FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On May 26, 2022, Penn State announced that a health study commissioned by the Pennsylvania Department of Environmental Protection (PADEP) to examine the environmental and human health impacts of spreading conventional oil and gas produced water (OGPW) as a dust suppressant concluded the practice is ineffective for that purpose and poses dangers to the environment and human health. See News Release, Tim Schley & Ashley J. WennersHerron, Penn State Coll. of Eng’g, “Oil and Gas Brine Control Dust ‘No Better’ than Rainwater, Researchers Find” (May 26, 2022). The announcement coincided with PADEP’s finalization of the study. See William Burgos et al., Penn State Univ., “Evaluation of Environmental Impacts from Dust Suppressants Used on Gravel Roads” (May 26, 2022) (Study).
Historically, road spreading OGPW was authorized in Pennsylvania, but PADEP placed a moratorium on the practice in response to a 2018 legal challenge and subsequent decision by the Environmental Hearing Board. See Lawson v. PADEP, EHB Docket No. 2017-051-B (May 17, 2018). In accordance with Pennsylvania solid waste laws, using OGPW on roads for dust control could continue if conventional operators demonstrated the chemical makeup of the wastewater was similar to commercially available dust suppressants.
The Study assessed the effectiveness and environmental impacts associated with various dust suppressants used on dirt and gravel roadways, which included testing synthetic rainwater, calcium chloride (CaCl2) brine, soybean oil, and OGPW from three conventional oil and gas operations.
PADEP presented the study results at the July 25, 2022, Oil and Gas Technical Advisory Board meeting. In sum, the study found that OGPW is no more effective than rainwater as a dust suppressant on roadways, likely due in part to OGPW’s high sodium concentrations, which can affect how OGPW “sticks” to dust particles. Further, the study showed OGPW actually destabilized gravel roadways, which could lead to more dust and increased long-term road maintenance costs. According to the study results, only CaCl2-based brines and soybean oil were effective dust suppressants, with the study’s rainfall-runoff experiments showing that CaCl2-based brines led to the lowest concentration of total suspended solids washed off the roadbeds. Study at 9.
The study also found that runoff from spreading OGPW on unpaved roadways contained concentrations of barium, strontium, lithium, iron, and manganese that exceeded human-health based criteria and levels of radioactive radium that exceeded industrial discharge standards. In addition, most contaminants contained in the applied dust suppressants washed from the roadbed during rain events. However, roadbeds treated with OGPW retained traces of radium, sodium, iron, and manganese after rainfall events and had the highest concentration of combined radium in runoff. Id. at 9–10. The study supports Penn State’s conclusions from a similar peer-reviewed study published in 2021. See Audrey M. Stallworth et al., “Efficacy of Oil and Gas Produced Water as a Dust Suppressant,” 799 Sci. of the Total Env’t 149347 (2021).
On September 20, 2022, PADEP informed the Citizens Advisory Council (CAC) that analysis of brine as a co-product submitted by conventional operators to allow for spreading on roadways for dust control did not meet the state’s residual waste regulations. PADEP is currently updating waste disposal and handling standards for conventional operations and a draft rulemaking is expected to be presented to oil and gas advisory committees following the December 18, 2022, Pennsylvania Grade Crude Development Advisory Council meeting. See Meeting Minutes, CAC (Sept. 20, 2022); PADEP, “October 2022 Report to the Citizens Advisory Council” (Oct. 2022). A report from PADEP detailing, among other things, conventional operators’ compliance with state environmental and regulatory requirements was due to the Governor’s Office on September 1, 2022, but has not been made public as of the time of this report. See 52 Pa. Bull. 4229 (July 30, 2022).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
During its June 14, 2022, meeting, the Pennsylvania Environmental Quality Board (EQB) voted 15-3, with one abstention, to adopt Part I of a revised final regulation reducing volatile organic compound (VOC) and methane emissions from unconventional wells and facilities. See Final-Form Rulemaking Preamble, EQB, “Control of VOC Emissions from Unconventional Oil and Natural Gas Sources” (June 14, 2022). This regulation establishes reasonably available control technology (RACT) requirements for 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. Id. at 1.
A substantially similar rule approved by the EQB in March 2022 did not distinguish between conventional and unconventional emission sources. That rulemaking had advanced to the Pennsylvania House and Senate Environmental Resources and Energy (ERE) Committees and the Independent Regulatory Review Commission (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 the Pennsylvania Department of Environmental Protection (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 revised the regulation to remove provisions regulating conventional wells and facilities and submitted the regulation to the EQB for approval, which it approved during 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 body took further action.
On October 12, 2022, the EQB voted 15-3 to approve Part II, a separate rule addressing VOC and methane emissions from conventional wells and facilities. See Final-Omitted Rulemaking Preamble, EQB, “Control of VOC Emissions from Conventional Oil and Natural Gas Sources” (Oct. 12, 2022). PADEP recommended that the EQB adopt Part II as a final-omitted regulation as part of the process to meet the U.S. Environmental Protection Agency’s 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). Adoption of Part II as a final-omitted regulation allows for the rulemaking to skip the proposed rulemaking stage and proceed forward without any public comment. Per the Pennsylvania Commonwealth Documents Law, PADEP may use the final-omitted process if starting at the proposed stage for rulemaking is “impracticable, unnecessary, or contrary to the public interest.” 45 Pa. Stat. § 1204(3). In its executive summary of the rulemaking, PADEP justified promulgation of Part II as a final-omitted regulation, stating that “[a] public comment period is also contrary to the public interest because it will delay the implementation of the VOC RACT requirements in this final-omitted rulemaking, resulting in the Commonwealth being unable to satisfy the December 16, 2022, sanction deadline.” Executive Summary at 5. Under the Regulatory Review Act, 71 Pa. Stat. §§ 745.1–.14, the IRRC and the House and Senate still have the opportunity to review the rulemaking. Failure of the state to adopt this rule reportedly may result in the loss of over $500 million in federal highway funding. Executive Summary at 5.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On September 16, 2022, the U.S. Court of Appeals for the Third Circuit affirmed a district court ruling that Pennsylvania state legislators and municipalities lacked standing to challenge the Delaware River Basin Commission’s (DRBC) regulation banning hydraulic fracturing for natural gas within the basin. Yaw v. DRBC, 49 F.4th 302 (3d Cir. 2022), aff’g No. 2:21-cv-00119, 2021 WL 2400765 (E.D. Pa. June 11, 2021); see Vol. XXXVIII, No. 3 (2021) of this Newsletter. The court held that the appellants failed to meet the standing requirements of Article III of the U.S. Constitution because: (1) in the case of the state senator appellants, individual members of the state legislature lack standing to assert the interests of the legislature as a whole; and (2) in the case of the municipality appellants, their alleged injuries were “conjectural” or “hypothetical,” as opposed to “actual” or “imminent.” The court also held that none of the appellants had standing as trustees of Pennsylvania’s public natural resources under the Environmental Rights Amendment to the Pennsylvania Constitution because the DRBC’s ban has not cognizably harmed the trust.
