FNREL Water Law Newsletter
(By Lisa Bruderly & Mackenzie Moyer)
In early 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a technical guidance document entitled “Pennsylvania Function-Based Aquatic Resource Compensation Protocol,” PADEP Doc. No. 310-2137-001 (effective Mar. 1, 2022) (Mitigation Guidance). See Vol. 55, No. 1 (2022) of this Newsletter. On January 7, 2023, PADEP published a notice in the Pennsylvania Bulletin rescinding the Mitigation Guidance for re-evaluation. 53 Pa. Bull. 107 (Jan. 7, 2023).
The Pennsylvania Dam Safety and Encroachments Act, 32 Pa. Stat. §§ 693.1–.27, and its implementing regulations, 25 Pa. Code ch. 105, require a person to obtain a permit from PADEP to construct, operate, maintain, modify, enlarge, or abandon a dam, water obstruction, or encroachment that alters the course, current, or cross section of a body of water. Mitigation Guidance at 1. A mitigation plan is typically required with the permit application, including, as applicable, a plan to compensate for the impact to regulated waters as a result of the project. Id. at 2.
The Mitigation Guidance was meant to provide a standardized system for evaluating functional compensation offsets associated with proposed aquatic resource impacts, determining compensatory mitigation requirements, assisting in identifying measures to minimize proposed project impacts, reducing subsequent compensation requirements, and evaluating compensation proposals. Id. Prior to the Mitigation Guidance, Pennsylvania’s method for determining compensation for losses to aquatic resources was based on acreage and linear feet.
Due to pushback from affected entities, including mitigation banks and permittees, PADEP formed a stakeholder working group to review the Mitigation Guidance. PADEP officially rescinded the Mitigation Guidance “to reevaluate its effectiveness and review potential revisions through stakeholder outreach.” 53 Pa. Bull. at 107. Until new guidance is developed, the previous acre-and-feet method will be used to identify and calculate mitigation needs and requirements.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Water Law Newsletter
(By Lisa Bruderly & Mackenzie Moyer)
On January 27, 2023, the Pennsylvania Department of Environmental Protection (PADEP) released the final 2022 Pennsylvania State Water Plan (Plan). The Plan is intended to inform decision making and educate the commonwealth on sustainable use of the commonwealth’s aquatic resources. It identifies regional and statewide water resource priorities and recommends over 100 statewide and legislative actions to address those priorities.
Background
The Water Resources Planning Act of 2002, 2002 Pa. Legis. Serv. Act 2002-220, requires PADEP to collaborate with statewide and regional committees to update the Plan every five years. However, the last State Water Plan was published in 2009.
PADEP identified five main goals for the Plan update:
- A reviewed and updated State Water Plan having the input, guidance, and advice from a repopulated and reinstated statewide committee, six regional committees, and the public.
- Approved and updated critical area resource plans (CARPs) within the Potomac and the Ohio planning areas left unfinished from the 2009 Plan Update.
- Enhanced web-based applications and tools to deliver improved access to water resource information, data, and statistics for educational and water planning purposes.
- Plan provisions to implement applicable water resource-related strategies outlined in the 2018 Pennsylvania Climate Action Plan.
- An updated 2009 State Water Plan Atlas using a web-based GIS application.
The Plan is meant to be a source of water resource data, the latest information, and policy recommendations. It will assist PADEP and other state agencies with developing and implementing policies, programs, and projects that correspond with Pennsylvania’s current and future water needs.
Plan Recommendations
The updated Plan recommends over 100 actions in areas such as flood control, stormwater management, water withdrawal, legacy coal mining impacts, legacy oil and gas wells, drinking water and wastewater treatment, contaminants of emerging concern, and agricultural nonpoint source pollution.
Regarding stormwater, the Plan’s recommendations include: providing a streamlined and more efficient stormwater management program for the regulated community, establishing legislation that allows local authorities, utilities, and management districts to collect “reasonable fees” and “generate sustainable revenues” dedicated to planning, maintaining, improving, and repairing stormwater management infrastructure, and continuing to create opportunities for delegated county conservation districts to implement chapter 102 (Erosion and Sediment Control) and chapter 105 (Dam Safety and Water Way Management) permitting.
Other recommendations in the Plan include establishing an emerging contaminants program, considering regionalization and consolidation of treatment systems to address acid mine drainage from abandoned coal mines, and providing additional funding to identify and address inactive, abandoned, and orphaned wells.
Jumping off the work completed for the 2009 State Water Plan, the 2022 Plan identifies four watersheds as critical water planning areas (CWPAs). CWPAs are areas where existing or future water demands threaten to exceed water availability. These four watersheds are the Marsh and Rock Creek watersheds in Adams County; the Back Creek watershed in Fayette County; and the Laurel Hill Creek watershed in Somerset and Fayette Counties. After a watershed is identified as a CWPA, a CARP is developed. The CARP will identify CWPA-specific recommendations to better manage water-use in the CWPA and ensure future use.
Environmental justice (EJ) and climate change have been top priorities for PADEP, and the Plan complements these priorities. On climate change, the Plan includes and incorporates recommendations found in the 2018 and 2021 Pennsylvania Climate Action Plans. For example, the 2018 Climate Action Plan highlighted opportunities to use stormwater best management practices and water conservation to meet climate change goals. These goals tie nicely with the goals of the State Water Plan and have been incorporated into the Plan. For EJ, the Plan aims at providing educational opportunities and soliciting participation from EJ areas in state water planning processes. PADEP hopes to bring public awareness to the State Water Plan and include vulnerable communities in water-use planning to ensure availability of water resources for all communities into the future.
According to PADEP, the next step is for PADEP and committee members “to reach out to legislative, government, advocacy, and business leaders statewide with information on how they may implement the strategies and actions to benefit all members of their communities.” PADEP, “Pennsylvania State Water Plan,” https://www.dep.pa.gov/Business/Water/PlanningConservation/StateWaterPlan/Pages/default.aspx.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
(By Daniel Bates featuring Justine Kasznica)
Pittsburgh Business Times
One of the first tasks of the Pittsburgh-based Keystone Space Collaborative was commissioning a market report to tally up all the tech companies and organizations from across the region — Pennsylvania, Ohio, and West Virginia — which are receiving funds from NASA or space-related grants from the Department of Defense.
“The numbers of space projects and participants in the region was impressive,” said Justine Kasznica, the industry group’s board chair and a founding member. “We had about 550 participants from across the tri-state region, and this without any dedicated cross-region political championship for the space industry.” Those companies brought more than $2 billion in government funding into the region, the 2021 market report showed. “That number puts us very squarely on the map. It’s a baseline,” she said, “from which to evaluate our future growth.”
With the Keystone Space Collaborative, she hopes to organize and promote space-relevant technology companies across the tri-state region — which are more plentiful and promising than most people realize, Kasznica said.
Kasznica is a tech and corporate attorney, and Chair of the law firm Babst Calland’s Emerging Technology Practice and leading advocate for the region’s space economy.
Leveraging Pittsburgh’s robotics hub.
She has worked with Pittsburgh robotics companies for 14 years. For the last decade, she has served as outside general counsel to Astrobotic Technology, an aerospace robotics company spun out of Carnegie Mellon University that has acquired more than $500 million in NASA contracts and worked on three missions to the lunar surface.
As the Pittsburgh region developed into a robotics hub, it organically gathered the kind of companies whose work is valued by NASA, the DOD and the growing sphere of private spaceflight companies, all of which need more than rockets and rovers.
“Our region brings [together] robotics, advanced technology, advanced manufacturing expertise, material science work, software development, and life sciences research,” Kasznica said. “These are all core pieces of a vibrant future new space economy. So as I look to the future — three to five, or 10 years from now — I really see this region emerging or reemerging at the forefront of the new space economy.”
The global space industry grew to $469 billion in 2021, according to the Space Foundation, and is expected to expand to $1 trillion by 2040.
This growth was not impacted much by the Covid-19 pandemic, and space technology is sheltered during economic downturns, said Kasznica. “Space, because of its historical connection to the public sector and public funding — particularly defense and NASA spending — is somewhat insulated, in terms of its contribution to national security needs.”
Thanks in large part to her work with Astrobotic, Kasznica developed a law practice in space technology. “Over the past decade, I’ve gotten to know and build relationships with a number of space legal mentors, regulatory experts, a community of fantastic industry professionals, folks from NASA, folks from the DOD, and really have immersed myself in the space industry,” she said.
Space industry needs regulatory and commercial legal support.
