Environmental Alert
(by Matt Wood and Mackenzie Moyer)
On February 26, 2022, the Environmental Quality Board (EQB) published a proposed rule to amend 25 Pa. Code Ch. 109 (Safe Drinking Water) to regulate certain per- and polyfluoroalkyl substances (PFAS). 52 Pa. B. 1245. Specifically, the rule proposes setting a maximum contaminant level goal (MCLG) and maximum contaminant level (MCL) for both perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS). PFOA and PFOS are two of the most common PFAS, a “family” of thousands of synthetic chemicals that have been used in consumer, commercial, and industrial applications since the 1940s. PFAS have been used to manufacture water-, stain-, and heat-resistant products and have been a common component in some aqueous film forming foams (AFFF) routinely used for firefighting. PFAS have been found in various environmental media like groundwater (including drinking water), plants, animals, and in humans. Because PFAS do not break down naturally in the environment, they have been called “forever chemicals.” Evidence suggests that PFAS exposure can lead to adverse health effects.
The proposed rule sets MCLGs of 8 parts per trillion (ppt) for PFOA and 14 ppt for PFOS and MCLs of 14 ppt for PFOA and 18 ppt for PFOS. The MCLGs are nonenforceable levels developed solely from health effects data and act as the starting point for determining the MCLs. To develop the enforceable MCLs, the Pennsylvania Department of Environmental Protection (PADEP) considered factors beyond health effects data, including technical limitations and costs that may affect the feasibility of achieving the MCLGs. As part of the rulemaking process, PADEP also considered PFAS other than PFOA and PFOS (i.e., PFNA, PFHxS, PFHpA, PFBS, and HFPO-DA), but proposed not establishing MCLs for these substances at this time, primarily due to a lack of occurrence data and incomplete cost/benefit data and analysis. If finalized, the PFOA and PFOS MCLs will apply to all 3,117 community, nontransient, noncommunity, bottled, vended, retail and bulk water systems in the Commonwealth and may affect other programs (e.g., if they are adopted as Act 2 groundwater cleanup standards).
The proposed rule represents a first for the Commonwealth. PADEP has never before developed and promulgated a state-level MCL for any contaminant, instead relying on federal standards and/or guidance. On PFAS, the federal government has moved relatively slowly. Although the U.S. Environmental Protection Agency (EPA) is currently developing drinking water regulations for PFOA and PFOS, the agency’s only current drinking water guidance is its 2016 Health Advisory Level (HAL) of 70 ppt for PFOA and PFOS combined, which critics have said is outdated, too high to be protective, and should be revised. EPA’s HAL is intended to identify the concentration of PFOA/PFOS in drinking water at or below which adverse health effects are not expected to occur over a lifetime of exposure but is not an enforceable standard or regulation. In Pennsylvania, however, public water systems that detect exceedances of the HAL are required to take certain actions depending on the circumstances, e.g., monitoring, notifying consumers, and installing treatment technologies.
In the absence of federal action, many states over the last few years – Pennsylvania among them – have moved on their own to investigate PFAS and develop their own regulations. In 2018, Governor Tom Wolf signed Executive Order 2018-08 creating the PFAS Action Team, a multi-agency group tasked with developing a comprehensive strategy to identify, research, and eliminate sources of PFAS contamination. In July 2019, PADEP began a sampling effort targeted at public drinking water systems within a half mile of potential PFAS sources like manufacturing, fire training, and military facilities. That effort concluded in March 2021 and the final results were posted to PADEP’s PFAS webpage in June 2021. PADEP’s sampling effort, among other things, informed the proposed rulemaking. Other states have already established MCLs for one or more PFAS, including Massachusetts, Michigan, New Hampshire, New Jersey, New York, and Vermont. Pennsylvania’s proposed rule’s MCLs for PFOA and PFOS fall within the same range as their counterparts established in other states (which are all significantly lower than EPA’s HAL).
At the federal level, EPA’s current effort to develop drinking water regulations for PFOA and PFOS is one of multiple goals and strategies summarized in EPA’s “PFAS Strategic Roadmap: EPA’s Commitments to Action 2021–2024” (Roadmap), released on October 18, 2021. The Roadmap highlights EPA’s “whole-of-agency” approach to addressing PFAS over the next few years, focused through three central directives: (1) Research; (2) Restrict; and (3) Remediate. Through these, EPA intends to address the lifecycle of PFAS. Besides establishing PFOA and PFOS drinking water regulations (which EPA expects to propose in fall 2022, with a final rule in fall 2023), EPA intends to designate PFOA and PFOS as hazardous substances under CERCLA and build the technical foundation to address PFAS in air emissions. The Roadmap and related materials are available on EPA’s website here. Babst Calland reviewed the Roadmap and highlighted many of EPA’s goals in an October 2021 Environmental Alert available here.
Despite EPA’s recent actions and current goals, Pennsylvania’s move to regulate PFOA and PFOS in drinking water makes it one of a handful of states outpacing the federal government’s efforts. The public comment period for Pennsylvania’s proposed rule is currently open and interested parties may submit comments through April 27, 2022 using any of the methods listed in PADEP’s announcement of the proposed rule. The EQB will also be holding five virtual public hearings from March 21-25, 2022 to accept public comments on the proposed rule. More information about how to participate in these meetings is posted on PADEP’s website here.
Babst Calland attorneys will continue to track PFAS developments in Pennsylvania and are available to assist you with PFAS-related matters (including preparing and submitting comments to Pennsylvania’s proposed rule). For more information on this development and other remediation matters, please contact Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, Mackenzie Moyer at (412) 394-6578 or mmoyer@babstcalland.com, or any of our other environmental attorneys.
Click here for PDF.
Babst Calland, through its Women’s Initiative, is pleased to announce the Firm’s participation in the Allegheny County Bar Association’s ALLY Initiative Cohort. ALLY stands for “Attorneys, Learning as allies, Living as allies, and Yielding results.” The Initiative is designed to engage attorneys and their law firms, corporate legal departments, courts and other organizations to commit to increasing inclusivity, creating equitable workplaces and empowering historically marginalized and underrepresented community members.
The Initiative, which will run from March 15 through October 2022, will offer programing and other projects, which will then allow firms and legal departments to earn an official “ACBA ALLY Certification.”
To read more, click here.
Smart Business
(by Sue Ostrowski featuring Kate Cooper)
When selling your business, you will devote a substantial amount of time and energy to negotiating the representations and warranties in the purchase agreement. Accurate representations and warranties are critical to ensuring that the expectations of the buyer and seller are aligned to minimize the risk of post-closing indemnification claims.
“Representations and warranties are promises made by the seller about the current and future state of the business, assuring the buyer the business is operating the way seller says it is,” says Kate Cooper, shareholder at Babst Calland. “If they are not accurate, a buyer can use these to make a claim for damages post-sale.”
