Smart Business
(by Sue Ostrowski featuring Moore Capito)
West Virginia scored a huge win when it landed the contract for the high-tech Virgin Hyperloop Certification Center in October. Now the state — and the region, including Pittsburgh — are looking to build on that success.
“We’re hoping this is going to be a jumping off point,” says Moore Capito, a shareholder at Babst Calland who also serves in the West Virginia House of Delegates. “Any time you can lend a huge name like Virgin, it certainly gives the region an increased amount of credibility.”
Smart Business spoke with Capito about what the project means for the region and how its success could attract other big projects — and jobs — to West Virginia and Pennsylvania.
What is the Virgin Hyperloop Project?
In general, a hyperloop is an experimental, next-generation mode of transportation that will transport passengers through a network of under- and above-ground tubes, capable of reaching speeds of 670 mph. The goal is to transform transportation, and the broader economy, so that travel that previously took hours will instead take minutes.
More specifically, the Virgin Hyperloop Project, with substantial investments from Sir Richard Branson and DP World Ports, is headquartered in Los Angeles and has been primarily testing the technology in Las Vegas. As part of its growth, Virgin sought a location for a certification center to serve not only as a venue for moving the technology forward but as a place where they could create a regulatory framework.
Regulations cover other modes of transportation — air, rail, sea, cars, trucks — but hyperloop is a grey area. This center will build out that regulatory framework around this new mode of transportation to certify that it is viable for commercial use.
What does the project entail?
The project is located on 800 acres where, in addition to the center, Virgin plans to build a six-mile hyperloop track. The undulation of the West Virginia landscape made it an attractive location to test how robust the pods must be to traverse such terrain.
At this point, the timeline is very broad, with 2021 focused on design, planning and feasibility of facilities. The goal in 2022 is to begin construction on the facilities. That construction will be rolled out in phases, with an end goal of certification by 2025.
How will this project benefit not only West Virginia, but the entire region?
Directly, the project is expected to create somewhere between 150 to 200 engineering and technician jobs, with thousands of additional indirect jobs in areas that could include maintenance, construction and manufacturing. It allows firms that have expertise in emerging technology — including businesses in the Pittsburgh area — to showcase that expertise and focus on mobility.
It’s been such an uplifting dialogue. There have been conversations, for instance, on how to increase regional entrepreneurship to modernize the economy to attract and retain new talent. We want people who want to jump in, but they need a pool to jump into.
This project gives people another reason to talk about the region’s capabilities. This is a fertile region for developing emerging technologies, and it’s exciting to see it move in this direction and to see more eyes on our region.
West Virginia is showing its commitment to modernizing and growing and engaging. Its technology movement is on the march.
This is a sign of more things to come as West Virginia continues to grow in this emerging technology, benefiting not just the state, but the greater region, as well.
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Emerging Technologies Perspective
(by Ashleigh Krick)
On November 9, 2020, the Federal Trade Commission (FTC) announced a settlement agreement with Zoom Video Communications, Inc. (Zoom) that arose from alleged violations that Zoom engaged in a series of deceptive and unfair practices that undermined user security.
The FTC found that Zoom made several representations across its platform regarding the strength of its privacy and security measures used to protect users’ personal information that were untrue and provided users with a false sense of security. Specifically, the FTC found that Zoom made multiple statements regarding “end-to-end” and “AES 256-bit” encryption used to secure videoconference communications. However, Zoom did not provide end-to-end encryption for any Zoom meeting conducted outside of Zoom’s “Connecter” product. And, Zoom used a lower level of encryption that did not provide for the same level of security as “AES 256-bit” encryption. The FTC also found that Zoom stored meeting recordings unencrypted and for a longer period than Zoom claimed in its Security Guide. And, Zoom circumvented browser privacy and security safeguards through software updates without notice to users and without establishing replacement safeguards.
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Employment Alert
(by Alexandra Farone)
At the end of October 2020, the Allegheny County Council and Pittsburgh City Council each passed bills entitled “Creating a Respectful and Open World for Natural Hair Acts,” prohibiting hairstyle-based discrimination in employment, housing, and public accommodations. Protective and cultural hair textures and hairstyles, including braids, cornrows, locs, Bantu knots, Afros, and twists, are now protected under these new laws, known as the CROWN Acts. Employers in Allegheny County should review their dress codes and grooming standards to ensure compliance with the CROWN Acts.