The five-member DRBC is governed by a compact between the federal government and four states that draw water from the Delaware River: Pennsylvania, New Jersey, Delaware, and New York, represented by a member of the U.S. Army Corps of Engineers and each state’s governor, respectively. See Delaware River Basin Compact, Pub. L. No. 87-328, 75 Stat. 688. The DRBC has authority to approve, construct, operate, and regulate projects and facilities that use the basin’s water resources. It can also address issues outside the basin if they have a substantial effect on the basin’s water quality and water supply and if the issues conflict with the DRBC’s comprehensive plan. See Cong. Research Serv., “Federal Conservation of the Delaware River” (Mar. 18, 2015).
The Third Circuit’s decision follows the DRBC’s February 2021 vote to ban hydraulic fracturing in the basin, which had been under a de facto moratorium since 2010. In support of the ban, the DRBC found that hydraulic fracturing for extraction of oil and natural gas “poses significant, immediate and long-term risks to the development, conservation, utilization, management, and preservation” of water resources within the basin. Yaw, 49 F.4th at 307. Following the ban, Pennsylvania legislators and municipalities filed suit, arguing that the DRBC overstepped its legal authority. Among other things, they alleged the ban “violated the Takings Clause of the United States Constitution, illegally exercised the power of eminent domain, and violated the Constitution’s guarantee of a republican form of government.” Id.
Acknowledging that challenges are likely to continue, the court noted that its ruling is narrow. It said that although the legislators and municipalities lack standing, they can attempt to seek redress of the issues by other means, such as requesting that the DRBC reverse the ban, seeking to amend the compact, or persuading a party with standing to assert the institutional injuries. Id.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
The Supreme Court of Pennsylvania has upheld a preliminary injunction of the Regional Greenhouse Gas Initiative (RGGI) rule granted by the Commonwealth Court of Pennsylvania. On July 8, 2022, the commonwealth court granted a preliminary injunction preventing the state from participating in RGGI pending resolution of the case. See Vol. 39, No. 3 (2022) of this Newsletter. Governor Tom Wolf appealed the injunction to the supreme court. On August 31, 2022, the supreme court denied the state’s emergency request to reinstate the automatic supersedeas, thereby maintaining the preliminary injunction while litigation on the merits proceeds before the commonwealth court later this year. See Ziadeh v. Pa. Legis. Reference Bureau, No. 79 MAP 2022 (Pa. Aug. 31, 2022).
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 state’s cap-and-trade program to 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 April 25, 2022, owners of coal-fired power plants and other stakeholders filed a petition for review and an application for special relief in the form of a temporary injunction, and a group of state lawmakers filed a challenge as well. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been completed and a hearing is expected to occur in November 2022.
Additionally, on July 12, 2022, natural gas companies Calpine Corp., Tenaska Westmoreland Management LLC, and Fairless Energy LLC filed a third legal challenge to the rule with arguments similar to those brought in the other two cases. See Calpine Corp. v. PADEP, No. 357 MD 2022 (Pa. Commw. Ct. filed July 12, 2022). Constellation Energy Corporation and Constellation Energy Generation LLC have petitioned to intervene in the case and a hearing on this application was scheduled for November 2, 2022. Briefing in this case is due in December 2022.
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 © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
As reported in Vol. 55, No. 3 (2022) of the Water Law Newsletter, the Pennsylvania House and Senate Environmental Resources and Energy standing committees (Standing Committees) and the Independent Regulatory Review Commission (IRRC) recently disapproved a proposed rulemaking to change the water quality criterion for manganese in Pennsylvania. The future of the rulemaking is now uncertain.
Proposed Changes to Manganese Water Quality Criterion
The proposed manganese rule would add a numeric water quality criterion for manganese of 0.3mg/L to Table 5 at 25 Pa. Code § 93.8c, which is intended to “protect human health from the neurotoxicological effects of manganese.” Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). Section 93.8c establishes human health and aquatic life criteria for toxic substances, meaning the Pennsylvania Department of Environmental Protection (PADEP) would be regulating manganese as a toxic substance. The existing criterion of 1.0 mg/L, which was established in 25 Pa. Code § 93.7 as a water quality criterion, would be deleted. The 0.3 mg/L criterion would apply to all surface waters in the commonwealth. PADEP identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth.” Executive Summary at 3.
PADEP also specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expects that mining operators would need to perform additional treatment to meet this criterion. Id. Final amendments to treatment systems would be implemented through PADEP’s permitting process and other approval actions. Consulting and engineering firm Tetra Tech estimated the overall cost to the mining industry to achieve compliance with the 0.3 mg/L standard “could range between $44–$88 million in annual costs (that is, for active treatment systems using chemical addition for manganese removal) and upwards of $200 million in capital costs.” Comment and Response Document at 213, “Water Quality Standard for Manganese and Implementation” (Aug. 9, 2022).
Rulemaking History
The Pennsylvania Environmental Quality Board (EQB) adopted the proposed rulemaking in December 2019. See Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). This rulemaking was prompted by the addition of subsection (j) to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, by Act 40 on October 30, 2017. Act 40 directed the EQB to promulgate regulations under Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, and related statutes to require that the water quality criteria for manganese established under 25 Pa. Code ch. 93 be met.
On June 30, 2020, PADEP submitted a copy of the proposed rulemaking to the IRRC and to the chairpersons of the Standing Committees for review and comment. The proposed rulemaking was published in the Pennsylvania Bulletin on July 25, 2020, 50 Pa. Bull. 3724, with a 60-day public comment period that closed on September 25, 2020. Comments were received from 957 commenters, including testimony from 13 witnesses at the public hearings. Since the proposed rulemaking, PADEP met with the Mining and Reclamation Advisory Board, the Aggregate Advisory Board, the Public Water Systems Technical Assistance Center Board, and the Water Resources Advisory Committee to discuss the proposed rule. On August 9, 2022, the EQB voted to adopt the final manganese rule.
Recent Disapproval of Proposed Manganese Criterion and Possible Next Steps
After the EQB adopted the manganese rule as final at its August 9 meeting, the rulemaking was sent to the Standing Committees and the IRRC. The IRRC received over 30 comments on the rulemaking and heard in-person testimony from numerous interested parties, including members of the regulated industry. The Standing Committees and the IRRC each voted to disapprove the rulemaking in early September. See IRRC, “Regulation #7-553: Water Quality Standard for Manganese and Implementation,” http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3271.