Smart Business spoke with Cooper about why it is critical that representations and warranties accurately portray your business when selling, and how a deal attorney with experience in your industry can help minimize the risk that a buyer will pursue a claim after closing.
What do representations and warranties cover?
Standard representations and warranties in nearly every purchase agreement include that the target entity is in good standing with the state, taxes have been properly filed and paid, and that it is in compliance with all applicable laws. Beyond that, it gets much more nuanced depending on the industry and the nature of the business. A technology company may need to make representations and warranties about its intellectual property, while a manufacturer might address environmental, health and safety issues. If you are selling real estate, you’ll need to make representations about any liens and encumbrances affecting property.
How can an experienced attorney help navigate through the process?
Every deal involves some level of risk-sharing and compromise, and the most effective way to get a deal done is to have seasoned deal lawyers on both sides. An experienced deal lawyer will be able to home in on the most impactful terms of the agreement and highlight the biggest risks to their client. An attorney can advise you on whether you need to make disclosures that set forth exceptions to the statements in a particular representation, whether it is reasonable to attempt to modify a representation with a knowledge or materiality qualifier, and whether it is appropriate to include indemnity limitations.
The owner will be heavily involved in the representations and warranties review, but an attorney can lead you through the process, compiling information about your business that is responsive to the representations and warranties and help evaluate how to communicate that to a buyer with respect to your disclosure schedules and the negotiated language in the purchase agreement.
When choosing an attorney to represent you in a sale, ask about the attorney’s approach to deal-making. Are they going to try to win every single point, at any expense, or will they take a more collaborative approach? There is never a zero-risk deal, but a seasoned attorney will drill down on the key points and focus on the right hills to die on, rather than making a big deal about something that represents an insignificant risk.
Engage an attorney who has done deals in your industry, which will give them a foundational knowledge of the key provisions that are likely to be negotiated and allow them to move the deal forward in the most efficient manner. Ultimately, deal-making is a collaborative process, and the right adviser can help the process run smoothly and get a good result for everyone.
How can you get your business ready for a sale?
Prepare, prepare, prepare. By identifying potential issues early, you can eliminate or minimize risks and address them before the buyer is performing due diligence and you are negotiating the representations and warranties in the purchase agreement. The seller wants to walk away with confidence that post-closing claims are unlikely and their ongoing liabilities are minimized, and buyers want to know they have the ability to make a post-closing indemnification claim to recover their losses if they discover an inaccuracy in the seller’s representations and warranties. Experienced deal attorneys can help balance these competing interests and minimize the risk of costly and time-consuming post-closing disputes.
To view the full article, click here.
To view the PDF, click here.
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
On October 8, 2021, the Pennsylvania Department of Environmental Protection (PADEP) revised the air pollution and noise control plans that apply to the following permit applications: Bituminous Surface Mine Permit 5600-PM-BMP0311, Anthracite Surface Mine Permit Application 5600-PM-BMP0343, and Large Noncoal Industrial Minerals Mine Permit 5600-PM- BMP0315.
The new air pollution and noise control plan requirements for all three application types asks applicants to identify if there will be any processing facilities (crushing, screening, cleaning, and/or stockpiling) in the permit area, and asks applicants to describe those facilities and the amount of minerals to be processed. If the amount of minerals to be processed is less than 200 tons/day, these plans require applicants to describe the management practice to be utilized to control fugitive dust, and if the amount of minerals to be processed is equal to or greater than 200 tons/day, the plans direct the applicant to contact the appropriate PADEP Regional Office Air Quality Program.
To control fugitive dust, the plans ask applicants to describe the practices that will be utilized at the surface mining operation for the following activities: access roads, truck traffic, drilling, overburden removal and coal extraction, stockpiles, loading and unloading, crushing and other processing equipment, and conveyers.
The plans also ask applicants to list all noise sources from equipment and mining activity that will originate within the permit area, indicating the hours of operations for this equipment and whether the permit area is adjacent to any residential areas, schools, hospitals, or churches. The plans require applicants to describe the pre-mining environmental sound levels in the permit area at various points of the day and ask if a noise study has been conducted within the surrounding area. Finally, the plans ask applicants to describe the measures (best management practices) that will be taken to mitigate noise and prevent noise from becoming a public nuisance.
The air pollution and noise control plan for the Large Noncoal Industrial Minerals Mine Permit 5600-PM-BMP0315 contains one additional requirement that is not included in the Bituminous Surface Mine Permit 5600-PM-BMP0311 or Anthracite Surface Mine Permit Application 5600-PM-BMP0343. The Large Noncoal Industrial Minerals Mine Permit plan requires applicants to provide the date that the PADEP Regional Air Quality Office was contacted or, if applicable, provide a copy of the PADEP Air Quality Program’s determination to grant an exemption from the air quality permit requirements and of any authorizations granted under the Air Quality General Operating Permit for Portable Nonmetallic Mineral Processing Plants.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNEL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
On December 10, 2021, the Pennsylvania Department of Environmental Protection (PADEP) published final technical guidance on remining of areas with preexisting pollutional discharges. See PADEP, TGD No. 563-2112-613, “Remining of Areas with Pre-Existing Pollutional Discharges” (Dec. 10, 2021). The purpose of this guidance is to identify and explain the requirements necessary to qualify for the remining protections found under subchapter F of 25 Pa. Code ch. 87, subchapter G of 25 Pa. Code ch. 88, and subchapter F of 25 Pa. Code ch. 90 (collectively, Subchapter F/G). This guidance explains the obligations of a mine operator during the remining activity, the procedures to be followed to modify a remining permit to account for changes in groundwater flow patterns and/or new discharges, and how to qualify for bond release.
The guidance document first identifies and explains conditions that must be met to qualify for Subchapter F/G permit authorization. For a Subchapter F/G permit to be issued, the proposed mining and reclamation activities should exhibit a significant potential to abate or reduce the pollutional load from the preexisting discharges of previous surface mining. Remining protections under Subchapter F/G do not apply to underground mining permits. To be eligible, applicants for Subchapter F/G permits must have no existing legal responsibility for treatment of the discharges or for reclaiming the proposed pollutional abatement area. The water quality must be indicative of mine drainage pollution and the discharges must be from mining activities that have been abandoned prior to the remining permit application. The discharges must also be hydrologically connected to the permit area and to the proposed pollution abatement area intended to reduce the pollution load.
The guidance document then explains the requirements of the Pollution Abatement Plans that are included in applications for authorization under Subchapter F/G. These Pollution Abatement Plans should describe the anticipated impact on the preexisting pollutional discharges, which may include effects on infiltration, evapotranspiration, water quality improvements, and any other anticipated pollution reduction benefits resulting from implementation of the abatement plan. The Pollution Abatement Plan is then incorporated into the permit as an effluent limit; the best management practices (BMPs) that comprise the Pollution Abatement Plan are the permit’s narrative effluent limits and the numerical limits are determined by a baseline dataset and are represented by the trigger values.
