Smart Business
(by Sue Ostrowski featuring Michael Fink)
For startup companies lacking the cash flow or liquid assets to obtain a traditional bank loan, venture debt could be the answer to help elevate them to the next level.
“Startups often lack many of the characteristics that would give traditional lenders comfort that a regular commercial loan would be a good deal for them,” says Michael Fink, attorney at Babst Calland. “Venture debt can be an alternative to help bridge the gap to a company’s next valuation.”
Smart Business spoke with Michael about how taking on venture debt can keep a business moving forward without decreasing its valuation.
What is venture debt, and how is it structured?
At its core, venture debt looks similar to other commercial debt a company may incur; it may be structured as a term loan or line of credit, or an option to draw on either. The startup generally may choose the facility it feels best fits its needs.
However, because it’s a riskier loan for lenders, venture debt terms are generally more favorable to the lender than those of traditional loans. Borrowers can expect an interest rate higher than the prime rate (5 to 15 percent being common), more lender control rights and expanded negative covenants, prohibiting, for example, making large purchases or divesting a line of business without the lender’s consent.
Venture debt’s availability is based primarily on a company’s ability to raise future equity rounds, so venture debt lenders often require a small equity component in exchange for the higher risk the lender is taking on. For example, the lender may receive a warrant to purchase either common equity or the preferred equity to be issued in the next fundraising round, typically at a discount.
When should a company consider pursuing venture debt?
Venture debt typically isn’t available until a company has had a priced equity fundraising round that includes a valuation for the lender to work from. Once available, companies find venture debt useful for many capital expenditures or operational needs, or possibly even acquisitions, all without further dilution to the current stockholders.
It’s common for startups to seek out venture debt after an equity round to bridge the gap to the next round. This could extend the cash runway to a new equity round and is generally cheaper to current stockholders than a whole new equity investment.
Finally, venture debt allows companies to avoid ‘down rounds,’ where a company sells shares at a lower price than in the previous round. A down round dilutes investors, can impact conversion and related capitalization calculations, may violate contracts, and signals to the public that the company may be troubled. Venture debt can help by providing a path to avoid this decreased valuation.
How can a business determine if venture debt is the right path?
Just because you can go out and get money doesn’t mean you should. There should be a solid reason for taking on venture debt or any other investment.
It’s really dependent on the circumstances of the business. As with any financing deal, venture debt can get complicated very quickly, and an experienced attorney can help evaluate where a company stands. Additionally, venture debt can be obtained from a number of sources, and an expert adviser can help navigate those options.
Although the process could be completed quickly in some circumstances (generally resulting in less favorable terms to the company), having a clear vision of your cash needs three to six months ahead can allow you to secure the most favorable terms and position your company for success. If you have six months of funding left and you’re not currently planning another equity round, it may make sense to start investigating your venture debt options now.
Venture debt can play a crucial role in helping companies grow. To determine whether taking it on makes sense for your business, speak with an expert adviser to help you work through the issues and come to the best decision.
For the full article, click here.
For the PDF, click here.
The Legal Intelligencer
(by Anna Jewart and Krista-Ann Staley)
Zoning regulations, although important, are not the sole restrictions on land use. Property owners and a variety of entities may agree to impose additional private restrictions on specific pieces of land. These private restrictions can create confusion regarding who, between the parties to the agreement and the municipality, has the authority to interpret and enforce their terms. The Pennsylvania Commonwealth Court recently issued a detailed, albeit nonprecedential, opinion addressing this type of scenario in Naylor v. Board of Supervisors of Charlestown Township, No. 659 C.D. 2018 (Pa. Cmwlth. Jan. 7, 2021). In Naylor, the court addressed a decades-long disagreement over the scope of a conservation easements. Among its holdings, the court concluded a township did not have standing to enforce a private conservation easement, even when it owned a separate parcel subject to the same easement. Naylor is a good reminder that municipal regulations and private agreements are distinct matters with independent enforcement mechanisms.
Easements are a common form of private land use restriction. An easement is a nonpossessory interest of a holder in real property, imposing limitations or affirmative obligations on property called the “servient” estate. Conservation easements are designed for certain “conservation” purposes, such as protecting the natural or scenic values of real property; assuring its availability for agricultural, or recreational use; protecting, or managing the use of natural resources; or maintaining land, air, or water quality.
In Pennsylvania, conservation easements receive certain statutory protections under the Conservation and Preservation Easement Act, 32 P.S. §§5051 et seq., (Easement Act). Enacted in 2001, the Easement Act sets forth requirements for the interpretation, construction and enforcement of conservation easements. Conservation easements created before the Easement Act are typically reviewed under the common law rules of construction, the same rules applicable to contract interpretation.
Naylor involved a long history of disagreement over a conservation easement on a historic farm in Charlestown Township. The current owners, the Naylors, wanted to build a home on their property, once part of a larger tract known as the Baughman Farm (farm). The prior owner (grantor) placed the farm into a conservation easement with a trust in 1986 (easement). The easement served to preserve the farm and its agricultural, historic, scenic, and relatively natural state. It specifically noted the presence of a historic mill (mill), and a Victorian home (Victorian house), and prohibited the construction of “new or additional buildings or structures unless necessary for agricultural purposes.” Shortly after the easement became effective, a fire destroyed the Victorian house. The grantor demolished the ruins and planted grass over the site.
Over the next 20-or-so years, the farm became a contentious issue between the grantor, the trust, the township and prospective buyers, including the Naylors. During that time, the grantor conveyed the farm to a foundation, which then subdivided the farm and conveyed the portion containing the mill to the township. The foundation later approached the Naylors, about purchasing the remaining 41.60 acres (property). The Naylors expressed interest, but only if they could build a single-family home (replacement house) on the property.
The Naylors, trust, foundation and township disagreed over whether the easement permitted the proposed construction and, if so, where. The township took the position that the Naylors could not build on the property at all, and certainly not outside the footprint of the Victorian house. The trust ultimately agreed with the township’s position.
In 2014, the Naylors filed an action seeking various declarations regarding their rights to build the replacement house. They also sought a declaration that township’s only role was to process the building permit application, and to enjoin the township from interfering with the proposed construction. Both the township and the trust participated in the procedural battle before the trial court that ensued over the next two years. After the trial court issued rulings largely in favor of the Naylors the township and the trust appealed to Commonwealth Court.
Before the Commonwealth Court, the township and trust argued the trial court erred by ruling the township did not have standing to enforce the easement. Specifically, they argued the township, as a fee simple owner of the subdivided portion of the farm containing the mill, was burdened by the easement, and consequently had statutory standing to challenge a violation of that easement under the Easements Act.
Section 5(a) of the Easements Act, 32 P.S. Section 55055(a), identifies persons who have standing to bring legal action to enforce a conservation easement. The list includes the owner of the property burdened by an easement; a person that holds an estate in that property; a person that has any interest or right in that property; a holder of the easement; a person having a third-party right of enforcement; a person otherwise authorized by federal or state law; the owner of certain affected coal interests. The court held that the township did not fall within any of those categories, because the lot it owned, while burdened by the easement, was an independent and distinct parcel of land. It specified that the Easements Act only allows third-party enforcement by those to whom the easement has granted enforcement rights. Because the terms only conveyed that right to the trust, the court found the trial court did not err in holding the township lacked standing in the matter.