Because of these disapprovals, the manganese rule was not sent immediately to the Office of the Attorney General for final approval. Instead, the rule was sent back to the EQB, who can choose to withdraw the regulation or resubmit it—with or without changes—to the IRRC and the Standing Committees within 40 days. If the EQB resubmits the rulemaking, the IRRC will hold a second public meeting within 15 days, and the Standing Committees then receive the rulemaking and can issue a concurrent resolution disapproving the regulation within 14 days. If the Standing Committees do not issue a concurrent resolution, the rulemaking can become final after the Attorney General’s approval. If the Standing Committees do issue a concurrent resolution, the rulemaking is sent to the General Assembly for a vote. If the General Assembly adopts the concurrent resolution, the General Assembly presents it to the Governor to sign or veto. If the General Assembly does not adopt the concurrent resolution, the rulemaking is sent to the Attorney General, who can approve the rulemaking. The regulation becomes final at publication in the Pennsylvania Bulletin. See 71 Pa. Stat. § 745.7; IRRC, “The Regulatory Review Process in Pennsylvania,” at 17–22 (2019).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
In late July 2022, the Pennsylvania Department of Environmental Protection (PADEP) published its Non-Regulatory Agenda, which outlines the agency’s upcoming plans related to its documents, manuals, and technical guidance. The Non-Regulatory Agenda outlines the agency’s intent to rescind its Engineering Manual for Mining Operations, TGD No. 563-0300-101 (Jan. 1, 1999), by the end of this year. The agenda also notes PADEP’s intent to revise several other technical guidance documents (TGDs) related to coal mining activities in the commonwealth. The TGDs identified by PADEP to be revised in early 2023 are:
- Surface Water Protection – Underground Bituminous Coal Mining Operations, TGD No. 563-2000-655 (Oct. 8, 2005);
- Financial Assurance and Bond Adjustments for Mine Sites with Post-Mining Discharges, TGD No. 563-2504-450 (Dec. 15, 2007) (draft);
- Increased Operation and Maintenance Costs of Re-placement Water Supplies (on All Coal and Surface Noncoal Sites), TGD No. 562-4000-102 (Dec. 2, 2006);
- Water Supply Replacement and Permitting, TGD No. 563-2112-605 (Dec. 31, 1998); and
- Water Supply Replacement and Compliance, TGD No. 562-4000-101 (Oct. 18, 1999).
Draft revisions will be published in the Pennsylvania Bulletin and should be available online at https://www.depgreenport. state.pa.us/elibrary/GetFolder?FolderID=4556. The public will have an opportunity to comment on these draft revisions for a period of at least 30 days.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
On November 12, 2022, the Pennsylvania Environmental Quality Board (EQB) published amendments to the Pennsylvania Department of Environmental Protection’s (PADEP) regulations in 25 Pa. Code chs. 121 and 129 for all major stationary sources of nitrogen oxides (NOx) or volatile organic compound (VOC) emissions, which is commonly known as the RACT III rule. See 52 Pa. Bull. 6960 (Nov. 12, 2022). The rule requires major sources of either or both of these air pollutants in existence on or before August 3, 2018, to meet reasonably available control technology (RACT) emission limits and requirements by January 1, 2023. See also Vol. 39, No. 1 (2022) of this Newsletter (Pennsylvania – Oil & Gas report).
These regulations are being promulgated to address federal Clean Air Act (CAA) RACT requirements to meet the 2015 ozone National Ambient Air Quality Standards (NAAQS) in the commonwealth. The CAA requires a reevaluation of RACT when new ozone NAAQS are promulgated. RACT is required in nonattainment areas, including the Ozone Transport Region, which includes Pennsylvania. The RACT III rulemaking establishes presumptive RACT requirements and emission limits for specific source categories of affected facilities. The RACT III rulemaking also imposes additional requirements for all major sources of NOx and/or VOCs, not just those subject to the presumptive RACT requirements and limitations.
RACT III applies to all major sources of VOCs and NOx. Because the commonwealth is in the Northeast Ozone Transport Region, the major source threshold is 50 tons per year (tpy) of VOCs and 100 tpy of NOx. PADEP estimates that 425 title V facility owners and operators will be subject to the final rule. Affected source categories include combustion units; process heaters; turbines; stationary internal combustion engines; direct-fired heaters, furnaces, or ovens; and other sources that are not regulated elsewhere under chapter 129. The sources included in these categories are located at various facility types, including fossil fuel-burning and other electric generation, petroleum and coal products manufacturing, and iron and steel milling. RACT III imposes presumptive RACT limitations at 25 Pa. Code § 129.112 on additional categories of facilities that were not previously subject to any presumptive RACT limitations or requirements. These categories include glass melting furnaces, lime kilns, and certain combustion units.
The owner or operator of a NOx air contamination source with a potential emission rate equal to or greater than 5.0 tpy of NOx for which presumptive RACT requirements are not outlined in section 129.112 is required to propose a NOx RACT requirement or RACT emission limitation to PADEP. Similarly, the owner or operator of a VOC air contamination source with a potential emission rate equal to or greater than 2.7 tpy of VOCs for which presumptive RACT requirements are not outlined in section 129.112 is required to propose a VOC RACT requirement or RACT emission limitation to PADEP.
Notably, 25 Pa. Code § 129.115 requires that all major VOC or NOx emitting facilities submit a written notification to PADEP or the appropriate local air pollution control agency by December 31, 2022, identifying air contamination sources at the facility as covered by—or exempt from—RACT III requirements. This written notification requirement applies to all major sources of NOx and VOC emissions, even if those facilities are not subject to the presumptive RACT provisions of section 129.112. The written notification must include the following for each identified air contamination source:
- a description of each identified air contamination source at the facility, including make, model, and location;
- the applicable RACT requirement or RACT emission limitation;
- how the owner or operator will comply with the application RACT requirement or RACT emission limitation; and
- the reason why a source is exempt from the RACT requirements and RACT emission limitations, if applicable.
Operators are not required to immediately amend operating permits to include RACT III, but as of January 1, 2023, the final rulemaking will apply to those sources covered by the rulemaking. As of this compliance date, RACT III’s requirements could supersede any conflicting requirements and emissions limitations in a facility’s permit or Pennsylvania regulations, unless those conflicting requirements are more stringent than RACT III. See 25 Pa. Code § 129.112(l)–(m).
The EQB adopted the proposed rulemaking in May 2021. The proposed rulemaking was published for public comment, see Vol. XXXVIII, No. 4 (2021) of this Newsletter, and PADEP held public hearings on the proposal. PADEP reviewed and responded to comments on the proposed rule and presented the final rule to the EQB at its August 9, 2022, meeting, where it was approved. Upon approval, the regulation was submitted to the Pennsylvania House and Senate Environmental Resources and Energy standing committees and the Pennsylvania Independent Regulatory Review Commission (IRRC). The standing committees approved the regulation on September 14, 2022, and the IRRC approved the regulation on September 15, 2022. The regulation was then approved by the Office of the Attorney General before being published in the Pennsylvania Bulletin. PADEP will now submit the regulation to the U.S. Environmental Protection Agency (EPA) for incorporation into Pennsylvania’s state implementation plan.
The RACT III compliance date established by EPA is January 1, 2023, and this regulation went into effect immediately upon publication in the Pennsylvania Bulletin. Owners and operators should take note of the impending December 31, 2022, notification deadline described above.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Water Law Newsletter
(By Lisa Bruderly and Christina Puhnaty)
In early September 2022, the Pennsylvania House and Senate Environmental Resources and Energy standing committees (Standing Committees) and the Independent Regulatory Review Commission (IRRC) disapproved the proposed rulemaking to change the water quality criterion for manganese in Pennsylvania. The future of the rulemaking is now uncertain.
