Case Western Reserve University – School of Law
(featuring Jim Chen)
On Sept. 28-29, two dozen of the foremost experts in climate change and international law gathered at Woodland Hall at the Cleveland Botanical Garden to debate how to respond to the increasing threat of global climate change. The event was organized by Case Western Reserve University School of Law’s Cox International Law Center and the school’s Burke Center for Environmental Law, and co-sponsored by the American Branch of the International Law Association.
Pictured above, alumnus Jim Chen (LAW ‘91), former vice president and counsel of Tesla and Rivian Motors, kicked things off as the Thursday evening dinner speaker with remarks about the need to safeguard human rights in the production of electric car batteries. Chen discussed a number of possible approaches to incentivize electric automobile manufacturers to adopt standards to protect the environment and human rights in their supply chain.
In his Friday morning welcome address, co-dean Michael Scharf set the stage by discussing how 2023 has seen some of the worst environmental disasters in our lifetime. “From continental-wide forest fires in Canada to floods of biblical dimension in Libya, climate change has been a daily fixture in the news this year,” he said. “In this context, I am pleased that CWRU School of Law was able to assemble such a prestigious group of experts to debate some of the most important questions facing international law: How should the international community enforce the newly recognized human right to a healthy environment? Is “ecocide” a viable international crime? Are environmental migrants entitled to refugee status? And can corporations be sued for climate change?”
John Knox, history’s first UN Special Rapporteur for Human Rights and the Environment, delivered the morning keynote address on Friday. He provided an insider’s view on how the new UN Resolution on the Human Right to a Healthy Environment came about, evolved during negotiations and ultimately gained the unanimous support of the General Assembly.
Following Knox’s remarks, a panel of experts explored how the international community can implement and enforce the new UN Resolution, including using tax laws to incentivize compliance.
The second panel explored the possible prosecution of the crime of ecocide at the national and international level. Milena Sterio of Cleveland State described the fifty year history of attempts to recognize ecocide as a separate international crime. While environmental destruction can be prosecuted as a war crime, Leila Sadat, the former Special Advisor to the ICC Prosecutor, opined that peacetime ecocide is a phenomenon, not a crime. The experts then debated whether attacks against the environment resulting in human casualties during peacetime could be prosecuted as a crime against humanity under existing law.
Expanding on that discussion, the Honorable Chile Eboe-Osuji, former President of the International Criminal Court, provided the Friday luncheon speech about the individual right to peace and its relation to attacks against the environment during an act of aggression.
The third panel focused on the evolving law relating to climate displacement. With sea levels rising and countries subject to increased draughts, fires and floods, so called “climate refugees” have been pouring across borders. The panelists discussed whether “refugee” is the right term, what triggers protection of such displaced individuals, does international human rights law or international environmental law take precedence and what is the role for domestic law.
For litigators, the high point of the conference was the fourth panel on climate change litigation against corporations. To date, there have been 300 cases brought against companies for climate change around the world. Almost all of them have failed. Obstacles include standing, the Political Question Doctrine, Forum Non Conveniens, the First Amendment and causation. But the panelists acknowledged that the recent Dutch Shell case decided by the Hague District Court could be a game-changer, paving the way for successful global warming suits across the world.
The Court ordered Shell to reduce its worldwide CO2 emissions by 45 percent by 2030. All eyes are on the Dutch courts as they consider the appeal of the case.
Closing remarks were delivered by alum Austin Fragomen (LAW ‘68), Chairman of the Business Advisory Group on Migration of the Global Forum on Migration and Development. Fragomen, the founder of the Case Western Reserve Journal of International Law, told the participants that the World Bank estimates that 216 million people will be displaced by climate change by 2050. “Vulnerable populations need a comprehensive solution that spells out the rights and benefits of climate migrants,” he said. As a positive first step, Fragomen described how the non-binding Global Compact on Migration calls on countries to set goals concerning immigration pathways for climate migrants, and to report on progress on various aspects of climate migration.
Articles by the conference speakers will be published in Volume 56 of the Case Western Reserve Journal of International Law in May 2024. The archived videotape of the conference is available for viewing anytime.
To read the full article, click here.
Reprinted with permission from Case Western Reserve University – School of Law.
Environmental Alert
(by Gary Steinbauer and Gina Buchman)
On September 28, 2023, the United States Environmental Protection Agency (EPA) Office of Enforcement and Compliance Assurance (OECA) released a guidance memorandum entitled EPA’s Climate Enforcement and Compliance Strategy.[1] EPA is directing all of its enforcement and compliance offices to address climate change in every matter within their jurisdiction, as appropriate. This action was taken in conjunction with: President Joe Biden’s Executive Order 14008,[2] which directs all federal agencies to implement a “whole of government” approach to climate change; EPA’s overarching goal of addressing climate change issues in its FY2022-2026 Strategic Plan;[3] and EPA’s inclusion of Mitigating Climate Change as one it is six recently finalized National Enforcement and Compliance Initiatives for FY2024-2027.[4] To implement this new strategy, EPA’s enforcement and compliance programs are directed to take action in three specific areas across all enforcement and compliance activities, including criminal, civil, federal facilities, and cleanup enforcement:
- Prioritize Enforcement and Compliance Activities to Reduce Emissions of Greenhouse Gases
EPA plans to prioritize current enforcement initiatives that will reduce greenhouse gas emissions. The National Enforcement and Compliance Initiative of Mitigating Climate Change focuses on reducing methane and hydrofluorocarbons (HFCs) emissions. To reduce methane emissions, EPA is placing a greater emphasis on compliance with new source performance standards (NSPS) at oil and gas facilities and landfills. EPA plans to place a particular focus on oil and gas “super-emitter events”, which are part of a new set of requirements in the soon to be finalized NSPS Part 60 Subparts OOOOb and OOOOc. EPA will also use its enforcement authority to ensure compliance with the American Innovation and Manufacturing Act, which phases out the production and consumption of HFCs.