The two CROWN Acts are nearly identical. The Allegheny County CROWN Act defines “hairstyle” as “any characteristic, texture, form, or manner of wearing an individual’s hair if such characteristic, texture, form or manner is commonly associated with a particular race, national origin, gender, gender identity or expression, sexual orientation, or religion.”
The Pittsburgh CROWN Act defines “hairstyle” as “hair texture and styles of hair of any length, such as protective or cultural hairstyles, natural hairstyles, and other forms of hair presentation.” Mayor Bill Peduto submitted the CROWN Act for the City Council’s consideration earlier in October, citing the 2019 report of Pittsburgh’s Gender Equity Commission that found inequities and barriers facing people of color—especially women—in the city regarding their hairstyles and natural hair.
Individuals within the City of Pittsburgh seeking to make claims of discrimination based on hairstyle can report the matter to the City’s Commission on Human Relations, the agency tasked with enforcing the CROWN Act. The Commission has released extensive guidance for information regarding the CROWN Act in the employment, housing, and public accommodation sectors.
If you have any questions about the impact of the CROWN Acts, particularly on your existing personnel policies, please contact Alexandra G. Farone at (412) 394-6521 or afarone@babstcalland.com.
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The PIOGA Press
(by Keith Coyle and Varun Shekhar)
On October 14, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) containing potential changes to the federal gas pipeline safety regulations and reporting requirements. Citing PHMSA’s experience administering special permits, as well as the information provided in earlier studies and from various stakeholders, the NPRM proposed to amend the regulations to allow operators to apply integrity management (IM) principles to certain gas transmission line segments that experience class location changes. Comments on the NPRM are due December 14.
PHMSA relied heavily on the conditions included in class location special permits in developing the proposed rules. The IM alternative only would be available to pipeline segments that experience an increase in population density from a Class 1 location to a Class 3 location, subject to certain eligibility criteria. Operators using the IM alternative would be required to conduct an initial integrity assessment within 24 months of the class location change and apply the IM requirements in 49 C.F.R. Part 192, Subpart O to the affected segment. Operators also would be required to implement additional preventative and mitigative measures for cathodic protection, line markers, depth-of-cover, right-of-way patrolling, leak surveys and valves.
PHMSA’s decision to propose an IM alternative for managing class location changes is a significant step forward for pipeline safety. The class location regulations are based largely on concepts established decades ago, and the pipeline industry long has advocated for an approach that reflects modern assessment tools and technologies. While the NPRM does not necessarily satisfy all of the industry’s objectives, PHMSA’s proposal sets the stage for the next phase of the rulemaking process and potential development of a final rule.
Background
In July 2018, the agency published an advance notice of proposed rulemaking (ANPRM) asking for public comment on potential amendments to the class location regulations in 49 C.F.R. Part 192. As PHMSA explained in the ANPRM, Part 192 generally requires operators to respond to class location changes by (1) reducing the maximum allowable operating pressure (MAOP), (2) conducting a new pressure test or (3) replacing the pipe in the affected segment. The agency asked whether those requirements should be updated to allow operators to address certain class location changes through the use of IM measures. PHMSA also asked for public comment on several related questions, including whether the availability of the IM alternative should be limited to segments that meet certain eligibility criteria and whether the agency should incorporate the conditions included in prior class location special permits in the regulations.
What’s in the NPRM?
PHMSA is proposing to establish an IM alternative for pipeline segments that experience a class location change from Class 1 to Class 3. The key features of the proposed IM alternative include:
- Designating the area affected by the class location change as a high consequence area (HCA) and applying the IM program requirements in 49 C.F.R. Part 192, Subpart O to the segment. Performing an initial integrity assessment within 24 months of the class location change.
In performing the initial and subsequent integrity assessments of the affected segment with inline inspection (ILI) tools, inspecting all pipe between the nearest upstream ILI tool launcher and downstream ILI receiver.
Replacing pipeline segments with discovered cracks exceeding 20 percent of wall thickness or a predicted failure pressure of less than 100 percent specified minimum yield strength (SMYS) or less than 1.5 times MAOP.
- Installing remote-control or automatic shutoff valves or upgrading existing mainline block valves downstream and upstream of the affected segment to provide that capability. The valves would need to be able to close within 30 minutes of rupture identification.
- Implementing additional preventive and mitigative measures, including conducting close interval surveys (CIS) every seven years, performing leak surveys on a quarterly basis, conducting monthly right-of-way patrols and performing cathodic protection test station surveys.