Proposed Changes to Manganese Water Quality Criterion
The proposed manganese rule would add a numeric water quality criterion for manganese of 0.3 mg/L to Table 5 at 25 Pa. Code § 93.8c, which is intended to “protect human health from the neurotoxicological effects of manganese.” Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). Section 93.8c establishes human health and aquatic life criteria for toxic substances, meaning the Pennsylvania Department of Environmental Protection (PADEP) would be regulating manganese as a toxic substance. The existing criterion of 1.0 mg/L, which was established in 25 Pa. Code § 93.7 as a water quality criterion, would be deleted. The 0.3 mg/L criterion would apply to all surface waters in the commonwealth. PADEP identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth.” Executive Summary at 3.
PADEP also specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expects that mining operators would need to perform additional treatment to meet this criterion. Id. Final amendments to treatment systems would be implemented through PADEP’s permitting process and other approval actions. Consulting and engineering firm Tetra Tech estimated the overall cost to the mining industry to achieve compliance with the 0.3 mg/L criterion “could range between $44–$88 million in annual costs (that is, for active treatment systems using chemical addition for manganese removal) and upwards of $200 million in capital costs.” Comment and Response Document at 213, “Water Quality Standard for Manganese and Implementation” (Aug. 9, 2022).
Rulemaking History
The Pennsylvania Environmental Quality Board (EQB) adopted the proposed rulemaking in December 2019. See Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). This rulemaking was prompted by the addition of subsection (j) to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, by Act 40 on October 30, 2017. Act 40 directed the EQB to promulgate regulations under Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, and related statutes to require that the water quality criteria for manganese established under 25 Pa. Code ch. 93 be met.
On June 30, 2020, PADEP submitted a copy of the proposed rulemaking to the IRRC and to the chairpersons of the Standing Committees for review and comment. The proposed rulemaking was published in the Pennsylvania Bulletin on July 25, 2020, 50 Pa. Bull. 3724, with a 60-day public comment period that closed on September 25, 2020. Comments were received from 957 commenters, including testimony from 13 witnesses at the public hearings. Since the proposed rulemaking, PADEP met with the Mining and Reclamation Advisory Board, the Aggregate Advisory Board, the Public Water Systems Technical Assistance Center Board, and the Water Resources Advisory Committee to discuss the proposed rule. On August 9, 2022, the EQB voted to adopt the final manganese rule.
Recent Disapproval of Proposed Manganese Criterion and Possible Next Steps
After the EQB adopted the manganese rule as final at its August 9 meeting, the rulemaking was sent to the Standing Committees and the IRRC. The IRRC received over 30 comments on the rulemaking and heard in-person testimony from numerous interested parties, including members of the regulated industry. The Standing Committees and the IRRC each voted to disapprove the rulemaking in early September. See IRRC, “Regulation #7-553: Water Quality Standard for Manganese and Implementation,” http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3271.
Because of these disapprovals, the manganese rule was not sent immediately to the Office of the Attorney General Office for final approval. Instead, the rule was sent back to the EQB, who can choose to withdraw the regulation or resubmit it—with or without changes—to the IRRC and the Standing Committees within 40 days. If the EQB resubmits the rulemaking, the IRRC will hold a second public meeting within 15 days, and the Standing Committees then receive the rulemaking and can issue a concurrent resolution disapproving the regulation within 14 days. If the Standing Committees do not issue a concurrent resolution, the rulemaking can become final after the Attorney General’s approval. If the Standing Committees do issue a concurrent resolution, the rulemaking is then sent to the General Assembly for a vote. If the General Assembly adopts the concurrent resolution, the General Assembly presents it to the Governor to sign or veto. If the General Assembly does not adopt the concurrent resolution, the rulemaking is sent to the Attorney General, who can approve the rulemaking. The regulation becomes final upon publication in the Pennsylvania Bulletin. See 71 Pa. Stat. § 745.7; IRRC, “The Regulatory Review Process in Pennsylvania,” at 17–22 (2019).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Pittsburgh Business Times
In March, the Securities and Exchange Commission (SEC) released a proposed rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors. If finalized, this rule would become some of the first mandatory Environmental, Social and Governance (ESG) reporting requirements for U.S. companies, requiring the disclosure of climate-related risk information in registration statements and periodic reports.
This proposed regulation has significant consequences not just for public companies, but private companies as well. Babst Calland Environmental Attorney Gina N. Falaschi explains the implications of the proposed rules, should they take effect.
What requirements could the rules introduce?
Under the SEC proposal, public companies would be required to disclose the oversight and governance of climate-related risk by their board and management; how any climate-related risk has a material effect on business and consolidated financial statements; the process for identifying, assessing and managing climate-related risks and how to integrate those processes into the company’s overall risk management; whether the company has adopted a transition plan to deal with climate-related risks and how to measure any physical or transitional risks to its operations; the effect of severe weather events and related natural conditions; and information regarding any publicly set climate-related targets or goals.
The SEC’s proposal also requires the disclosure of certain greenhouse gas emissions. These emissions are divided into three categories based on the Greenhouse Gas Protocol definitions. Scope 1 emissions are the direct greenhouse gas emissions that occur from sources that a company owns or controls, such as emissions from manufacturing activities and vehicles. Scope 2 emissions are the indirect greenhouse gas emissions that occur from the generation of energy that a company buys and consumes in its operations. Scope 3 emissions are the result of assets not owned or controlled by a company that the company indirectly impacts in its value chain, both upstream and downstream, from the company’s operations, such as the purchased goods and services, waste generation, business travel, downstream transportation, distribution and use of products sold, and the end-of-life treatment of products sold. Scope 3 emissions would have to be disclosed only if considered “material.”
What do companies need to do to prepare?
While the regulation has not yet been finalized, many companies could be required to begin compliance in the near future, so it’s prudent that both publicly traded and privately held companies consider the implications of this proposed rule.
Publicly traded companies may need to consider how the disclosed information will be used. The assumption is that forced disclosure will make companies change their behavior and reduce emissions. But it could also open companies to significant liability, including shareholder litigation.
Climate disclosures are surrounded by a degree of uncertainty, especially in anticipating climate impact. Scope 3 emissions calculations require many assumptions about human behavior and estimates to derive at a final number. These emissions also may be counted multiple times by different companies in the same value chain for a particular product.
This rule also requires companies to submit extensive amounts of information, which may require them to hire new personnel or outside consultants to analyze and report the required data to the SEC.
How are private companies affected?
Private companies may be asked by their publicly traded customers to estimate or account for their greenhouse gas emissions, which may also require them to hire outside consultants to assist with calculations and data gathering.
Additionally, this new rule will likely become a standard by which all companies are evaluated. Having ESG disclosures may make companies more attractive to customers and put private companies without ESG disclosures at a competitive disadvantage.