Enforcement of any forthcoming climate rules will also be subject to this initiative. EPA will also prioritize enforcement actions that will reduce emissions of greenhouse gases by addressing violations related to carbon dioxide, nitrous oxide, and volatile organic compound emissions. Examples cited include gas flaring, storage tank emissions, wastewater treatment systems, incineration/combustion operations, Greenhouse Gas Reporting Rule compliance, and Renewable Fuel Standards compliance.
EPA is directing its enforcement staff to consider climate change in administrative, civil, and criminal case development process and settlements. Enforcement staff should consider clean renewable energy projects (like wind, solar, and vehicle electrification), green infrastructure cleanup responses, and climate mitigation remedies in case resolution, including the use of Supplemental Environmental Projects.
Key take-aways: The regulated community can expect an increased enforcement focus on alleged violations of laws and regulations aimed at reducing greenhouse gas emissions. In particular, the oil and gas industry can expect continued, and likely increased, enforcement of NSPS Part 60, Subparts OOOO and OOOOa, and, when finalized, Subparts OOOOb and OOOOc. Subparts OOOOb and OOOOc will allow for third parties to become certified to collect methane emissions data, report “super-emitter” events to EPA and the facility, and force action by the facility, making data gathering, and therefore enforcement efforts, easier for the agency.
- Incorporate Climate Adaptation and Resilience Principles into All Enforcement and Compliance Activities
EPA’s enforcement and compliance program will incorporate climate resilience into case resolutions. Relevant climate risk will be raised in negotiations and, if appropriate, injunctive relief that promotes resilience to climate change will be included. Further guidance regarding these sustainability efforts is anticipated.
The agency will also target investigations at facilities at risk for climate-related impacts, considering, for example, the frequency with which the area experiences significant weather events. Settlements of violations under other environmental laws, including the Safe Drinking Water Act, Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), Resource Conservation and Recovery Act (RCRA), and Clean Water Act, may be used as opportunities to reduce risk of harm to the environmental or communities from climate impacts. Enforcement staff is directed to anticipate and prepare for future extreme weather events when developing injunctive relief in regulatory settlements under these laws.
Key take-aways: With this new directive, EPA may, especially in cleanup programs, seek injunctive relief aimed at accounting for potential future climate-related impacts that may not be directly tied to the alleged violation or the area to be remediated. Anticipating future health and climate conditions may make future remediation projects more costly and time-consuming.
- Provide Technical Assistance and Build Climate Change Capacity Among EPA Staff and State and Local Partners
To promote this new strategy, OECA will provide technical assistance and training to EPA staff, as well as state and local partners, regarding the integration of climate change considerations into enforcement and compliance activities and infrastructure planning. EPA will promote the use of the Climate Resilience Evaluation and Awareness Tool for infrastructure planning and expand OECA’s Climate Adaptation Network.
Under the Clean Air Act § 112(r) Accidental Release Prevention and Risk Management Plan program, as well as under RCRA and CERCLA, agency staff will consider climate change risk in inspection targeting and civil and criminal case investigation. Staff will also work with the Office of Land and Emergency Management to identify vulnerable facilities and develop compliance assistance materials.
Key take-aways: Facilities located in coastal and other areas believed to be impacted by climate change should expect increased scrutiny by the agency, including inspections and information requests. Operators of drinking water and wastewater systems should also expect EPA and state and local agencies to focus on climate resiliency as part of compliance and enforcement activities.
For more information on this development and other climate change or EPA enforcement matters, please contact Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Gina F. Buchman at (202) 853-3483 or gbuchman@babstcalland.com, or any of our other environmental attorneys.
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[1] Memorandum from David M. Uhlman to OECA Office Directors and Deputies, et al., EPA’s Climate Enforcement and Compliance Strategy, Sept. 28, 2023.
[2] Executive Order 14008, Tackling the Climate Crisis at Home and Abroad, Jan. 27, 2021.
[3] FY 2022-2026 EPA Strategic Plan (Mar. 2022).
[4] OECA FY 2024 – 2027 National Enforcement and Compliance Initiatives, Aug. 17, 2023.
Click here for PDF.
The Foundation Water Law Newsletter
(Lisa M. Bruderly, Mackenzie M. Moyer and Jessica Deyoe)
On January 31, 2023, during his first month in office, Pennsylvania Governor Josh Shapiro signed Executive Order 2023-07, “Building Efficiency in the Commonwealth’s Permitting and Licensing Processes,” to improve licensing, permitting, and certification throughout the commonwealth. Pennsylvania’s agencies issue hundreds of licenses and permits each year. The Pennsylvania Department of Environmental Protection alone issues hundreds of permits each year, including National Pollutant Discharge Elimination System permits, erosion and sediment control permits, and water quality management permits. According to Governor Shapiro, Pennsylvanians “deserve a government that works efficiently and effectively to get them answers.” Press Release, Gov’r Josh Shapiro, “Governor Shapiro Signs Executive Order to Improve Commonwealth Licensing, Permitting, and Certification Processes by Establishing Standard Response Times and Money-Back Guarantee” (Jan. 31, 2023). The executive order aims to eliminate unpredictability and long wait times for businesses in the permitting process. Id.
Under the executive order, agencies had until May 1, 2023, which was 90 days from the signing, to compile a catalog of the licenses, certificates, and permits they issue, the statutory authority governing the length of time in which agencies must process applications, and the application fee charged by each agency. The Governor’s Office then began a review to establish efficient application processing times based on specific agency recommendations. Once these timeframes are established, if an agency fails to respond to an applicant within the identified timeframe, the agency must refund the application fee. See Press Release, Gov’r Josh Shapiro, “Shapiro Administration Announces All Commonwealth Agencies Take Critical Step in Improving Licensing, Permitting, and Certification Processes” (May 5, 2023).
The executive order also requires the Governor’s Office to review the digital application systems that businesses use to apply for licenses and permits, aiming to modernize and streamline application processes. Many of the current digital systems used for permit applications are believed to be outdated, slow, cumbersome, and confusing.
In early May 2023, Governor Shapiro announced that the Governor’s Office was working on its recommendations. Id. It is unclear when the recommendations are expected to be published, but once published, they are expected to provide transparency to the permitting process and establish deadlines by which agencies must respond to applications. Shortly after this announcement, approximately 60 businesses throughout the commonwealth sent a letter to the Governor urging him to expedite the permitting reform process. The letter requested the Governor and the Pennsylvania General Assembly to work together to promptly and efficiently address a “dysfunctional” and “unpredictable” permitting system.
