Energy Alert
(by Kevin Garber, Sean McGovern and Jean Mosites)
On September 14, 2021, the Sierra Club, PennFuture, Clean Air Council, Earthworks and other groups (Petitioners) submitted two parallel rulemaking petitions to Pennsylvania’s Department of Environmental Protection (DEP) asking the Environmental Quality Board (EQB) to require full-cost bonding for conventional and unconventional oil and gas wells, for both new and existing wells. The petitions do not address or consider the permit surcharges and other funding mechanisms for plugging wells, including the federal infrastructure bill that is expected to provide millions of dollars to plug abandoned wells.
Background
The Pennsylvania General Assembly addressed and increased bonding in 2012. Under Act 13, well owners/operators are required to file a bond for each well they operate or a blanket bond for multiple wells. Currently, the bond amount for conventional wells is $2,500 per well, with the option to post a $25,000 blanket bond for multiple wells. 72. P.S. §1606-E. For unconventional wells, the current bond amount required varies by the total well bore length and the number of wells, and is limited under the statute to a maximum of $600,000 for more than 150 wells with a total well bore length of at least 6,000 feet. 58 Pa.C.S. §3225(a)(1)(ii). EQB has statutory authority to adjust these amounts every two years to reflect the projected costs to the Commonwealth of plugging the well.
Proposed Changes to Bond Amounts
The Petitioners contend that a lack of full-cost bonding has resulted in the abandonment of thousands of wells and that such wells pollute the environment and adversely affect the health of communities, and allege that the EQB has an obligation to increase bond amounts pursuant to the petition under the Environmental Rights Amendment. Pa. Const. art. I, § 27. Petitioners argue that increased bond amounts would encourage operators to plug non-producing wells or provide funds for the state to plug wells if an operator does not plug them.
The Petitioners rely upon the EQB’s authority to adjust a well’s bond “every two years to reflect the projected costs to the Commonwealth of plugging the well” (58 Pa.C.S. § 3225(a)) to propose a dramatic increase in bond amounts, applying the increases retroactively.
Petition for Full-Cost Bonding for Conventional Wells
The petition for conventional well bonding seeks to amend 25 Pa. Code § 78.302.
The petition requests the bond increase from $2,500 to $38,000 per well and the blanket bond increase from $25,000 to the sum of the applicable individual bond or security amount required for each well. For example, a blanket bond for 10 wells at $38,000 per well would total $380,000. The Petitioners contend that the proposed bond amount is supported by an expert analysis of average well plugging costs from 1989 to 2020. The expert report concludes that the bond should be raised to $25,000 and $70,000, for conventional and unconventional wells respectively. The Petition notes, however, that $38,000 is in line with DEP’s estimate of $33,000 for its average historical cost of plugging abandoned/orphaned conventional wells.
The amendment requested would apply to new as well as existing wells drilled after April 17, 1985. The amendment also would require DEP to report to EQB every two years (four years, if two is not feasible) whether EQB should adjust the bond amount.
Petition for Full-Cost Bonding for Unconventional Wells
The petition asks EQB to adopt a new regulation for unconventional wells in 25 Pa. Code Chapter 78, which would mirror an amended regulation for conventional wells, even though 25 Pa. Code § 78a.302 already exists and would contradict the proposed new regulation.
The Petitioners want EQB to increase the bond from the current range, which starts at $4,000 per well, to $83,000 per unconventional well. Blanket bonds would equal the sum of the applicable individual bond or security amount required for each well. For example, a blanket bond for 10 wells at $83,000 per well would total $830,000. The Petitioners rely on substantially the same analysis and rationale used in their petition for conventional wells to support the increased bond amounts.
Like the petition for conventional wells, the regulation would apply to new and existing unconventional wells drilled after April 17, 1985 and would require DEP to report to EQB every two years (four years, if two is not feasible) whether EQB should adjust bond amounts.
What happens next?
Per the EQB Petition Policy, as set forth in the regulations at 25 Pa. Code Chapter 23, DEP has 30 days from receipt of the petitions to determine whether the petitions are complete and if they request an action that can be taken by the EQB that does not conflict with federal law. If the DEP determines the petitions meet the above conditions, the EQB will be informed of the petition for rulemaking and the nature of the request. At the next EQB meeting occurring at least 15 days after the Department’s determination, the Petitioners may make a brief oral presentation and DEP will make a recommendation whether the EQB should accept the petition.
Babst Calland will be tracking these petitions and subsequent actions taken by DEP and the EQB. If you have any questions regarding the potential regulatory changes described in this Alert, please contact Kevin Garber at (412) 394-5404 or kgarber@babstcalland.com; Sean McGovern at (412) 394-5439 or smcgovern@babstcalland.com; or Jean Mosites at (412) 394-6468 or jmosites@babstcalland.com.
Click here for PDF.
The Legal Intelligencer
(by Alex Farone)
The COVID-19 pandemic has broadly affected nearly every state’s unemployment compensation (UC) system in one way or another, and Pennsylvania is no exception. From extended appeal deadlines to an uptick in UC fraud claims, this article sets forth four of the most recent changes or proposed changes to Pennsylvania’s UC system that have arisen due to COVID-19.
- Appeal Deadlines: Extension and Refresher
The process for employees seeking UC benefits can involve several steps and multiple appeals. The first step involves the recently separated employee filing an application for benefits. Applications are processed by one of several UC Service Centers across the Commonwealth. These Service Centers are tasked with making an initial determination on claimants’ applications. The Service Centers’ determinations may be appealed by either the claimant or their former employer to a UC Referee, who will conduct an evidentiary hearing on the merits of the application. The decision of the UC Referee may then be appealed by either party to the UC Board of Review (Board).
Until recently, applicants and employers had just 15 days to appeal initial determinations and referees’ decisions. On June 30, 2021, Governor Tom Wolf signed Act 30, formerly H.B. 178, into law, extending the time period allowed for appeals of UC Service Center determinations and UC Referee decisions from 15 days to 21 days.
Act 30 does not impact the deadlines to file appeals with either the Pennsylvania Commonwealth Court or the Supreme Court of Pennsylvania. An appeal to the Pennsylvania Commonwealth Court from the Board is an appeal as of right, but any further appeal to the Pennsylvania Supreme Court must be specifically permitted by that Court in response to an appellant’s petition for allowance of appeal.
- Commonwealth Court Signals Possibility of “Untimely” UC Appeal Acceptance Due to COVID-19
On August 31, 2021, the Pennsylvania Commonwealth Court issued its opinion in Barsky v. Unemployment Compensation Board of Review, remanding the matter back to the Board and opening the door for consideration of untimely appeals due to COVID-19’s impact. No. 948-CD-2020 (Pa. Commw. Ct. Aug. 31, 2021).
In Barsky, the claimant lost his job in March 2020 when Governor Wolf mandated the closure of non-essential businesses due to the COVID-19 pandemic. Mr. Barsky applied for and received unemployment benefits, until the UC Service Center terminated benefits due to an alleged overpayment. His last day to file a timely appeal to the UC Referee was June 3, 2020, but his appeal was not received until June 4, 2020. The UC Referee held a hearing regarding the timeliness of his appeal and dismissed it as untimely. The Board affirmed.