The guidance provides that the protections under Subchapter F/G can be applied in three ways in a tiered manner:
(1) collect data to establish a baseline pollution load at individual points and hydrologic units, (2) sample at designated in- stream monitoring points to establish an instream baseline concentration, or (3) through BMPs only. Applicants should justify why they cannot use option 1 in order to use option 2, and to use option 3, they must justify why they cannot use options 1 and 2. If individual, discrete points can be monitored, the Tier 1 option is likely the appropriate option. The guidance then outlines the steps that operators must take following trigger exceedances.
Finally, the guidance document describes the procedures for modifying Subchapter F/G permits and the permit baselines, and the standards to qualify for bond release.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania- Mining
(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
As previously reported, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program, or Regional Greenhouse Gas Initiative (RGGI), regulation is nearing final publication. See Vol. XXXVIII, No. 4 (2021) of this Newsletter. RGGI is a regional cap-and-trade program for carbon dioxide (CO2) emissions from fossil fuel-fired electric generating units with a nameplate capacity of 25 megawatts or greater. PADEP proposes that the commonwealth join RGGI pursuant to Governor Tom Wolf’s 2019 executive order.
Following approval of the regulation by Pennsylvania’s Independent Regulatory Review Commission in September 2021, the final-form rulemaking was submitted to the House and Senate Environmental Resources and Energy standing committees.
The Senate Environmental Resources and Energy Committee passed a resolution disapproving the regulation and reported that resolution out of committee to the full chamber. The Senate passed Senate Concurrent Regulatory Review Resolution 1 (S.C.R.R.R.1), which disapproves of the rulemaking, on October 27, 2021. S.C.R.R.R.1 was reported by the House Environmental Resources and Energy Committee on November 8, 2021. On December 15, 2021, in a 130-70 vote, the House passed a resolution as well.
While the resolution was pending in the legislature, on November 29, 2021, the Environmental Quality Board (EQB) sub- mitted the CO2 Budget Trading Program rule to the Legislative Reference Bureau for publication in the Pennsylvania Bulletin. The Legislative Reference Bureau informed the EQB that it was not authorized to publish the rule because S.C.R.R.R.1 was still pending before the House of Representatives.
Governor Wolf vetoed the resolution on January 10, 2022, and released a veto message about the importance of the regulation. Press Release, Gov’r Tom Wolf, “Governor Wolf Vetoes Resolution That Would Hinder Pennsylvania’s Ability to Address Climate Crisis” (Jan. 10, 2022). The Governor’s veto sent the resolution back to the legislature, where each chamber has 30 calendar days or 10 legislative days, whichever is longer, to at- tempt a veto override. The legislature needs a veto-proof two- thirds majority to override the veto and block the regulation. As of this writing, neither chamber has attempted to override the veto.
In the meantime, State Senator Gene Yaw, chair of the Senate Environmental Resources and Energy Committee, wrote a letter to PADEP Secretary Patrick McDonnell to urge him to re- consider an invitation to testify before the committee at a hearing to discuss RGGI allowance prices scheduled for January 18, 2022. Letter from Sen. Gene Yaw, to Hon. Patrick McDonnell, Sec’y, PADEP (Jan 13, 2022). PADEP did not attend the hearing.
Based on the legislative calendar, the legislature has until approximately March 29, 2022, to attempt to override the Governor’s veto. In the meantime, however, on February 3, 2022, McDonnell filed suit in the Commonwealth Court of Pennsylvania seeking to compel the Legislative Reference Bureau to publish the EQB’s final-form rulemaking for the CO2 Budget Trading Program in the Pennsylvania Bulletin. See Complaint, McDonnell v. Pa. Legislative Reference Bureau, No. MD 2022 (Pa. Commw. Ct. Feb. 3, 2022).
If the legislature is unsuccessful in blocking the regulation, or if the commonwealth court compels publication before the end of March 2022, it will be published in the Pennsylvania Bulletin as a final rule. The Office of the Attorney General already approved the regulation in December 2021. Legal challenges to the final rule are anticipated. Further information regarding the rule 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 K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)
On November 6, 2021, the Pennsylvania Environmental Quality Board (EQB) issued proposed amendments to 25 Pa. Code chs. 88 (Anthracite Coal) and 90 (Coal Refuse Disposal). See Coal Refuse Disposal Revisions, 51 Pa. Bull. 6914 (proposed Nov. 6, 2021). The proposed amendments are intended to implement Pennsylvania’s Act of October 4, 2019 (P.L. 452, No. 74) (Act 74) and to address the differences between the commonwealth’s regulations and federal regulations relating to temporary cessation at coal refuse disposal sites.
This proposal was adopted by the EQB at its meeting on June 15, 2021. On January 5, 2022, the EQB received a letter from Pennsylvania’s Independent Regulatory Review Commission (IRRC) indicating that the IRRC has no objections, comments, or recommendations on the proposed rule. See Letter from David Sumner, Exec. Dir., IRRC, to Hon. Patrick McDonnell, Chairman, EQB (Jan. 5, 2022). The amendments will go into effect upon publication of the final-form rulemaking in the Pennsylvania Bulletin.
Changes Proposed Pursuant to Act 74
Act 74 amended section 6.1 of the Coal Refuse Disposal Control Act (CRDA), 52 Pa. Stat. § 30.56a, to remove the commonwealth’s one-year limitation on the temporary cessation of operations at a coal refuse disposal site. The Pennsylvania Department of Environmental Protection (PADEP) has proposed to incorporate this amendment at 25 Pa. Code § 88.310(k)(1).
Pursuant to Act 74’s amendment of section 6.1 of the CRDA, PADEP also proposes to amend 25 Pa. Code § 90.167(a) to address temporary cessation status of operations lasting 30 days or more and will require a notice to be submitted to PADEP. This notice must include the affected acres in the permit area, a description of the extent and kind of reclamation of the area, a description of the activities that will continue during the temporary cessation status, and a description of the status of the operation or operations that is the source of the coal refuse.
Act 74 also allowed PADEP to promulgate regulations that will link the status of operations generating coal refuse to the coal refuse disposal area. For example, under these new regulations, when an underground coal mine is approved for temporary cessation, the coal refuse disposal site associated with that mine would also be approved for temporary cessation because no refuse material is being generated to be sent there. Where a coal refuse disposal site receives material from more than one mine, the coal refuse disposal site’s temporary cessation status ends with the resumption of operations at any of its source mines, or with permanent cessation at all source mines. PADEP has proposed to incorporate these amendments at sections 88.332(d)–(f) and 90.167(e)–(g).