The industry’s legal needs can be complex. “I saw a real need for sophisticated regulatory and commercial legal needs by the space companies,” Kasznica said. “They have export control issues. They have regulatory issues. They have a slew of sophisticated commercial issues. But many of these are nascent companies with limited resources.”
New companies in the expanding field may not be able to afford the kind of legal expertise bought by longtime aerospace and defense contracting giants. This is a need Kasznica and Babst Calland are addressing, she said.
“We now have a team of lawyers who are training up … to really be able to offer a much better value at the same sophistication, same ability to problem solve, but at a rate that is commensurate with this region’s expectations.”
Keystone Space Collaborative is the centerpiece.
The Keystone Space Collaborative, of which Babst Calland is a founding sponsor, provides networking opportunities, advocacy and promotion and an “ecosystem map,” which is especially valuable because the space technology industry is supported through relationships with universities, military research institutions and federal agencies. The Keystone Space Collaborative hopes to strengthen those bonds.
Last year, the group held its first annual conference, which brought more than 250 participants to Pittsburgh, including NASA administrators, the Pennsylvania governor and senators and congressional representatives from the tri-state region. Excitement is already building for this year’s conference, to be held in Pittsburgh on June 1st and 2nd.
“We are catching a wave,” Kasznica said, “and I think, because of the crossover to other sectors that this region is known for, the space industry really has an opportunity here.”
The space economy has gone through “a paradigmatic shift,” she said. “The cost of access to space has decreased by tenfold, thanks, in part, to some of the commercial players like SpaceX, Blue Origin and the like.” This
has “created an opportunity in low Earth orbit for commercialization of new technology.”
The environment of low Earth orbit offers a test lab for new technologies, particularly in material science, advanced manufacturing techniques and biotech, said Kasznica. “The in-space development of organoids and other biomaterials, the study of cellular structures as well as new drug development are just a few examples
of R&D activities that can benefit from this unique space environment,” said Kasznica, “The anticipated commercialization of low Earth orbit will create a tremendous opportunity that amplifies the industry beyond just the traditional space aspects of it, and this region is well positioned to take advantage of this opportunity.”
Though her focus has widened, Kasznica said that the client that started her on this path, Astrobotic, will play a prominent role in the industry’s future. “I see Astrobotic as a critical linchpin and an anchor for the region,” she said. “It has been a classic emerging technology success story.” She noted the company went from “literally two” employees to a team of more than 200.
She is helping the company create a permanent campus on Pittsburgh’s North Side that will house the larger Keystone Space Innovation Center and AFWERX/SPACEWRX Innovation Hub, which will serve as a focal point for convening and engaging the region’s space and defense innovation technology entrepreneurs.
It will be a space industry hub, Kasznica said, the kind that fosters creative synergy. “Those of us who study the innovation economy know that innovation clusters are born and are best nourished and grown with like-minded adjacent companies working collaboratively together, having those coffee stand conversations and being able to interact with one another. The greatest innovations and growth happens within clustered environments.”
Kasznica shared a vision of the site, which could act as a capitol for the tri-state region’s space economy.
“Crystal ball: 10 years from now, you go down to the North Side, and you sip a space-themed coffee drink while preparing an investment pitch deck, or scheduling on-site business development meetings with various space companies both from Pittsburgh and outside of the region, while your kids are visiting the Moonshot Museum and Carnegie Science Center and learning about how they can someday participate in the new space economy. What I see is a vibrant diverse community built around space and defense innovation.”
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Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
Environmental Alert
(By Christopher (Kip) Power and Robert Stonestreet)
On February 10, 2023, 12 separate civil actions were filed (by more than 20 individual plaintiffs) in the U.S. District Court for the Northern District of West Virginia, challenging the construction and operation of the Black Rock Wind Farm (BRWF) located in Grant and Mineral Counties, West Virginia. Defendants include the developer of the facility, Clearway Energy Group, LLC, and its wholly-owned subsidiary, Black Rock Wind Force, LLC. Presumably seeking to satisfy the statute of limitations on one or more of plaintiffs’ common law causes of action, the complaints allege that they were filed exactly one year after the BRWF began operation.
The BRWF was authorized by an “Order Granting a Site Certificate” issued by the West Virginia Public Service Commission (PSC) on November 19, 2019. (As noted in that Order, Clearway Energy also owns the Pinnacle Wind Farm in Mineral County, West Virginia.) The application filed with the PSC sought approval to construct up to 29 wind turbines (each with a nameplate capacity between 3.6 MW and 5.8 MW), to be mounted at a hub height of 352.6 feet. Due to an existing 110 MW interconnection limit in Black Rock’s proposed agreement with PJM Interconnection LLC (the regional transmission organization that coordinates the movement of wholesale electricity for West Virginia and 12 other states), only 23 turbines were authorized to be constructed by the PSC Order.
Plaintiffs assert that the operation of the 23-turbine BRWF has “substantially and unreasonably” affected the “serenity, ambience, wildlife viewing and aesthetic nature” of their real property, and that it has harmed their “personal mental, emotional and physical wellbeing” in a variety of ways. Though the complaints do not mention it, it appears that virtually all the conditions identified as the cause of plaintiffs’ alleged injuries (excessive noise, vibration, shadow/light flicker, acoustic energy, and impaired viewsheds) were addressed in studies and testimony submitted by Black Rock to the PSC, and by the PSC Order. The PSC Order noted that, as of the date of its issuance, the owners of approximately 60 of the 193 occupied dwellings located within a one-mile radius of the facility had entered into or were negotiating “Neighbor Agreements” with Black Rock. The PSC also noted that existing wind turbines were visible in five of the nine viewpoints used in the analysis of the project’s potential visual effects.
Each of the 12 complaints is virtually identical except for the identity of the plaintiffs and the respective properties at issue. Each complaint asserts two claims. First, the complaints allege that the BRWF constitutes a nuisance. Under West Virginia law, there are two types of nuisance claims. A private nuisance is a substantial and unreasonable interference with the private use and enjoyment of another’s land. West Virginia law also recognizes claims for public nuisance, which is a claim alleging that certain conduct adversely impacts the public at large. Public nuisance claims generally cannot be asserted by private citizens unless they can demonstrate a “special injury” they suffered that is different than the alleged impact of the condition on the general public.
A bill is currently pending before the West Virginia Legislature that would restrict the scope of public nuisance claims. Senate Bill 572 would prohibit public nuisance claims based on an action or condition “that is permitted, authorized, approved, or mandated by a statute, ordinance, regulation, permit, order, rule, court order, or other similar measure issued, adopted, promulgated, or approved by a federal, state, or local governmental entity.” If passed, Senate Bill 572 would not likely affect the nuisance claims against the BRWF, because those claims appear to be for private nuisance (impacts on just the named plaintiffs’ properties) rather than a public nuisance (impacts on the public at large).
The second claim in the complaints alleges that the defendants were negligent in “siting, constructing and operating” the BRWF, knowing that the sound generated by the turbines would cause various physical ailments to nearby residents, including headaches, dizziness, rapid heartbeat, sleeplessness, and other adverse conditions. Although they may not be enough to prevent the claim from being heard, the studies submitted for purposes of obtaining the PSC Site Certificate for the BRWF will presumably also be important in evaluating the merits of this claim.
The complaints request entry of an injunction order to abate the nuisance (which would presumably require the BRWF to cease operations) and an award of damages to compensate the plaintiffs for diminution of value of their properties and their personal injuries. Responses to the complaints will be due within 21 days after the named defendants are formally served with them.
For questions about renewable energy projects in West Virginia, and the defense of common law or statutory claims based on alleged environmental impacts, please contact Christopher B. (Kip) Power at (681) 265-1362 or cpower@babstcalland.com, or Robert M. Stonestreet at (681) 265-1364 or rstonestreet@babstcalland.com.
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The Wildcatter
(By Nikolas Tysiak)
Welcome back, I hope everyone had an excellent holiday season. As always, the period covering December and January is usually the slowest time of year regarding judicial and legislative activity, and this year is no exception. Just one case of interest from Ohio, and some minor administrative code revisions in Pennsylvania.
Ohio Public Works Commission v. Barnesville, 2022-Ohio-4603. The village of Barnesville, OH, purchased about 104 acres of land as an “open space” project in connection with the Clean Ohio Conservation Fund, which is administered by the Ohio Public Works Commission (“OPWC”) in 2002. As part of the deal, OPWC required that Barnesville take deeds for the lands with certain covenants and restrictions, including a limitation on the use of the purchased lands, restricting the use of the property for the stated purposes, and empowering the OPWC to enforce the covenants and restrictions with various penalties attached. Barnesville subsequently leased the oil and gas under the lands at issue to Antero Resources in 2012, without the consent of OPWC. The Ohio Supreme Court found that the actions of Barnesville in regard to the oil and gas rights violated the transferability restriction imposed by the OPWC, overruling the 7th District Court of Appeals. However, the Supreme Court also determined that the lease to Antero violated the use restriction imposed by OPWC as part of the overall transaction and affirmed the appropriateness of injunctive relief in enforcing such restrictions, including an injunction deeming the oil and gas lease unenforceable. Consequently, the Supreme Court affirmed the decision of the 7th District Court of Appeals’, remanding the case for further consideration, accordingly.