- Complying with more stringent repair criteria, including treating additional anomalies as “immediate” repair conditions and requiring remediation of conditions reaching a 1.39 safety ratio and 40 percent wall loss (as opposed to a 1.1 safety ratio and 80 percent wall loss under the current IM regulations).
The agency is proposing to limit the IM alternative to segments that experience a class location change after the effective date of the final rule, subject to a 60-day notification requirement. PHMSA is also proposing to prohibit the use of the IM alternative for pipeline segments with the following conditions or attributes:
- Bare pipe, wrinkle bends, missing material properties records, certain historically problematic seam types (including DC, LF-ERW, EFW, and lapwelded pipe or pipe with a longitudinal joint factor below 1.0) and body, seam or girth-weld cracking;
- Pipe with poor external coating, tape wraps or shrink sleeves;
- Leak or failure history within five miles of the segment;
- Pipe transporting gas that is not of suitable composition and quality for sale to gas distribution customers;
- Pipe operated at MAOP determined under the grandfather clause (49 C.F.R. § 192.619(c)) or under an alternative MAOP (49 C.F.R. § 192.619(d)); and
- Segments that do not have a documented successful eight-hour Subpart J pressure test to at least 1.25 times MAOP.
What’s not included in the NPRM?
The agency did not propose an IM alternative for Class 2 to Class 4 location changes. PHMSA reasoned that given the high population density associated with Class 4 locations, there would not be adequate, feasible measures that could be used to provide Class 4 locations with an equivalent level of public safety instead of replacing pipe.
Although raised in industry comments on the ANPRM, PHMSA did not propose any amendments to the so-called “cluster rule.” That rule allows operators to adjust endpoints of a Class 2, 3 or 4 location based on the presence of a “cluster” of buildings intended for human occupancy. Industry commenters had asked the agency to either clarify or revise the existing clustering methodology. PHMSA declined that request and simply noted that the NPRM contained provisions that would apply to segments covered under the cluster rule.
PHMSA did not propose to limit the availability of the IM alternative based on pipeline diameter, operating pressure or potential impact radius (PIR) size. Some of the commenters who responded to the ANPRM asked the agency to include a more conservative PIR-based limitation, but industry commenters had opposed that provision as unnecessary.
What’s next?
After the public comment period closes, the agency will consider the information provided and decide whether to present the NPRM to the Gas Pipeline Advisory Committee (GPAC) for consideration. GPAC is a 15-member federal advisory committee that reviews and provides non-binding recommendations to PHMSA on proposed changes to the gas pipeline safety regulations. Once the GPAC process is complete, the agency can develop a final rule for consideration by the Office of the Secretary and Office of Management and Budget and eventual publication in the Federal Register. Completion of these steps is not likely to occur until 2021 or later.
The NRPM can be found at www.federalregister.gov/documents/2020/10/14/2020-19872/pipeline-safetyclass-location-change-requirements.
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The Legal Intelligencer
(by Stephen L. Korbel and Anna Z. Skipper)
With approximately 90,700 minimum wage employees in Pennsylvania, it is of little surprise that that minimum wage laws are a frequent topic of conversation and debate. However, most often, the discussion is limited to the wage itself, and the nuances of the laws governing employee compensation are frequently glossed over. The statutes and regulations setting the minimum wage, the Pennsylvania Minimum Wage Act of 1968 (PMWA), 43 P.S. Sections 333.101 et seq., 34 Pa. A.D.C. Section 231.1 et seq., and the federal Fair Labor Standards Act (FLSA), 29 U.S.C.A. Sections 201 et seq. and 29 C.F.R. Ch. V, Pt. 510 et seq., both do much more than simply establishing a minimum rate of pay, and the other requirements are of no less import to Pennsylvania employers’ legal obligations, liability, or bottom line. This year, while debates over the minimum wage were had at dinner tables and debate stages across the nation, both the Pennsylvania and federal overtime regulations were quietly amended to cover more employees, and thus effect more employers than they ever have before.
Historically, the minimum wage and overtime requirements have always gone hand-in-hand. The FLSA was passed in 1938 to establish minimum standards for workers engaged directly or indirectly in interstate commerce. In addition to establishing a minimum wage, it also established the maximum workweek, overtime pay requirements and more. The PMWA, enacted in 1968, largely mirrors the FLSA, and covers most private employers, including those also subject to the FLSA. Where both the PMWA and FLSA apply, an employer is required to comply with both laws, or the stricter requirement favoring the employee. The PMWA sets the Pennsylvania minimum wage equal to that under the FLSA, and both require nonexempt employees to receive overtime pay equal to one and a half times “the regular rate for all hours worked in excess of forty in a workweek.” Who is an eligible non-exempt employee depends on how they are paid and how much they are paid, as well as their job duties or job classification. Generally, with some exceptions, hourly employees who work more than 40 hours per week are eligible for overtime. In addition, certain salaried employees may be eligible based on their salary and their job duties, while others are explicitly exempt, such as farm labor or domestic service workers.