Eventually, the court turned to the interpretation of the easement. It determined, because the easement predated the Easement Act, it should be reviewed under the common law rules of construction. As discussed by the court, under applicable contract law, the fundamental rule of construction is determining the intention of the parties as manifested by the language of the written instrument. Where the words of the easement are clear and unambiguous, the intent of the parties must be determined exclusively from the agreement itself.
The court reasoned the easement did not restrict, directly or by inference, the location for a Replacement House and permitted the addition of buildings and other improvements “as may be necessary for agricultural purposes.” Thus, it found the exact location of the Replacement House was immaterial to the easement and not at all restricted. The court also concluded there were no restrictions in the easement regarding the style, size, configuration or construction of the replacement house.
The court also addressed whether the easement required the trust or township’s pre-approval of the location, development plan and construction of the replacement house. The court found the terms of the easement did not give the trust or the township the authority to approve or disapprove any improvements to the Farm but did give the trust the right to enforce the easement. Consequently, the court found the trust had the authority to enter upon the property to inspect for violations of the easement and to file suit to enforce its terms; however, the easement did not vest the township or the trust with any preemptive gatekeeping role.
Although nonprecedential, Naylor reinforces the separation between zoning regulations and private land use restrictions; municipal entities have the authority to interpret and enforce the former but require standing to interpret and enforce the latter. Even in this peculiar setting, where the local government owned property subject to the easement at issue, the court was unwilling to extend its local regulatory power to the interpretation or enforcement of its terms. Although they are separate issues, it is not uncommon for private property issues, such as those relating to easements, licenses, and deed restrictions, to come up in the context of municipal permitting. For example, objectors to a project may appear at a zoning hearing meeting to argue the proposed use violates a private easement. Naylor serves as a reminder that these private real estate issues are squarely within the jurisdiction of the court, not the municipality, to be determined in the context of quiet title, ejectment, trespass and similar claims. As such, evidence relating to the scope and applicability of private real estate agreements is immaterial and irrelevant to a zoning proceeding. Consequently, parties seeking to enforce private real estate agreements should turn to the courts, not municipal staff, zoning boards, and governing bodies hearing zoning cases, for relief.
Krista M. Staley is a shareholder in the public sector services and energy and natural resources groups of the Pittsburgh law firm of Babst Calland Clements & Zomnir. In these capacities, Staley focuses her practice on representation of diverse private and public sector clients on land use and other local regulatory matters. Contact her at kstaley@babstcalland.com.
Anna S. Jewart is an associate in the firm’s public sector services group and focuses her practice on zoning, subdivision, land development, and general municipal matters. Contact her at ajewart@babstcalland.com.
For the full article, click here.
Reprinted with permission from the February 11, 2021 edition of The Legal Intelligencer© 2021 ALM Media Properties, LLC. All rights reserved.
Renewables Law Blog
(By Ben Clapp)
A recently settled enforcement action against a solar project developer in Massachusetts underscores the importance of adhering to appropriate stormwater pollution prevention protocols when siting, designing and constructing a project. The Commonwealth of Massachusetts sued the project developer under state and federal environmental laws, alleging that they had constructed a solar array on a hillside parcel without designing or implementing the required stormwater controls. Specifically, the Commonwealth alleged that the developer never properly analyzed the potential for harm from stormwater discharges resulting from construction of the solar array, failed to install necessary stormwater controls prior to conducting site clearing and grading activities, applied for a General Stormwater Permit for construction activities (Permit) without having first prepared a Stormwater Pollution Prevention Plan (SWPPP), and ultimately failed to comply with requirements of the Permit and SWPPP that are designed to prevent stormwater pollution. As a result, the Commonwealth claimed, there was an extensive discharge of sediment-laden stormwater over several months into a downgradient river that adversely affected the river’s water quality, and also eroded the hillside, scoured out perennial and intermittent streams, uprooted trees, destroyed streambeds, and filled in wetlands with sediment. The developer has agreed to pay more than $1 million to settle the claim, which includes the cost of restoring impacted natural resources, compensatory mitigation costs, the Commonwealth’s legal fees, and a $100,000 civil penalty.
The case is an important reminder that renewables projects face the same environmental compliance obligations as any other large-scale infrastructure project, and that such projects, while considered “green,” are not immune from environmental enforcement actions. While renewables projects are often scrutinized for potential impacts to protected species, a greater risk of liability may lie in a project’s failure to comply with more “run of the mill” permitting and compliance requirements. For more information on this case, please click here.
Tags: enforcement action, solar, stormwater, Stormwater Pollution Prevention Plan, SWPPP
PA Business Central
This has been a year like no other! Our annual Top 100 People edition highlights the vibrant economic and social life of central Pennsylvania by honoring the people who make it happen. When goods or services are delivered in an efficient and timely manner, expertise and knowledge brought to bear on a problem, or necessary care provided, it’s not just the businesses and the institutions – but the people behind them that get the job done. We all know that powerhouse individual – the person with the vision, dedication and drive to not only complete the task, but to envision, expand and excel. We are fascinated by the impact a single individual can have on their workplace, their community and the lives of those around them. The stories of these individuals can provide instruction, inspiration and the motivation to raise our own standard of excellence. That is why we take great pride in bringing you Pennsylvania Business Central’s Top 100 People for 2021!
As always, we reached out to community leaders, local chambers of commerce, and you, our loyal readers, to identify those individuals whose unique contributions have set them apart as leaders. We received a wealth of nominations that reflect the rich diversity of central Pennsylvania and its business community. So many deserving nominations in such a challenging year, that we had to expand our list of honorees – and so we are proud to honor 120 outstanding leaders in this year’s edition!
In selecting this year’s honorees, we wanted to show the full spectrum of leadership – from the small entrepreneur to the CEO of a large corporation – that helps shape our communities and our lives. And while every story is unique, we think you’ll find that these honorees share a dedication to hard work, dynamic leadership and the pursuit of excellence.
Many of you probably know some of these distinguished honorees. These are the people who run companies, volunteer in their community and raise families – they are our neighbors and our friends – the ones who give that extra effort that makes all the difference. We hope that you will enjoy learning about them as much as we did. We are proud to honor them.
As a companion to this edition, we are looking forward to our Top 100 Organizations signature edition, which will publish in February, celebrating the best in central Pennsylvania’s businesses, non-profits and brands.
Jean Mosites is a shareholder in Babst Calland’s Environmental, Energy and Natural Resources, and Public Sector groups. She counsels clients on environmental compliance, resolves liabilities under federal and state remediation programs, and represents clients in administrative, state and federal courts. She earned her B.A. and M.A. in Political Science from the University of Pittsburgh and her J.D. from Duquesne University School of Law. She is rated by Martindale-Hubbell as AV Preeminent, Peer Rated for the Highest Level of Professional Excellence, and is listed in The Best Lawyers in America© in the Environmental Law Section. Jean serves on the Pennsylvania Bar Association’s Environmental and Energy Law Section Council and the Pennsylvania Environmental Hearing Board Rules Committee. She frequently writes articles and presents educational and training programs on environmental law. She also actively supports community service organizations including the Education Partnership and the Pittsburgh Cultural Trust.
For the full article, click here.
The Legal Intelligencer
(by Brian Lipkin)
In 2021, employers can expect a few significant developments from the Occupational Safety and Health Administration (OSHA):
COVID-19 Standards. Currently, to decide whether an employer has taken proper COVID-19 measures, OSHA typically applies the “general duty clause,” which is the “catch-all” section of the Occupational Safety and Health Act. The general duty clause requires a workplace free from recognized hazards, to protect employees from death or serious physical harm.