Although intended to drive companies to become greener, the new required disclosures may discourage companies from going public. ESG matters also will likely become a meaningful component of M&A transactions, and due diligence efforts will need to take into account the impact that a potential merger or acquisition will have on its climate disclosures.
ESG is a rapidly developing area of law. Business leaders should work with legal counsel and sustainability consultants when developing both voluntary and mandatory climate-related disclosures to mitigate risks related to these disclosures.
To view the full video with Gina Falaschi on this topic and other articles on current business issues and trends, visit www.pittsburghbusinesstimes.com/babstcalland. To learn more about Babst Calland and its environmental practice, go to www.babstcalland.com.
To view the full article and PDF, click here.
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Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
Smart Business
(By SBN Staff featuring Gina Falaschi)
In March, the Securities and Exchange Commission (SEC) released a proposed rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors. If finalized, this rule would become some of the first mandatory Environmental, Social and Governance (ESG) reporting requirements for U.S. companies, requiring the disclosure of climate-related risk information in registration statements and periodic reports.
This proposed regulation has significant consequences not just for public companies, but private companies as well.
Smart Business spoke with Gina N. Falaschi, an associate at Babst Calland, about the implications of the proposed rule, should it take effect.
What requirements could the rule introduce?
Under the SEC proposal, public companies would be required to make a number of disclosures related to their climate-related risks and impact. Those include disclosures regarding the oversight and governance of climate-related risk by their board and management, how any climate-related risk has a material effect on business and consolidated financial statements, and information regarding any publicly set climate-related targets or goals.
The SEC’s proposal also requires the disclosure of certain greenhouse gas emissions, which are divided into three categories. Scope 1 emissions are the direct greenhouse gas emissions that occur from sources that a company owns or controls. Scope 2 emissions are the indirect greenhouse gas emissions that occur from the generation of energy that a company buys and consumes in its operations. Scope 3 emissions are the result of assets not owned or controlled by a company that the company indirectly impacts in its value chain, both upstream and downstream from the company’s operations. Scope 3 emissions would have to be disclosed only if considered ‘material.’
What do companies need to do to prepare?
While the regulation has not yet been finalized, many companies could be required to begin compliance in the near future, so it’s prudent that both publicly traded and privately held companies consider the implications of this proposed rule.
Publicly traded companies may need to consider how the disclosed information will be used. The assumption is that forced disclosure will make companies change their behavior and reduce emissions. But it could also open companies to significant liability, including shareholder litigation.
Climate disclosures are surrounded by a degree of uncertainty, especially in anticipating climate impact. Scope 3 emissions calculations require many assumptions about human behavior and estimates to derive at a final number. These emissions also may be counted multiple times by different companies in the same value chain for a particular product.
This rule also requires companies to submit extensive amounts of information, which may require them to hire new personnel or outside consultants to analyze and report the required data to the SEC.
How are private companies affected?
Private companies may be asked by their publicly traded customers to estimate or account for their greenhouse gas emissions, which may also require them to hire outside consultants to assist with calculations and data gathering.
Additionally, this new rule will likely become a standard by which all companies are evaluated. Having ESG disclosures may make companies more attractive to customers and put private companies without ESG disclosures at a competitive disadvantage.
Although intended to drive companies to become greener, the new required disclosures may discourage companies from going public. ESG matters also will likely become a meaningful component of M&A transactions, and due diligence efforts will need to take into account the impact that a potential merger or acquisition will have on its climate disclosures.
ESG is a rapidly developing area of law. Business leaders should work with legal counsel and sustainability consultants when developing both voluntary and mandatory climate-related disclosures to mitigate risks related to these disclosures.
To view the PDF, click here.
To view the full article, click here.
Public Sector Alert
(by Michael Korns and Ember Holmes)
On Thursday, November 3, 2022, Governor Tom Wolf signed PA Senate Bill 696, also known as Act 151 of 2022 or the Breach of Personal Information Notification Act. Act 151 amends Pennsylvania’s existing Breach of Personal Information Notification Act, strengthening protections for consumers, and imposing stricter requirements for state agencies, state agency contractors, political subdivisions, and certain individuals or businesses doing business in the Commonwealth. Act 151 expands the definition of “personal information,” and requires Commonwealth entities to implement specific notification procedures in the event that a Commonwealth resident’s unencrypted and unredacted personal information has been, or is reasonably believed to have been, accessed and acquired by an unauthorized person. The requirements for state-level and local entities differ slightly; this Alert will address the impact of Act 151 on local entities. While this law does not take effect until May 22, 2023, it is critical that all entities impacted by this law be aware of these changes.
For the purposes of Act 151, the term “local entities” includes municipalities, counties, and public schools. The term “public school” encompasses all school districts, charter schools, intermediate units, cyber charter schools, and area career and technical schools. Act 151 requires that, in the event of a security breach of the system used by a local entity to maintain, store, or manage computerized data that includes personal information, the local entity must notify affected individuals within seven business days of the determination of the breach. In addition, local entities must notify the local district attorney of the breach within three business days.
The definition of “personal information” has been updated, and includes a combination of (1) an individual’s first name or first initial and last name, and (2) one or more of the following items, if unencrypted and unredacted:
- Social Security number;
- Driver’s license number;
- Financial account numbers or credit or debit card numbers, combined with any required security code or password;
- Medical information;
- Health insurance information; or
- A username or password in combination with a password or security question and answer.
The last three items were added by this amendment. Additionally, the new language provides that “personal information” does not include information that is made publicly available from government records or widely distributed media.
Act 151 defines previously undefined terms, drawing a distinction between “determination” and “discovery” of a breach, and setting forth different obligations relating to each. “Determination,” under the act, is defined as, “a verification or reasonable certainty that a breach of the security of the system has occurred.” “Discovery” is defined as, “the knowledge of or reasonable suspicion that a breach of the security of the system has occurred.” This distinction affords entities the ability to investigate a potential breach before the more onerous notification requirements are triggered. A local entity’s obligation to notify Commonwealth residents is triggered when the entity has reached a determination that a breach has occurred. Further, any vendor that maintains, stores, or manages computerized data on behalf of a local entity is responsible for notifying the local entity upon discovery of a breach, but the local entity is ultimately responsible for making the determinations and discharging any remaining duties under Act 151.
Another significant update afforded by Act 151 is the addition of an electronic notification procedure. Previously, notice could be given: (1) by written letter mailed to the last known home address of the individual; (2) telephonically, if certain requirements are met; (3) by email if a prior business relationship exists and the entity has a valid email address; or (4) by substitute notice if the cost of providing notice would exceed $100,000, the affected class of individuals to be notified exceeds 175,000, or the entity does not have sufficient contact information. Now, in addition to the email option, entities can provide an electronic notice that directs the individual whose personal information may have been materially compromised to promptly change their password and security question or answer, or to take any other appropriate steps to protect their information.
Act 151 also provides that all entities that maintain, store, or manage computerized personal information on behalf of the Commonwealth must utilize encryption – this provision originally applied only to employees and contractors of Commonwealth agencies, but was broadened in Act 151. Further, the act provides that all entities that maintain, store, or manage computerized personal information on behalf of the Commonwealth must maintain policies relating to the transmission and storage of personal information – such policies were previously developed by the Governor’s Office of Administration.