On appeal to the Commonwealth Court, Mr. Barsky alleged that his representative mailed his appeal documents on time and offered evidence of a U.S. Postal Service (USPS) receipt indicating the documents were mailed on June 1, 2020. He also argued a health condition that placed him at risk of contracting COVID-19 in public spaces, as well as the USPS backlog of mailing operations due to COVID-19, caused his otherwise timely mailing to be delivered after the appeal deadline, and therefore his appeal should have been permitted nunc pro tunc, as if it been delivered timely. Recognizing that an appeal nunc pro tunc (“now for then”) is warranted where the filing delay was caused by non-negligent circumstances, the Commonwealth Court remanded to the Board to consider whether the USPS tracking number on the envelope received by the UC Service Center was filed timely and warranted an appeal.
The effects of the Commonwealth Court’s Barksy decision are significant for both claimants and employers when arguing timeliness of UC appeals and requests for nunc pro tunc relief. Though the safest options for ensuring timely appeals are to e-mail or fax the appeal for verifiable, same-day receipt, or mailing the appeal from a USPS office via certified mail, Barksy indicates that COVID-19-related disruptions to USPS operations may be sufficient to allow an appeal nunc pro tunc where the appellant can demonstrate they mailed the appeal documents in sufficient time to reach the UC Center under traditional circumstances.
- New Proposed Legislation: Lowering Aid and Limiting Repayment Requirements
Two bills proposed this year in the Pennsylvania House of Representatives illustrate some of the Commonwealth’s attempts in balancing unemployment needs with transitioning Pennsylvanians back to work.
Proposed H.B. 508 would phase out Pennsylvania’s participation of federal COVID-19-related UC programs established through the 2021 American Rescue Plan Act, which are currently enhancing and extending benefit payments to Pennsylvania UC claimants. If signed into law, the bill would also provide for a back-to-work bonus program to incentivize UC claimants to promptly seek and maintain employment. This program would provide a $300 bonus to former UC claimants who are employed by a single employer for four consecutive weeks. An additional $300 would be available if the former claimant remains with the same employer for an additional four weeks (a total of eight consecutive weeks). On June 9, 2021, this bill was recommitted to the Pennsylvania House Appropriations Committee.
Proposed H.B. 1027 would prohibit Pennsylvania’s Department of Labor and Industry from seeking repayment of UC benefit overpayments made through no fault of the claimant. Exceptions to the repayment prohibition would apply if the overpayments were made due to a claimant’s false or fraudulent statement, or a failure to disclose pertinent information. On March 26, 2021, this bill was referred to the Pennsylvania House Committee on Labor and Industry.
- Be Suspicious of Scams and Fraud Schemes
As recently recognized by the Pennsylvania legislature in proposing the repayment exceptions within H.B. 1027, employers and the Pennsylvania Department of Labor and Industry have recently been faced with an uptick of attempted fraud by supposed UC claimants seeking overpayments or identity thieves seeking UC benefits. As of March 2021, at least 50,000 reports of UC fraud have been made to the Pennsylvania Department of Labor and Industry since the COVID-19 pandemic began. Over 300 complaints of UC fraud during the pandemic have been reported to the Pennsylvania Office of the Attorney General, which led to at least 29 arrests.
It is important for employers to remain vigilant regarding UC documents they receive that may indicate an instance of attempted fraud. Common red flags include receiving UC documents for employees whose employment was never interrupted, receiving multiple UC documents for a single claimant, or receiving UC documents for former employees where the personal information such as birth date or social security number appears to be inaccurate.
Employers should not hesitate to verify a UC form’s legitimacy with the UC Service Center if its accuracy is in doubt. For example, some recently issued (and otherwise legitimate) documents omitted the claimant’s name. Employers can verify the legitimacy of a form because each includes a unique UC code that can be verified with the UC Service Center upon receipt by calling 833-728-2367.
For the full article, click here.
Reprinted with permission from the September 16, 2021 edition of The Legal Intelligencer© 2021 ALM Media Properties, LLC. All rights reserved.
Renewables Law Blog
(By Ashley Krick)
On September 8, 2021, the Department of Energy (DOE) released its Solar Futures Study providing a blueprint for the role of solar energy in decarbonizing the nation’s power sector. The 310-page Study outlines a future in which solar provides 40% of the nation’s electricity supply by 2035 through cost reductions, technological improvement, rapid deployment, and supportive policies. And, with the electrification of buildings and the transportation sector, solar could also power 30% of all building end uses and 14% of transportation end uses by 2050.
The Study identifies several policy initiatives needed to support the deployment of solar at this scale, including decarbonization targets, R&D investments and cost reductions, changes to wholesale electricity market regulation, and transmission development, to name a few. In order to meet the 40% by 2035 goal, the Study estimates that the U.S. must install an average of 30 GW of solar capacity per year between now and 2025 and 60 GW per year from 2025-2030, with a total of 1,000 GW of solar deployed by 2035. If the solar industry sees this level of growth, the Study estimates that the industry could employ up to 1.5 million people by 2035. The Study also highlights the important role that battery storage and demand-side management will play given that solar power varies based on daily and seasonal patterns.
With solar power currently providing approximately 3% of the nation’s electricity supply, the DOE’s 40% goal will be contingent on many factors supporting the industry in the coming years, including cost reductions, supportive policies, and widespread deployment.
Tags: Department of Energy, DOE, renewable, renewable energy, solar, solar energy
The PIOGA Press
(by Lisa Bruderly)
The U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers announced, on September 3 that they had halted implementation of the current definition of “waters of the United States” (WOTUS) effective immediately and reverted back to the pre-2015 definition until further notice. The switch follows an August 30 order from the U.S. District Court for the District of Arizona, which remanded and vacated the definition of WOTUS promulgated by the Trump administration in 2020 (commonly referred to as the Navigable Waters Protection Rule (NWPR)) in the case of Pascua Yaqui Tribe v. U.S. Environmental Protection Agency. While there was speculation that the court’s vacatur could be narrowly interpreted to apply only to states where the plaintiffs in the case were located (i.e., Arizona, Minnesota, Washington and Wisconsin), EPA and the Corps are applying the change in WOTUS definition nationwide.
Importance of the definition of WOTUS
The definition of WOTUS identifies which waters are federally-regulated under the Clean Water Act (CWA), and therefore determines when a federal permit is required for projects (e.g., pipelines, access roads, well pads) that involve dredging or filling of a waterbody (i.e., a Section 404 permit). The WOTUS definition also affects federal spill reporting and spill prevention planning.
With regard to Section 404 permitting, the more expansive the definition of WOTUS, the more waters that are federally-regulated. The extent of WOTUS impacts resulting from a project determines whether an individual or a general Section 404 permit is required, with the process for obtaining an individual permit typically resulting in more Corps involvement, delay and expense.