Currently, OSHA also applies its existing standard on respiratory protection. This standard focuses on whether an employer has identified appropriate protective equipment, issued it to employees, and trained them to use and maintain it properly.
So far, there are no OSHA standards specific to COVID-19. In the near future, we expect that to change.
On Jan. 21—his first full day in office—President Joe Biden signed an executive order on protecting worker health and safety. Biden ordered the Secretary of Labor to consider issuing emergency COVID-19 standards by March 15. In particular, Biden directed the Secretary of Labor to consider ordering employees to wear masks in the workplace.
We expect the new standards will require employers to develop written plans to limit COVID-19 exposures in the workplace. These plans will likely require employers to identify potential risks, and outline mitigation strategies.
Biden also ordered the Secretary of Labor to issue updated COVID-19 guidance for employers by Feb. 4.
OSHA will release the new standards and guidance on its website at osha.gov/coronavirus.
Targeted Enforcement. Currently, OSHA prioritizes two types of workplaces for COVID-19 enforcement: hospitals and health care providers that treat COVID-19 patients; and workplaces with high numbers of complaints or known COVID-19 cases.
These priorities are consistent with the breakdown of complaints OSHA has received. As of Jan. 24, OSHA had received the most complaints on the health care industry: a total of 2,939. Retail stores, restaurants, and construction workplaces were the next three industries that were common subjects of OSHA complaints.
As part of his executive order, Biden intends to “launch a national program to focus OSHA enforcement efforts related to COVID-19 on violations that put the largest number of workers at serious risk.” Based on this statement, we expect OSHA to continue to focus on the health care, retail, restaurant and construction industries for enforcement.
Due to OSHA’s enforcement priorities, it is less likely to investigate COVID-19 complaints against low-risk workplaces, such as offices. When OSHA receives a complaint against a low-risk workplace, it typically sends the employer a letter asking for a response, and closes the matter without an in-person visit. We expect this practice to continue, and potentially increase, under the revised enforcement priorities.
The executive order also directs OSHA to target enforcement of retaliation claims against “whistleblowers” who have reported workplace safety and health concerns.
Increased Enforcement. As of Jan. 24, OSHA had opened a total of 1,539 inspections related to COVID-19. Employers might be interested to learn how these concerns came to OSHA’s attention. Workplace fatalities or catastrophes were the most common source, with 822 inspections. Next, there were 362 complaints that resulted in inspections, while 150 inspections were referred by other agencies.
In his executive order, Biden directs the Secretary of Labor to review OSHA’s enforcement efforts so far, and “identify any short-, medium- and long-term changes that could be made to better protect workers and ensure equity in enforcement.”
Through the end of 2020, OSHA had issued proposed penalties totaling $3.9 million due to COVID-19-related violations. With Biden’s increased emphasis on enforcement, we expect both the number of inspections and the proposed penalty amounts to increase in the new year.
Enhanced Cooperation With Other Agencies. When OSHA issues an emergency COVID-19 standard, as expected, it will only apply to employers within OSHA’s jurisdiction. The executive order anticipates this potential gap in coverage. So, the executive order requires OSHA to work with federal, state, and local government agencies to protect municipal workers and mine workers from COVID-19.
Next Steps. Employers should look for OSHA to issue updated COVID-19 guidance by Feb. 4, followed by an emergency COVID-19 standard in the next few months. Based on these materials, employers should prepare for the year ahead by updating their COVID-19 safety plans. At a minimum, employers should document in writing the steps they have taken to address COVID-19 risks in the workplace, since OSHA is likely to request these documents as part of any inspection. Employers in high-risk industries—such as the health care, retail, restaurant, and construction industries—should plan for OSHA to increase enforcement efforts in 2021.
Brian D. Lipkin, an attorney with the Pittsburgh law firm of Babst Calland Clements & Zomnir, represents employers in workplace safety and health matters. Contact him at blipkin@babstcalland.com or 412-394-5456.
For the full article, click here.
Reprinted with permission from the January 28, 2021 edition of The Legal Intelligencer© 2021 ALM Media Properties, LLC. All rights reserved.
Environmental Alert
(by Matthew Wood)
On December 18, 2020, the U.S. Environmental Protection Agency (EPA) released for public comment interim guidance on the destruction and disposal of per- and polyfluoroalkyl substances (PFAS) and materials containing PFAS (Interim Guidance; available for download here). PFAS are a large group of manmade chemicals that have been used in wide-ranging consumer, commercial, and industrial applications since the 1940s and more recently have been discovered in various environmental media (e.g., drinking water sources), plants, animals, and humans. Because PFAS do not tend to break down naturally, and evidence suggests that exposure to PFAS chemicals can lead to adverse health effects, developing methods to treat, dispose of, and destroy PFAS has been viewed by stakeholders as a necessary step to address PFAS in the environment.
The Interim Guidance, which EPA was statutorily obligated to publish within one year of the enactment of the National Defense Authorization Act for Fiscal Year 2020 (FY20 NDAA), discusses certain treatment and disposal technologies that may be effective in destroying or disposing of PFAS and PFAS-containing materials. More broadly, it represents another formal step EPA has taken to address PFAS in the environment, coming nearly two years after EPA released its PFAS Action Plan.
In addition to providing a background on PFAS, the Interim Guidance generally covers four topics: (1) the PFAS and PFAS-containing materials to which it applies; (2) the applicable destruction/disposal technologies; (3) considerations for potentially vulnerable populations living near destruction/disposal sites; and (4) ongoing and planned research and development. The Interim Guidance is based on currently available research and science, which is limited. As such, EPA has identified knowledge gaps, uncertainties, and research areas that, if resolved, would inform future recommendations. As EPA continues to conduct research and accumulate information, the regulated community can expect the agency to revise the Interim Guidance (which must be done at least every three years in accordance with the FY20 NDAA).
To What PFAS Does the Interim Guidance Apply?
The scope of the Interim Guidance is limited to certain types of PFAS and PFAS-containing materials, all of which were required to be included by the FY20 NDAA. They are: aqueous film-forming foam (AFFF); soils and biosolids; textiles treated with PFAS (non-consumer goods); spent filters, membranes, resins, granular carbon, and other water treatment waste; landfill leachate containing PFAS; and solid, liquid, or gas waste streams containing PFAS from facilities manufacturing or using PFAS. Despite the limited scope, EPA says that the discussed technologies may be effective against other types of PFAS. Notably, the Interim Guidance is not intended to address the disposal or destruction of PFAS-containing consumer products (e.g., non-stick cookware), but EPA has not indicated whether such materials will be covered by future revisions (or separate guidance).
What PFAS Destruction/Disposal Methods Does the Interim Guidance Identify?
The Interim Guidance discusses and divides currently available destruction and disposal technologies according to the PFAS’s physical phase: solid (e.g., biosolids, spent treatment materials, contaminated soils, and textiles); liquid (e.g., landfill leachate, AFFF, and solvents); and gas (e.g., landfill gas and emissions from manufacture, use, or destruction). EPA has determined that thermal treatment may be effective for all three physical phases, while landfill disposal and underground injection may be effective disposal technologies for solid phase PFAS and liquid phase PFAS, respectively.