Pennsylvania has amended several administrative code sections regarding VOC emissions control requirements arising custody transfer from the wellhead to transmission or storage. See 25 Pa. ADC § 129.121 – 129.140. Additionally, there were revisions to the permits required in the disturbance of waterways and watersheds. See 58 Pa. ADC § 51.61.
There is nothing else to report this time. Until next time, we are always interested in hearing from the membership, so please do not hesitate to reach out to us.
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Reprinted with permission from the MLBC February 2023 issue of The Wildcatter. All rights reserved.
Legal Intelligencer
(by Ben Clapp and Gina Falaschi Buchman)
On January 12, 2023, U.S. Environmental Protection Agency (EPA) published a notice of public comment period in the Federal Register requesting “Public Comment on EPA’s National Enforcement and Compliance Initiatives for Fiscal Years 2024-2027.”[1] Though EPA is charged with the enforcement of many environmental statutes, like any agency with limited resources, it must prioritize enforcement efforts. Every four years, EPA reviews its priorities and sets new enforcement and compliance initiatives for which it establishes specific goals and a comprehensive strategy.[2]
Over the years, EPA has used various names for these initiatives. The program started as the National Priorities. In 2010, the program was changed to the National Enforcement Initiatives in response to stakeholder feedback that the term “National Priorities” implied that EPA’s many other enforcement activities were of lesser significance programmatically or environmentally. From 2010 to 2018, the program was known as the “National Enforcement Initiatives,” but EPA decided to “evolve the National Enforcement Initiatives program into a National Compliance Initiatives (NCIs) program by providing states and tribes with additional opportunities for meaningful engagement, by developing and applying a broader set of compliance assurance tools, and by aligning the NCIs with the Agency Strategic Plan measures and priorities.”[3]
On December 20, 2022, EPA released a memorandum entitled “Updated Policy for EPA’s Enforcement and Compliance Initiatives” which explains that “[w]hile criminal enforcement and civil enforcement (judicial and administrative) remain the key tools to address serious noncompliance, hold polluters accountable and create general deterrence, EPA also uses informal enforcement and compliance tools to advance the national initiatives. To reflect this comprehensive approach, the national initiatives will now be known as National Enforcement and Compliance Initiatives (NECIs).”[4]
The December 2022 memorandum also sets forth three criteria to be used to evaluate initiatives to be included in the Fiscal Years 2024-2027 NECIs: (1) EPA will consider whether there is a serious need to address the issue and whether it is a widespread environmental violation. EPA will aim to address noncompliance that has a significant adverse impact on the environment and public health, particularly in environmental justice communities. (2) EPA will consider whether federal enforcement can make a difference, that is, will it be effective in holding polluters accountable and leveling the playing field. (3) EPA will consider whether the NECI aligns with the EPA’s FY2022-2026 Strategic Plan to concentrate enforcement resources to contribute towards the broader goals of the agency.[5] Two of the agency’s goals – Goal 1: Tackle the Climate Crisis and Goal 2: Take Decisive Action to Advance Environmental Justice – apply to all program areas. Strategic Plan Goal 3: Enforce Environmental Laws and Ensure Compliance reemphasizes the role of the NECIs. The memorandum also states that NECIs should be evaluated as to whether they can support media-specific goals in the Agency’s Strategic Plan such as Goal 4.1 – Improve Air Quality and Reduce Localized Pollution and Health Impacts.
While the EPA is preparing for the next four-year cycle, it is still enforcing under the current set of National Compliance Initiatives for Fiscal Years 2020-2023. The agency is currently focused on six NCIs where the enforcement program has the lead for the agency and a seventh priority area, where the enforcement program is contributing to the EPA’s goal of reducing childhood lead exposure. The six current NCIs 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 System Permits;
- Reducing Noncompliance with Drinking Water Standards at Community Water Systems; and
- Reducing Risks of Accidental Releases at Industrial and Chemical Facilities.
EPA’s list of proposed NECIs for Fiscal Years 2024-2027 were selected using the three criteria explained above. EPA is soliciting comment on whether to continue, modify, or conclude the six initiatives from the FY 2020-2023 cycle. EPA notes that it is planning to continue the following four existing initiatives into the FY 2024-2027 cycle: (1) Creating Cleaner Air for Communities by Reducing Excess Emissions of Harmful Pollutants. EPA plans to continue this initiative with a focus on processes for which widespread noncompliance continues to be identified: flares, storage tanks, wastewater treatment, and incineration/combustion. (2) Reducing Risks of Accidental Releases at Industrial and Chemical Facilities. EPA plans to continue this initiative because EPA has found that many regulated facilities are not adequately managing risks they pose to surrounding communities. (3) Reducing Significant Non-Compliance in the National Pollutant Discharge Elimination System (NPDES) Program. EPA will continue and expand this initiative to include municipal permittees that are covered under a general permit, as unlawful discharges from such facilities can cause significant adverse impacts to overburdened communities. (4) Reducing Non-Compliance with Drinking Water Standards at Community Water Systems. EPA proposes to continue this initiative because, while progress has been made working with States in improving Safe Drinking Water Act compliance, further improvement is needed. EPA has also proposed to return the following two initiatives to the standard “core” enforcement program: (1) Reducing Toxic Air Emissions from Hazardous Waste Facilities and (2) Stopping Aftermarket Defeat Devices for Vehicles and Engines as significant improvement has been made and there is increased awareness of the issues.
EPA also specifically solicited comment on two potential new NECIs: (1) Mitigating Climate Change. This initiative would seek to combat climate change through a focus on reducing non-compliance with the illegal import, production, use, and sale of hydrofluorocarbons pursuant to the American Innovation and Manufacturing Act of 2020, excess emissions from sources within certain industrial sectors, and non-compliance with other requirements such as mobile source, fuels, and methane regulations. (2) Addressing PFAS Contamination. This initiative would focus on implementing the commitments under the EPA’s 2021–2024 Per-and Poly-fluoroalkyl substances (PFAS) Strategic Roadmap.[6] EPA also sought comment on two additional areas being considered for possible development as NECIs: (1) Reducing Exposure to Lead and (2) Addressing Coal Combustion Residuals (CCR). EPA noted that while both topics are significant enforcement priorities, resource constraints limit the number of NECIs that can be pursued.
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 sometimes 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. EPA will accept comments on the proposed NECIs until March 13, 2023 on the Federal e-rulemaking portal (www.regulations.gov).
________________
[1] Public Comment on EPA’s National Enforcement and Compliance Initiatives for Fiscal Years 2024-2027, 88 Fed. Reg. 2093 (Jan. 12, 2023), available at https://www.govinfo.gov/content/pkg/FR-2023-01-12/pdf/2023-00500.pdf.
[2] Memorandum from Susan Parker Bodine to Regional Administrators, FY 2020-FY2023 National Compliance Initiatives, (June 7, 2019), available at https://www.epa.gov/sites/default/files/2019-06/documents/2020-2023ncimemo.pdf.
[3] Memorandum from Susan Parker Bodine to Regional Administrators, Transition from National Enforcement Initiatives to National Compliance Initiatives (Aug. 21, 2018), available at https://www.epa.gov/sites/default/files/2018-08/documents/transitionfromneitonci082118.pdf.
[4] Memorandum from Lawrence E. Starfield to Regional Administrators, “Updated Policy for EPA’s Enforcement and Compliance Initiatives” (Dec. 20, 2022), available at https://www.epa.gov/system/files/documents/2022-12/necimemo.pdf.
[5] EPA, FY2022-2026 Strategic Plan, (March 2022) available at FY 2022-2026 EPA Strategic Plan.
[6] 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.
Ben Clapp is a shareholder of Babst Calland. Mr. Clapp’s transactional work, which straddles the Firm’s Environmental and Corporate practice areas, consists of advising clients on the environmental components of complex deals, including identifying and analyzing significant environmental liability and compliance issues arising in connection with mergers and acquisitions, asset sales, project financings, and corporate restructurings, and working to resolve, manage, allocate or mitigate these environmental risks in the client’s best interest. Contact him at 202-853-3488 or bclapp@babstcalland.com.