Significance of the change in WOTUS definition
When the Trump administration promulgated the NWPR in 2020, environmental groups criticized and challenged the new WOTUS definition, claiming it was too narrow and did not federally regulate enough types of waters. For example, the NWPR did not federally regulate ephemeral streams or other waters based on Justice Anthony Kennedy’s “significant nexus” test, introduced in the seminal Supreme Court opinion Rapanos v. United States and Carabell v. United States.
By vacating the NWPR, WOTUS are again described under a definition promulgated in the late 1980s and interpreted in subsequent EPA/Corps guidance that was issued following the Rapanos and Solid Waste Agency of Northern Cook County (SWANCC) v. United States Supreme Court decisions. This earlier definition and subsequent interpretations are generally considered to be more expansive and inclusive than the NWPR. Subsequently, reverting to this earlier definition is expected to result in more waters being federally regulated.
Biden administration’s plan to revise the WOTUS definition
President Biden has always intended to revise the definition of WOTUS. In his first week in office, he asked EPA and the Corps to consider revising or rescinding the current definition. On June 9, EPA and the Corps announced their intent to revise the WOTUS definition “to better protect our nation’s vital water resources.” The agencies identified a two-step rulemaking process, which would first restore protections in place prior to 2015 with updates to reflect relevant Supreme Court decisions, and a second rulemaking that would continue to “refine and build” on the prior definition. In addition to developments in science, EPA and the Corps identified that the new rulemaking would consider, among other things, the effects of climate change and input received from disadvantaged communities with environ-mental justice concerns.
On the same day, the Department of Justice (DOJ) filed a motion to request remand of the NWPR to EPA and the Corps. DOJ also asked courts to stay judicial challenges to the current WOTUS definition while the Biden administration reconsidered the definition. However, the court in the Pascua Yaqui Tribe case, instead remanded and vacated the NWPR definition. This vacatur prompted the EPA/Corps decision on September 3 to revert to the pre-2015 WOTUS definition.
Anticipated impact and timing
While the WOTUS definition proposed by the Biden administration will certainly be more expansive than the NWPR, it is yet unclear how far the pendulum will swing with the proposed rulemakings. The agencies have expressed their intent to develop a “durable” definition of WOTUS based on input from “diverse perspectives and based on an inclusive foundation.” To start this process, the agencies solicited pre-proposal written recommendations about how to define WOTUS and implement this definition. In addition, the agencies held several public meetings, during which the public could pro-vide verbal recommendations. More public engagement is anticipated, including 10 geographically focused roundtables for stakeholders.
Among other things, the Biden administration’s definition of WOTUS will most likely regulate waters (including ephemeral streams) that are considered to have a “significant nexus” to traditionally navigable waters. This definitional change is expected to require more energy infrastructure projects to obtain federal CWA permitting, thus extending the time and increasing cost of permitting for many projects that impact waters. No timeframe for the new rulemakings has been announced. While EPA’s Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions identified revision of the definition of WOTUS as a “long-term action,” with unspecified dates for the proposed and final actions, it is unclear whether this most recent change in WOTUS definition will change the schedule for proceeding with the proposed rulemakings.
Babst Calland will continue to track developments related to the federal regulation of waters and will provide necessary updates. If you have any questions or would like any additional information, please contact Lisa M. Bruderly at 412-394-6495 or lbruderly@babstcalland.com.
For the full article, click here.
Reprinted with permission from the September 2021 issue of The PIOGA Press. All rights reserved.
Energy Alert
The United States District Court for the Northern District of West Virginia has certified questions to the West Virginia Supreme Court of Appeals asking whether the seminal decision in Estate of Tawney v. Columbia Natural Resources, LLC, 219 W.Va. 266, 633 S.E.2d 22 (2006) regarding the deductibility of post-production expenses remains the law of West Virginia, and if so, the proper interpretation of Tawney.
In Charles Kellam, et al. v. SWN Production Company, LLC, et al., No. 5:20-CV-85, a class action royalty case, the District Court, Judge John Preston Bailey, certified on his own motion whether Tawney remains the law of West Virginia, whether the lease in question allowed the deductions, and the proper application of Tawney. The District Court certified the questions without ruling on the defendants’ pending Motion for Judgment on the Pleadings which argued the Kellam’s lease complied with Tawney and the District Court was bound by the decision in Young v. Equinor USA Onshore Properties, Inc., 982 F.3d 201 (4th Cir. 2020), where the Fourth Circuit Court of Appeals reversed Judge Bailey and held a similar lease clearly and unambiguously allowed the deduction of post-production expenses. The Kellam’s lease states the lessee agrees to pay the lessor “as royalty for the oil, gas, and/or coalbed methane gas marketed and used off the premises and produced from each well drilled thereon, the sum of one-eighth (1/8) of the price paid to Lessee per thousand cubic feet of such oil, gas, and/or coalbed methane gas so marketed and used . . . less any charges for transportation, dehydration and compression paid by Lessee to deliver the oil, gas, and/or coalbed methane gas for sale.”
In Young, the Fourth Circuit Court of Appeals rejected the finding by Judge Bailey that the lease did not contain sufficiently explicit language about the method of calculating deductions and therefore did not comply with Tawney, noting that “Tawney doesn’t demand that an oil and gas lease set out an Einsteinian proof for calculating post-production costs. By its plain language, the case merely requires that an oil and gas lease that expressly allocates some post-production costs to the lessor identify which costs and how much of those costs will be deducted from the lessor’s royalties.” Young, 982 F.3d at 208.
In the September 14, 2021 Order certifying the questions to the West Virginia Supreme Court of Appeals, Judge Bailey relied on his similar reasoning in Young, which the Fourth Circuit Court of Appeals rejected.
The West Virginia Supreme Court of Appeals may reformulate the questions and will decide whether to accept the certified questions for review. If they do, a briefing schedule will be entered, and the court will also decide whether to allow limited or full oral argument.
For more information about the case contact Tim Miller, tmiller@babstcalland.com, Jennifer Hicks, jhicks@babstcalland.com, or Katrina Bowers, kbowers@babstcalland.com, who are serving as counsel for the defendants in Kellam.
Click here for PDF.
Pipeline Safety Alert
(by James Curry and Evan Baylor)
If enacted, the Senate Infrastructure Investment and Jobs Act of 20211 (Infrastructure Bill) would provide $1 billion for the newly established Natural Gas Distribution Infrastructure Safety and Modernization Grant Program (Program) to be administered by the Pipeline and Hazardous Materials Safety Administration (PHMSA). The program would offer $200 million in grant funding each year for five years, starting in fiscal year 2022. The funding would be available only to municipal and community owned utilities. Eligible projects would include the repair, rehabilitation, or replacement of natural gas distribution pipeline systems and the acquisition of equipment to improve pipeline safety and avoid economic losses. In choosing projects, PHMSA would consider: (1) the risk profile of applicant’s current pipeline systems, including if they are prone to leaks; (2) whether a project may generate jobs; (3) whether a project may benefit disadvantaged communities; and (4) and how a project would impact economic growth.