Act 74 also revised section 6.1 of the CRDA to include an enumerated list of the circumstances under which an operator must install a system to prevent precipitation from contacting the coal refuse. These instances include when phases reach capacity, when specified in the permit, when an operator temporarily ceases operation for a period in excess of 90 days unless PADEP approves an operator’s request for a longer period, or when the operation permanently ceases. PADEP proposed changes to section 90.122(h) to parallel Act 74’s language.
Other Changes Proposed by PADEP
PADEP further proposed an amendment to section 88.333(b) that would provide a trigger for when temporary cessation becomes permanent cessation. The three circumstances that will terminate the temporary cessation status are failure to comply with a final adjudicated proceeding through an act or omission that violates the acts defined in section 86.1 or chapters 86–90, failure to comply with a permit condition required by the acts or chapters 86–90, and failure to comply with a consent order and agreement or a consent order. A similar provision is not found in the federal requirements or in Act 74.
PADEP has also proposed clarifications to regulations that will settle confusion for applicants for coal refuse site permits. One such clarification is amending the existing performance standards for terraces and surface water runoff at coal refuse disposal sites to state that terraces must be constructed as they are needed to control erosion and prevent cascading failures of the final cap rather than just being an optional use. This proposed change is found at section 90.122(m).
PADEP has also proposed amendments to sections 88.332(b) and 90.167(b) that address a temporary cessation status of operations lasting 90 days or more. These amendments require operators to submit to PADEP a confirmation that the current bond is adequate to complete reclamation and to describe the timing of the installation of the “phased system” to prevent precipitation from contacting the refuse.
Comments on the proposed amendments were due in early December 2021 and the EQB received comments from two parties, the Center for Coalfield Justice and the Pennsylvania Coal Alliance. Comments on the proposed rule can be found at https://www.ahs.dep.pa.gov/eComment/ViewComments.aspx?enc=DN064MT8R38NKyiRv2iU7MXT16ZFzbgxvN%2bnfipCQR4%3d.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On October 5, 2021, Pennsylvania Attorney General Josh Shapiro announced that the Environmental Crimes Section had charged Energy Transfer, L.P. (Energy Transfer), parent company of Sunoco Pipeline, L.P. (Sunoco), with 46 counts of environmental crimes. The charges stemmed from an investigation by the Forty-Fifth Statewide Investigating Grand Jury (Grand Jury), which concluded that Sunoco had violated Pennsylvania law in connection with its construction of the Mariner East 2 pipeline, a project that crosses 17 counties in the commonwealth. Two charges were later added from a criminal referral from the Pennsylvania Department of Environmental Protection (PADEP), bringing the total charges to 48. Among other things, Attorney General Shapiro and the Grand Jury alleged that Sunoco had repeatedly allowed—and failed to report to PADEP, as required by law—spills, leaks, and losses of drilling fluid during horizontal directional drilling (HDD) activities. The Grand Jury also heard testimony from landowners complaining of impacts to their properties, including to drinking water sources, and found that Sunoco’s HDD activities had impacted multiple recreational lakes in different counties. See generally Police Criminal Complaint, Commonwealth v. Energy Transfer, L.P., No. CR- 302-2021 (Pa. Commw. Ct. Oct. 5, 2021); Grand Jury’s Presentment (Oct. 5, 2021).
On December 6, 2021, two months after Attorney General Shapiro announced the criminal charges, PADEP and the Department of Conservation and Natural Resources (DCNR) announced that it had reached a settlement with Sunoco that requires the company to address impacts from releases of drilling fluid and mud that occurred in August 2020 at Marsh Creek Lake State Park in Chester County, Pennsylvania. Specifically, the settlement requires Sunoco to (1) dredge the top six inches of sediment from approximately 15 acres of Ranger Cove (which was closed due to the impacts); (2) replace fish, turtle, and bird habitat structures impacted by the dredging; (3) dewater/transport all dredged material from the lake and restore shoreline and streamside forest buffers; (4) post a $4 million bond (to ensure completion of the remediation); (5) pay $4 million for natural resource damages to be used by DCNR for the benefit of the state park (e.g., an accessible boat launch, stream and shoreline restoration, invasive species suppression, efficiency measures that will take the park to net-zero energy, and a public visitor center); and (6) pay a civil penalty of $341,000 to the Clean Water Fund for permit violations. See News Release, PADEP, “Wolf Administration Requires Sunoco to Restore Lake at Marsh Creek State Park in Chester County” (Dec. 6, 2021); Consent Order and Agreement, In re Sunoco Pipeline, L.P. (PADEP Dec. 6, 2021).
Concurrent with executing the settlement, PADEP approved major amendments to Sunoco’s chapter 102 (Erosion and Sediment Control) and chapter 105 (Water Obstruction and Encroachments) permits for construction of the pipeline at Marsh Creek Lake. The amendments provide Sunoco an avenue to complete construction of the pipeline using a separate route and the open-cut method (as opposed to HDD, meaning no drilling fluids will be used). More information and documents about the Marsh Creek Lake impacts and settlement are available at https://www.dep.pa.gov/About/Regional/SoutheastRegion/ Community%20Information/Pages/Marsh-Creek-Lake-HDD-290. aspx. Construction of the Mariner East 2 pipeline is expected to be completed in the first quarter of 2022. A preliminary hearing in the criminal case against Energy Transfer is scheduled for March 1, 2022.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On November 29, 2021, the Pennsylvania Supreme Court overturned a decision by the Pennsylvania Commonwealth Court, ruling that UGI Storage Company (UGI) could be held liable for taking oil and gas drilling rights in a proposed protective buffer zone around the Meeker natural gas storage field in Tioga County, Pennsylvania. In 2009, UGI, a quasi-public entity with the power of eminent domain, sought from the Federal Energy Regulatory Commission (FERC) a certificate of public convenience and necessity to acquire and operate certain facilities related to the interstate transportation and sale of natural gas owned by UGI Central Penn Gas, Inc. (CPG), including a 1,216- acre underground storage field in Tioga County and an additional 2,980-acre protective buffer zone around the storage field.
FERC granted UGI’s application for the storage field but denied its request for the full buffer zone (citing issues with notification and property rights requirements in accordance with applicable federal regulations). The decision resulted in only parts of the buffer zone being certificated. In 2015, certain property owners sought the appointment of a board of viewers to assess damages for de facto condemnation of their properties under section 502(c) of the Eminent Domain Code, 26 Pa. Cons. Stat. § 502. The property owners claimed that although only certain segments of the buffer zone had been certificated, UGI was treating the properties within the uncertificated segments in the same manner as those within the certificated are- as as protection for the integrity and security of the storage field. As such, the property owners alleged that UGI had deprived them of the financial benefits of utilizing natural gas underlying their properties by effectively prohibiting hydraulic fracturing activities, thus resulting in a de facto condemnation. The case moved between the trial and appellate courts over the next few years.