Copyright © 2022, 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, Matthew C. Wood and Gina F. Buchman)
On July 8, 2023, the Pennsylvania Department of Environmental Protection (PADEP) published a notice of availability of a new draft technical guidance document (TGD) entitled “Guidelines for the Development and Implementation of Oil and Gas Well Site Integrated Contingency Plans for Unconventional Well Sites,” TGD No. 800-2200-001 (July 6, 2023). See 53 Pa. Bull. 3649 (July 8, 2023). The draft TGD is intended to provide direction to unconventional gas operators regarding expected and useful information to include in unconventional well site emergency response plans and preparedness, prevention, and contingency plans.
PADEP hopes that the document will provide operators with a practical and consolidated approach to meeting requirements under multiple state regulations for emergency or contingency planning. PADEP also hopes that utilizing a “one-plan” approach will minimize duplicating effort and standardize the format of emergency response information. Plans prepared in accordance with this TGD are intended to satisfy the requirements of seven different PADEP regulations and guidance documents.
The draft TGD includes a plan template divided into sections to facilitate field use: (1) a plan introduction, with pertinent site contact information and administrative obligations, and “quick sheets,” providing critical information and maps for first responders and site personnel; (2) a two-part section containing site-specific information and the purpose of the plan and the procedures and actions operators, their agents, and responders will utilize to respond to an emergency at the site; (3) a section focusing on preparedness, prevention, and contingency planning as required across multiple regulations to reduce redundant information already incorporated into other sections of the plan; (4) a section outlining the training and exercise the operator will conduct to ensure that the responding agencies are familiar with the plan and properly trained in the event of an emergency; (5) appendices with references, checklists, incident command system definitions, and forms; and (6) a regulation and guidance matrix referencing applicable state regulation and guidance requirements.
Copyright © 2023, 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, Matthew C. Wood and Gina F. Buchman)
On June 29, 2023, the Pennsylvania House of Representatives passed House Resolution 131, a resolution directing the Legislative Budget and Finance Committee (LBFC) to study the revenue of Pennsylvania’s oil and natural gas industry. Since the enactment of Act 13 of 2012, producers in Pennsylvania have paid an impact fee based on production and pricing for unconventional gas wells. This differs from other states, including Texas, where producers pay a severance tax—a tax on the extraction of oil and natural gas.
The resolution, which was introduced by Representative Mandy Steele, directs the LBFC to conduct a study to determine the revenue Pennsylvania may have collected since the enactment of Act 13 if a severance tax had been implemented. The bill also directs the LBFC to report its findings and severance taxes, impact fees, or other oil or gas related taxes paid by producers in other states for natural gas production by June 2024.
The LBFC is a bipartisan legislative service agency consisting of 12 members of the General Assembly. The LBFC conducts studies and makes recommendations regarding the elimination of unnecessary expenditures, promotion of economy in government, and assurance that commonwealth expenditures are made in accordance with their legislative intent. The staff of the LBFC has experience in business administration, business analytics, economics, environmental science, public administration, law, and supply chain management. They have assisted the LBFC in a variety of public policy and state program areas, including emergency preparedness, community and economic development, education, environmental protection, game and fisheries, health and welfare, law enforcement, liquor control, local government, rural affairs, transportation, and veteran’s affairs.
Proposals to levy a severance tax on oil and gas production have been common in recent years. Former Pennsylvania Governor Tom Wolf proposed a severance tax during each of his eight years in office. These efforts met significant opposition from Republican lawmakers and the oil and gas industry. Current Governor Josh Shapiro did not propose a severance tax during his campaign or in his current budget plan.
House Resolution 131 will be submitted to the Pennsylvania Senate for consideration. If the resolution passes, a report may be expected in the second quarter of 2024.
Copyright © 2023, 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, Matthew C. Wood and Gina F. Buchman)
On July 22, 2023, the Pennsylvania Department of Environmental Protection (PADEP) published its semi-annual Regulatory Update, which summarizes the current status of regulations under development or consideration (and includes recently completed regulations). See 53 Pa. Bull. 3905 (July 22, 2023). The Regulatory Update highlighted agency progress on two proposed rulemakings to amend 25 Pa. Code ch. 78, the regulations governing conventional oil and gas well operations, that have been in development since 2020.
The first proposed rulemaking, “Environmental Protection Performance Standards for Conventional Oil and Gas Operators” (#7-539), proposes to amend 25 Pa. Code ch. 78 to update the environmental protection performance standards for surface activities at conventional oil and gas well sites. Among other things, it would amend the chapter 78 regulations to update well reporting requirements and protection and replacement of public or private water supply regulations to align them with Act 13 of 2012 (which amended Pennsylvania’s Oil and Gas Act, 58 Pa. Cons. Stat. §§ 2301–3504). The proposed rule would also amend bonding requirements to align with Act 57 of 1997 (which amended the Administrative Code of 1929) and amends the regulations regarding well inactive status designations. See Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021). This proposed rulemaking was most recently presented at the December 16, 2021, Pennsylvania Grade Crude Development Advisory Council (CDAC) meeting and the proposed date of promulgation is Q4 2023. See 53 Pa. Bull. 3905 (July 22, 2023).
The second proposed rulemaking, “Waste Management and Related Issues at Conventional Oil and Gas Well Sites” (#7-540), addressed the proper management of waste at conventional oil and gas well sites. This rulemaking would amend chapter 78 to require operators to establish an area of review prior to initiating operations to identify any wells within certain distances of the planned operations, would require operators to develop preparedness, prevention, and contingency plans, and addresses proper handling, storage, processing, and disposal of waste generated by conventional oil and gas operations. See Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021). This proposed rulemaking was most recently presented at the February 16, 2023, CDAC meeting and the proposed date of promulgation is the first quarter of 2024.