If enacted, the $1 billion Program would reflect a substantial expansion of PHMSA’s current grant programs both in terms of the amount of funding available and because it would authorize spending on capital projects.
Given the scope of this program, if it is adopted into law, stakeholders may have practical questions on how PHMSA would implement it. For example, would capital projects funded through the Program trigger NEPA? Or would a Categorical Exclusion apply? Current DOT Categorical Exclusions may not cover projects and PHMSA does not have its own set of Categorical Exclusions.2 Would PHMSA need to propose implementing regulations for the Program or could it adopt a less formal application process and criteria? How would PHMSA choose projects, given the broad criteria outlined in the Infrastructure Bill? And would PHMSA limit projects to only physical infrastructure or could projects also include technology, software, and cybersecurity improvements? Further, would PHMSA have sufficient current staffing to administer the Program?
The Infrastructure Bill is not yet enacted. It still requires passage in the House before it would move to President Biden’s desk.
If you have any questions or would like further information regarding the proposed Natural Gas Distribution Infrastructure Safety and Modernization Grant Program, please contact Jim Curry at 202.853.3461 or jcurry@babstcalland.com.
Click here for PDF.
_________________________
1 H.R.3684 – 117th Congress (2021-2022): Infrastructure Investment and Jobs Act, H.R.3684, 117th Cong. (2021), https://www.congress.gov/bill/117th-congress/house-bill/3684.
2 U.S. DOT Order 5610.1C: Procedures for Considering Environmental Impacts at Sect 4(C). In 2016, DOT proposed changes to Order 5610.1C to add categorical exclusions, which if adopted would not likely apply to the Program. U.S. DOT Order 5610.1D: Procedures for Considering Environmental Impacts [Draft] at Sect. 10.
Environmental Alert
(by Lisa Bruderly)
The U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps) announced, on September 3, 2021, that they would halt implementation of the current definition of “waters of the United States” (WOTUS) effective immediately and revert back to the pre-2015 definition until further notice. The switch is the result of an August 30, 2021 order from the U.S. District Court for the District of Arizona in the case of Pascua Yaqui Tribe v. U.S. Environmental Protection Agency, which remanded and vacated the definition of WOTUS promulgated by the Trump administration in 2020 (commonly referred to as the Navigable Waters Protection Rule (NWPR)). While there was speculation that the court’s vacatur could be narrowly interpreted to apply only to states where the plaintiffs in the case were located (i.e., Arizona, Minnesota, Washington and Wisconsin), EPA and the Corps have changed the WOTUS definition nationwide.
Importance of the Definition of WOTUS
The definition of WOTUS identifies which waters are federally-regulated under the Clean Water Act (CWA), and, therefore, determines when a federal permit is required for projects that involve dredging or filling of a waterbody (i.e., a Section 404 permit) or the discharge of pollutants into a surface water (i.e., a NPDES permit). The WOTUS definition also affects federal spill reporting and spill prevention planning.
With regard to Section 404 permitting, the more expansive the definition of WOTUS, the more waters that are federally-regulated. The extent of WOTUS impacts caused by a project determines whether an individual or a general Section 404 permit is required, with the process for obtaining an individual permit typically resulting in more Corps involvement, cost and delay.
Significance of the Change in WOTUS Definition
When the Trump administration promulgated the NWPR in 2020, environmental groups criticized and challenged the new WOTUS definition, claiming that it was too narrow and did not federally regulate enough types of waters. For example, the NWPR did not federally regulate ephemeral streams or other waters based on Justice Anthony Kennedy’s “significant nexus” test, introduced in the seminal Supreme Court opinion – Rapanos v. United States and Carabell v. United States.
By vacating the NWPR, WOTUS are defined under a definition promulgated in the late 1980s and interpreted in subsequent EPA/Corps guidance documents that were issued following the Rapanos and Solid Waste Agency of Northern Cook County (SWANCC) v. United States Supreme Court decisions. This earlier definition and subsequent interpretations are generally considered to be more expansive and inclusive than the NWPR. Subsequently, reverting to this earlier definition is expected to result in more waters being federally-regulated.
Biden Administration Intent to Revise the WOTUS Definition
President Biden has always intended to revise the definition of WOTUS. In his first week in office, he asked EPA and the Corps to consider revising or rescinding the current definition. On June 9, 2021, EPA and the Corps announced their intent to revise the WOTUS definition “to better protect our nation’s vital water resources.” The agencies identified a two-step process, which would first restore protections in place prior to 2015 with updates to reflect relevant Supreme Court decisions, and a second rulemaking that would continue to “refine and build” on the prior definition. In addition to developments in science, EPA and the Corps identified that the new rulemaking would consider, among other things, the effects of climate change and input received from disadvantaged communities with environmental justice concerns.
On the same day, the Department of Justice (DOJ) filed a motion to request remand of the NWPR to EPA and the Corps. DOJ also asked courts to stay judicial challenges to the current WOTUS definition while the Biden administration reconsidered the definition. However, the court in the Pascua Yaqui Tribe case, instead remanded and vacated the NWPR definition. This vacatur prompted the EPA/Corps decision on September 3, 2021 to revert to the pre-2015 WOTUS definition.
Anticipated Impact and Timing
While the WOTUS definition proposed by the Biden administration will certainly be more expansive than the NWPR, it is yet unclear as to how far the pendulum will swing with the proposed rulemakings. The agencies have expressed their intent to develop a “durable” definition of WOTUS based on input from “diverse perspectives and based on an inclusive foundation.” To start this process, the agencies solicited pre-proposal written recommendations about how to define WOTUS and implement this definition. In addition, the agencies held several public meetings, during which the public could provide verbal recommendations. More public engagement is anticipated, including 10 geographically focused roundtables for stakeholders.
Among other things, the Biden administration’s definition of WOTUS is most likely to regulate waters (including ephemeral streams) that are considered to have a “significant nexus” to traditionally navigable waters. This definitional change is expected to require more projects to obtain federal CWA permitting, thus extending the time and increasing cost of permitting for many projects with impact to waters.
No timeframe for the new rulemakings has been announced. While EPA’s Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions identified revision of the definition of WOTUS as a “long-term action,” with unspecified dates for the proposed and final actions, it is unclear whether this most recent change in WOTUS definition will also change the schedule for proceeding with the proposed rulemakings.
Babst Calland will continue to track developments related to the federal regulation of waters and will provide necessary updates. If you have any questions or would like any additional information, please contact Lisa M. Bruderly at (412) 394-6495 or lbruderly@babstcalland.com.
Click here for PDF.
RMMLF Water Law Newsletter
(By Lisa M. Bruderly)
On June 25, 2021, the U.S. Army Corps of Engineers (Corps) released the finalized Pennsylvania State Programmatic General Permit-6 (PASPGP-6). See Corps, Special Pub. Notice No. SPN-21-28 (June 25, 2021). Going into effect on July 1, 2021, the permit will expire in five years, on June 30, 2026. Under section 404 of the Clean Water Act, 33 U.S.C. § 1344, and section 10 of the River and Harbor Act of 1899, 33 U.S.C. § 403, PASPGP-6 authorizes work in “waters of the United States” (WOTUS) within Pennsylvania that causes no more than minimal adverse environmental effects. State authorization under the Pennsylvania Department of Environmental Protection’s (PADEP) chapter 105 regulations (typically, a general permit or a waiver) is still required for most activities authorized by PASPGP-6.