On appeal to the Commonwealth Court of Pennsylvania in 2020, the court applied the three-prong test for determining whether a de facto condemnation had occurred (but disagreed as to whether the owners needed to prove that UGI had proper- ty-specific powers of eminent domain in order to prove same). See generally Hughes v. UGI Storage Co., 243 A.3d 278 (Pa. Commw. Ct. 2020), vacated and remanded, 263 A.3d 1144 (Pa. 2021). Under the test, the property owners had to show that (1) the condemnor had the power to condemn the land under eminent domain procedures; (2) the property owner was substantially deprived of the use and enjoyment of the property through exceptional circumstances; and (3) the damages sustained were an immediate, necessary, and unavoidable consequence of the condemnor’s exercise of its eminent domain power. Id. at 284. A majority of the members of the court concluded that failing to obtain FERC’s certification for segments of the buffer zone precluded UGI exercising its eminent domain power. As such, the court found that the property owners could not establish that “that any purported deprivation of the beneficial use and enjoyment of their properties ‘is the immediate, necessary and unavoidable consequence of the exercise of the power to condemn,’ the third prong necessary to find a de facto taking.” Id. at 289 (quoting In re Condemnation by Commonwealth, 805 A.2d 59, 68 (Pa. Commw. Ct. 2002)). The property owners appealed to the Pennsylvania Supreme Court.
In Hughes v. UGI Storage Co., 263 A.3d 1144 (Pa. 2021), the court looked to the text of the Eminent Domain Code, concluding that nothing therein indicated a requirement of a relation- ship between the eminent domain power and a specific property. Id. at 1156. Instead, the court reasoned that an actionable taking only required that the condemnor proceeded by authority of law for a public purpose. Id. Relying on its interpretation of the Eminent Domain Code and a string of U.S. Supreme Court decisions that found no requirement of a relationship between the eminent domain power and a specific property, the court held that “a public or quasi-public entity need not possess a property-specific power of eminent domain in order to implicate inverse condemnation principles.” Id. at 1158. The court vacated the commonwealth court’s order and remanded to that court for further proceedings consistent with its opinion and to address a waiver issue previously raised at the trial court level.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On January 15, 2022, the Pennsylvania Department of Environmental Protection (PADEP) released in the Pennsylvania Bulletin, and requested public comment on, its draft 2022 Integrated Water Quality Monitoring and Assessment Report (2022 Integrated Report). See 52 Pa. Bull. 418 (Jan. 15, 2022). The draft 2022 Integrated Report, which PADEP is required to produce biennially pursuant to sections 303(d) and 305(b) of the Clean Water Act (CWA), 33 U.S.C. §§ 1313(d), 1315(b), and 40 C.F.R. pt. 130, identifies state waters that do not meet applicable water quality standards. Waters fall into three general statuses—attaining, impaired, or unassessed—and are further categorized according to uses, data, and whether a total maximum daily load (TMDL) is necessary (e.g., Category 1 waters are attaining for all uses, while Category 5 waters are impaired for one or more uses by a pollutant that requires a TMDL).
Pursuant to applicable regulations, PADEP assessed waters throughout the commonwealth for four uses: drinking water, fish consumption, aquatic life, and recreational use. 25 Pa. Code § 93.3. Similar to the 2020 Integrated Report, see Vol. XXXVII, No. 3 (2020) of this Newsletter (Pennsylvania—Mining report), PADEP identified acid mine drainage, agriculture, and stormwater runoff as the top known sources for waters impairment. PADEP conducted initial assessments on 5,844 stream miles and 25,742 public lake acres in addition to reassessing an additional 5,334 stream miles and 14,262 public lake acres. Waters were reassessed for a variety of reasons, including removal of potential discharge sources, identification of new discharge sources, or verification that source and cause of impairment are unchanged. The draft 2022 Integrated Report identified 27,886 impaired stream miles, 2,418 more than documented in the 2020 Integrated Report. The draft 2022 Integrated Report reflects the cumulative assessment of 99% (84,977 miles) of stream miles and 97% (109,819 acres) of lake acres statewide and is the fifteenth in a series of reports prepared and submitted to the U.S. Environmental Protection Agency (EPA) pursuant to the CWA.
Items of note in the draft 2022 Integrated Report include:
- Since 2004, approximately 920 stream miles and 28,000 public lake acres have been restored.
- Approximately 28,000 stream miles and 69,000 public lake acres are listed as impaired.
- After PADEP completed the new assessments and reassessments, the percentage of impaired waters in Pennsylvania increased to 33%, up from 30% as documented in the 2020 Integrated Report.
- The draft 2022 Integrated Report identified Lancaster (1,286 stream miles), Elk (1,126 stream miles), Chester (1,020 stream miles), Franklin (928 stream miles), and Allegheny (915 stream miles) as counties having the most miles of impaired streams.
- PADEP delisted a total of 380 stream miles and 178 public lake acres. A total of 120 stream miles were fully restored, 78 stream miles had causes for impairment removed, and the remaining stream miles were delisted because of data refinement. Of the 178 public lake acres delisted, 95 acres were fully restored, 26 acres had causes for impairment removed, and the remaining acres were delisted because of data refinement.
PADEP is seeking general comments on the draft 2022 Integrated Report, and specific comments on waters listed as high priorities for TMDL development and on those selected for restoration through alternatives to TMDLs. PADEP is accepting comments on the draft 2022 Integrated Report through March 1, 2022. The final 2022 Integrated Report, including a list of Category 5 waters (requiring development of a TMDL), will be submitted to the EPA pursuant to sections 303(d) and 305(b) of the CWA.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On January 15, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published draft General Permit WMGR163 (Draft Permit) in the Pennsylvania Bulletin for public comment. See 52 Pa. Bull. 419 (Jan. 15, 2022). PADEP created the Draft Permit as a result of the July 9, 2021, passage of Act 70, which amended the Administrative Code of 1929. As pro- posed, the Draft Permit would authorize the short-term processing, transfer, and beneficial use of oil and gas liquid waste to hydraulically fracture or otherwise develop an oil or gas well under the authority of the Solid Waste Management Act, 35 Pa. Stat. §§ 6018.101–.1003, and the Municipal Waste Planning, Recycling and Waste Reduction Act, 53 Pa. Stat. §§ 4000.101–.1904. The Draft Permit covers facilities that process and beneficially reuse oil and gas liquid waste for no longer than 180 consecutive days.