Gina Falaschi Buchman is an associate in the Environmental Group of Babst Calland. Ms. Falaschi provides advice to clients in the energy, transportation, and technology sectors regarding compliance with state and federal environmental regulations. She has assisted companies with disclosure of regulatory violations to state and federal agencies and has counseled clients in negotiations with the U.S. Department of Justice, U.S. EPA, and California Air Resources Board. Contact her at 202-853-3483 or gbuchman@babstcalland.com.
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Reprinted with permission from the February 16, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
The American Oil & Gas Reporter
(By Lisa Bruderly)
The U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20. The regulated community is watching this new definition of WOTUS because it will determine federal jurisdiction under the Clean Water Act.
For example, projects involving oil or natural gas development or pipeline construction require federal permitting for impacts from crossing, or otherwise disturbing, WOTUS. Generally speaking, the more impacts to such federally regulated streams and wetlands, the more complicated, expensive and lengthy the Corps Section 404 permitting.
In addition to determining the scope of federal permitting for the dredging/filling of streams and wetlands, the WOTUS definition also determines the scope of several other federal regulations, including regulations associated with National Pollutant Discharge Elimination System permitting, Spill Prevention, Control and Countermeasure plans and federal spill reporting. Although WOTUS is not defined in the CWA, the WOTUS definition appears in 11 different federal regulations.
Overview And Background
The agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS. However, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the agencies already have been informally utilizing to determine WOTUS, for example, relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (such as the 2006 case, Rapanos v. United States). Challenges to the new definition are already underway.
The definition of WOTUS has been debated for nearly two decades, starting with several U. S. Supreme Court cases, which addressed the meaning of the 1980s WOTUS definition. This 1980s definition is very brief and is open to much interpretation because it does not include any defined terms. As discussed further below, rather than providing clarity, the U.S. Supreme Court decisions introduced additional uncertainty by offering more than one test for determining WOTUS.
Subsequently, Presidents Obama and Trump each introduced their own WOTUS definitions. President Barack Obama introduced the Clean Water Rule (CWR) in 2015, and President Donald Trump introduced the Navigable Waters Protection Rule (NWPR) in 2020.
Not surprisingly, the CWR entailed a broader interpretation of WOTUS, based heavily of Justice Anthony Kennedy’s significant nexus test in Rapanos, while the NWPR was based heavily on Justice Antonin Scalia’s “relatively permanent waters” test in Rapanos. Both the CWR and the NWPR were immediately and significantly challenged. Neither rule remains in effect.
Current Status
The Biden administration published its draft definition of WOTUS on Dec. 7. The final rule was published in the Federal Register on Jan. 18. The agencies’ approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Scalia issued the plurality opinion, which held that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (such as adjacent wetlands).
Justice Kennedy, however, advanced a broader WOTUS interpretation in his concurring opinion, which was based on the concept of a “significant nexus” (for instance, wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical and biological integrity of other covered water”). President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination.
While this new WOTUS definition may not be, conceptually, a significant change to how the agencies regulate streams and wetlands, the new definition may expand the agencies’ interpretation of a wetland that is “adjacent” to a WOTUS, through its lengthy discussion of adjacent wetlands in the final rule’s preamble.
The new definition also may expand how the agencies determine whether a water body will “significantly affect” a WOTUS, by providing a definition of “significantly affect,” which enumerates five factors to assess and five functions to consider in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water.
Factors include distance from the traditionally navigable water, hydrologic factors and climatological variables. Functions include contribution of flow and retention and attenuation of runoff. Both the factors and the functions are broad and open to interpretation, which may lead to the agencies asserting jurisdiction over more water bodies. The new definition also codifies that the effect of the potentially regulated water must be evaluated alone “or in combination with similarly situated waters in the region,” which likely will broaden how the agencies evaluate the potential regulation of ephemeral and isolated water bodies.
Supreme Court And Congress
Publication of this definition, at this time, is likely a preemptive move by the agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the court will, again, weigh in on the definition of WOTUS.
In Sackett, landowners in Idaho have had a long-standing challenge to an administrative order issued against them for allegedly filling wetlands without a permit. The Sacketts assert that Justice Kennedy’s significant nexus test in Rapanos is not the appropriate test to delineate wetlands as WOTUS, and that, under the test identified by Justice Scalia, the wetlands on their property are not WOTUS.
In 2021, the U.S. Court of Appeals for the Ninth Circuit ruled against the Sacketts’ position and held that the “significant nexus” test in the Kennedy concurrence was the controlling opinion from Rapanos. The Sacketts petitioned the U.S. Supreme Court to consider whether Rapanos should be revisited to adopt the plurality’s test for wetland jurisdiction under the CWA. However, the Supreme Court instead will consider the narrow issue of whether the Ninth Circuit “set forth the proper test for determining whether wetlands are WOTUS.”
Some have speculated that the U.S. Supreme Court’s opinion may support a narrower interpretation of WOTUS than the agencies have been implementing. For example, if the court narrows or eliminates the “significant nexus” test, the decision will create even more uncertainty in identifying WOTUS and may invalidate the Biden administration’s definition. The Sackett opinion is expected by this summer.
In a letter dated Jan. 30, 25 Republican governors asked President Biden to delay implementation of the new WOTUS definition until the U.S. Supreme Court issued the Sackett decision. The governors oppose the new definition and claim that it is, among other things, ill-timed, burdensome and overbroad. The governors assert that delaying implementation of the new definition until after the issuance of the Sackett decision will minimize the number of changes to the definition in a short time. The governors stated that multiple revisions would “impose an unnecessary strain on farmers, builders and every other impacted sector of the American economy.”
Consistent with the sentiments of the Republican governors, in early February, Republican members of Congress, led by Senator Shelley Moore Capito, R-W.V., and representatives Sam Graves, R-Mo., and David Rouzer, R-N.C., announced that they intended to use the Congressional Review Act to formally challenge the new WOTUS definition through a joint resolution of disapproval. The hearing was held on Feb 8.
The CRA provides Congress a mechanism to vote to disapprove agency rules that go beyond the authority Congress granted to federal agencies and to send the resolution to the president, who can approve or veto the resolution. If passed, the joint resolution of disapproval could invalidate the rule and prohibit an agency from issuing a rule that is in substantially the same form without further congressional authorization. President Biden is expected to veto any such joint resolution of disapproval.
Consistent with Obama’s CWR and Trump’s NWPR, the new WOTUS definition already has been challenged in the U.S. District Court of the Southern District of Texas by Texas and 18 industry groups, including the American Petroleum Institute, claiming that the new definition is “unworkable” and in conflict with the CWA (see accompanying story, page 30). These challenges may result in the stay or vacatur of the new definition. If this occurs, the agencies may, again, revert back to the current WOTUS definition.
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Republished with permission from the February issue of The American Oil & Gas Reporter.
PIOGA Press
(By Gina Falaschi Buchman, Justine Kasznica, and Susanna Bagdasarova)
On November 14, 2022, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a proposed Federal Acquisition Regulation (FAR) rule that would require certain federal suppliers to annually disclose their greenhouse gas (GHG) emissions and climate-related financial risks, as well as set GHG emissions reduction targets, on an annual basis. 87 Fed. Reg. 68,312 (Nov. 14, 2022) (Proposed Rule). The Proposed Rule entitled the “Federal Supplier Climate Risks and Resilience Rule” implements President Biden’s Executive Order 14030, directing a number of federal agencies to take action to address climate-related risks and the Administration’s push toward net-zero emissions procurement by 2050.
The Proposed Rule would introduce a new FAR subpart 23.XX containing mandatory GHG emissions1 disclosure and reporting requirements for major federal suppliers, which are divided into “significant” and “major” contractors for purposes of the applicable requirements. “Significant contractors,” defined as federal contractors receiving at least $7.5 million but less than $50 million in federal contract obligations in the prior fiscal year, must conduct a GHG inventory of their annual Scope 12 and Scope 23 emissions and report the total annual emissions in the System for Award Management (SAM). “Major contractors,” defined as federal contractors receiving more than $50 million in federal contract obligations in the prior fiscal year, are subject to the same requirement with respect to Scope 1 and Scope 2 emissions and must also conduct and report the results of a GHG inventory of their annual Scope 34 emissions.
Major contractors are also required to use the Carbon Disclosure Project (CDP)5 Climate Change Questionnaire annually to complete a publicly available disclosure of their Scope 1, Scope 2, and Scope 3 emissions as well as their climate risk assessment process and any risks identified. In addition, major contractors must identify and publicly disclose science-based targets to reduce their GHG emissions.