As noted, PADEP’s Regulatory Update also highlighted completed regulations. Those included “Control of Emissions from Conventional Oil and Natural Gas Sources” (#7-580), a rulemaking to amend 25 Pa. Code ch. 129 to establish emissions limitations and reasonably available control technology requirements for volatile organic compounds and other pollutants applicable to existing conventional oil and natural gas operations. Pennsylvania’s Independent Regulatory Review Commission (IRRC) approved this rule on April 20, 2023. See IRRC, Approval Order, Regulation No. 7-580 (Apr. 20, 2023).
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)
In May 2023, Governor Shapiro awarded $7.8 million resulting from the federal Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021), to fund projects for the reclamation of abandoned mine land, abatement of acid mine drainage through reclamation, or treatment of acid mine drainage through the construction, operation, or maintenance of an acid mine drainage treatment facility. See Press Release, Pa. Dep’t of Env’t Prot. (PADEP), “The Shapiro Administration Awards $7.8 Million Dollars in Grants for Environmental Restoration Projects” (May 26, 2023). As a result of the award, PADEP’s Bureau of Abandoned Mine Reclamation announced 16 projects across 12 Pennsylvania counties that PADEP will soon initiate. See id.; see also Guidance, PADEP, “2023 Abandoned Mine Land and Acid Mine Drainage Grant Program,” https://files.dep.state.pa.us/Mining/Abandoned%20Mine%20Reclamation/AbandonedMinePortalFiles/AML_AMD_GRANT_PROGRAM_GUIDANCE.pdf.
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)
In early July 2023, the Pennsylvania Department of Environmental Protection (PADEP) issued a draft general permit, GP-21, and an accompanying technical support document for the regulation of emissions from coal mine methane enclosed flares. See PADEP’s Draft Permit and Technical Support Document at http://www.depgreenport.state.pa.us/elibrary/GetFolder?FolderID=860346. PADEP cites sections 6.1 and 6.6 of the Pennsylvania Air Pollution Control Act, 35 Pa. Stat. §§ 4006.1, .6, and section 504(d) of the Clean Air Act, 42 U.S.C. § 7661c(d), as its authority for regulating coal mine methane enclosed flares.
The draft GP-21 sets forth standardized terms and conditions related to best available technology (BAT), compliance certification, notification, recordkeeping, reporting, and source testing requirements for coal mine methane enclosed flares at natural minor facilities. The GP-21 would authorize the construction, modification, and/or operation of coal mine methane enclosed flares that have actual emissions greater than what PADEP considers de minimis emissions:
- 4 tons per year (tpy) of carbon monoxide from a single source and 20 tpy of carbon monoxide at the facility;
- 1 tpy of nitrogen oxide (NOx) from a single source and 5 tpy of NOx at the facility;
- 6 tpy of oxides of sulfur from a single source and 8 tpy of oxides of sulfur at the facility; 0.6 tpy of PM10 from a single source and 3 tpy of PM10 at the facility;
- 1 tpy of volatile organic compounds (VOCs) from a single source and 5 tpy of VOCs at the facility; and
- 5 tpy of a single hazardous air pollutant (HAP) from a single source and 1 tpy of multiple HAPs at the facility. The HAPs may not contain polychlorinated biphenyls, chromium, mercury, lead, polycyclic organic matter, dioxins, or furans.
BAT compliance requirements for sources covered by a GP-21 includes operating the flare according to vendor/manufacturer design standards designed to limit NOx emissions to be less than or equal to 0.08 lb/MMBtu and limit carbon monoxide emissions to less than or equal to 0.30 lb/MMBtu. The GP-21 will also require malfunction reporting, monthly visible emissions testing using EPA Method 22, and quarterly fractional gas analysis. If a coal mine methane enclosed flare cannot meet the requirements of the GP-21, a plan approval and/or operating permit issued in accordance with 25 Pa. Code ch. 127, subch. B and/or subch. F, will be required.
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)
As previously reported in Vol. 39, No. 2 (2022) of this Newsletter, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule, or RGGI Rule, which links the commonwealth’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), was published in the Pennsylvania Bulletin in April 2022. See 52 Pa. Bull. 2471 (Apr. 23, 2022). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) 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.
On May 24, 2023, the Pennsylvania Supreme Court heard arguments on whether a lower court was right to prevent Pennsylvania’s participation in RGGI. One of the predominant topics at oral argument was the issue of whether the credits that power plants would have to purchase under the regulation are considered a tax or a fee. The petitioners believe the credits to be an unconditional tax while the Commonwealth contends that the credits are a fee as authorized under the Air Pollution Control Act.
The corresponding lower court case was filed on April 25, 2022, by owners of coal-fired power plants and other stakeholders requesting review and a temporary injunction, which was initially granted. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022); Vol. 39, No. 3 (2022) of this Newsletter. On March 24, 2023, the Supreme Court of Pennsylvania granted requests to dismiss the preliminary injunction because the petitioners had failed to pay the bond required to secure the preliminary injunction. See Vol. 40, No. 2 (2023) of this Newsletter. Petitioner Bowfin KeyCon Holdings, LLC, which has an interest in some of the subject coal-fired power plants, filed an appeal of the bond amount in summer 2022, claiming that the bond was infeasible or impossible to pay and asked the court to reduce it to a negligible amount.
The state’s future plans for its RGGI regulation remain unclear, but it is unlikely to take action prior to a decision on the merits. Further information regarding the rule and the history of the rulemaking can be found on PADEP’s RGGI webpage at https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Babst Calland today published its 13th annual energy industry report: The 2023 Babst Calland Report – Legal & Regulatory Perspectives for the Energy Industry. The Report provides insights on some of the most critical issues facing the industry.
This edition of The Babst Calland Report also features a special video briefing from U.S. Senator Barrasso (R-WY), ranking member of the Senate Committee on Energy and Natural Resources, who is at the forefront on federal energy policy.
Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. energy sector remains as dynamic as ever. New energy policies and legislation are changing the regulatory landscape and affecting all parts of the energy value chain. It is more important than ever for energy executives and their counsel to stay on top of federal, state, and local regulatory developments, legal risks, and the related business implications.”