If finalized as proposed, any company interested in using the Draft Permit will have to register its authorized activities with PADEP pursuant to 25 Pa. Code § 287.643. PADEP will be prohibited from requiring an applicant to obtain a determination of applicability from the agency (25 Pa. Code § 287.641(c)) prior to the issuance of the final permit as authorized under 25 Pa. Code § 287.641(d) for the land application of material. Key provisions in the Draft Permit include:
- Facilities are authorized to process and transfer oil and gas liquid waste for no more than 180 consecutive days during the permit’s one-year coverage
- The permittee may not store more than 1,000,000 gallons of oil and gas liquid waste on-site at any one
- Oil and gas liquid waste is not subject to concentration limits or chemical testing in order to be stored in an impoundment (unlike General Permit WMGR123).
- The applicable facility must meet the siting requirements set forth in the permit (e.g., it must not be located within a 100-year floodplain or within certain distances of an exceptional value wetland, dwelling, or property line, subject to certain exceptions).
- The permittee must develop and make available at the facility a Preparedness, Prevention and Contingency Plan that is consistent with applicable PADEP guidance.
The Draft Permit is available for review and comment through March 15, 2022, and Act 70 requires PADEP to submit the general permit to the Pennsylvania Legislative Reference Bureau by July 1, 2022, for publication in the Pennsylvania Bulletin. 71 Pa. Stat. § 510-39.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
The Pennsylvania Department of Environmental Protection (PADEP) is preparing to finalize a rulemaking that adopts reasonably available control technology (RACT) requirements and RACT emission limitations for existing oil and natural gas sources of volatile organic compound (VOC) emissions. This proposal is based on the U.S. Environmental Protection Agency’s (EPA) October 2016 Control Techniques Guidelines (CTG) for the Oil and Gas Industry, 81 Fed. Reg. 74,798 (Oct. 27, 2016), which provide RACT requirements for VOC emissions from existing oil and gas sources. The rule would apply to owners and operators of any of the following oil and natural gas sources of VOC emissions that were in existence on or before the effective date of this rulemaking: storage vessels (in all segments except natural gas distribution), natural gas-driven continuous bleed pneumatic controllers, natural gas-driven diaphragm pumps, centrifugal and reciprocating compressors, and fugitive emission components.
Pennsylvania’s Environmental Quality Board (EQB) first published a proposed rulemaking on May 23, 2020. 50 Pa. Bull. 2633 (May 23, 2020); see Vol. XXXVII, No. 3 (2020) of this Newsletter. The proposed rulemaking was published for public comment, three virtual hearings were held, and the comment period ended on July 27, 2020. PADEP received roughly 4,500 comments from approximately 36,000 commenters. PADEP is preparing, but has not yet released, a comment and response document for the rulemaking.
The draft final-form rule was presented to the Air Quality Technical Advisory Committee in December 2021 and was presented to PADEP’s other advisory committees in January 2022. The final-form rule incorporated public comment by making changes to improve clarity and minor edits on applicability and inspection requirements. The rulemaking will impact approximately 199 conventional wells and 4,913 unconventional wells, which will be required to implement leak detection and repair (LDAR) programs or increase the current LDAR frequency under the proposed rulemaking. Approximately 278 midstream com- pressor stations and 5 natural gas processing plants will be required to implement LDAR programs or meet new requirements.
On December 16, 2021, EPA found that Pennsylvania failed to submit state implementation plan (SIP) revisions required by the Clean Air Act (CAA) in a timely manner to address RACT requirements associated with the 2016 Oil and Natural Gas Industry CTG mentioned above. See 86 Fed. Reg. 71,385 (Dec. 16, 2021). Failure to submit SIP revisions within the next 18 months will trigger sanctions and the creation of a federal implementation plan.
PADEP anticipates advancing the draft final rule to the EQB for approval in the first quarter of 2022. The agency will finalize the rule and submit it to EPA as a SIP revision in the second quarter of 2022—within EPA’s new 18-month deadline. Compliance requirements would likely begin in January 2023.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Water Law Newsletter
(By Lisa M. Bruderly, Mackenzie Moyer and Evan M. Baylor)
On October 16, 2021, the Pennsylvania Department of Environmental Protection (PADEP) published a revised draft technical guidance document entitled “Guidance on Notification Requirements for Spills, Discharges, and Other Incidents of a Substance Causing or Threatening Pollution to Waters of the Commonwealth Under Pennsylvania’s Clean Streams Law,” PADEP Doc. No. 383-4200-003 (Oct. 16, 2021) (Spill Guidance). See 51 Pa. Bull. 6559 (Oct. 16, 2021). This guidance replaces the first draft published on August 8, 2020, in response to comments on that draft. The intended purpose of the Spill Guidance is to address what spills, discharges, or other incidents need to be immediately reported to PADEP.
Background of Immediate Notification Procedures
Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, requires PADEP to protect the waters of the commonwealth from activities that pollute or have the potential to pollute these waters. Chapters 91 and 92a of Pennsylvania’s regulations, specifically, 25 Pa. Code §§ 91.33 and 92a.41, require immediate notification to PADEP when a spill, discharge, or other incident results in an unpermitted discharge of a sub- stance that causes, or threatens to cause, pollution of the waters of the commonwealth, endangerment to downstream users, or damage to property.
Specifically, section 91.33(a) requires the responsible person to immediately notify PADEP
[i]f, because of an accident or other activity or incident, a . . . substance which would endanger downstream users of the waters of this Commonwealth, would otherwise result in pollution or create a danger of pollution of the waters, or would damage property, is discharged into these waters . . . or is placed so that it might discharge, flow, be washed or fall into them . . . .
The Spill Guidance states that accidents, activities, or incidents that may need to be reported under section 91.33 include, among other things, “spills, leaks, overflows, line breaks, [and] existing pollution that is newly discovered.” Spill Guidance at 3. In an emergency, public health and safety come first; notification to PADEP “should occur as soon as possible after immediate risks to public health and safety subside.” Id. at 4.
Section 92a.41(b) requires National Pollutant Discharge Elimination System (NPDES)-permitted facilities to comply with the oral notification requirements of section 91.33 no later than four hours after becoming aware of an incident causing or threatening pollution. The incident could occur as a result of an accident or incident at the facility “or during an activity authorized by an NPDES permit.” Id. at 3. NPDES-permitted facilities are required to submit a written notification to PADEP within five days of the permittee becoming aware of any incident.
What Spills, Discharges, or Other Incidents Need to Be Reported
PADEP does not identify threshold amounts of substances that trigger notification requirements (i.e., reportable quantities) because the impact of spills is fact-intensive and cannot be predicted ahead of time. Factors to evaluate when determining whether a spill should be reported include (1) the nature of the substance spilled (e.g., concentration, quantity, toxicity); (2) the location of the spill (e.g., characteristics of nearest waters of the commonwealth, geology, and proximity to surface water and downstream users); (3) the weather conditions before, during, and after the incident; and (4) the presence and implementation of a spill response plan. Id. at 6–7.
