of federal, state, and local regulatory and compliance issues related to mining, renewable, oil and natural gas well development, production, midstream, storage, plugging and restoration in the Appalachian Basin. He also has experience with environmental transactions, including due diligence activities; environmental justice considerations and requirements; and river basin commissions.
Amanda Brosy is an associate in the Environmental practice of Babst Calland. Her practice involves client counseling on compliance with federal and state environmental laws and regulations, resolving liabilities under federal and state remediation programs, and advising clients on significant environmental liability and compliance issues arising in various types of transactions.
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Reprinted with permission from the October 5, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.