Thermal Destruction: EPA indicates that PFAS-containing waste may be destroyed by various hazardous waste thermal treatment devices and processes, including in commercial incinerators, cement kilns, and lightweight aggregate kilns (LWAKS). These technologies are subject to RCRA and Clean Air Act permitting and oversight, as well as other operating requirements, and are used to effectively destroy other constituents, such as organic chemicals. The primary outstanding question is whether they can achieve the same efficacy for PFAS. Other potentially effective destruction technologies listed in the Interim Guidance include carbon reactivation units, non-hazardous waste combustion sources (e.g., sewage sludge incinerators), and thermal oxidizers.
Uncertainties common to these technologies include their ability to completely destroy PFAS (and byproducts from incomplete destruction), releases of PFAS or byproducts via emissions or secondary waste streams (e.g., scrubber water or bottom/fly ash), and testing monitoring limitations. Potentially adding further complications, EPA admits that the efficacy of a treatment process may vary even for sources within the same category. From these and other uncertainties, EPA concluded that it requires additional research to better understand these technologies and make more refined recommendations.
Landfill Disposal: The Interim Guidance also targets landfilling as a potential method of disposal of solid phase PFAS and PFAS-containing materials, recognizing that due to PFAS’s ubiquity, the chemicals are already being disposed of in regular waste management pathways. EPA identifies both hazardous waste landfills and municipal solid waste (MSW) landfills as probable disposal options, but (like thermal destruction) highlights potential differences between the two. Namely, while permitted hazardous waste landfills generally are equipped with extensive environmental controls (e.g., double-liners, leak detection, gas and leachate management, etc.) and employ related practices such as detailed record keeping, MSW landfills (especially older landfills) may not. Accordingly, EPA believes hazardous waste landfills are probably most effective at managing PFAS, while the effectiveness of other landfills likely turns on their respective control technologies and management systems.
Like its evaluation of thermal destruction, there is a dearth of specific analysis concerning how PFAS behave in landfills. EPA seeks to better understand, among other things, PFAS’s effect on landfill liner integrity, the presence of PFAS in landfill gaseous emissions, PFAS concentrations in landfill leachate and possible treatment of same (which may implicate other destruction/disposal methods), and how PFAS interact with other constituents. These uncertainties are driving EPA’s further evaluation of the efficacy of landfilling PFAS and PFAS-containing wastes.
Underground Injection: The Interim Guidance identifies underground injection (UI) as a viable option to dispose of liquid PFAS and PFAS-containing materials, noting that like landfill disposal, this practice is already occurring (applicable to myriad constituents, including PFAS). Generally, this process involves injecting the liquid wastes into a deep well (known as a Class I well) below the lowermost underground sources of drinking water and into a confined geologic formation. EPA has found Class I wells categorized for hazardous wastes well suited for PFAS because they are constructed, permitted, operated, and monitored to protect drinking water sources. Nevertheless, whether a specific Class I well is suitable depends on site-specific factors such as local geology.
The primary uncertainty identified by EPA regarding UI of PFAS waste is understanding the long-term fate and transport of the wastes. Such understanding is not only limited by a lack of applicable studies, but also the wide-ranging chemical properties of specific PFAS chemicals, how they may interact with co-contaminants, and the makeup of the applicable geological formations. EPA indicates that researching and understanding these uncertainties could support future UI permits for PFAS wastes.
Storage: EPA does not consider storage of PFAS and PFAS-containing materials a viable disposal or destruction technology. The agency recognizes, however, that storage may be an appropriate, temporary strategy in cases where uncertainties regarding the discussed technologies preclude immediate disposal or destruction of the PFAS.
How Does the Interim Guidance Address Potentially Vulnerable Populations?
As required by the FY20 NDAA, the Interim Guidance also considers the potential for PFAS releases during destruction or disposal and the impacts on potentially vulnerable populations living near destruction and disposal sites. It does this by identifying potential releases and exposure pathways (e.g., through conceptual site models), defining potentially vulnerable populations (e.g., through risk assessments), and considering community engagement (which may be required in certain circumstances). Specifically, EPA recognizes that intrinsic (i.e., biological) risks and extrinsic (i.e., external) factors may combine to create environmental justice concerns, “which encompass the disproportionate exposure and impacts associated with environmental releases” on minority populations, low-income populations, and/or indigenous populations.
The Interim Guidance primarily refers stakeholders, including the public, to other guidance and tools that may more specifically inform their evaluation and decision-making. Some of these resources address topics and considerations such as assessing environmental justice (e.g., the disproportionately high and adverse human health or environmental effects of actions on minority and low-income populations), risks to children, and risks to tribal and indigenous lifeways.
What is EPA Researching Now and What Does it Plan to Research in the Future?
EPA concludes the Interim Guidance by detailing its current informational needs, which broadly consist of research to: (1) better characterize the multi-media PFAS-containing materials targeted for destruction or disposal; and (2) measure and assess existing methods, improve existing methods, and/or develop new methods for PFAS destruction/disposal. One of EPA’ near-term goals (1-2 years), is focusing on developing additional sampling and analysis methods for PFAS in various media (e.g., air emissions, wastes, water, and solids).
Long-term (3+ years) initiatives include developing monitoring technologies and modeling to measure and predict PFAS fate, transport, and deposition in the air. Further, EPA desires to partner with (or continue to partner with) other government agencies, industry, and academia to coordinate research and develop innovative technologies. EPA tracks the status of its research and development on its website. Completing these goals should inform future revisions of the Interim Guidance, which, as noted, must occur at least every three years. EPA is accepting comments on the Interim Guidance through February 22, 2021.
Publication of the Interim Guidance is just one of the PFAS-related actions EPA took in the weeks prior to President Joe Biden taking office. With the change in administration and agency personnel, it remains to be seen how EPA will further address these and other actions. Regardless, Babst Calland’s environmental attorneys will continue to track the Interim Guidance’s progress and are available to assist you with preparing comments or with other PFAS-related matters. For more information, please contact Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, or any of our other remediation attorneys.
Click here for PDF.
EmTech Law Blog
(by Chris Farmakis)
We understand the unprecedented challenges facing our organizations. Now, more than ever, we realize how critical it is for our clients to seek cost efficiencies while making legal, operational, financial and ‘game changing’ business decisions.
Solvaire, Babst Calland’s affiliated Alternative Legal Service Provider – with its enhanced AI-enabled processes and machine learning capabilities – can help to increase efficiency, while lowering project costs. For more than 21 years, Solvaire has effectively designed, performed, and implemented complex buy-side diligence projects, discovery projects and tailored document management solutions. Solvaire’s track record and satisfied clients speak for themselves.
Check out Solvaire’s new website and request a free consultation to learn how Solvaire can work with your team to provide superior diligence, discovery and document management services – on time, with accuracy and consistency and within a budget that provides price certainty.
To stay informed about Solvaire news, latest case studies and content, as well as innovative business and technology enhancements, sign up for updates here.
Explore Solvaire, and unlock the value it provides.
On behalf of Babst Calland and Solvaire, we look forward to serving you on your next project.
Chris Farmakis
Chairman, Babst Calland
President, Solvaire
Tags: diligence, Discovery, Document Management, e-Discovery, Solvaire
We understand the unprecedented challenges facing our organizations. Now, more than ever, we realize how critical it is for our clients to seek cost efficiencies while making legal, operational, financial and ‘game changing’ business decisions.
Solvaire, Babst Calland’s affiliated Alternative Legal Service Provider – with its enhanced AI-enabled processes and machine learning capabilities – can help to increase efficiency, while lowering project costs. For more than 21 years, Solvaire has effectively designed, performed, and implemented complex buy-side diligence projects, discovery projects and tailored document management solutions. Solvaire’s track record and satisfied clients speak for themselves.