The Spill Guidance presents a risk characterization framework to assist in evaluating whether a spill may endanger downstream users, pollute waters, or damage property. Id. at 7–9. To illustrate this fact-intensive evaluation, PADEP uses examples ranging from spilling a drop of milk on a driveway, in which notification is not expected, to a tanker truck dumping thousands of gallons of milk into a stream, where notification is required. Id. at 9. PADEP’s position is that “it is not tenable to define pre-established, quantitative criteria by which it can be determined if a particular spill or discharge constitutes or threatens pollution,” but notification is “strongly encourage[d]” when the risks of pollution, endangerment to downstream users, or property damage are unknown or uncertain. Id.
PADEP must also be notified of a spill that does not directly discharge to a surface water of the commonwealth, if that spill could possibly enter a water of the commonwealth and endanger downstream users, result in pollution, or cause property damage. Id. at 6. In instances of evaluating whether an indirect discharge could result in a violation of water quality standards, additional factors must be considered including the length of time for the spilled substance to reach surface water and the extent the spilled substance is diluted or transformed before reaching the surface water. Id.
The Spill Guidance also addresses pollution risks to groundwater. Id. Waters of the commonwealth include “underground water,” and “spills or other unauthorized discharges that do not occur directly to surface waters may also constitute pollution as defined in The Clean Streams Law.” Id. As an example, the Spill Guidance states that “if a spill or unauthorized discharge results in harmful contamination of groundwater used by a municipal drinking water treatment plant, that spill or unauthorized discharge would constitute pollution as defined by The Clean Streams Law.” Id.
The Spill Guidance presents examples of incidents that would require immediate notification and incidents that would not be expected to require notification. Incidents that require immediate notification include sanitary sewer overflows; vehicular or other transportation accidents in which pollutants are spilled on or into the ground, storm drains, drainage swales, or surface water; and historical/existing pollution that is newly discovered. Incidents where PADEP does not expect notification include spills/overflows collected by appropriate secondary containment and minor spills onto the ground where the contaminated soil is immediately removed and there is no reasonable possibility of the substance reaching groundwater or surface water. Id. at 9–10.
PADEP recognizes that some spills or unauthorized discharges pose negligible risk of pollution, and notification of these spills is neither required nor expected. However, PADEP “strongly encourages” notification regarding any spill or unauthorized discharge where the risks of pollution to waters of the commonwealth, property damage, or endangering downstream users are “unknown or uncertain.” Id. at 9. Overall, PADEP emphasizes that it is best to err on the side of caution and notify if there is “a reasonable possibility that pollution occurred or will occur.” Id. at 11. Comments were due on the draft guidance document on December 15, 2021, and can be viewed at https://www.ahs.dep.pa.gov/eComment/.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Water Law Newsletter
(By Lisa M. Bruderly, Mackenzie Moyer and Evan M. Baylor)
On January 25, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a long-awaited technical guidance document, entitled “Pennsylvania Function- Based Aquatic Resource Compensation Protocol,” PADEP Doc. No. 310-2137-001 (effective Mar. 1, 2022) (Mitigation Guidance), for evaluating and valuing aquatic resource compensatory mitigation.
As background, a draft version of the Mitigation Guidance was published in March 2014. PADEP revised that draft to in- corporate feedback from other federal and Pennsylvania agencies, PADEP’s Water Resources Advisory Committee, and public comments.
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 stated purposes of the Mitigation Guidance are to:
- provide an acceptable methodology to evaluate functional compensation offsets associated with proposed aquatic resource impacts and determine compensatory mitigation requirements;
- assist in identifying measures that minimize proposed project impacts on aquatic resource functions to reduce subsequent compensation requirements; and
- provide a means for evaluating compensation proposals performed on-site, at a mitigation bank, or through an in-lieu fee
Id.
The Mitigation Guidance is intended to ensure consistency in determining compensation requirements and valuing compensation projects. Id. It is intended to be compatible, and used concurrently, with the federal compensatory mitigation requirements of the U.S. Environment Protection Agency and U.S. Army Corps of Engineers. Id. at 3.
This Mitigation Guidance applies to all intermittent and perennial watercourses, floodways and floodplains, wetlands, and other bodies of water, such as lakes and reservoirs, that are wholly or partly within Pennsylvania. Id. at 1. The Mitigation Guidance separates the regulated waters of the commonwealth into three aquatic resource groups based on the predominant functions of each aquatic resource type: (1) riverine (intermittent and perennial wadeable watercourses and their flood- ways/floodplains); (2) lacustrine (lakes, reservoirs, and non-wadeable rivers); and (3) palustrine (wetland environments, including unvegetated wetlands). Id. at 3–10. Function groups have been established for each resource type and are intended to represent the “predominant functions present within the applicable aquatic resource types.” Id. at 4.
Evaluation of whether a project may require compensation starts with establishing the project’s potential effect on the function group for the applicable resource type. The evaluation examines the area and type of impact (i.e., direct, indirect, or temporal). Id. at 4–5. The project effect is then scored (i.e., minimal to severe) and adjusted, as appropriate. Id. at 5–8. A re- source condition assessment is also conducted. Id. at 8–9. Other scores are assessed for (1) the aquatic resource value, taking into account the resource’s uniqueness, protected or public uses, and other special characteristics; and (2) the wetland coefficient of conservatism, a criterion relied on to categorize the wetland resource value for an impact area. Id. at 10–15.
In instances of after-the-fact permitting or enforcement, resource conditions are assigned to an already impacted resource area by either assuming the impacted resource was in the best attainable condition or by conducting a Condition Level
1 Rapid Assessment. Id. at 9. Compensation requirements are calculated after determining the areas of direct, indirect, and temporal impacts, the project effect category and value for each applicable function group, the appropriate resource condition scores for each resource area, and the appropriate resource value category and value for each resource. Id. at 15.
The Mitigation Guidance also describes the methodology to evaluate whether a mitigation project provides adequate compensation to offset the function compensation requirements. Id. at 23. This methodology includes scoring and adjustment (if appropriate) of the compensation value factor and determining the condition differential between the condition of the resource before and after the project. Id. at 18. After evaluation of other factors, the functional credit gain is calculated for each resource function group and adjusted, if appropriate. Id. at 22.
The Mitigation Guidance will be effective March 1, 2022. PADEP will provide updated application forms, instructions, and training prior to the effective date. The Mitigation Guidance and the accompanying Aquatic Resource Condition Level 2 Rapid Assessment Protocols are available on PADEP’s eLibrary website.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Law360
(By Robert Stonestreet, Christopher (Kip) Power and Ben Clapp)
State and federal lawmakers are creating economic opportunities for the coal industry and landowners to support production of critical materials in high demand for technology products.