This year’s Report highlights various challenges and opportunities in the energy sector, including:
- Hydrogen and Carbon Capture and Storage (CCS) are getting a boost as tools for reducing carbon emissions. The 2021 Infrastructure Investment and Jobs Act and the 2022 Inflation Reduction Act (IRA) provided billions in funding in the form of tax credits, grants, and loans for hydrogen and CCS technologies.
- Climate policy and Environmental, Social and Governance (ESG)-related practices may trigger new reporting requirements imposed by federal and state regulatory agencies. With increased focus on reducing greenhouse gas, particularly methane emissions from the energy industry, several proposed federal agency rules could make ESG reporting mandatory for certain sectors.
- Environmental Justice (EJ) efforts continue to expand as a priority for federal and state agencies following directives from the Biden Administration. The IRA made about $3 billion in funding available for EJ grants. While adoption of the EPA’s proposed budget for 2024 is far from guaranteed, it demonstrates the current administration’s commitment to funding EJ efforts.
- Despite the federal government’s policy drive for growth in the low carbon energy sector, practical issues remain. Grid interconnection and project permitting are driving substantial costs and delays. And many of these problems aren’t limited to just renewables, with permitting headwinds facing all types of energy projects, including CCS, pipelines and oil and gas development. Absent significant reforms to reduce permitting timelines and serial litigation, many of these unprecedented federal incentives may go untapped.
- The Appalachian Basin, like most of the energy producing regions of the U.S., continues to see a variety of novel litigation. The influx of “new” entrants to the energy litigation field has resulted in many new suits asserting variations on traditional energy litigation themes.
- Pennsylvania’s Amended Breach of Personal Information Notification Act (BPINA) went into effect on May 2, 2023. Any companies that do business in Pennsylvania, maintain data belonging to Pennsylvania residents, or do business with the Commonwealth or its agencies, should become familiar with these new data requirements, and review their security-related policies, practices, and incident response plans to ensure compliance with the Amended BPINA.
To request a copy of The 2023 Babst Calland Report, click here.
The Babst Calland Report is provided for informational purposes for our clients and friends and does not constitute legal advice.
The Wildcatter
(By Nikolas Tysiak)
Hello friends – only two relevant developments to report on this time – one in Ohio and one in Pennsylvania.
First, in French v. Ascent Resources-Utica, LLC, 2023-Ohio-3228 (7th Dist.), the Court of Appeals took an appeal from Ascent regarding the trial court’s summary judgment, finding that several leases on the land of French (and others) had expired. Ascent argued that the leases had been unitized as part of an existing unit, and therefore the leases were properly held beyond the primary term. The court found, however, that while a unitization document had been filed, several of the tracts within the unit were not under the control of Ascent, and there was no relationship between Ascent and the lessees of those lands that would allow the Unit to commence operations as conceived. Because of this, Ascent did not meet the operational requirements under the leases to maintain the leasehold rights beyond the primary terms of the leases. Additionally, the Court found there had been no actual drilling activity on the Unit, as no drilling permit had been issued. Consequently, no operations or production occurred on the Unit including the leases, either. The Court therefore upheld the motion for summary judgment against Ascent.
Second – in Douglas Equipment, Inc. v. EQT Production Company, 2023 WL 5239153 (Pa. Sup. Court August 15, 2023), the Superior Court was confronted with interpreting the language of a deed relating to a reservation of oil and gas rights. The landowners entered into an oil and gas lease in 1994. Importantly, shut-in payments could not be paid for more than 3 years under the terms of the lease. After executing the lease, the same landowners conveyed the land to Holt and Lee, excepting and reserving “all rights, title and interest” in the underlying lease, except for the free gas privilege. The lessee under the 1994 lease made shut-in payments starting in 2008, and apparently never stopped such payments. In 2016, Holt and Lee leased the land to EQT. The 1994 lease was assigned to LOLA Drilling. The successors to the original landowners under the 1994 lease claimed that the 1994 lease remained in full force and effect. Holt and Lee claimed that the 1994 lease had expired three years after production stopped in 2008, despite the ongoing payment of shut-in payments beyond the three-year period as an at-will lease subject to continuation by mutual consent. The trial court granted summary judgment in favor of EQT, and the original landowners appealed. The Superior Court agreed with the trial court, holding that at-will tenancy is a function of traditional landlord and tenant law, which does not apply in the context of an oil and gas lease. Instead, the Superior Court found that the terms of the lease itself govern the relationship between the parties in this instance, unless the same had been modified. Because there was no clear modification of the terms, the lease terms applied. Consequently, following three years of shut-in payments, the 1994 lease expired some time in 2011, resulting in leasing rights reverting to Holt and Lee and that time. This conclusion effectively affirmed the authority of EQT under the EQT lease to act as sole lessee on the property.
As always, let us know if you come across any interesting developments that should be shared with the membership.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the MLBC October 2023 issue of The Wildcatter. All rights reserved.
Smart Business
(By Adam Burroughs featuring Joseph Pope)
The commercial real estate market is facing a number of challenges. Among the most pressing are the new market realities being reflected in certain property insurance coverages that are affecting borrowers’ new and existing loans.
“Certain long-standing insurance requirements simply are not available any longer or are undergoing significant adjustment,” says Joseph A. Pope, an attorney with Babst Calland. “It’s playing out in real time between borrowers and their attorneys and lenders.”
Smart Business spoke with Pope about how changes in property insurance coverage are affecting commercial real estate lending, and what borrowers need to know about it.
How is property insurance changing?
Certain property insurance coverage is no longer available that had historically been part of lenders’ standard coverage requirements. Sometimes those considerations are geographic. For instance, in Florida there are types of property insurance that are either no longer being offered, or providers won’t cover certain properties as insurance companies have essentially hit their maximum amount of risk in the state. In Midwest and Gulf Coast states, changes to hail, windstorm and named storm coverage policies are affecting deductibles and certain payouts for these specific coverages. Similar changes are affecting property insurance in essentially all U.S. markets, including Pennsylvania, whether by way of loss of coverage, higher deductibles or increased premiums.
What now must be negotiated with lenders?
Property owners with existing loans in affected jurisdictions now must explain to their lenders that they may no longer be able to fulfill certain loan requirements that are predicated on insurance coverage. Lenders have been slow to proactively update their previous standard minimum requirements on property loans and there’s no guaranty they will do so in a borrower-friendly way.