Under the proposed regulatory framework, a federal supplier is presumed to be nonresponsible (and therefore ineligible for contract awards) until the relevant contracting officer confirms that the contractor has (itself or through its immediate owner or highest-level owner, as defined in the FAR), complied with the applicable requirements of the Proposed Rule.
Certain entities are exempted from the Proposed Rule’s reporting and disclosure requirements, including higher education institutions, nonprofit research entities, state or local governments and federal management and operating (M&O) contractors which derive at least 80 percent of their annual revenue from such M&O contracts. Additionally, if a major contractor qualifies as a “small business” or is a nonprofit organization, it is subject only to the reporting requirements of a significant contractor. The requirements may also be waived by the Senior Procurement Executive for emergencies, national security, or other mission essential purposes.
Significant and major contractors will be required to report Scope 1 and Scope 2 emissions one year following the publication of the final rule. Major contractor requirements to disclose Scope 3 emissions, climate-related risks, and science-based targets begin two years following the publication of the final rule.
If this Proposed Rule is finalized, many companies with government contracts, particularly small businesses, will be required to calculate and report GHG emissions and climate-related financial information for the first time. Preparations of such disclosures is costly and may require the hiring of new personnel or outside contractors to complete calculations and compile and organize information. In addition, companies without government contracts may be asked by customers or suppliers with government contracts to estimate or account for their GHG emissions as part of the supply chain. Finally, public disclosure of climate-related financial information could subject companies to litigation risk by shareholders, investors, or non-governmental organizations.
From a practical standpoint, many oil and gas companies may already calculate and report GHG emissions under other federal, state, or permit requirements, including companies required to report under the EPA’s Greenhouse Gas Reporting Program (GHGRP). EPA’s GHGRP regulations generally apply to (1) direct GHG emissions sources that emit at least 25,000 metric tons of CO2-equivalent (CO2e, the amount of CO2 emissions with the same global warming potential as the number of metric tons of another GHG) per year; (2) fuel and industrial gas suppliers; and (3) facilities with underground CO2 injection wells. Other companies voluntarily set GHG emission reduction targets as part of their sustainability initiatives. The annual calculating and reporting of GHG emissions to satisfy other obligations may lessen the burden of the Proposed Rule on certain companies affected both directly and indirectly by the proposal.
The DoD, GSA, and NASA will accept comments on the Proposed Rule until February 13, 2023 on the Federal e-rulemaking portal (www.regulations.gov).
If you have any questions about the Proposed Rule or submission of comments, please contact Gina Falaschi Buchman at (202) 853-3483 or gfalaschi@babstcalland.com, Justine M. Kasznica at (412) 394-6466, or jkasznica@babstcalland.com, or Susanna Bagdasarova at (412) 394-5434 or sbagdasarova@babstcalland.com.
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1 GHG is defined to include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride, and sulfur hexafluoride.
2 “Scope 1” emissions are GHG emissions from sources that are owned or controlled by the reporting company.
3 “Scope 2” emissions are GHG emissions associated with the genera-tion of electricity, heating and cooling, or steam, when these are pur-chased or acquired for the reporting company’s operations but occur at sources other than those owned or controlled by the entity.
4 “Scope 3” emissions are GHG emissions that are a consequence of the operations of the reporting entity but occur at sources other than those owned or controlled by the entity.
5 The CDP is a nonprofit organization that runs a disclosure system for companies, cities, states, and regions to manage environmental impact and scores these entities based on questionnaires submitted.
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Reprinted with permission from the February 2023 issue of The PIOGA Press. All rights reserved.
Eric M. Spada recently joined Babst Calland as senior counsel in the Litigation Group. Mr. Spada’s practice focuses primarily on commercial litigation. He has represented a diverse array of clients in a variety of cases in state and federal courts in Pennsylvania, Ohio, West Virginia, and Florida, and also in commercial and construction arbitrations. Mr. Spada has also practiced in front of real estate tax assessment and appeal boards and state and federal ALJs. His litigation experience includes matters relating to construction, real estate, energy and natural resources, tax assessments and tax exemptions, and financial services. He has also successfully litigated cases concerning closely-held business disputes, franchising, civil identity theft, and insurance fraud issues. Mr. Spada also has extensive experience in the e-Discovery space.
Prior to joining Babst Calland, Mr. Spada was an associate with Buchanan Ingersoll & Rooney PC. He is a 2008 graduate of George Washington University Law School.
Legal Intelligencer
(By Jennifer Malik and Anna Hosack)
While municipalities continue to grapple with the repercussions of Slice of Life, proponents for another controversial residential use—community living or group homes—attempted to rely on Slice of Life to support a curative amendment to a zoning ordinance that would allow a community living use in a residential district.
In 2019, the Pennsylvania Supreme Court examined the zoning issues surrounding the increasingly popular use of single-family homes as short-term rentals in Slice of Life v. Hamilton Township Zoning Hearing Board, 207 A.3d 886 (Pa. 2019). In the nearly four years since Slice of Life was decided, many municipalities have relied on its holding to prohibit short-term rentals in residential zoning districts—reasoning that the purely transient use of short-term rentals is inconsistent with the common definition of “family” that is typically defined as a single household in local ordinances. While municipalities continue to grapple with the repercussions of Slice of Life, proponents for another controversial residential use—community living or group homes—attempted to rely on Slice of Life to support a curative amendment to a zoning ordinance that would allow a community living use in a residential district.
On Nov. 7, 2022, the Pennsylvania Commonwealth Court rendered a decision in Hope House in Midland PA v. Borough of Midland, PA, No. 145-CD-2022 2022 WL 16727674 (Pa. Cmwlth. 2022), affirming the denial of a property owner’s curative amendment that would have permitted a group home in a single family residentially zoned district. Although the court’s decision was unreported, it may be cited for persuasive value in the future and is indicative of the court’s interpretation of the boundaries of the holding in Slice of Life.
In December 2020, Hope House, a nonprofit organization, purchased a six-bedroom home located in Midland Borough’s R-1 Single-Family Residential Zoning District—intending to use the property as a “community living facility” for approximately 17 women and children in need of shelter. Hope House would not limit how long a resident could stay on the property, but estimated residents would stay for an average of four to five months. Hope House sought a curative amendment to the borough’s zoning ordinance that would allow a “community living arrangement” as a use permitted by-right in the R-1 zoning district, on the theory that the borough’s zoning ordinance was exclusionary. During the public hearing on the proposed amendment, the borough’s code enforcement officer opined that Hope House’s proposed use qualified as a “group residence,” which is permitted as a conditional use in the R-3 zoning district under the existing zoning ordinance. The zoning ordinance defines “group residence” as “a dwelling facility operated for not more than 15 persons plus staff, living together as a single family or as a single housekeeping unit.” The borough denied the curative amendment, finding that the proposed amendment was not only overly broad, but also unnecessary because Hope House’s proposed use fit into the existing definition of a “group residence” under the zoning ordinance. Hope House appealed the borough council’s determination to the Court of Common Pleas of Beaver County who affirmed the denial.
On appeal to the Commonwealth Court, Hope House argued that pursuant to Slice of Life, its proposed use did not qualify as a “group residence” under the zoning ordinance because its residents would be transient, and therefore could not be considered to be living as a “single housekeeping unit.” As readers may recall, in Slice of Life, the Pennsylvania Supreme Court evaluated whether a local zoning ordinance prohibited the use of property as a short-term rental unit in a single-family residential zoning district. There, the local zoning ordinance defined a “family” as “one or more persons occupying a dwelling unit, related by blood, marriage, or adoption living together as a single housekeeping unit and using cooking facilities and certain rooms in common.” The Pennsylvania Supreme Court held that by defining “family” as requiring “a single housekeeping unit,” the ordinance clearly and unambiguously excluded purely transient uses of property in a single-family residential district.
The Commonwealth Court rejected Hope House’s argument, distinguishing Slice of Life, because in that case, the Pennsylvania Supreme Court was interpreting the phrase “single housekeeping unit” in the context of the zoning ordinance’s definition of a “family,” as opposed to as part of a definition of a “group residence,” within a multi-family zoning district. Consequently, the Commonwealth Court found that the “logic and reasoning used to interpret the meaning of ‘single housekeeping unit’ in the definition of ‘family’ could not be extended to interpret the meaning of ‘single housekeeping unit’ in the zoning ordinance’s definition of ‘group residence.’” The Commonwealth Court reasoned that group residences are unlike single-family households and do not have an inherent expectation of stability. Additionally, the plain language of the zoning ordinance at issue indicated that a “single housekeeping unit” was not intended to be synonymous with “family” and it is clear the borough did not intend to adopt the definition laid out in Slice of Life since the zoning ordinance was last revised in 1993. Lastly, the court reasoned that by using the disjunctive “or,” the zoning ordinance made “living together as a single housekeeping unit” distinct from “living together as a family.” Since Hope House’s residents will have common living and dining areas and will participate in similar programs and activities within the residence, the residents will be living together as a single housekeeping unit for purposes of qualifying as a “group residence.” Therefore, the court concluded that persons “living together… as a single housekeeping unit” under the zoning ordinance’s definition of “group residence” can include transient persons and rejected Hope House’s argument that the zoning ordinance was exclusionary.