Check out Solvaire’s new website and request a free consultation to learn how Solvaire can work with your team to provide superior diligence, discovery and document management services – on time, with accuracy and consistency and within a budget that provides price certainty.
To stay informed about Solvaire news, latest case studies and content, as well as innovative business and technology enhancements, sign up for updates here.
Explore Solvaire, and unlock the value it provides.
On behalf of Babst Calland and Solvaire, we look forward to serving you on your next project.
Chris Farmakis
Chairman, Babst Calland
President, Solvaire
Environmental Alert
(by Julie Domike and Gina Falaschi)
On January 15, 2020, the California Air Resources Board (CARB) announced the opening of the reporting system for the Large Entity One-Time Reporting Requirement for vehicle fleet owners. This reporting requirement was passed by CARB as part of its June 2020 adoption of the Clean Trucks Rule. As the California Office of Administrative Law (OAL) has not yet approved the regulation, businesses may voluntarily provide information at this time if they wish to begin the reporting process ahead of the April 1, 2021 deadline.
The Large Entity One-Time Reporting Requirement seeks to gather information about how medium- and heavy-duty vehicles are being operated by individual fleets and entities in order for CARB to: (1) determine where zero-emission vehicles may now be suitable; (2) identify the barriers to adoption of zero-emission vehicles; and (3) define necessary vehicle characteristics to meet different fleet needs.
Many businesses, organizations, and government entities must comply with this requirement on or before April 1. An entity must report if it operates a facility in California and: (1) had more than $50 million in revenues in 2019 from all related subsidiaries, subdivisions, or branches, and has at least one vehicle; (2) owns 50 or more vehicles; (3) dispatches 50 or more vehicles into or throughout California; or (4) is a government agency (federal, state, local, and municipalities) that has at least one vehicle. This reporting requirement applies to owners of on-road vehicles with a manufacturer gross vehicle weight rating (GVWR) greater than 8,500 pounds; light-duty vehicles, such as cars and small pick-ups, are not covered by this requirement.
The report must contain general information about the entity and its operations, as well as information about the vehicles it owns and operates. This includes basic information about the vehicles (including off-road yard trucks), home-base locations for vehicles, and how the vehicles are operated. Vehicle operation information includes vehicle body types, daily miles traveled, where vehicles are refueled, and other usage characteristics.
If you have any questions or need assistance determining whether your business must complete this filing, please contact Julie R. Domike at 202-853-3453 or jdomike@babstcalland.com or Gina N. Falaschi at 202-853-3483 or gfalaschi@babstcalland.com.
Click here for PDF.
Pittsburgh Business Times
Nothing highlights the urgent need for business continuity planning like a devastating, prolonged global pandemic.
Without question, this global pandemic has forced businesses, large and small, to face and adapt to a new normal. They’ve had to deal with state mandated closures, layoffs, employee safety threats, new remote work environments, cybersecurity concerns, supply chain interruptions, real estate lease adjustments, and a myriad of other serious business continuity challenges.
Many of those same issues will haunt the business community this year and possibly beyond, even amidst what one might hope would become a strong post-pandemic period of recovery. And that, said Don Bluedorn, managing shareholder and environmental attorney of Pittsburgh law firm Babst Calland, is why more businesses need to consider a longer-term view of their future – including adaptable disaster plans that take into account business continuity in times of unexpected disruptions.
Bluedorn spoke recently with the Pittsburgh Business Times about business continuity planning.
“This has been a unique year,” said Bluedorn, who not only advises businesses but also has had to confront the pandemic himself as chief executive of one of Pittsburgh’s largest law firms. “There’s an old saw that ‘tough times don’t last, but tough people and tough businesses do. And I think that’s certainly true during this pandemic and the difficult economic construct we all have had to face.”
Business Continuity: Pre- and Post-Pandemic
Of course, Bluedorn was quick to point out the importance of ongoing business continuity or disaster planning even without the cloud of a pandemic hovering overhead.
“A SWOT analysis of strengths, weaknesses, opportunities and threats still applies,” he said. “But I think people need to look more broadly than that now. Certainly, from my perspective, looking at the legal and regulatory implications that have arisen as a result of the pandemic are critically important. I also think it’s important for business leaders to recognize that they need to take the long view.”
He added: “I think people need to recognize that the decisions they make today and in the short term future really will define how they are thought of for years to come and that these are times when sometimes difficult decisions need to be made and the company should be looking into the long-term future. One of the shortfalls that businesses have had to confront this past year is poor planning for contingencies, and by contingencies, I mean disaster recovery.”
Donald C. Bluedorn II – Managing Shareholder, Babst Calland
Bluedorn shared that Babst Calland had been better prepared for the pandemic and teleworking, thanks largely to a “small disaster with a flood” several years back at the firm’s downtown office, which forced many of the firm’s employees to work temporarily from home.
“We learned a lot of valuable lessons from that,” he said. “For better or worse, when the pandemic hit, we were able to very seamlessly move to a teleworking situation. We had off-site servers, cloud supply, and licenses for all of our people. Many businesses didn’t have that, and many businesses, frankly, still don’t have that. They’re scrambling to play catch-up.”
That’s where a good contingency plan comes into play, Bluedorn said, particularly for 2021 and beyond, as the pandemic continues.
“What is the right process that you need as a company to enter 2021?” Bluedorn asked. “What’s the right structure that you need? And what are the right technological tools that you need to better service your clients, your customers, and to engage in your operations?
Assessing Contractual Obligations
From a legal perspective, Bluedorn said business leaders also should take the time to review their companies’ contractual obligations to others, as well as the obligations of others to them. That would include supplier/vendor and other supply chain contracts, manufacturing contracts, employment contracts, health insurance and even building lease agreements, among other areas of obligation that have been affected by the pandemic.
“Maybe they need some additional credit guarantees or some additional performance assurances,” Bluedorn said. “Conversely, they may be looking for some relief in their own contractual obligations. Now’s the time to do that, to get out ahead of it.”
Data Security and Employee Privacy
Teleworking has presented its own challenges as well, Bluedorn said, elevating the issues of data security and worker privacy, among others.
“Teleworking has created, unfortunately, opportunities for criminals and others to take advantage,” he said, noting that every business continuity plan should include provisions for dealing with cyber-attacks, stopping or tracking cyber-theft, and preventing future attacks. “What do you do about it? Whom do you go after? How do you protect that? What procedures do you put in place? And whom do you contact to do the forensics to figure out what happened? We’re starting to see that now because of increased teleworking.”
Other factors to consider in creating a business continuity plan, according to Bluedorn: the changing political landscape, with ramifications such as tax changes and changes in environmental regulation, and the potential effects of climate change on the business, whether directly or indirectly.
Putting People First
All of that said, Bluedorn emphasized that business continuity plans should put people first.
“Sometimes, it’s easy to get lost in the numbers and the business aspects and not really think about the people,” he said. “I think a successful business should think about the people, while at the same time keeping an eye on the numbers.”
Among the most important people issues, he said, is daily connectivity between employees.
“Looking at your infrastructure and making decisions about what’s involved – I tell people that, in some
ways, the hardware and software are the easy part to this,” Bluedorn said. “What we’ve also seen on the teleworking side is the loss of daily connectivity with co-workers and clients and customers. Business owners need to be aware of this, and they need to foster ways for people to interact on a daily basis, just like they would if they were in the office.