Existing borrowers should talk with their lender about any modifications that need to be made to their insurance requirements because of new market realities before delivering an insurance certificate that doesn’t comply with the lender’s current loan requirements. An attorney can offer the best advice to borrowers that are not able to provide insurance that complies because of a market-forced change.
Borrowers looking for a new commercial property loan will need to address these issues early in the application process because it may require getting a lender to come to grips with the borrower’s ability to secure certain insurance coverage. Having coverage preapproved at the time of application avoids the headache of having to negotiate it later.
Why should borrowers involve their attorney in the application process?
When looking at lenders, companies often look first at interest rates. Given the rise in rates, certain non-bank lenders, such as Life Companies, have been able to offer more appealing rates for commercial property loans. But while the lower rates are attractive, they’re likely to come with more points of legal negotiation upfront, including as early as the application process. This can amount to the application for the loan becoming an enforceable loan document.
With certain lenders, potential borrowers may now expect to receive loan applications that are many pages long with a number of binding boilerplate clauses, many of which were historically negotiated during the loan documentation process. When this is the case, they should run it by their legal counsel to ensure they’re clear on what they’re agreeing to. Counsel who is familiar with these types of documents can identify provisions and exceptions that could be unfavorable to the borrower.
While the lower rate a non-bank lender can offer is preferred, there can be more rigidity in their lending process vs. that of a conduit lender or even a traditional bank. In either case, borrowers should involve their attorney in the process early to avoid inadvertently binding themselves to any kind of loan provisions in the application process. The faster that a borrower can identify, address and negotiate those issues, the more leverage they’ll have to negotiate, and the more likely an efficient, timely closing will occur.
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Legal Intelligencer
(by John McCreary and Janet Meub)
On August 29, 2023, the United States Department of Labor (DOL) published a Notice of Proposed Rulemaking that would permit union representatives and other nonemployees to participate in workplace inspections conducted by Occupational Safety and Health Act Compliance and Safety Officers (CSHOs).
Section 8(e) of the Occupational Safety and Health Act (OSHA) currently allows “a representative of the employer and a representative authorized by employees the opportunity to accompany CHSOs during the physical inspection of the workplace for the purpose of aiding the inspection.” The OSHA and 29 CFR part 1903 give CSHOs the authority to resolve any disputes about who the employer and employee representatives are and to deny any person from participating in the inspection whose conduct interferes with a fair and orderly investigation. The CSHO also has the authority to permit additional employer representatives and representative authorized by employees to participate in the workplace walk-throughs. See 29 CFR 1903.8(a).
OSHA has historically mandated that the representative authorized by employees for a worksite inspection be an actual employee. Over the years, OSHA has offered guidance on its interpretation of section 1903.8(c) and the definition of “representative authorized by employees”. In 2003, OSHA issued a letter of interpretation (the Racic Letter) in response to the question of whether a union representative who files a complaint on behalf of a single worker could act as a walk-through inspection representative in a workplace that had no labor agreement. OSHA determined that there was “no provision for a walkaround representative who has filed a complaint on behalf of an employee of the workplace.” See, ID OSHA – 2023-0008-0002. Ten years later, in 2013, OSHA issued a second letter of interpretation (the Sallman Letter) stating that workers at a worksite without a collective bargaining agreement could designate a union or community organization for purposes of an OHSA walk-through inspection as long as it had been “authorized by employees to serve as their representative”. OSHA then withdrew the Racic Letter as confusing.
In October 2015, OSHA updated its Field Operations Manual (FOM) to incorporate its interpretation of 29 CFR 1903.8(c). In doing so, it stated that there may be instances where workers without a certified or recognized bargaining agent would benefit from a third party representing them at an OSHA inspection. However, in 2016, The National Federation of Independent Business (NFIB), challenged the Sallman Letter by filing suit in the Northern District of Texas arguing that the Sallman Letter was at odds with OSHA regulations, should have been subject to notice and comment rulemaking, and that it exceeded OSHA’s statutory authority. The district court concluded: 1) that the Sallman Letter contradicted §1903.8(c) which clearly required that the employee representative be an employee himself; and 2) that a change to a regulation must be subject to notice and comment rulemaking. The court did, however, reject the NFIB’s argument that the Sallman Letter conflicted with OSHA itself, concluding that OSHA requires the employee’s representative to be authorized by the employees, not necessarily that the representative be an employee himself. See, Nat’l Fed’n of Indep. Bus. v. Dougherty, 2017 WL 1194666 (N.D. Tex. Feb. 3, 2017). In the wake of that decision, OSHA rescinded the Sallman Letter and removed the language referencing it in the FOM.
Having now, engaged in the proper notice and comment rulemaking process, OSHA’s proposed rule change seeks to broaden the types of individuals who may serve as a representative of the employees during OSHA’s physical inspections of the workplace:
- The representative authorized by the employees may be an employee OR a third party (i.e., a union representative, a bilingual interpreter, an expert on a particular piece of equipment, occupational hygienist, etc.).
- A third-party representative authorized by employees may be reasonably necessary to conduct an effective and thorough physical workplace inspection by virtue of her knowledge, skills, or experience.
The proposed change would permit a union representative, even where employees are not represented by a union or in the absence of a collective bargaining agreement, to participate in an OSHA workplace inspection. The DOL and OSHA believe that the rule change strengthens OSHA’s ability to obtain critical information regarding worksite conditions and hazards everywhere – not just in facilities where the employees are represented by unions. Critics of the proposed rule change argue that OSHA is promoting infiltration of private employer property for unionization efforts.
The DOL seeks written comments on the proposed rule change by all stakeholders by October 30, 2023. If you have any questions about the DOL’s proposed rule change or OSHA workplace inspections, please contact John A. McCreary, Jr. at (412) 394-6695 or jmccreary@babstcalland.com or Janet K. Meub at (412) 394-6506 or jmeub@babstcalland.com.