The Pennsylvania Supreme Court’s holding in Slice of Life remains undisturbed by Hope House, and it remains clear that municipalities may prohibit short-term rentals and other purely transient residential uses in single family residential districts. However, the interpretation of “single housekeeping unit” by the Commonwealth Court in Hope House appears to represent a logical boundary to how Slice of Life may be applied going forward and indicates that the law has not fully settled on how zoning ordinances should account for transient uses such as short-term rentals. It remains imperative that municipalities that regulate short-term rentals or other transient residential uses expressly address such uses within their zoning ordinances. As the Hope House court noted, it is crucial for the municipality to have the ability to place conditions on transient uses to regulate the health and safety of those in the area surrounding the use. Therefore, once a municipality has planned for the use, the municipality should consider what conditions would be appropriate for the use and location. Relevant standards for transient uses could include those that regulate parking, noise, signage, smoke, electrical disturbance, odors or glare.
Jennifer Malik is a shareholder and Anna Hosack is an associate in the public sector services group of the Pittsburgh law firm of Babst, Calland, Clements and Zomnir, P.C. Malik focuses her practice on health care benefits, administration, insurance coverage and appellate law—with an emphasis on zoning and land use. Hosack focuses her practice on zoning, subdivision and land development, and municipal ordinance construction and enforcement. Contact them at jmalik@babstcalland.com and ahosack@babstcalland.com.
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Reprinted with permission from the February 9, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
ACBA Young Lawyers’ Division newsletter Point of Law
(By Alexandra Farone)
On January 5, 2023, the Federal Trade Commission (FTC) proposed a national ban on noncompetition agreements. Noncompetition agreements, or “non-competes,” are contractual terms between employers and workers that prohibit the worker from working for a competing employer or starting a competing business, typically within a certain geographic area for a certain period of time. If a worker violates a non-compete clause, the employer can sue the worker for breach of contract and may be able to obtain a preliminary injunction enjoining the worker to stop the conduct that purportedly violates the non-compete clause. If successful in litigation, the employer may be able to obtain a permanent injunction and/or the payment of monetary damages. If the FTC’s proposed ban becomes final, this is all about to change.
As a basis for the proposed rule, the FTC made a preliminary finding that non-competes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act (the “Act”). Section 5 of the Act provides that “unfair methods of competition in or affecting commerce” are unlawful, and that the FTC is “empowered and directed” to prevent businesses from using unfair methods of competition.
Under the proposed rule, employers could not ask new employees, independent contractors, or even unpaid volunteers to sign non-competes. All existing non-competes would have to be rescinded, and employers would have to inform current and former workers on an individual basis that their noncompete is no longer in effect within 45 days of the rescission. The proposed rule would also prohibit employers from attempting to enter non-competes, or representing to a worker under certain circumstances that the worker is subject to an enforceable noncompete.
The proposed rule is focused on non-competes, but other restrictive covenants could become subject to the rule if they are so broad that they effectively function as non-competes. For example, the FTC states that a contractual term that requires the worker to pay the employer or a third party for training costs if the worker’s employment terminates within a certain time period, where the payment is not reasonably related to the actual costs incurred for training, may be deemed a prohibited de facto non-compete clause. It is unclear whether non-solicitation agreements (agreements in which a worker agrees not to solicit the employer’s other employees or clients to end their relationship with that employer) would be barred by this proposed rule, as many non-solicitation agreements are drafted broadly to have the near-effect of a non-compete. Many commentators believe that the FTC will revise the proposed rule after the comment period to provide more clarity regarding non-solicitation agreements.
There is also a proposed exception where the ban will not apply to non-compete clauses entered into by someone (1) selling a business entity, (2) disposing all of the person’s ownership interest in the entity, or (3) selling substantially all of a business entity’s operating assets, when the person is a substantial owner, member, or partner in the business entity at the time the person enters into the non-compete. A “substantial” owner, member, or partner is one who holds at least a 25% ownership interest in a business entity. Additionally, entities that are exempted from coverage under the Act – certain banks, savings and loan entities, federal credit unions, common carriers, air carriers, persons subject to the Packers and Stockyards Act of 1921, and entities not organized to carry on business for its own profit or that of its members – may not be subject to the rule.
The FTC voted 3-to-1 to publish the Notice of Proposed Rulemaking (NPRM). The public has 60 days to comment on the proposed rule. In the NPRM, the FTC also describes and seeks comment on several topics related to the proposed rule, including whether non-competes with senior executives should be subject to a different standard than non-competes with other workers, whether low- and high-wage workers should be treated differently, whether franchisees should be covered by the rule, and whether “no-poach” agreements and wage-fixing agreements should be barred. After the comment period closes on March 10, 2023, the rule will either take effect or be struck down.
Compliance would be mandated 180 days after the adoption of the rule. If adopted, it is generally expected that there will be multiple challenges to the FTC’s authority to issue this non-compete ban, which may result in a stay in enforcement of the ban until any litigation is resolved.
This proposed rule has been expected for some time. More than one year ago, on July 9, 2021, President Joe Biden signed Executive Order 14036 encouraging the FTC to limit or ban noncompetition agreements. The FTC estimates that 18% of U.S. workers are currently covered by non-competes. The FTC further predicts that this ban may result in up to $300 billion in additional earned wages, save consumers up to $148 billion on health costs annually, and double the number of companies in the same industry founded by a former worker.
There is a reasonable likelihood that legal challenges to this ban would be successful. In West Virginia v. EPA, No. 20-1530, — U.S. — (June 30, 2022), the Court recently demonstrated skepticism of sweeping rule-making from regulatory agencies, due to potential violation of the separation of powers doctrine. The Court adopted the major questions doctrine, which holds that in extraordinary cases of political and economic significance, where an agency makes “unheralded” use of its authority, the agency must be able to identify a clear statement from Congress authorizing that particular action. Given the broad scope, it is very likely that a national non-compete ban would be considered an extraordinary case of political and economic significance, and would have to clear the major questions doctrine hurdle to survive.
Employers who use non-competes should consider submitting comments to the FTC on the proposed ban and should begin thinking strategically about implementing non-disclosures and confidentiality agreements in lieu of non-compete agreements should the ban become law.
Alexandra Farone is an employment and litigation associate at Babst, Calland, Clements and Zomnir P.C. and can be contacted at afarone@babstcalland.com.
To view the Point of Law Winter 2023 edition, click here.
Reprinted with permission from the Point of Law Winter 2023 edition by the Allegheny County Bar Association.
Smart Business
(By Sue Ostrowski featuring Susanna Bagdasarova)
A number of countries require businesses to identify individuals who have a beneficial ownership interest in a company, making it more difficult for illicit actors to hide behind a corporate entity and use it for potentially illegal purposes. Until now, the United States has not been one of them. That is changing thanks to the “Beneficial Ownership Information Reporting Requirements” final rule issued by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The information, says Susanna Bagdasarova, an associate at Babst Calland, will be filed with FinCEN to create a national, non-public database for limited law enforcement and regulatory use.
“The intent is to curtail the deliberate misuse of business entities as shell companies for illegal purposes — to deter fraud, protect national security and prevent oligarchs or criminal actors from using entities to launder money or provide a cover for drug or human trafficking,” Bagdasarova says.
Smart Business spoke with Bagdasarova about which of the 32 million businesses estimated to be subject to the rule fall under that umbrella, when they need to file, and what it means for your business.
What does filing entail and who must do so?
‘Reporting companies’ (domestic and foreign business entities, including corporations, LLCs, and other entities formed or registered to do business in a state) will be required to file reports that identify themselves and provide identifying information regarding each beneficial owner and certain ‘company applicants.’ A ‘beneficial owner’ is an individual who directly or indirectly exercises substantial control over the reporting company, or holds at least 25 percent of the ownership interests of a reporting company. Both ‘substantial control’ and ‘ownership interests’ are defined broadly to prevent loopholes allowing corporate structures to obscure owners or decision-makers.