For projects that meet the threshold criteria, PASPGP-6 typically provides a quicker and less complicated alternative to obtaining an individual section 404 permit. The permit identifies reporting activities, which require Corps review and coordination, as well as non-reporting activities, which can be authorized by PADEP without Corps involvement. Compensatory mitigation, at a minimum one-to-one ratio, will typically be required for impacts to WOTUS that are greater than 0.1 acre and are a reporting activity.
PASPGP-6 updates include new eligibility and reporting guidelines. Key changes from PASPGP-5 to PASPGP-6 include:
- The 1.0 acre eligibility threshold for temporary and/or permanent impacts to WOTUS was changed to an eligibility threshold for permanent loss, both direct and indirect, of 0.5 acre of WOTUS and 1,000 linear feet of jurisdictional stream channel.
- The eligibility threshold for temporary impacts to WOTUS, including jurisdictional wetlands, was changed from 1.0 acre to unlimited acreage, provided the work is determined to result in no more than minimal impact.
- Eligibility thresholds are determined based on the impacts of each “single and complete project,” as determined by the Corps. Reporting thresholds are determined based on the impacts of the overall project, and not the single and complete project.
- The reporting thresholds of 0.10 acre of permanent wetland conversion and 0.5 acre of temporary and/or permanent impacts to WOTUS were replaced with thresholds of 0.25 acre of permanent impacts to WOTUS, 250 linear feet of permanent impacts to juris-dictional stream channel, and 1.0 acre of temporary impacts to WOTUS.
- Certain formerly ineligible section 10 waters in the Corps’ Pittsburgh District are now eligible for the PASPGP. Except for work that qualifies for authorization under PADEP Waivers 10 and 12, any regulated work within these waters is a reporting activity and requires Corps review.
- Language was added stating that all waters and wetlands are assumed to be WOTUS in the absence of an approved jurisdictional determination.
Grandfathering provisions are in place for activities that were permitted (or intended to be permitted) under PASPGP-5. Generally, verified reporting activities under PASPGP-5 that comply with the terms and conditions of PASPGP-6 are authorized by PASPGP-6. In addition, all previously authorized non-reporting activities under PASPGP-5 that meet the terms and conditions of PASPGP-6 are reauthorized without further notice to the Corps. Activities that obtained PASPGP-5 authorization by June 30, 2021, have a valid state authorization, and commenced construction (or had construction work under contract to commence) prior to June 30, 2021, have until June 30, 2022, at the latest, to complete the regulated work under the terms of the PASPGP-5 authorization and PADEP authorization. The Corps has provided additional guidance on grandfathered activities and other aspects of PASPGP-6 on its websites for the applicable districts.
Copyright © 2021, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Smart Business
(by Sue Ostrowski featuring Kevin Douglass)
You’ve just discovered someone is stealing from your company. Worse yet, what if a high-level person — a partner, an owner, a director or an officer — is involved?
“Particularly if the theft involves a substantial amount of money, an accomplice outside of your business, or if criminal investigatory agencies are involved, you should consult with an attorney about how best to interact with authorities, respond to possible subpoenas, conduct an internal investigation and craft a consistent message to employees and customers,” says Kevin Douglass, a shareholder at Babst Calland.
Of course, every employee with access to company financials poses a risk, and every company should take steps to protect itself.
Smart Business spoke with Douglass about how to keep your business from falling prey to a theft — and what to do if it happens anyway.
How can a company protect its assets?
Employees with the greatest access to the company’s finances are in the best position to take advantage. The easiest way to prevent stealing is to ensure that there are checks and balances built into your company’s financial system, regardless of the trust you have in employees or colleagues responsible for managing that system.
The easiest way to do that is to require that more than one person monitor the company’s cash flow, including approval or review of checks, credit and debit card usage, petty cash and invoicing. If that is not possible, consider an audit every couple of years by an independent accounting firm and provide them with full access to the company’s internal financial records.
An individual may only take small amounts in the beginning, increasing the amount and frequency as they gain confidence. And to cover their tracks, they likely will delete, alter or fabricate financial recordkeeping. If undetected, embezzlement can last years, or even decades, and add up to thousands or millions of dollars. Once someone starts down this path, they rarely stop until they are caught.
Company theft happens more often than you might think. No company wants to publicize the fact that an employee is stealing. Often, once detected, a business may choose to quietly terminate the employee and sweep the situation under the rug to avoid negative attention. But that does not mean that it did not happen.
Once theft is discovered, how should a company proceed in the immediate aftermath?
First, you must be certain the person has actually stolen from the business. As quickly as possible, perform an internal investigation and, depending on the complexity and scope, consider hiring an independent investigator or accountant to ensure your investigation is credible and comprehensive.
You also need to take steps to prevent further harm to your business, including likely termination of the employee, denying the offender access to the company’s accounts and finances, as well as other company records and property, including laptops and company phones. An employee under suspicion may intentionally delete computer files and/or alter records, so decisive and immediate action is necessary. If the individual has signature authority on a bank account, you need to remove that authority or consider closing the account.
After a theft is discovered, consider whether and how to communicate with other employees, customers and the public. Can you keep this quiet? Should you keep it quiet? What is the right messaging?
In addition, you must decide whether to report the theft and seek recovery of the stolen funds. Is a customer a victim via fabricated invoices or other means? If yes, consider your obligations with counsel given the company’s unwitting role in the theft.
How can an attorney help you navigate the crisis?
It is critical to receive sound advice as quickly as possible when confronted with a theft of company assets involving an owner or employee. Counsel can guide you through this stressful process, ensuring proper communication and messaging with governmental authorities, employees and customers, as well coordinating the internal investigation. In addition, counsel can help navigate the complex contractual issues that may arise in order to sever ties with an offending owner.
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EmTech Law Blog
(by Ashleigh Krick)
On August 13, 2021, the National Highway Traffic Safety Administration’s (NHTSA) Office of Defect Investigations (ODI) opened a Preliminary Evaluation (PE21-020) into crashes with in-road or roadside first responders involving Tesla vehicles where Autopilot was confirmed to have been engaged during the approach to the crash. NHTSA cites to 11 crashes involving emergency vehicles that involved 17 total injuries and 1 fatality. The earliest cited crash is the January 22, 2018, crash in Culver City, California, where a Tesla Model S rear-ended a firetruck parked along a California freeway. A National Transportation Safety Board investigation into the crash found that the driver was overly reliant on Autopilot and that Autopilot allowed the driver to disengage from the driving task.