Finally, under Act 151, any entity that is subject to and in compliance with certain healthcare and federal privacy laws is deemed to be in compliance with Act 151. For example, an entity that is subject to and in compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is deemed compliant with Act 151.
Although Act 151 is an amendment to prior legislation, the updates create potential exposure for local entities and the vendors that serve them. For local municipalities, schools, and counties, compliance will require a proactive approach – local entities will have to familiarize themselves with the new requirements, be mindful of the personal information they hold, and ensure that their vendors are aware of their obligations. Further, local entities will be required to implement encryption protocols, and prepare and maintain storage and transmission policies. If you have questions about how Act 151 will impact your organization, please contact Michael Korns at 412-394-6440 or mkorns@babstcalland.com or Ember Holmes at 412-394-5492 or eholmes@babstcalland.com.
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The American College of Environmental Lawyers (ACOEL)
(By Donald C. Bluedorn II)
On November 3, 2022, Pennsylvania Governor Wolf signed House Bill 1059, which amends the Commonwealth’s Tax Reform Code and, among other things, establishes the Pennsylvania Economic Development for a Growing Economy (“PA EDGE”) program, consisting of tax credits for four economic areas. https://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?sYear=2021&sInd=0&body=H&type=B&bn=1059.
Much of the publicity around the bill has focused on the tax credits available to promote a “hydrogen hub” and the use of hydrogen-based technologies. Indeed, the bill provides for tax credits up
to $50 million per year, or a total of $1 billion over a 20-year period.
In explaining his support for House Bill 1059, Governor Wolf started by noting his belief in the importance of the role of hydrogen in addressing the effects of climate change. “In its most recent report, the Intergovernmental Panel on Climate Change notes that ‘hydrogen is a promising energy carrier for a decarbonized world,’ and highlights hydrogen’s potential to ‘provide low-carbon heat for industrial processes or be utilized for direct reduction of iron ore.’” https://www.governor.pa.gov/wp-content/uploads/2022/11/20221103-1059.pdf.
The Governor then went on to note his belief that the use of hydrogen must be tied responsibly to the reduction of emissions and the consideration of Environmental Justice.
That said, I recognize that in order for hydrogen to play a meaningful role in reducing emissions, we must ensure that hydrogen used is truly “clean” through stringent emissions standards. We must also commit to strong and equitable community protections to prevent impacts to already overburdened communities and to guide benefits to communities that need them.
Perhaps the most controversial provisions of the bill, or at least those that drew the most attention in much of the press, were the provisions that also authorized a tax credit for the use of natural gas in the manufacturing of petrochemicals or fertilizers. In explaining his support for these provisions, the Governor highlighted his belief that these were stop-gap measures to help build a bridge to the future.
Relatedly, [the bill] also authorizes a tax credit based on the use of natural gas. This provision was included as a short-term fail-safe in the event that a manufacturing facility is constructed and clean hydrogen is not initially available. While I do not believe that it would be possible for a project facility that has been funded as part of a DOE regional clean hydrogen hub to utilize natural gas instead of hydrogen for a significant duration of time, the bill requires a company applying for the credit to sign a commitment letter stating the date by which it will begin to purchase clean hydrogen. It is my expectation that this period of time would not exceed a year or two.
In addition to its focus on hydrogen technology, House Bill 1059 also provides tax credits for Pennsylvania milk processing, biomedical manufacturing and research, and semiconductor manufacturing. In his statement, the Governor expressly recognized the need for even more support of semiconductor manufacturing in the Commonwealth. “This program is a first step to help chip manufacturers and their suppliers build new facilities in Pennsylvania, but we need to continue to invest in order to make Pennsylvania a leader in this industry.”
Founding Father Benjamin Franklin reportedly wrote that “in this world nothing can be said for certain, except death and taxes.” With the benefit of 21st Century hindsight, perhaps we can add hydrogen, natural gas, and climate change to the list . . . ?
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Reprinted with permission from the November 28, 2022 ACOEL Blog.
Energy Alert
(by Gary Steinbauer, Gina Falaschi and Christina Puhnaty)
On November 11, 2022, the U.S. Environmental Protection Agency (EPA) released a pre-publication version of its supplemental proposal for Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review (Supplemental Proposal). The Supplemental Proposal has been highly anticipated since EPA published its initial proposal on November 15, 2021. EPA, Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review, 86 Fed. Reg. 63110 (Nov. 15, 2021) (Initial Proposal).
EPA currently regulates emissions from oil and natural gas facilities under 40 C.F.R Part 60 Subparts OOOO[1] and OOOOa.[2] As part of the Initial and Supplemental Proposals, EPA would regulate oil and natural gas facilities constructed, modified, or reconstructed after November 15, 2021, under a new Subpart OOOOb. With the Supplemental Proposal, EPA has released proposed regulatory language for Subpart OOOOb. In addition, EPA released proposed regulatory text for emissions guidelines in a new Subpart OOOOc. These emissions guidelines are intended to inform states in the development, submittal, and implementation of state plans to establish standards of performance for greenhouse gases (in the form of limitations on methane) from sources existing on or before November 15, 2021. Under the Supplemental Proposal, states and tribes would be required to submit plans to EPA for review within 18 months of the publication of a final rule, with a compliance deadline for existing sources that is no later than 36 months after the deadline to submit the plan to EPA. The Supplemental Proposal also includes an updated proposed “Appendix K,” which is a protocol for determining leaks using optical gas imaging that EPA is now proposing to limit to natural gas processing plants.
The Supplemental Proposal includes several significant changes or updates, which EPA describes as improvements, and additional proposed requirements for sources that were not covered in the Initial Proposal. Several consequential aspects of the Supplemental Proposal include:
- Super-Emitter Response Program: EPA is proposing to allow regulatory agencies and approved “qualified” third parties to monitor well sites, centralized production facilities, and compressor stations for “super-emitter emission events,” which are defined as emission events resulting in 100 kilograms (220.5 pounds) per hour or more of methane. Upon receipt of a notification by a third party, owners and operators of these facilities would be required to initiate a prescribed root cause analysis within five days and complete the root cause analysis and initial corrective actions within 10 calendar days. If initial corrective actions do not rectify the identified cause of the event, facility owners and operators will be required to prepare and submit a corrective action plan to EPA. In addition, recipients of “super-emitter emission event” notifications would also be required to notify EPA within 15 days of completing corrective actions. EPA plans to host a public website that will include information related to the proposed Super-Emitter Response Program.
- Abandoned and Unplugged Well Monitoring: The Supplemental Proposal includes new suite of well closure requirements. Under these proposed requirements, owners and operators of well sites would be required to submit a closure plan to EPA within 30 days of the cessation of production. The contents of this plan would need to include the steps necessary to permanently plug all wells, a description of financial requirements and assurance to complete closure, and the schedule for completing closure. Fugitive emissions monitoring would be required until closure, and an Optical Gas Imaging survey would be required to confirm that closure eliminated any emissions from the well.