The filing must include the company’s full legal name and trade names, principal business address, jurisdiction of formation or initial registration, and taxpayer ID number. The company must also include detailed personal identifying information for each individual beneficial owner.
The rule requires an initial filing, then additional filings within 30 days of any change regarding any of the reported information. Businesses will need to monitor changes in ownership and management throughout the year for compliance purposes. Many companies will be subject to this requirement, although the rule provides for 23 exceptions, including banks, wholly-owned subsidiaries, SEC reporting companies, and ‘large operating companies.’
How will the RULE be enforced?
The reported information will be aggregated by FinCEN into a central database for national security, intelligence and law enforcement purposes. Information will be tightly controlled and will not be publicly available. There are potential civil and criminal consequences for failing to comply. Willful violations can result in civil penalties of up to $500 per day a violation has not been remedied and criminal penalties can reach $10,000 and/or up to two years in prison.
How can an attorney help businesses navigate through the requirements?
The first step is to determine whether your company is exempt from reporting requirements. If not, a company should review its management and ownership structure to understand its reporting obligations. Companies with very simple management and ownership structures may be able to navigate the filing on their own. However, if there is some complexity in a company’s management or ownership structure or uncertainty about determinations of beneficial ownership or substantial control, an attorney can help you avoid missteps.
The rule becomes effective Jan. 1, 2024, with a one-year filing grace period for existing companies.
Given the goal of transparency to combat financial crimes, the government is casting a rather wide net, so companies need to review their structures to determine which individuals have a sufficient ownership interest and substantial control to trigger reporting requirements.
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Legal Intelligencer
(by Casey Alan Coyle and Emily Davis)
Sometimes life imitates art. The Disney animated film “Encanto” centers around a family, the Madrigals. They live in a magical house that bestows upon each child in the family a unique gift, except the protagonist, Mirabel. Mirabel soon discovers that the magic surrounding the house is in danger and seeks out the assistance of her ostracized uncle, Bruno. The Madrigal family avoided mention of Bruno for ten years. Mirabel knew the basics: he could predict the future. But the contours of his powers, the details of his disappearance, the mere mention of his name—all forbidden topics of discussion. The family even wrote a Grammy-nominated song about it, “We Don’t Talk About Bruno.”
Likewise, for nearly a decade, the Pennsylvania Supreme Court has declined to further discuss its holding in Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014), despite numerous calls for clarification. As a result, uncertainty remains regarding the “gist of the action” doctrine in Pennsylvania. Therefore, just like the Madrigal family, there is one question permeating the legal community: is it finally time to talk about Bruno?
Contract v. Tort Distinction
The contract-tort distinction is fundamental to civil litigation. While actions for breach of contract compensate the plaintiff for damages foreseeable at the time of a contract, tort claims remedy injuries resulting from the defendant’s conduct. Nonetheless, the contract-tort distinction is often unclear. Charles Miller, Contortions over Contorts: A Distinct Damages Requirement?, 28 Tex. Tech. L. Rev. 1257, 1257-58 (1997). This blurred boundary is complicated by plaintiffs’ ability to recover additional forms of damages for actions sounding in tort that are not available for actions sounding in contract, like punitive damages. Danielle Sawaya, Not Just For Products Liability: Applying The Economic Loss Rule Beyond Its Origins, 83 Fordham L. Rev. 1073, 1083 (2014). These additional remedies provide a strong incentive for plaintiffs to disguise breach of contract claims as tort claims to recover a greater damages award. Lisa T. Munyon, et al., Tort and Contract Actions: Strange Bedfellows No More In The Wake Of Tiara Condominium, 87 Fla. B.J. (2013).
The Bruno Decision
Courts have attempted to devise rules to maintain the conceptual distinction between tort and contract claims, and one of those is the “gist of the action” doctrine. The doctrine bars a plaintiff from suing in tort when the “gist” or gravamen of the plaintiff’s claim is contractual in nature. eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 15 (Pa. Super. 2002). The purpose of the doctrine is to preclude a plaintiff from “re-casting ordinary breach of contract claims into tort claims.” Hart v. Arnold, 884 A.2d 316, 339 (Pa. Super. 2005). As recently explained by one federal court: “Pennsylvania courts have employed this doctrine to deal with Trojan Horse torts—that is, instances when plaintiffs have clothed a breach of contract claim in negligence terms so they can recover noneconomic damages (like pain and suffering) that they could not recover under contract law.” Humphries v. Pa. State. Univ., No. 4:20-CV-00064, 2021 WL 435532, at *7 (M.D. Pa. Sept. 24, 2021).
While the gist of the action doctrine has been a longstanding fixture of Pennsylvania law, the Pennsylvania Supreme Court did not formally adopt it until Bruno. In doing so, the Court articulated the test to determine when a claim is barred by the doctrine. The Court held that, “[i]f the facts of a particular claim establish that the duty breached is one created by the parties by the terms of their contract—i.e., a specific promise to do something that a party would not ordinarily have been obligated to do but for the existence of the contract—then the claim is to be viewed as one for breach of contract.” Bruno, 106 A.3d at 68. In contrast, “[i]f. . . the facts establish that the claim involves the defendant’s violation of a broader social duty owed to all individuals, which is imposed by the law of torts and, hence, exists regardless of the contract, then it must be regarded as a tort.” Id. The Supreme Court added that the “nature of the duty alleged to have been breached” is the “critical determinative factor in determining whether the claim is truly one in tort, or for breach of contract.” Id.
Justice Eakin authored a concurring opinion, in which he cautioned against what he deemed “troublesome language” in the majority opinion. Bruno, 106 A.3d at 124. He opined: “To the extent the majority is perceived to ‘paint with a broad brush,’ suggesting any negligence claim based on a contracting party’s manner of performance does not arise from the underlying contract, I must disagree. In some cases, such as here, that may be the case. However, synthesizing case law to stand for such a broad pronouncement does not comport with the ‘gist of the action’ doctrine—an inherently circumstantial analysis.” Id.
The Fallout
Although intended to end the uncertainty surrounding the gist of the action doctrine, Bruno left several questions unanswered. Chief among them is how to determine whether a claim concerns a “broader social duty” or a duty imposed by contract. Malone v. Weiss, No. 17-1694, 2018 WL 827433, at *4 (E.D. Pa. Feb. 12, 2018). As one federal court put it, “the Bruno court did not explain how to separate claims that implicate ‘broader social dut[ies]’ (and do not trigger the gist of the action doctrine) from contract duties (that do trigger gist of the action).” Ohama v. Markowitz, 434 F.Supp.3d 303, 319 (E.D. Pa. 2020). This lack of guidance has proven “particularly problematic in the context of a claim for fraudulent inducement because such claims inherently involve both a ‘social duty’ to refrain from fraud as well as duties imposed by contract.” Sheridan v. Roberts Law Firm, No. 2:19-CV-00467, 2019 WL 6726469, at *4 (E.D. Pa. Dec. 11, 2019) (citation and quotation marks omitted).
Pennsylvania state and federal courts have reached “different conclusions” about whether the gist of the action doctrine applies to fraudulent inducement claims. Downs v. Andrews, 639 Fed. Appx. 816, 820 (3d Cir. 2016). In Malone, for instance, the federal district court found that “[p]ermitting a fraudulent inducement claim . . . would essentially negate the entire doctrine of gist of the action because a Plaintiff would have only to allege that Defendants never intended to abide by a provision in their contract to escape dismissal.” Malone, 2018 WL 827433, at *4. On the other hand, in KMB Shamrock, Inc. v. LNR Transportation, Inc., 50 Pa. D. & C. 5th 259 (Lackawanna Cnty. Ct. Com. Pl.), the state court determined that fraudulent inducement claims should “remain unaffected by the gist of the action doctrine following . . . Bruno.”
The lack of clarity surrounding the doctrine is not confined to the tort of fraudulent inducement. Consider, for example, the tort of breach of fiduciary duty, which is often raised alongside a breach of contract claim where an employee solicits customers for a competitor during his/her employment in violation of a non-solicitation agreement. In that scenario, the act underlying the tort is identical to the act constituting the breach of the contract. Therefore, allowing both claims to proceed effectively allows the plaintiff to obtain double recovery for the same harm. Yet, under Bruno, is not clear whether the gist of the action doctrine precludes such a result.