In the investigation report, ODI described Tesla’s Autopilot as an SAE Level 2 Advanced Driver Assistance System (ADAS) system “in which the vehicle maintains its speed and lane centering when engaged within its Operational Design Domain (ODD).” Even with the ADAS active, ODI noted that the driver continues to hold primary responsibility for Object and Event Detection and Response (OEDR). As such, ODI explained that the investigation will “assess the technologies and methods used to monitor, assist, and enforce the driver’s engagement with the dynamic driving task during Autopilot operation.” ODI will also evaluate Autopilot’s ODD and OEDR.
While the investigation focuses on a relatively narrow issue—the ability of Autopilot to identify and respond to parked emergency vehicles—it reinforces the Agency’s interest in crashes involving SAE Level 2 ADAS systems that are being deployed on public roads. Particularly, the Agency’s interest in how vehicle manufacturers are perhaps enforcing the driver’s engagement when these systems are activated. This investigation follows NHTSA’s recent Order requiring crash reporting for ADAS-equipped vehicles.
Tags: Advanced Driver Assistance System, autopilot, investigation, NHTSA
Pennsylvania House Environmental Resources and Energy Committee Hearing
In his testimony on August 17, 2021 at the Pennsylvania House Environmental Resources and Energy Committee public hearing on the Environmental and Economic Benefit of Pipelines, Babst Calland Attorney Keith Coyle, chairman of the Marcellus Shale Coalition’s Pipeline Safety Workgroup, explains, “As long as we are relying on fossil fuels to produce power, we need pipelines to deliver them safely. …It’s pretty clear we are going to be relying on natural gas and petroleum for some time. There is no other way to do this safely and to move product in bulk besides these pipelines.”
To view the video of the full public hearing of the House Environmental Resources & Energy Committee on the Environmental and Economic Benefits of Pipelines, click here.
Environmental Alert
(by Julie Domike)
An August 10, 2021 decision by Judge Michael J. Truncale of the U.S. District Court for the Eastern District of Texas may upend assumed privilege for documents and studies gathered as part of an environmental self-audit in Texas. The Order on Motion to Quash Subpoena, Sierra Club v. Woodville Pellets, LLC, No. 9:20-cv-178, 2021 WL 3522443 (E.D. Tex. Aug. 10, 2021) addressed the subpoena for stack test reports sought by the Sierra Club in a Clean Air Act enforcement case against the wood pellet manufacturing facility in Woodville, Texas.
Background
On August 18, 2020, Sierra Club filed a complaint under the citizen suit provisions of the federal Clean Air Act, alleging that Woodville Pellets, LLC had violated the statute by emitting unpermitted amounts of air pollutants from its facility. The matter will be tried before a jury in November; during discovery, the Sierra Club sought reports of stack testing that Trinity Consultants conducted as part of a facility audit under Texas law. Failing to receive the documents from Woodville Pellets, the Sierra Club served a subpoena on Trinity, which is not a party to the litigation, seeking these and other documents. Woodville and Trinity moved to quash the subpoena on the grounds that the documents sought are privileged under the Texas Environmental, Health, and Safety Audit Privilege Act (Audit Act) and this prevents their production.
The Decision
The Court accepted that the stack tests were done as part of an audit under the Audit Act, which extends a privilege to documents gathered as part of an environmental self-audit. The privilege provides these documents are not admissible as evidence or subject to discovery in a civil action under state law. Tex. Health & Safety Code Ann. § 1101.051, 1101.101. However, the Court disagreed that these documents were protected from discovery under federal law and denied the motions, determining that the state audit privilege claim does not itself justify a federal court applying that privilege. Although the stack test reports may have been created with the expectation that they would not be disclosed under state law, the Audit Act does not apply to EPA. Noting that Texas guidance states the privilege is waived in the event the violations are disclosed to EPA, the Court suggested in dicta that an audit report sent to EPA could then be obtained through a FOIA request to EPA. Further, EPA’s staunch opposition to expansive audit privileges under state laws1 supported the Court’s determination under federal law that the stack test reports are not privileged. Finally, the Court found that the state’s interest in maintaining confidential these reports did not outweigh the federal interest in the ‘truth-seeking process’ of the litigation.
While this case will likely be appealed to the Fifth Circuit, the decision must be taken into account when embarking on facility audits. The Court’s analysis is made under federal law and is not limited to actions under the Clean Air Act. Further, the decision is likely not limited to the Texas Audit Act and may apply to audits conducted under other states’ audit privilege policies or laws.
If you have any questions or would like further information regarding implications of this decision for audit laws in other states, please contact Julie R. Domike at 202-853-3453 or jdomike@babstcalland.com.
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1See EPA’s Audit Policy, Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, 65 Fed. Reg. 19618, 19623 (April 11, 2000).
Babst Calland is pleased to announce that three lawyers were selected as 2022 Best Lawyers “Lawyer of the Year” in Pittsburgh, Pa. and Charleston, W. Va. (by BL Rankings). Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant.
Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, professionalism, and integrity. Those named to the 2022 Best Lawyers “Lawyer of the Year” include:
Kevin K. Douglass, Natural Resources Law “Lawyer of the Year” in Pittsburgh, Pa.
Mark D. Shepard, Bet-the-Company Litigation “Lawyer of the Year” in Pittsburgh, Pa.
Robert M. Stonestreet, Environmental Law “Lawyer of the Year” in Charleston, W. Va.