John A. McCreary, Jr. is a shareholder in the employment and labor and public sector groups of Babst Calland. His practice spans the full range of issues encountered in the employment setting, including labor contract negotiation and administration, grievance arbitration, benefit plan issues, disputes over hiring practices, wrongful termination claims, as well as litigation over pension and benefit entitlements. Contact him at 412-394-6695 or jmccreary@babstcalland.com.
Janet Meub is senior counsel in the Litigation and Employment and Labor groups of Babst Calland. Ms. Meub has significant experience in the areas of employment and labor law, professional liability defense, insurance coverage and bad faith litigation, toxic tort litigation, nursing home negligence, and medical malpractice defense. She has a diversified practice that includes defending employers, healthcare providers, law enforcement and other professionals, and non-profits, at all levels of civil litigation through trial. Contact her at 412-394-6506 or jmeub@babstcalland.com.
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Reprinted with permission from the September 14, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
PIOGA Press
(By Jessica Deyoe)
On August 17, 2023, U.S. Environmental Protection Agency (EPA) announced its National Enforcement and Compliance Initiatives (NECIs) for Fiscal Years 2024-20271. For over 25 years, EPA has reviewed its priorities and set new enforcement and compliance initiatives every four years. Though EPA is charged with the enforcement of many environmental statutes, it prioritizes certain initiatives to address what it perceives to be the most serious and widespread environmental problems facing the United States.
While the EPA is preparing for the next four-year cycle, it is still enforcing under the current set of NECIs for Fiscal Years 2020-2023. The current six NECIs are:
- Creating Cleaner Air for Communities by Reducing Excess Emissions of Harmful Pollutants from Stationary Sources;
- Reducing Hazardous Air Emissions from Hazardous Waste Facilities;
- Stopping Aftermarket Defeat Devices for Vehicles and Engines;
- Reducing Significant Noncompliance with National Pollutant Discharge Elimination Systems Permits;
- Reducing Noncompliance with Drinking Water Standards at Community Water Systems; and
- Reducing Risks of Accidental Releases at Industrial and Chemical Facilities.
To determine initiatives for FY 2024-2027 cycle, EPA identified three criteria to evaluate the FY 2020-2023 initiatives and to consider new initiatives: (1) the need to address “serious and widespread environmental issues and significant noncompliance,” with particular focus on overburdened and disadvantaged communities; (2) a focus on areas where federal enforcement is needed to “hold polluters accountable” in order to “promote a level playing field”; and (3) alignment with EPA’s Strategic Plan Fiscal Year 2022-2026.
The FY 2024-2027 NECIs selected by EPA focus on three of EPA’s Strategic Plan goals in particular: (1) Tackle the Climate Crisis, (2) Take Decisive Action to Advance Environmental Justice, and (3) Enforce Environmental Laws and Ensure Compliance.
EPA solicited comments on whether to continue current NECIs, modify them, or conclude them. After consideration of public comments, EPA kept three initiatives from the current NECIs and prioritized, for the first time, three new national initiatives: mitigating climate change, PFAS exposure, and protecting communities from carcinogenic coal ash contamination.
In addition, EPA is incorporating environmental justice considerations into all six initiatives for FY 2024-2027.
The Fiscal Year 2024-2027 NECIs, described in greater detail below, are:
- Mitigating Climate Change (new)
- Addressing Exposure to PFAS (new)
- Protecting Communities from Coal Ash Contamination (new)
- Reducing Air Toxics in Overburdened Communities (modified from FY 2020-2023)
- Increasing Compliance with Drinking Water Standards (continued from FY 2020-2023)
- Chemical Accident Risk Reduction (continued from FY 2020-2023)
EPA returned three of its FY 2020-2023 initiatives to the standard “core” enforcement program where they will remain important areas for enforcement and compliance, even though they will no longer be national initiatives.
Fiscal Years 2024-2027 NECIs:
- Mitigating Climate Change
For the first time, climate change is included in EPA’s NECIs as a priority. EPA intends the enforcement and compliance efforts of this initiative to reduce greenhouse gas emissions. This initiative will focus on what EPA considers to be three of the biggest contributors to climate change: (1) methane emissions from the oil and gas industry, (2) methane emissions from landfills, and (3) the use, production, and importation of hydrofluorocarbons.
As part of this initiative, EPA will use its enforcement and compliance tools to reduce greenhouse gas emissions while addressing significant documented noncompliance in these industry sectors. By focusing on enforcement of long-standing air pollution requirements, such as New Source Performance Standards at oil and gas facilities and landfills, EPA aims to achieve the ancillary benefit of reducing methane emissions. Significantly, EPA also indicated that if they promulgate new rules to reduce methane emissions in the future, enforcement of those requirements could be included in this initiative.
- Addressing Exposure to PFAS
Also for the first time, EPA included PFAS contamination as a top priority, in light of the widespread presence of PFAS in air, water, and land throughout the United States. The primary goals of this initiative, are to (1) achieve site characterization, (2) control ongoing releases that pose a threat to human health and the environment, (3) ensure compliance with permits and other agreements to prevent and address PFAs contamination, and (4) address endangerment issues as they arise.
The initial goals outlined by EPA to support their primary goals include (1) identifying and characterizing the extent of PFAS contamination near PFAS manufacturing/use facilities, (2) performing oversight of PFAS characterization and control activities at federal facilities to serve as a model for regulated community, and (3) continuing to address violations and imminent and substantial endangerment situations by major PFAS manufacturers, federal facilities, and other industrial parties who significantly contribute to PFAS contamination. Beginning in FY 2025, EPA will build upon these initial goals by taking additional enforcement actions where appropriate.
EPA also indicated that if EPA designates PFOA and PFOS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), this NECI will focus on implementing EPA’s PFAS Strategic Roadmap and holding those responsible for significantly contributing to the release of PFAS in the environment. EPA specifically noted that it does not intend to pursue “entities where equitable factors do not support CERCLA responsibility, such as farmers, water utilities, airports, or local fire departments.”