In sum, and as noted by one commentator, “[w]hile the court’s decision to invoke a duty-based standard was an attempt to establish a uniform interpretation of the doctrine under Pennsylvania law, its broad holding allows for continued ambiguity surrounding the application of the doctrine and may increase the number of tort claims brought by plaintiffs who can rely on the opinion’s broad language.” Lauren Anthony, Home Is Where The Confusion Is: Pennsylvania Formally Adopts The “Gist Of The Action” Doctrine And Builds A House For Ambiguity In Bruno V. Erie Insurance Co., 61 Vill. L. Rev. 235, 246 (2016).
Conclusion
Almost ten years after Bruno, the uncertainty surrounding the gist of the action doctrine persists. Therefore, if given the opportunity through the proper vehicle, the Pennsylvania Supreme Court likely will further expound on its decision in Bruno. After all, there’s a lot to say about Bruno.
Casey Alan Coyle is a shareholder at Babst Calland. and focuses his practice on appellate law and complex commercial litigation. He is also a former law clerk to Chief Justice Emeritus Thomas Saylor of the Pennsylvania Supreme Court. Contact him at 267-939-5832 or ccoyle@babstcalland.com.
Emily A. Davis is an associate at Babst Calland and focuses her practice on appellate law and complex commercial litigation. She is also a former law clerk to Chief Justice Baer of the Pennsylvania Supreme Court. Contact her at 724-672-7445 or edavis@babstcalland.com.
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Reprinted with permission from the February 2, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
GO-WV
(By Lisa Bruderly)
U. S. EPA and the U. S. Army Corps of Engineers (the Agencies) have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20, 2023. The definition of WOTUS determines federal jurisdiction under the Clean Water Act (CWA). For example, projects involving oil or natural gas development or pipeline construction require Corps permitting for impacts from crossing, or otherwise disturbing, WOTUS. Typically, the more impacts to such federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.
Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-need-ed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)).
The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). Justice Anthony Kennedy, however, advanced a broader interpretation of WOTUS in his concurring opinion, which was based on the concept of a “significant nexus,” meaning that wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered water.”
President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination. Publication of this definition, at this time, is likely a preemptive move by the Agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the Court is considering “the proper test for determining whether wetlands are ‘waters of the United States.’” Some have speculated that the U. S. Supreme Court’s opinion may support a more narrow interpretation of WOTUS than is currently being implemented by the Agencies. If true, this inconsistency would create even more uncertainty in identifying WOTUS.
While this new WOTUS definition may not, conceptually, be a significant change to how the Agencies regulate streams and wetlands, the new definition could expand how the Agencies evaluate whether a wetland is “adjacent” to a WOTUS and whether a waterbody will “significantly affect” a WOTUS, both of which would support federal jurisdiction of the stream/wetland. The preamble to the new definition includes lengthy discussion regarding adjacent wetlands. In addition, the new definition of “significantly affect” enumerates five factors to be assessed and five functions to be considered in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water. Factors include distance from the traditionally navigable water, hydrologic factors and climatological variables. Functions include contribution of flow and retention and attenuation of runoff. Both the factors and the functions are broad and open to interpretation, which could lead to the Agencies asserting jurisdiction over more waterbodies.
The new definition also codifies that the effect of the potentially regulated water must be evaluated “alone or in combination with similarly situated waters in the region,” which will likely broaden how the Agencies evaluate the potential regulation of ephemeral and isolated waterbodies.
Consistent with President Obama’s Clean Water Rule and President Trump’s Navigable Waters Protection Rule, the new WOTUS definition has already been challenged in the U.S. District Court of the Southern District of Texas by Texas and 18 industry groups, including the American Petroleum Institute, claiming that the new definition is “unworkable” and in conflict with the CWA. These challenges may result in the stay or vacatur of the new definition. If this occurs, the Agencies may, again, revert back to the current definition of WOTUS.
Babst Calland will continue to follow these and other Clean Water Act developments. If you have any questions about these developments, contact Lisa Bruderly at 412-394-6495 or lbruderly@babstcalland.com.
Click here, to view the article online in the February issue of Go-WV News.
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On December 10, 2022, the Pennsylvania Environmental Quality Board (EQB) published in the Pennsylvania Bulletin a final-omitted rulemaking (Conventional VOC Rule), 52 Pa. Bull. 7635, and a final-form rulemaking (Unconventional VOC Rule), 52 Pa. Bull. 7587, adopting reasonably available control technology (RACT) standards to control volatile organic compound (VOC) and methane emissions from existing and future conventional oil and gas operations and unconventional oil and gas operations. These regulations establish RACT requirements for conventional and unconventional oil and natural gas sources of VOC emissions. These sources include natural gas-driven continuous bleed pneumatic controllers, natural gas-driven diaphragm pumps, reciprocating compressors, centrifugal compressors, fugitive emissions components and storage vessels installed at unconventional well sites, gathering and boosting stations, and natural gas processing plants, as well as storage vessels in the natural gas transmission and storage segment.
The Conventional VOC Rule was effective on notice from the Pennsylvania Department of Environmental Protection (PADEP) on December 2, 2022. Members of the Pennsylvania House Environmental Resources and Energy (ERE) Committee had disapproved the final-omitted regulation, Regulation #7-579, in a November 14, 2022, letter to the Independent Regulatory Review Commission (IRRC). On November 17, 2022, the IRRC approved the final-omitted rulemaking, and the EQB subsequently adopted an emergency certified final-omitted regulation, Regulation #7-580, on November 30, 2022. See Press Release, PADEP, “EQB Adopts Emergency Air Quality Regulation for Existing Conventional Oil and Gas Sources” (Nov. 30, 2022). Regulation #7-580 is identical to Regulation #7-579 except that it received an emergency certification of need from then-Governor Tom Wolf. PADEP said that the final-omitted regulation was appropriate under the Commonwealth Documents Law because notice and comment from the public was unnecessary, impractical, and contrary to the public interest. PADEP recommended that EQB adopt the regulation as a final-omitted regulation as part of the process to meet the U.S. Environmental Protection Agency’s (EPA) December 16, 2022, deadline for the state to adopt methane emission controls for oil and gas operations. See Executive Summary, “Control of VOC Emissions from Conventional Oil and Natural Gas Sources—25 Pa. Code Chapter 129” (Oct. 12, 2022); see also Vol. 39, No. 4 (2022) of this Newsletter. Failure of the state to adopt the required regulations reportedly could have resulted in the loss of over $500 million in federal highway assistance. On December 5, 2022, the Pennsylvania Independent Oil & Gas Association, Pennsylvania Independent Petroleum Producers, and Pennsylvania Grade Crude Oil Coalition filed a lawsuit challenging the legality of the Conventional VOC Rule. See Petition for Review in the Nature of a Complaint for Declaratory Relief, Pa. Indep. Oil & Gas Ass’n v. Commonwealth, No. 574 MD 2022 (Pa. Commw. Ct. filed Dec. 5, 2022).
The Unconventional VOC Rule, which became effective upon publication in the Pennsylvania Bulletin, was adopted by the EQB at its June 14, 2022, meeting. The House ERE Committee met on July 11, 2022, and approved a letter to the IRRC announcing its opposition to the final EQB regulation on a number of grounds, including that the revised regulation had not gone through public notice and comment. During its July 21, 2022, meeting, the IRRC unanimously voted to approve the regulation. The House ERE Committee met on August 2, 2022, to vote on a concurrent resolution disapproving of the rule, and the resolution was voted out of committee. The House and Senate each had 30 calendar days, or 10 legislative voting days (whichever is later), to adopt the concurrent resolution. Neither took further action and the regulation was published in the Pennsylvania Bulletin.
A rule substantially similar to those published on December 10 was approved by the EQB in March 2022, but it did not distinguish between conventional and unconventional emission sources. That rulemaking had advanced to the Pennsylvania House and Senate ERE Committees and the IRRC for consideration, but the House ERE Committee issued a disapproval letter for the rulemaking on April 26, 2022. Three trade associations also filed a petition for review of the rulemaking in the Commonwealth Court of Pennsylvania. The petition and the House ERE Committee’s disapproval letter alleged that PADEP failed to comply with Act 52 of 2016, which requires that any rulemaking concerning conventional oil and gas wells be undertaken separately and independently from those concerning unconventional oil and gas wells or other subjects. As a result, PADEP withdrew the regulation from IRRC consideration on May 4, 2022. See Vol. 39, No. 2 (2022) of this Newsletter.
PADEP submitted both the Unconventional VOC and Conventional VOC Rules to EPA as a revision to Pennsylvania’s state implementation plan (SIP). On December 14, 2022, EPA issued a completeness determination for PADEP’s revision to Pennsylvania’s SIP, which avoided the imposition of federal highway funding sanctions that were set to take effect on December 16, 2022. EPA is now evaluating whether it will approve the SIP revision.
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