“People are so critically important to every business,” he adds. “I would encourage everyone who runs or owns a business to think about putting the people first because that will result in positive effects for your business.”
The PIOGA Press
(by Lisa Bruderly)
On December 10, the U.S. Environmental Protection Agency (EPA) issued for public comment its draft guidance regarding the U.S. Supreme Court’s County of Maui “functional equivalent” analysis within the Clean Water Act (CWA) National Pollutant Discharge Elimination System (NPDES) program (85 Fed. Reg. 79489). The comment period closed on January 11.
In County of Maui v. Hawaii Wildlife Fund, 140 S. Ct. 1462 (2020), the Supreme Court held that an NPDES permit is required in instances when a point source discharge of a pollutant through groundwater to a navigable water is the “functional equivalent” of a direct pollutant discharge from a point source into a navigable water. Babst Calland discussed the Supreme Court’s April 23, 2020, decision and its far-reaching implications in the May 2020 PIOGA Press article “Potential Clean Water Act liability extends to discharges to groundwater that reach surface water.”
The Supreme Court offered a non-exclusive list of seven factors to consider on a case-by-case basis:
- Transit time;
- Distance traveled;
- Nature of the material through which the pollutant travels;
- Extent to which the pollutant is diluted or chemically changed as it travels;
- Amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source;
- Manner by or area in which the pollutant enters the navigable waters; and
- Degree to which the pollution (at that point) has maintained its specific identity.
Emphasis on threshold requirements for NPDES permits
The draft guidance stresses that the County of Maui decision did not change the structure of the NPDES permit program, and, at most, only adds another step in determining whether an NPDES permit is required under a limited number of scenarios. In fact, EPA devotes much of the eight-page draft guidance to discussing the following two threshold conditions that trigger NPDES permitting:
- An actual discharge of a pollutant to a water of the United States must occur; and
- The discharge of a pollutant must be from a point source.
The draft guidance emphasizes that unless both of these thresholds are met, the “functional equivalent” analysis is not necessary, concluding that “[o]nly after it is established that an actual discharge of pollutants from a point source to waters of the United States via groundwater occurs (or will occur) would there be a need to consider the Supreme Court’s ‘functional equivalent’ analysis.”
Consideration of identified factors
Although the seven factors in the County of Maui decision were not extensively discussed, the draft guidance does briefly address how transit time and distance traveled may affect the “functional equivalent” evaluation. For example, EPA reaffirmed that permitting authorities cannot assume that all releases “near a water of the United States” are the functional equivalent of a direct discharge to that water. Instead, the draft guidance suggests that where there are indications that a discharge of pollutants through groundwater has reached navigable waters, the permitting authority should consider conducting a technical analysis (e.g., an evaluation of hydraulic conductivity and/or hydraulic gradient) to understand whether there is either an actual discharge of a pollutant to a navigable water or the functional equivalent of such a discharge.
The draft guidance recognizes that what happens to the discharged pollutant over time and distance is also “critical” to the “functional equivalent” analysis. For example, the pollutant composition and/or concentration that reaches the navigable water may differ from the composition/concentration of the discharge “through chemical or biological interaction with soils, microbes, plants and their root zone, groundwater, or other pollutants, or simply through physical attenuation or dilution,” such that the discharge through groundwater may not be the functional equivalent of a direct discharge.
Introduction of an eighth factor
EPA introduces an eighth factor to consider in performing a “functional equivalent” analysis: the design and performance of the system or facility from which the pollutant is released. EPA includes this factor because a facility or system may be designed or operated in a way that significantly changes the composition and/or concentration of pollutants that reach navigable water, thereby affecting whether the pollutant released by the point source is the “functional equivalent” of the pollutant that enters the surface water. For example, a system may be designed to “promote dilution, adsorption or dispersion of the pollutant, thereby affecting the extent to which the pollutant is chemically changed, the amount of pollutant entering the water of the United States relative to the amount of the pollutant that leaves the point source, and the degree to which the pollutant has maintained its specific identity at the point it reaches a water of the United States.” Facilities with a storage or treatment system (e.g., a septic system or settling pond) may be less likely to require a NPDES permit because the function of the system could prevent the functional equivalent of a discharge of pollutants to waters of the United States.
“Functional equivalent” test still evolving
The “functional equivalent” analysis is factually dependent and can be determined only on a case-bycase basis. The draft guidance does not provide any “hard and fast” rules that the regulated community can rely on to assess whether a point source discharge that enters a navigable water through groundwater would require a NPDES permit. Continued uncertainty and differences in the application of the analysis among the regulatory agencies and/or jurisdictions are nearly certain, especially with the possibility that the incoming Biden administration may revise or rescind the draft guidance.
Click here for PDF.
The PIOGA Press
(by Robert Stonestreet)
On December 16, the United States Fish and Wildlife Service adopted a final regulation to define the term “habitat” for use when designating “critical habitat” areas under the Endangered Species Act (ESA). 85 Fed Reg 81411. The ESA already defines the term “critical habitat,” which in general means areas designated as essential to preserve or promote recovery of threatened or endangered species regardless of whether those species are actually present in the area. The term “habitat,” however, is not itself defined in the ESA or pre-existing regulations.
The Service proposed two potential “habitat” definitions in August 2020 for public comment. In the final rulemaking, the Service chose to adopt a “habitat” definition markedly different than the two definitions proposed for public comment back in August. The adopted definition reads as follows:
For the purposes of designating critical habitat only, habitat is the abiotic and biotic setting that currently or periodically contains the resources and conditions necessary to support one or more life processes of a species.
According to the Service, abiotic means “derived from non-living sources such as soil, water, temperature, or physical processes” and the term biotic means “derived from living sources such as a plant community type or prey species.” The preamble portion of the Federal Register entry notes that the phrase “resources and conditions” is intended to clarify that habitat “is inclusive of all qualities of an area that can make that area important to the species.”
Compare that definition to the two definitions proposed for public comment on August 5, 2020, which appear below:
Primary Proposed Definition: The physical places that individuals of a species depend upon to carry out one or more life processes. Habitat includes areas with existing attributes that have the capacity to support individuals of the species.
Alternate Proposed Definition: The physical places that individuals of a species use to carry out one or more life processes. Habitat includes areas where individuals of the species do not presently exist but have the capacity to support such individuals, only where the necessary attributes to support the species presently exist.
The Service noted that the revised version of the adopted definition takes into account the approximately 48,000 public comments submitted to the agency.
This rulemaking was a response to litigation over what areas the Service could designate as critical habitat that is not occupied by a listed species. Weyerhaeuser Co. v. United States Fish and Wildlife Service, 139 S. Ct. 361 (2018). In Weyerhaeuser, the Service designated an area as critical habitat for a species even though that species could not survive in the area under current conditions. The Service reasoned that the area was once occupied by the species, and certain modifications could be made in the future that would allow the species to return to the area. The United States Supreme Court ruled that the Service could not designate an area as critical habitat for a listed species that was not “habitat” for that species in the first place―i.e. an area where the species could survive.
The Service seems to acknowledge that the adopted “habitat” definition would preclude the type of designation at issue in Weyerhaeuser. In response to comments that the proposed definition would improperly preclude areas that require restoration from being designated as critical habitat, the Service noted that “habitat, whether occupied or unoccupied, must still have (currently or periodically) the resources and conditions necessary to support one of the life processes for the species.” According to the Service, “the definition respects the statutory text by distinguishing between habitat and areas that are not habitat (but can become habitat in the future, whether by virtue of restoration activities or because of other changes).”