The term “critical materials” refers to a group of 50 minerals, elements, substances and materials, including substances known as rare earth elements, that the U.S. Department of Energy has identified as key components of products that are essential to the economic or national security of the U.S., and that are susceptible to supply chain disruption.
According to the U.S. Geological Survey, approximately 97% of rare earth elements are produced in China. The federal legislation known as the Infrastructure Investment and Jobs Act, or IIJA, seeks to reduce the risk of supply chain disruption by diversifying and domesticating production of these materials.
To that end, the act allocates over $1.3 billion to support a number of new and existing DOE initiatives directed toward research, development and production of critical materials generally — and in some cases, rare earth elements specifically.
Rare earth elements are essential for many high-tech products, such as smartphones and other sophisticated electronic devices. They are key components of important defense applications, such as guidance systems, sonar and radar. These elements also serve as important raw materials used in the manufacture of renewable energy equipment, such as solar panels and wind turbines.
Rather than being rare, these elements exist in many places throughout the U.S. and the rest of the world, although generally in very low concentrations that make them difficult to economically recover and process.
But relatively greater concentrations of rare earth elements, along with other critical materials, can be found in coal seams and adjacent geologic formations. Even higher concentrations often exist in polluted water flowing from surface and underground coal mines — commonly referred to as acid mine drainage, or AMD.
The heightened concentration of rare earth elements and other critical materials in AMD, AMD sludge (a byproduct of AMD treatment) and legacy coal refuse disposal areas (also known as gob piles) presents potential opportunities for the mining industry to leverage grants and other funding sources provided by the IIJA to subsidize AMD treatment costs, and promote reclamation of legacy abandoned mine lands.
Companies operating in the mining industry — not just academic institutions or research foundations — are eligible to apply for large amounts of funding created by the IIJA related to the extraction of critical materials generally and rare earth elements specifically. These programs include:
- $400 million appropriated to fund pilot projects for the processing, recycling and development of critical materials, at least 30% of which must be granted to projects relating to secondary recovery, which includes recovery of critical materials from mine waste piles, AMD sludge or byproducts produced through legacy mining activities. Each grant for chosen pilot projects can be up to $10 million, and the DOE will prioritize projects that are shown to be economically viable in the long term.
- An allocation of $127 million in grants focused on research to improve the security of rare earth elements, including through the development and assessment of advanced separation technologies for the extraction and recovery of rare earth elements and other critical materials from coal and coal byproducts, such as AMD, and evaluation of environmental or health impacts associated with the recovery of rare earth elements from coal-based resources and methods of mitigating those impacts.
- Grant funding totaling $140 million dedicated toward establishing a rare earth demonstration facility, that would demonstrate the feasibility of a comprehensive, full-scale operation to extract, separate and refine rare earth elements from AMD, mine waste and other “deleterious material” at a single site. The cost share for an award recipient is expected to be approximately 50%. The DOE seeks to “catalyze development of an economic, competitive, sustainable domestic REE supply from unconventional and secondary sources capable of supporting [approximately] 10% of current U.S. demand.” With specific reference to this funding opportunity, the DOE recently issued a request for information, seeking input on a number of different topics from industry, academia, government agencies, investors and other key stakeholders with interest in developing such a facility. Interested parties are asked to comment upon all aspects of the development, design and construction of a demonstration facility, including potential impacts to environmental justice and energy transition communities, and the types of information that will be needed to determine whether a project is successful. The request for information is not a formal funding opportunity, which is expected to be issued in the fourth quarter of 2022.
- $600 million in grant funding available for projects to establish a sustainable long-term supply of critical materials, including innovations in technologies to diversify commercially viable sources of these materials, and development of advanced critical material extraction, production, separation, alloying or processing technologies.
- $75 million to fund contracts supporting construction of a research facility to be used for pilot projects focused on developing a reliable supply chain for rare earth elements and other critical materials.
Opportunities to apply for these grants and contracts through the DOE are expected to open beginning in the fourth quarter of 2022, subject to the development of appropriate policies or regulations to guide the process.
State lawmakers in West Virginia are also taking important steps to promote rare earth element recovery associated with coal mining operations. Legislators have recently introduced multiple bills in the 2022 legislative session intended to clarify that those who successfully extract rare earth elements from mine drainage may derive a commercial benefit from doing so.
These efforts seek to resolve the issue of who owns the substances present in AMD, which historically has been considered a liability rather than an asset, due to the costs and permitting liability associated with treating it. Under current proposals, ownership of rare earth elements and the right to assign, sell or otherwise financially benefit from their production, may also be vested in the state where AMD is being treated at abandoned or bond-forfeited reclamation sites.
Other states where AMD could serve as a potential source of rare earth elements may pursue similar legislation. But West Virginia appears to be the only state currently doing so.
West Virginia’s proposed legislation is important, because attributing specific volumes of mine drainage water to specific properties can present difficult challenges. Key considerations include whether the water flowing from a site is properly considered to be surface water or groundwater, and whether the analytical framework is one focused on the right to consumptive use or liability for treatment prior to discharge.
At least from a regulatory perspective, in a growing number of cases, the distinction between surface water and groundwater is a determination that is not easily made. For example, in the past, it may have been reasonable to assume that any point source discharge of water subject to a permit issued under the Clean Water Act’s National Pollutant Discharge Elimination System program is a purely surface water.
But in light of the U.S. Supreme Court‘s 2020 decision in County of Maui v. Hawaii Wildlife Fund, introducing the functional equivalency test for pollutants conveyed through groundwater, that line of demarcation may not be so clear. Things can be even murkier in the underground mine context.
A single mine may span multiple tracts with many different mineral owners. Since water moves through the subsurface in both mined-out voids and unmined geologic formations, mine drainage in underground areas can be an amalgamation of water flowing from and/or through a number of different underground mines forming one or more underground mine pools.
While volumes of water flowing from or through certain mine voids can be reasonably calculated, estimating what quantity of rare earth elements came from a particular mine void or source would be challenging, to say the least. Technical approaches that have been accepted in similar legal contexts — e.g., in the context of the Underground Injection Control permitting program under the federal Safe Drinking Water Act — may prove helpful in addressing this question, and enabling interested parties to reach agreements to facilitate rare earth element extraction.
In short, these and other legislative actions present substantial opportunities for members of the coal industry to participate in grant programs, and otherwise derive revenue from recovery and sale of rare earth elements and other critical materials associated with mining operations.
In the best case scenario, those treating AMD may find that they can turn a liability into an opportunity for financial gain. Regardless of the specific application, participating in these programs will take careful planning, and an early focus on the key issues in the development of a framework for project success.
For the full article, click here.
The article was first published on Law360, February 28, 2022.