In addition, 32 Babst Calland lawyers were selected for inclusion in the 2022 Edition of The Best Lawyers in America (by BL Rankings), the most respected peer-review publication in the legal profession:
- Chester R. Babst – Environmental Law, Litigation – Environmental
- Donald C. Bluedorn II – Environmental Law, Water Law, Litigation – Environmental
- Dean A. Calland – Environmental Law
- Matthew S. Casto – Commercial Litigation
- Frank J. Clements – Corporate Law
- Kathy K. Condo – Commercial Litigation
- James Curry – Oil and Gas Law
- Julie R. Domike – Environmental Law, Litigation – Environmental
- Kevin K. Douglass – Natural Resources Law
- Christian A. Farmakis – Corporate Law
- Kevin J. Garber – Environmental Law, Natural Resources Law, Energy Law, Water Law, Litigation – Environmental
- Norman E. Gilkey – Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization Law, Litigation – Bankruptcy, and Mediation
- Steven M. Green – Energy Law
- Lindsay P. Howard – Environmental Law, Litigation – Environmental
- Blaine A. Lucas – Energy Law, Land Use and Zoning Law, Municipal Law, Litigation – Land Use and Zoning
- John A. McCreary – Labor Law – Management
- Janet L. McQuaid – Environmental Law
- James D. Miller – Construction Law and Litigation – Construction
- Timothy M. Miller – Energy Law, Commercial Litigation, Bet-the-Company Litigation, Oil and Gas Law, Litigation – Environmental
- Jean M. Mosites – Environmental Law
- Christopher B. Power – Environmental Law, Natural Resources Law, Energy Law, Commercial Litigation, Mining Law, Oil and Gas Law, Litigation – Regulatory
Enforcement (SEC, Telecom, Energy), Litigation – Environmental, Litigation – Land Use and Zoning, Litigation – Municipal
- Joseph K. Reinhart – Environmental Law, Natural Resources Law, Energy Law, Litigation – Environmental
- Bruce F. Rudoy – Mergers and Acquisitions Law, Corporate Law
- Charles F.W. Saffer – Real Estate Law
- Mychal Sommer Schulz – Litigation – ERISA
- Mark D. Shepard – Commercial Litigation, Bet-the-Company Litigation, Litigation – Environmental
- Steven B. Silverman – Information Technology Law, Commercial Litigation
- Krista-Ann M. Staley – Land Use and Zoning Law
- Laura Stone – Corporate Law
- Robert M. Stonestreet – Environmental Law, Energy Law, Commercial Litigation
- David E. White – Construction Law, Litigation – Construction
- Michael H. Winek – Environmental Law
13 Babst Calland lawyers were also named to the 2022 Best Lawyers: Ones to Watch list which recognizes associates and other lawyers who are earlier in their careers for their outstanding professional excellence in private practice in the United States:
- Mary H. Binker – Corporate Law and Real Estate Law
- Katrina N. Bowers – Energy Law and Environmental Law
- Carla M. Castello – Commercial Litigation, Litigation – Labor and Employment and Mass Tort Litigation / Class Actions – Defendants
- Marissa A. Cocciolone – Energy Law
- Nicholas M. Faas – Administrative / Regulatory Law and Government Relations Practice
- Marc J. Felezzola – Commercial Litigation and Litigation – Construction
- Alyssa Golfieri – Land Use and Zoning Law and Municipal Law
- Sean R. Keegan – Commercial Litigation and Litigation – Labor and Employment
- Jennifer L. Malik – Land Use and Zoning Law
- James D. Mazzocco – Litigation – Environmental and Transportation Law
- Cary M. Snyder – Appellate Practice, Commercial Litigation, and Communications Law
- Joshua S. Snyder – Commercial Litigation and Energy Law
- Benjamin R. Wright – Commercial Litigation and Construction Law
Best Lawyers undergoes an authentication process, and inclusion in The Best Lawyers in America is based solely on peer review and is divided by geographic region and practice areas. The list has published for more than three decades, earning the respect of the profession, the media, and the public as the most reliable, unbiased source of legal referrals. Its first international list was published in 2006 and since then has grown to provide lists in over 65 countries.
The Legal Intelligencer
(by Krista Staley and Anna Jewart)
On June 30, 2021, Governor Tom Wolf signed Pennsylvania House Bill 1621, the Small Wireless Facilities Deployment Act as Act 50 of 2021 (“Act 50”), into law. This Act reflects years of negotiations between industry groups and municipalities over the balance of local land use authority and ease of deployment in small cell infrastructure deployment. Effective August 29th, the Act standardizes the local permitting process for small cell facilities located within municipal rights-of-way.
As demand increases exponentially for faster and more reliable wireless service, so does the demand to develop infrastructure capable of providing greater coverage and capacity. A decade ago, a single large cell tower on the outskirts of town could meet a community’s wireless voice and data service needs. However, the reliability of these large “macro cell” wireless facilities has decreased as mobile data traffic exploded. The telecommunications industry responded by developing “small cell networks” distributed throughout communities and buildings to better meet to the constant on-the-go data needs of the modern age. Instead of utilizing a single tower, possibly hundreds of feet high, small cell networks use multiple low-power antennas that connect to fiber optic cables. These small cell systems allow for greater speeds and more uniform coverage where they are deployed. However, they require a greater level of “wireless density” in order to function as intended. In other words, small cell facilities must be installed every few blocks rather than every few miles.
To achieve the desired wireless density providers have sought to utilize existing utility poles, street lights, or other structures within municipal rights-of-way. This allows for ease of installation as well as proximity to users. While the use of the right-of-way, and the existing infrastructure therein, is a convenient solution for wireless providers, the rapid development of these technologies has forced municipalities across the country to scramble to determine how to handle permits for the installation of small cell facilities within their communities. Conflicts between local zoning and land use regulations and federal law has led to confusion among local leaders, often spurred by citizen opposition and misinformation about the safety of these new technologies.
Although local governments have a certain level of control over activities within their rights-of-way, federal law, contained in Sections 253 and 332(c)(7) of the Communications Act, 47 U.S.C. §253(a), 332(c)(7)(B)(i)(II), prohibits state or local regulations that prohibit or “have the effect of prohibiting” interstate communications. This prohibition limits municipalities’ ability to regulate small cell providers through their zoning, land development, or other ordinances. In 2018, the Federal Communications Commission (“FCC”) issued a Declaratory Ruling (“Small Cell Order”) which outlined when such an effective prohibition has occurred. Act 50 largely codifies these FCC rules, but it also places certain additional burdens and limitations on municipalities within the Commonwealth that will impact how local governments process applications for the installation of small cell facilities within their rights-of-way going forward.
While the Act in large part attempts to standardize local permitting for small cell facilities, it also imposes certain requirements on wireless providers. For example, wireless providers must repair any damage to the right-of-way or other land disturbed by its activities or that of its contractors. If a provider fails to do so, a municipality may, within 30 days after written notice, perform the repairs and charge the provider for the costs plus a penalty not to exceed $500.00. Providers are also required to demonstrate that collocation on an existing structure is not possible prior to placing a new structure within the right-of-way. The Act also defines “Small Wireless Facilities” subject to its protections as facilities where each antenna is no greater than three cubic feet, and the volume of all other equipment associated with the facility is cumulatively no more than 28 cubic feet. Utility poles used for small cell facilities may not be greater than fifty feet in height.
Act 50 primarily sets requirements for how municipalities handle applications to place small cell facilities within their rights-of-way. From a zoning perspective, small cell facilities must be considered a permitted use in all areas of the municipality, except underground districts. They may still be reviewed by municipal staff in accordance with local zoning, land use, and certain other ordinances. However, municipalities may not subject small cell applicants to discretionary zoning review, such as conditional use or special exception requirements. Municipalities may require applicants to obtain permits of general applicability in order to collocate small cell facilities on existing poles, replace existing utility poles with added small cell infrastructure, or install a new utility pole with added small cell infrastructure within the municipal right-of-way.
In accordance with the 2018 FCC Small Cell Order, Act 50 limits the application fee municipalities may charge for placing a small cell facility within their rights-of-way. The Act allows up to $500.00 for an application seeking approval of up to five collocated small cell facilities, up to $100.00 for each additional collocated facility, and up to $1,000.00 for an application for a new or replacement pole. In addition, municipalities are permitted to charge a right-of-way management fee of up to $270.00 per small cell facility per year, unless they can demonstrate that a higher fee is a reasonable approximation of the actual cost to manage the right-of-way and that the fee is reasonable and non-discriminatory. These limits may be adjusted in the future if the FCC adjusts the fee levels in its 2018 Small Cell Order.