- Fugitive Emissions Monitoring for All Wells: Contrary to its Initial Proposal, in which EPA proposed to require fugitive emissions monitoring (i.e., leak detection and repair or LDAR monitoring) at wells with estimated emissions of 3 tons per year or more, the Supplemental Proposal would require LDAR monitoring at all well sites, regardless of estimated fugitive emissions from the well sites. The type (audio, visual, or olfactory versus instrument) and frequency of LDAR monitoring will vary depending on whether the facility in question is a single wellhead-only well site, wellhead only well site with two or more wellheads, or a well site or a centralized production facility that contains “major production and processing equipment.”
These are only some of the numerous additional requirements that EPA is proposing in the Supplemental Proposal. Due to the breadth and complexity of the Supplemental Proposal and the long-awaited release of proposed regulatory text, EPA has also published a memorandum and accompanying chart that summarizes where, throughout the proposal, the agency is soliciting public comment (Summary of Comment Solicitations). In the Summary of Comment Solicitations, EPA has organized the agency’s 142 solicitations for comment by topic, preamble section, and issue to assist the public in understanding on which aspects of the proposal the agency specifically seeks input and guidance. Examples of the topics on which EPA solicits comment include: the potential of advanced methane detection technologies; the “equivalence determination” now required by Clean Air Act Section 136(f)(6)(A)(ii), a provision added to the per the Biden Administration’s Inflation Reduction Act of 2022; and the proposed Super-Emitter Response Program.
Although the Supplemental Proposal has not been published in the Federal Register, EPA has established a public comment deadline of February 13, 2023, and will hold virtual public hearings on January 10 and 11, 2023. Comments can be submitted to EPA by registering to speak at the public meeting or in writing on the Federal e-rulemaking portal (www.regulations.gov). The agency plans to issue a final rule in 2023.
EPA’s efforts to advance CAA regulations to reduce methane emissions from the oil and gas industry sector are separate from the inspections and anticipated rulemaking by the Pipeline and Hazardous Materials Safety Administration (PHMSA) under Sections 113 and 114 of the PIPES Act of 2020. While PHMSA has stated that EPA’s regulations may satisfy some Section 114 PIPES Act requirements, it has provided little guidance on this issue.
If you have any questions about the Supplemental Proposed Rule or submission of comments to EPA, please contact Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Gina N. Falaschi at (202) 853-3483 or gfalaschi@babstcalland.com, or Christina Puhnaty at (412) 394-6514 or cpuhnaty@babstcalland.com.
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[1] Specified affected facilities constructed, reconstructed, or modified after August 23, 2011 and on or before September 18, 2015 are regulated under Subpart OOOO.
[2] Specified affected facilities constructed, reconstructed, or modified after September 18, 2015 and on or before November 15, 2021 are regulated under Subpart OOOOa.
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Legal Intelligencer
(by Alex Farone and Janet Meub)
Navigating the Family and Medical Leave Act (FMLA) in the COVID era, including the pandemic-related amendments, has felt like a minefield for many employers. Now that the surge of COVID-related uses of FMLA leave has largely passed, a new aspect of statutory compliance is emerging as a hot-button issue: treatment of remote workers under the FMLA.
The FMLA provides eligible employees with up to 12 weeks of protected, unpaid leave per year for qualifying family or medical reasons. In order to be eligible for FMLA coverage, four elements must be met:
- The employer is a covered employer under the Act, meaning it has at least 50 employees for at least 20 weeks in the current or previous year;
- The employee must have worked for the employer for at least 12 months, not necessarily consecutively;
- The employee must have worked at least 1250 hours in the last 12-month period; and
- The employee must be employed at a worksite where the employer employs at least 50 employees within a 75-mile radius.
Many employers do not pay much consideration to the last element, also known as the “50/75 Rule,” likely because the first element requires 50 employees and in the majority of instances those 50 employees are by default going to work within a 75-mile of the employer’s office. However, in the COVID era and beyond, more and more employees are permitted to work remotely on a full-time basis, and employers are hiring remote employees all over the country, regardless of the location of the employer’s physical office or operations.
The FMLA itself does not address remote workers, but the Department of Labor’s regulations specify that an employee’s personal residence is not a worksite for employees who work at home by telecommuting. 29 C.F.R. § 825.111(a)(2). Further, “[f]or employees with no fixed worksite … the worksite is the site to which they are assigned as their home base, from which their work is assigned, or to which they report.” Id.
In many instances, the remote employee’s home base, worksite from which their work is assigned, and worksite to which they report are one and the same—a single location such as a main office. For example, suppose a new data processing company has 100 employees and one physical office, located in Pennsylvania from which all management employees operate on-site. The company’s low-level data entry employees work remotely, and the company has been rapidly hiring employees nationally without regard to their state of residence. If a remote data entry employee in California seeks FMLA leave, the Company must determine her eligibility. Does the Company employ 50 employees within 75 miles of the office, which is the employee’s home base, the location from which her work is assigned, and to which she reports? If 20 employees work in the office, 10 more work remotely nearby in Pennsylvania, and 70 work remotely throughout the country, more than 75 miles away from the Office, then the 50/75 Rule has not been met, and the employee is not eligible for FMLA coverage.
Things get much more complicated, however, if the employer has multiple locations or if supervisors themselves work remotely. When passing the FMLA, the Senate indicated that the term “worksite” was intended to be interpreted in the same manner as the term “single site of employment” under the Worker Adjustment and Retraining Notification Act (WARN) and its regulations. See Sen. Rep. No. 103-3 at 23 (1993). So, when a remote employee’s worksite is not obvious, we look to case law interpreting the WARN Act to determine what it means for a worksite to be the site: (1) to which the employee is assigned as their home base; (2) from which their work is assigned; or (3) to which they report.
The Third Circuit provided a clear interpretation in Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139 (3d Cir. 1998). Per Ciarlante, a remote employee’s “home base” must be, at a minimum, a location at which the employee would be physically present at some point during a typical business trip. It refers to the physical base of the employee, rather than to the physical base of the employer’s operations. A remote employee’s “assigning site” is the source of the day-to-day instructions given to the employee. It is not determined by the location of centralized payroll or other centralized managerial or personnel functions. Instead, it is the location of the workers who are ultimately responsible for creating work tasks—the source of instructions, rather than a mere conduit location through which instructions are passed to the employee. Finally, a remote employee’s “reporting site” is the location of the personnel who are primarily responsible for reviewing reports and other information sent by the employee to assess performance, record tasks completion, etc.