The regulation becomes effective on January 15 and will apply only to proposed critical habitat rulemakings published in the Federal Register after that date.
Click here for PDF.
The PIOGA Press
(by Keith Coyle and Brianne Kurdock)
On December 27, President Donald J. Trump signed the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (2020 PIPES Act) into law. Adopted as part of a broader federal spending and COVID-19 relief package, the signing of the 2020 PIPES Act represents the culmination of a multiyear effort to reauthorize the nation’s federal pipeline safety program. The prior reauthorization of the federal pipeline safety program, enacted in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (2016 PIPES Act), expired on September 30, 2019.
The 2020 PIPES Act authorizes general funding for the Pipeline and Hazardous Materials Safety Admin – istration’s (PHMSA) gas and hazardous liquid pipeline safety programs of $156.4 million for fiscal year 2021, $158.5 million for FY 2022, and $162.7 million for FY 2023, with additional amounts authorized in each of these fiscal years from the Oil Spill Liability Trust Fund for hazardous liquid pipeline safety and the user fee program for underground gas storage facilities. The 2020 PIPES Act also prescribes specific funding amounts that PHMSA must use for certain activities, including for recruitment and retention of federal pipeline safety personnel, operational expenses, and federal grant programs.
In addition to authorizing funding levels through FY 2023, the 2020 PIPES Act contains several amendments to the federal pipeline safety laws. Some of the key changes are highlighted below.
Title I of the 2020 PIPES Act:
- Establishes a new three-year program for advancing pipeline safety technologies, testing and operational practices.
- Adds an operator’s self-disclosure to the list of factors that PHMSA must consider in assessing administrative civil penalties.
- Recognizes additional due process protections for PHMSA enforcement proceedings, including that:
- An operator be allowed to request that matters of fact and law be resolved in a consent agreement and consent order.
- An operator and PHMSA be permitted to convene meetings for purposes of reaching a settlement or simplification or other disposition of issues.
- The case file in an enforcement action include all pertinent agency records.
- An operator be allowed to reply to PHMSA’s post-hearing submissions and request that a hearing be held on an expedited basis.
- PHMSA carry the burden of proof, presentation, and persuasion in an enforcement proceeding.
- PHMSA issue a post-hearing recommendation not later than 30 days after the deadline for any post-hearing submission of a respondent.
- PHMSA issue an order within 120 days of the filing of a petition for reconsideration.
- An operator be allowed to ask PHMSA to issue a declaratory order to resolve issues of controversy or uncertainty.
- Requires PHMSA to notify the public of an enforcement hearing and provides that the agency will make formal hearings, as defined in 49 C.F.R. § 190.3, open to the public. Currently, PHMSA’s enforcement cases, with the exception of a hearing on an emergency order, are conducted informally and do not qualify as formal hearings.
- Directs PHMSA to post the charging and responsive documents related to an enforcement action along with the decision or order on its website. For the most part, PHMSA has already been posting these materials on its website.
- Requires PHMSA to issue a final rule within two years that clarifies the applicability of the pipeline safety regulations to idle pipelines, which are defined as pipelines that have ceased normal operations and will not resume service for at least 180 days, have been isolated and purged, or contain small, non-hazardous volumes of gas.
- Directs PHMSA to issue a final rule within three years updating the federal safety standards for the operation and maintenance of large-scale liquefied natural gas facilities, other than peak shaving facilities.
- Following the submission of a report to Congress and subject to the appropriation of necessary funding, authorizes PHMSA to create the National Center of Excellence for Liquefied Natural Gas Safety.
- Requires PHMSA to issue a final rule within 90 days establishing new minimum federal safety standards for onshore gas gathering lines.
- Orders PHMSA to issue new leak detection and repair program rules within one year for operators of regulated gas gathering lines, gas transmission lines and gas distribution lines.
- Requires each operator to amend its operation and maintenance plan within one year to meet the leak detection and repair program requirements of 49 U.S.C. § 60102(q).
- Directs PHMSA to review each operator’s operation and maintenance plan within two years of the act and not less than five years thereafter. This review may be included as a part of a regularly scheduled inspection.
- Requires PHMSA to make a determination on whether to advance the rulemaking proceeding for updating the class location requirements.
- Directs PHMSA to enter into an agreement with the National Academy of Sciences to complete a study within two years relating to the installation of automatic or remote-controlled shutoff valves on existing gas transmission lines in high consequence areas and existing hazardous liquids pipelines in commercially navigable waterways or unusually sensitive areas.
- Defines the terms “certain coastal waters” and “coastal beach” and requires PHMSA to complete an outstanding rulemaking mandate for these areas from the 2016 PIPES Act within 90 days.
- Requires each hazardous liquid pipeline operator to implement procedures that assess potential impacts by maritime equipment or other vessels, including anchors, anchor chains or any other attached equipment.
- Amends the reporting obligation for safety-related condition reports to require an operator to submit the report to the secretary of transportation, the appropriate state authority and the tribe where the subject of the report occurred. If there is no state authority, the operator must submit the report to the governor of the relevant state.
Title II of the 2020 PIPES Act, also known as the Leonel Rondon Pipeline Safety Act, contains several amendments to the federal pipeline safety laws in response to a September 2018 gas distribution incident in the Merrimack Valley, Massachusetts. In particular, Title II of the 2020 PIPES Act:
- Requires PHMSA to issue regulations within two years amending the integrity management program, emergency response plan, operation and maintenance manual and pressure control recordkeeping requirements for gas distribution operators.
- Directs PHMSA to submit a report to Congress within three years on the implementation of pipeline safety management systems within the gas distribution industry.
- Orders PHMSA to issue regulations within 180 days requiring that at least one qualified agent of a gas distribution operator be present at a district regulator station or other site to monitor and prevent overpressurization during certain construction projects, unless the district regulator station has a monitoring system and the capability for remote or automatic shutoff.
- Mandates that PHMSA issue regulations within one year that require gas distribution operators to assess and upgrade district regulator stations.
The product of an agreement reached in the waning days of the current session of Congress, the 2020 PIPES Act does not contain several amendments proposed during earlier phases of the legislative process. The 2020 PIPES Act does not eliminate PHMSA’s obligation to consider the costs and benefits of changes to the pipeline safety regulations or prohibit the use of direct assessments as part of a pipeline operator’s integrity management program. The act does not change the mens rea (or mental state) requirement in the criminal statute or expand the list of prohibited activities covered under the criminal provision. Nor does the act authorize the use of administrative law judges in PHMSA enforcement actions, increase the amount of civil penalties that can be imposed for violations of the pipeline safety laws or regulations, or authorize the filing of mandamus actions challenging PHMSA’s failure to perform nondiscretionary duties.
The task of implementing the provisions in the 2020 PIPES Act will fall on the incoming administration of President-elect Joseph R. Biden. Having emphasized environmental issues during the 2020 campaign, including efforts to address climate change through reductions in greenhouse gas emissions, the Biden administration will have the opportunity to advance these commitments in addressing the rulemaking mandates in the 2020 PIPES Act, particularly the new leak detection and repair program requirements. The Biden administration’s policy preferences and appointees for key positions will influence the implementation of the 2020 PIPES Act as well. President-elect Biden has already announced that Pete Buttigieg, the former mayor of South Bend, Indiana, will be his nominee to serve as the next secretary of the U.S. Department of Transport – ation, although a potential nominee for PHMSA administrator may not be announced until later this year.