In addition, the Act establishes time limits for municipal review of applications for small cell facilities. Municipalities have only 60 days to approve or deny an application to collocate facilities and 90 days to render a decision on an application to replace or install a new pole. Failure to comply with these deadlines results in a deemed approval. Municipalities are only permitted to deny an application for certain enumerated reasons, such as interference with the safe operation of traffic control, failure to comply with their applicable codes, or failure to comply with the requirements of the Act. If approved, right-of-way occupancy permits must have an initial term of at least five years and permit two five-year renewal terms. On the other hand, the applicant must complete all permitted work within one year.
The Act does allow for a certain level of local control over application and design criteria for small cell facilities. Municipalities may adopt objective guidelines for small cell facilities regarding minimization of their aesthetic impact so long as the guidelines do not prohibit the provider’s technology or unreasonably discriminate among providers of functionally equivalent services. This includes requiring concealment measures for facilities within historic districts, as well as limitations on access to areas designed exclusively for underground cable or utility facilities. They may also adopt certain application criteria such as requiring the submission of construction and engineering drawings, documentation of approval from the pole owner, and documentation showing compliance with the municipality’s design guidelines.
If municipalities desire to amend or adopt an ordinance in compliance with the Act, including establishing permissible aesthetic guidelines or application requirements, they must do so within 60 days of the effective date of the Act. If a municipality does not do so, any applications received must be processed in compliance with the Act. Therefore, municipalities should review their ordinances for compliance with the Act and consider amendment or adoption of any permissible design or application criteria for small cell facilities prior to October 28, 2021.
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Reprinted with permission from the August 19, 2021 edition of The Legal Intelligencer© 2021 ALM Media Properties, LLC. All rights reserved.
The PIOGA Press
This is another excerpt from The 2021 Babst Calland Report, which represents the collective legal perspectives of Babst Calland’s energy attorneys addressing the most current business and regulatory issues facing the oil and natural gas industry. The full report is available online at reports.babstcalland.com/the-2021-babst-calland-report-1.
Appalachian Storage Hub
As has been chronicled in earlier editions of this white paper, the explosive growth of natural gas production from the Marcellus and Utica shale formations in the Appalachian region starting in 2010 produced strong economic gains for West Virginia, Pennsylvania and eastern Ohio for several years.
In addition, much of that gas is relatively “wet”— meaning that it has a high proportion of natural gas liquids (NGLs) such as ethane, propane, butanes and natural gasolines (pentanes) that are used as petrochemicals in various manufacturing industries. Regional leaders, seeking to capitalize on the vast natural gas resources of those shales, began to stress the importance of developing local businesses that use NGLs—rather than allowing plastics manufacturing and other uses to accrue in other areas.
In 2017, the American Chemistry Council published a report suggesting that the buildout of the petrochemical industry in Appalachia could support the construction of as many as five ethane crackers. Among other factors, the report described that a key to the development of petrochemical manufacturing presence in the area would be the establishment of an Appalachian Storage Hub (ASH) that would act as a conduit for the production and sale of NGLs, storing massive quantities of the liquids and connecting the storage facilities to end users via pipelines. U.S. Senators Shelley Moore Capito and Joe Manchin of West Virginia, along with Senator Rob Portman of Ohio, introduced legislation intended to promote the goal of establishing an ASH. In 2018, the U.S. Department of Energy’s National Energy Technology Laboratory (located in Morgantown, West Virginia, and led by Project Director Brian Anderson) published the “Ethane Storage and Distribution Hub in the United States Report to Congress,” outlining the potential benefits of an ASH and ranking the most likely methods of building such a facility based on the geology, topography and other relevant regional factors. As recently as November 17, 2020, Senator Manchin wrote to DOE Secretary Dan Brouillette, seeking an update on the department’s efforts at preparing a report addressing the proposed ASH, as called for in the Fiscal Year 2020 Energy and Water bill.
Today, we find that Mr. Anderson has been appointed as the Executive Director of the Biden’s administration Interagency Working Group (IWG) on Coal and Power Plant Communities and Economic Revitalization. The NETL website offers no discussion of planned updates to the 2018 study, and the prospect of development of an ASH backed by DOE-guaranteed loans would seem to be directly at odds with most if not all of President Joseph R. Biden, Jr.’s plans to move swiftly away from the use of fossil fuels in our energy mix. Speaking at a recent meeting of the Ohio River Valley Institute, Finance Professor Kathy Hipple of Bard College’s MBA in Sustainability program commented that the recent major shift in the plastics market away from single-use plastic products, as well as China’s 2018 decision to stop importing plastics waste and recycled material, have created considerable concerns about the growth projections for the plastics industry, which only creates a further cloud on the development of an ASH anytime in the foreseeable future.
In short, while unforeseen events have a way of changing the outlook for the natural gas industry (including NGLs), for now it appears that the development of an ASH to support a robust plastics manufacturing industry in our region is firmly on the back shelf.
Carbon capture and storage
The federal government is trying to incentivize the development of carbon capture and storage (CCS) to inject captured carbon dioxide from emissions into underground geologic formations by expanding tax credits for qualifying projects. The Bipartisan Budget Act of 2018 expanded Section 45Q of the tax code to increase the CCS project credit value (so long as the project started within seven years of enactment), reduce the minimum eligibility threshold, allow for the transfer of credit and expand the program to include carbon oxides, rather than just carbon dioxide.
In January 2021, the Treasury Department and IRS issued final regulations regarding the Section 45Q credit. These regulations provide procedures to determine adequate CCS security measures, exceptions for determining to whom the credit is attributable, procedures to allow third-party taxpayers to claim the credit, standards for measuring carbon oxide and conditions that allow smaller carbon capture facilities to be aggregated for purposes of claiming the credit.
Some states are also working together to incentivize the development of CCS projects. For example, on October 1, 2020, seven states– Kansas, Louisiana, Maryland, Montana, Oklahoma, Pennsylvania and Wyoming—signed a memorandum of understanding committing to establish and implement a regional CO₂ transport infrastructure plan. Under the MOU, the signatory states will establish a coordination group to develop an action plan that will include policy recommendations for and barriers to CO₂ transport infrastructure deployment. This action plan is set for release in October 2021.
Other states are taking more direct action. In March 2021, the North Dakota Legislature passed, and the governor signed, a bill exempting CO₂ that is either stored underground or injected into old oil fields to boost production, a process known as “enhanced oil recovery,” from sales tax. A number of CCS projects are already underway in North Dakota.
Wyoming is looking to use CCS to extend the use of traditional fossil fuels including coal. The governor of Wyoming requested a study and the state partnered with the U.S. Department of Energy to evaluate the potential opportunities for retrofitting existing power plants with CCS technology. The study showed CCS retrofits can provide significant benefits, including reduced carbon dioxide emission, reduction in consumer cost, increased employment benefits, and higher state and local revenue.
In addition to funding studies, the Department of Energy has also provided federal funding for research into air capture technologies and other CCS-related technologies. As technology and infrastructure development for both capture and transportation improves, and with the availability to tax incentives, an increase in CCS projects is anticipated in the coming years.
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Reprinted with permission from the August 2021 issue of The PIOGA Press. All rights reserved.