Needless to say, determining a remote employee’s worksite for purposes of analyzing FMLA eligibility under the 50/75 Rule is fact-intensive and case-specific. Employers who are particularly at risk of incorrectly applying the 50/75 Rule or granting FMLA leave to employees who are not actually eligible are: (1) employers with over 50 employees, all of whom work on-site, but are spread out over multiple locations that may not be within 75 miles of one another; and (2) employers with few physical locations but many remote employees who live in multiple states. The Third Circuit has not yet analyzed the 50/75 Rule for remote workers in the current era of now-standard employment of remote employees. The U.S. District Court for the Eastern District of Pennsylvania analyzed the issue back in 2013, but in the context of a remote employee’s transfer to another position and reporting location around the time of her requested FMLA leave. O’Donnell v. Passport Health Communs., 2013 U.S. Dist. LEXIS 51432, 2013 WL 1482621 (E.D. Pa. Apr. 10, 2013). Therefore, employers in this jurisdiction are left largely without guidance from controlling case law as to the legal worksite of remote employees under the FMLA.
It is more than just best practice for employers to get up to speed on the FMLA’s 50/75 Rule application to remote workers—their legal defense of any potential claim depends on it. In a claim for FMLA violation (typically either interference or retaliation), employers may assert the defense of good faith, which means the act or omission that allegedly violated the FMLA was done in good faith and that the employer had reasonable grounds for believing the act or omission was not a violation of the FMLA. See 29 U.S.C. § 2617(a). The FMLA does not define “good faith,” so courts look to the Fair Labor Standards Act for its interpretation of this phrase. Under this interpretation, good faith requires a duty to investigate potential liability and more than reliance on ignorance.
One recent case in another jurisdiction underscored just how substantial the burden is on employers to successfully invoke the good faith defense. See Landgrave v. ForTec Med., Inc., 581 F. Supp. 3d 804 (W.D. Tex. 2022). In January of 2022, a District Court in the Fifth Circuit granted an FMLA-leave-seeking plaintiff’s partial motion for summary judgment to deny her employer’s affirmative defense of good faith. The plaintiff was a remote employee, and the employer had denied her request for FMLA leave, deeming her ineligible under the 50/75 Rule based on their interpretation of the plaintiff’s worksite. Despite this denial, the plaintiff took a leave of absence from work to care for her ailing mother. As she had no available leave to use, her employer deemed her to have voluntarily resigned her position when she failed to report to work by a date certain. The plaintiff claimed that the employer failed to investigate the FMLA’s applicability to remote workers before ending her employment.
The employer’s Human Resources Manager testified that she had no knowledge of the FMLA’s treatment of remote workers and that she did not seek legal counsel regarding FMLA eligibility. She did review the employee handbook’s requirements of FMLA eligibility, which mentioned a requirement of 50 “employees in the work or reported-to location” to reach the decision that the plaintiff did not qualify for FMLA protection. However, the court agreed with the plaintiff that this investigation into FMLA eligibility was insufficient to constitute “good faith” on the part of the employer. Specifically, the court stated that referring to an employee handbook for guidance on how to assess FMLA eligibility of a remote employee does not relieve an employer of its duty to investigate the employee’s rights where the handbook does not address the treatment of remote workers.
Employers should consult legal counsel any time a remote employee seeks FMLA leave to determine if the 50/75 Rule is met. In turn, counsel should specifically inform their employer clients of the 50/75 Rule and ensure that the 50/75 Rule is represented in company policies or handbooks concerning FMLA eligibility for remote workers specifically. Additionally, employers should keep a regularly-updated list of the cities and states in which all remote employees live, to more quickly calculate the number of employees within 75 miles of a particular worksite.
Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations. Please contact her at 412-394-6521 or afarone@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 November 17, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.
Infrastructure Alert
(by Jim Curry, Sean McGovern and Lee Banse)
On November 3, 2022, Pennsylvania Governor Tom Wolf approved legislation that will provide up to $50 million of annual tax credits for facilities located in a Pennsylvania regional clean hydrogen hub that use clean hydrogen produced at the hub in manufacturing.[1] The tax credits are available between January 1, 2024 until December 31, 2043, providing up to $1 billion of credits over the life of the program.[2]
The Pennsylvania tax credits complement federal efforts to foster a clean hydrogen industry through the development of regional clean hydrogen hubs. The federal Bipartisan Infrastructure Law, enacted in November 2021, provided $7 billion for the Department of Energy (DOE) to establish between six to ten regional clean hydrogen hubs for the development of a domestic clean hydrogen industry.[3]
Under the new Pennsylvania program, the credits are available to taxpayers who have made a capital investment of at least $500 million to construct a facility in a Pennsylvania regional clean hydrogen hub, have satisfied certain job creation and employment requirements, and who purchase clean hydrogen produced in the Pennsylvania hub for use in manufacturing at the facility.[4] The tax credits will be applied at a rate of 81 cents per kilogram of clean hydrogen purchased.[5] Qualifying taxpayers may also apply for a tax credit of 47 cents per thousand cubic feet of natural gas purchased for use at the manufacturing facility.[6] A qualified taxpayer may assign the tax credits, subject to certain requirements in the statute.[7]
In a press release on the bill, Governor Wolf stressed the role clean hydrogen will play in reducing carbon emissions, and his support for applications for a regional clean hydrogen hub in Pennsylvania.[8] Governor Wolf also addressed the natural gas tax credits, expressing his belief that these will serve as an interim solution in case clean hydrogen is not immediately available for manufacturing facilities in the hub, and that the credits will likely not be used after a one to two-year period.[9]
The Pennsylvania tax credits also complement the new clean hydrogen tax (45V) credit in the recent federal Inflation Reduction Act (IRA), which became law in August 2022.[10] The IRA provides a tax credit of up to $3 per kilogram of clean hydrogen produced.[11]
Hydrogen hub concept papers were due to DOE on November 7, 2022, with complete applications due April 7, 2023. DOE anticipates notifying selected applicants in the Fall of 2023.[12] As DOE evaluates proposals over the next year, these new Pennsylvania tax credits may strengthen the various Pennsylvania-related proposals and help drive development of the use of hydrogen within the state.
If you have any questions about this legislation or need additional information about the Pennsylvania clean hydrogen tax credits, please contact Jim Curry at (202) 853-3461 or jcurry@babstcalland.com, Sean McGovern at (412) 394-5439 or smcgovern@babstcalland.com, or Lee Banse at (202) 853-3463 or lbanse@babstcalland.com.
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[1] General Assembly of Pennsylvania, H.B. 1059, Subarticle D, Sec. 1753-L(D)(2) (Oct. 26, 2022).
[2] Id. at Sec. 1761-L (B).
[3] Infrastructure Investment and Jobs Act, Pub. L. 117-58, Sec. 813, 135 Stat. 429, 1008 (Nov. 15, 2021).
[4] H.B. 1059, Subarticle D, Sec. 1752-L.
[5] Id. at Sec. 1753-L(A).
[6] Id.
[7] Id. at Sec. 1756-L.
[8] https://www.governor.pa.gov/wp-content/uploads/2022/11/20221103-1059.pdf.
[9] Id.
[10] Inflation Reduction Act of 2022, Pub. L. 117-169, 136 Stat. 1818 (Aug. 16, 2022).
[11] Id., 136 Stat. 1936.
[12] https://oced-exchange.energy.gov/Default.aspx#FoaId4dbbd966-7524-4830-b883-450933661811.
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