- Protecting Communities from Coal Ash Contamination
The third new initiative for FY 2024-2027 will focus on coal combustion residuals (CCR), which are found throughout the country in onsite landfills, settling ponds, and other coal plant surface impoundments. This initiative will focus on the approximately 300 facilities EPA has identified nationwide that are collectively responsible for approximately 775 coal ash units. As part of this initiative, EPA notes that neighborhoods located near these facilities are often communities with environmental justice concerns. This NECI will focus on conducting investigations, particularly at coal ash facilities impacting overburdened or vulnerable communities, taking enforcement action at coal ash facilities in noncompliance, and protecting/cleaning contaminated groundwater, surface water, and drinking water resources.
- Reducing Air Toxics in Overburdened Communities
This initiative is a modification of EPA’s existing NECI Creating Cleaner Air for Communities. The original initiative addressed the adverse health and environmental effects from exceedances of the National Ambient Air Quality Standard (NAAQS) and health impacts on communities from emissions of hazardous air pollutants (HAPs). Recognizing the need to address environmental justice concerns for communities that suffer impacts from high levels or multiple sources of air pollution, the modified NECI will focus on overburdened communities selected by each EPA Region that are facing high levels of air pollution from HAPs. Each Region will make these determinations in partnership with states based on fenceline monitoring and other tools that detect air pollution. It will target, investigate, and address noncompliance with clean air standards designed to protect public health, with a focus on sources of HAPs in communities already highly burdened with pollution impacts.
- Increasing Compliance with Drinking Water Standards
This initiative, which began in FY 2020, seeks to ensure that the approximately 50,000 regulated drinking water systems, Community Water Systems (CWSs), comply with the Safe Drinking Water Act (SDWA). EPA noted that, while considerable progress has been made in improving SDWA compliance, further improvement of compliance is needed. Therefore, EPA will ramp up its field presence, take impactful enforcement to increase compliance, and offer more compliance assistance to prevent and address public health risks. In addition, EPA will continue to support and work with states, Tribes, territories, local governments, and the regulated community to ensure delivery of safe water to communities.
- Chemical Accident Risk Reduction
This initiative, continued from the FY 2020-2023 cycle, is intended to reduce the likelihood of catastrophic chemical releases, and to address the problem of avoidable chemical incidents that continue to occur throughout the county. EPA has found significant noncompliance by companies that handle hazardous substances and will target companies that do not comply with risk management requirements established to protect public health and safety from hazardous chemical releases. This NECI will focus on inspecting and addressing noncompliance at facilities using two hazardous substances in particular: anhydrous ammonia and hydrogen fluoride. Maintaining an awareness of the NECIs as they are developed and implemented can help the regulated community understand where EPA has identified significant nationwide noncompliance. With this knowledge, companies can identify aspects of their operations that fall within the ambit of the NECIs and evaluate internal compliance programs as appropriate. Additionally, companies should be aware that EPA will occasionally prepare updated guidance documents related to components of the NECIs in an effort to assist the regulated community in complying with the underlying environmental laws and regulations.
1 Memorandum from David M. Ulhmann to Regional Administrators, “FY 2024-2027 National Enforcement and Compliance Initiatives” (Aug. 17, 2023), available at https://www.epa.gov/system/files/documents/2023-08/fy2024-27necis.pdf
EPA, FY2022-2026 Strategic Plan, (March 2022) available at FY 2022-2026 EPA Strategic Plan. (https://www.epa.gov/system/files/documents/2022-03/fy-2022-2026-epa-strategic-plan.pdf)
EPA, PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, available at https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf.
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Reprinted with permission from the September 2023 issue of The PIOGA Press. All rights reserved.
TEQ Magazine
(By Kevin Douglass)
Many business owners are blindsided when a co-owner files a lawsuit against them detailing a list of grievances.
When owners form a new business or an owner is added to an existing ownership group, the stakeholders are typically optimistic about the future. Owners often do not discuss or consider the possibility of future differences and may not address them in their written agreements.
Consequently, when a disagreement inevitably arises, business owners frequently choose to minimize or completely ignore the dispute until considerable damage is done to the owners’ relationship, which allows these matters to fester and eventually disrupt the business. But with the right preventive approach, these challenges can be identified and resolved quickly and cost effectively.
What can trigger disagreements among owners?
One common trigger is finances. If the company is doing very well, owners may feel entitled to more compensation or at least more input into how additional profits will be invested. In contrast, if the business begins to struggle, owners’ compensation, distributions and benefits may need to be decreased, and tough decisions made about the company’s direction.
Other reasons for conflict can include a change in an owner’s level of commitment or job performance, an owner’s desire for more authority and input into company management, or conflicting business strategies. Changes in an owner’s personal life may also spark controversy, such as the involvement of a new family member or owner in the business, changes in an owner’s personal finances or simply the advancing age of the company’s primary manager(s).
What are the risks of ignoring owner disagreements?
Owner disagreements can spill over into a business’s operations and finances. Employees, lenders, customers, vendors and others can easily become aware of, and even embroiled in, the drama. They may be confused about which owner is in charge. If left unchecked, the reputation and health of the business may be threatened. Just as significantly, relationships on a professional, personal and family level may be permanently impacted, if not addressed thoughtfully and with sensitivity.
Some owners resort to litigation to obtain the satisfaction they believe they are entitled to, but the expense, stress and distraction of litigation is rarely the best route to resolve differences.
How can owners resolve their underlying issues quickly?
Do not ignore the issue. Instead, take the necessary steps to resolve potential conflicts as efficiently as possible.
Take the time to understand your legal and strategic options. Consult with an independent attorney who can objectively assess the strength of your position, as well as your goals, risks and opportunities. The company attorney’s primary obligation is to act in the best interest of the business, and therefore, may not be in the best position to give an owner personal legal advice.
After fully vetting an owner’s situation, finding a solution may include answering difficult questions. Do the owners share the same vision for the company’s future? Does the ownership, compensation or governance structure need to be redefined? Are new leaders and investors needed? Do the owners want to continue in business together, or separate via a buyout? Should the business be sold? Should a strategic or succession plan be developed, and if so, what should it look like?
Any resolution of issues involving owner conflict should strive to satisfy, or at least account for, the concerns of all owners and interested parties — even if they involve the buyout of an owner. Although litigation can be an effective way to resolve a dispute as a last resort, owners should seriously explore more cost-effective options to address conflict and strive to develop workable solutions that ensure the protection and preservation of the business.
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