Click here for PDF.
Renewables Law Blog
(By Christopher Hall)
Following the passage of West Virginia Senate Bill 583 in early 2020, West Virginia has seen an uptick in the number of new proposed renewable energy projects. SB 583 established a new incentive program supporting the development of renewable energy facilities on former industrial sites. Berkeley County, in the eastern panhandle, recently announced a proposed 100 MW solar facility to be built on a 750 acre brownfield site previously used as a manufacturing facility. Read more.
Tags: energy, renewable, SB 583, solar, tax credits, West Virginia Senate Bill 583
Pipeline Safety Alert
(by Keith Coyle and Ashleigh Krick)
On January 11, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Final Rule amending the gas pipeline safety regulations at 49 C.F.R. Parts 191 and 192. Adopted as part of the Trump administration’s efforts to reduce or eliminate unnecessary regulatory burdens, PHMSA estimates that the Final Rule will result in approximately $130 million in annualized cost savings for pipeline operators. Although the effective date of the Final Rule is March 12, 2021, the Agency provided a deferred compliance date of October 1, 2021, for the new amendments.
Additional information about the Final Rule is provided below.
Distribution Integrity Management Program Exemptions and Farm Taps
- Consistent with the policy announced in PHMSA’s March 2019 Exercise of Enforcement Discretion, the Final Rule provides operators with the option to maintain pressure regulating devices on farm taps under either the distribution integrity management program (DIMP) requirements or 49 C.F.R. § 192.740. The Final Rule exempts farm taps originating from unregulated production and gathering pipelines from the DIMP requirements, the overpressure protection inspection requirements in § 192.740, and the annual reporting requirements in Part 191.
- The Final Rule does not amend PHMSA’s regulations to provide additional clarity in determining what qualifies as a farm tap or where production, gathering, or transmission piping ends and distribution service line piping begins in farm tap configurations. The Agency stated that these definitional issues will be addressed in a guidance document that remains under development or in a future rulemaking proceeding. In the preamble to the Final Rule, PHMSA emphasized that any portion of a farm tap originating from an unregulated pipeline that meets the definition of service line must still comply with all applicable Part 191 and 192 requirements.
- The Final Rule also exempts master meter operators from the DIMP requirements. PHMSA noted that it would evaluate separately whether to extend the exception to small LPG operators or all distribution operators with fewer than 100 customers.
Corrosion Control
- The Final Rule allows operators to remotely monitor cathodic protection rectifier stations, codifying the position the Agency had already taken in a 2019 interpretation. If operators remotely monitor rectifiers, operators are required to conduct a physical inspection of the rectifier annually. PHMSA also confirmed that the regulations and related interpretations do not specify a particular technology.
- The Final Rule extends the atmospheric corrosion control inspection interval for distribution service lines from 3 years to 5 years, not to exceed 63 months. If atmospheric corrosion is identified, the inspection interval reverts to the 3-year period. Going forward, if no atmospheric corrosion is identified in a subsequent inspection, then the operator could then return to the 5-year inspection interval.
- The Final Rule did not adopt proposals by commenters and the Gas Pipeline Advisory Committee to use remediation as an alternative to the 3-year inspection interval if atmospheric corrosion has been observed. PHMSA explained that the current regulations already require remediation of atmospheric corrosion and operators can use the 5-year inspection interval if no atmospheric corrosion is identified in subsequent inspections. PHMSA also clarified that operators must retain the records of the two most recent atmospheric corrosion inspections to use the 5-year inspection interval in order to support that atmospheric corrosion was not identified on the service line. Finally, PHMSA clarified that consideration of corrosion risks in a DIMP plan includes atmospheric corrosion.
Reporting and Information Collection
- The Final Rule adjusts the monetary property damage threshold in the definition of an “incident” from $50,000 to $122,000 to account for inflation. This threshold had not been updated since 1984 and includes losses to the operator and third parties, but not the cost of lost gas. PHMSA committed to updating the monetary damage threshold annually based on the formula provided in newly established Appendix A to Part 191. The Agency will post the updated monetary damage threshold to its website, with the new threshold becoming effective on July 1st each year.
- The Final Rule eliminates §§ 191.12 and 192.1009 (the requirement to submit mechanical fitting failure (MFF) reports). Operators are still required to file incident reports for MFFs that involve a failure of a mechanical joint. Operators also need to include a count of hazardous leaks involving a mechanical joint failure in its gas distribution annual reports.
Standards Incorporated by Reference for Plastic Pipe
- The Final Rule incorporates by reference the 2018a edition of ASTM D2513-18a, “Standard Specification for Polyethylene (PE) Gas Pressure Pipe, Tubing, and Fittings” and adopts corresponding amendments to the plastic pipe design standards to allow a design factor of 0.40 for pipe with a diameter of 24 inches or less.
- The Final Rule also incorporates by reference the 2019 edition of ASTM F2620, “Standard Practice for Heat Fusion Joining of Polyethylene Pipe and Fittings” and corresponding amendments to the requirements for joining procedures in §§ 192.281 and 192.283 to clarify that procedures that provide an equivalent or superior level of safety to ASTM F2620 are acceptable. PHMSA agreed with commenters that 0.099 is an acceptable minimum wall thickness for 1-inch CTS Pipe.
Test Factor for Pressure Vessels
- In response to a 2015 petition for reconsideration, PHMSA amended § 192.153(e) to allow pressure vessels that were tested in accordance with the 1.3 times MAOP test factor after July 14, 2004, to continue operating without retesting.
- Pre-fabricated units and pressure vessels meeting the 1.3 test factor installed after July 14, 2004, are not subject to the strength testing requirements of § 192.505(b) as long as the components were installed before October 1, 2021 (the compliance deadline for the Final Rule). Likewise, these same components are not subject to the duration requirements of § 192.505(c) and (d) as long as they have been tested for duration consistent with § 192.153(a) and (b).
- Pre-fabricated units and pressure vessels installed on or after October 1, 2021, must be tested for the duration specified in §§ 192.505(c), 192.505(d), 192.507(c), or 192.509, as applicable.
- PHMSA also adopted its proposal to accept pre-installation manufacturer pressure tests, with certain conditions, for newly manufactured pressure vessels installed after October 1, 2021. If the manufacturer pressure test is used, the operator must inspect the pressure vessel after it has been placed into service in accordance with the new requirements in § 192.153(e). In response to comments regarding pressure vessels temporarily used on a pipeline facility, PHMSA is also accepting pre-installation manufacturer pressure tests or a prior test so long as the component is promptly removed after the task is complete. The Agency also adopted requirements pertaining to the pressure vessels that are temporarily removed from a pipeline facility and reinstalled at that location or a different location.
Other Amendments
- The Final Rule adopted a change to § 192.229(b), which provides that welders may not weld with a welding process they have not engaged in within the last 6 months, by extending the time frame to 7 ½ months.
- The Final Rule extends the allowance for testing fabricated units and short segments of pipe prior to installation if a post-installation test is not practicable, which is currently permitted for steel pipelines that operate at a stress level greater than 30% SMYS, to steel pipelines that operate at a stress level less than 30% SMYS and at or above 100 psi. The Final Rule does not extend the pre-testing provisions to pipelines operating below 100 psi, service lines, or plastic pipelines. The Final Rule removes “hydrostatic” from the new § 192.507(d) to allow for the use of test mediums other than water.
Click here for PDF.