Both the FLSA and PMWA regulations contain an overtime salary threshold, which sets forth a minimum salary requirement, under which otherwise nonexempt employees must be paid overtime. On Jan. 1, the FLSA regulations were updated to expand FLSA overtime eligibility to all employees with a salary at or below $35,308 per year. Pennsylvania employers subject to the FLSA were required to adhere to the federal salary threshold increase on Jan. 1, but on Oct. 3, the Pennsylvania Department of Labor & Industry (L&I) increased Pennsylvania’s salary threshold even further.
For the first time in over four decades, the PWMA regulations were amended to set a new minimum salary threshold of $875 per week or $45,500 per year, exceeding the federal requirements set earlier in the year. The new regulations are expected to expand overtime eligibility to 143,000 employees in Pennsylvania, and strengthen the regulations pertaining to 251,000 more. The new threshold is scheduled to be rolled out in phases, and will increase from the 2020 federal level, to $780 per week or $40,560 annually, on Oct. 3, 2021, and again to $875 per week or $45,500 annually, on Oct. 3, 2022. Beginning in 2023, the salary threshold will automatically adjust every three years. Up to 10% of those salary levels may be satisfied by commissions, incentive payments, and other non-discretionary bonuses.
As mentioned above, certain employees may be exempt from overtime rules, regardless of their salary, if they perform executive, administrative or professional duties. The Oct. 3 rulemaking also altered the test used to determine whether an employee is exempt for one of those reasons. This new “duties test,” contained in Section 5(a)(5) of the PMWA, was altered to more closely align with those contained in the FLSA. Employees below the salary threshold may be exempt as an executive, administrative, or professional employee, respectively, if they meet any of the following requirements: their primary duty is management of the enterprise or managing a customarily recognized department or subdivision of the enterprise, and their work requires customary and regular direction of at least two full-time employees; their primary duty consists of office or nonmanual work directly related to management policies or general operation of their employer or their employer’s customers, and their work requires the exercise of discretion and independent judgment; or their primary duty consists of work requiring the knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized instruction and study or work that is original or creative in character in a recognized field of artistic endeavor, and the work requires the exercise of discretion and judgment or invention, imagination or talent in a field of artistic endeavor. Employees meeting these requirements (think CEOs, consultants, attorneys, musicians or similar positions) remain ineligible for overtime payments regardless of their salary, but the adjustment of the duties test outlined above is expected to increase the number of nonexempt employees, and consequently increase overtime requirements for employers.
Finally, the PMWA, including the new overtime regulations, remains inapplicable to certain public employers, including state-affiliated entities, counties, municipalities and public school systems. Commentary issued along with the new regulations confirmed this position, although such employers remain subject to the FLSA and federal regulations. Public employers must thus adhere to the federal $35,308 per year salary threshold, but are not required to conform to the increases scheduled for 2021 and 2022.
The new federal and state regulations could have a significant impact on the overtime liabilities of Pennsylvania employers. Employers in violation of the PMWA may be subject to fines and imprisonment, in addition to civil actions brought by employees or the Secretary of L&I to recover unpaid wages, costs and reasonable attorney fees. Similarly, employers who willfully or repeatedly violate the overtime pay requirements of the FLSA are subject to civil penalties of up to $1,000 for each violation. Consequently, it is important that Pennsylvania employers closely analyze which statute or regulations apply to them, and whether they have any nonexempt salaried employees for whom they now must provide overtime compensation for hours worked in excess of 40 hours per workweek.
Stephen L. Korbel is a shareholder in the public sector and employment and labor groups of Babst Calland Clements & Zomnir. He counsels public and private employers in all aspects of the employment relationship, from hiring through termination. Contact him at skorbel@babstcalland.com or 412-394-5627.
Anna Z. Skipper is an associate in Babst Calland’s Public Sector Group and focuses her practice on zoning, subdivision, land development, and general municipal matters. Contact her at askipper@babstcalland.com.
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Reprinted with permission from the October 29, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
RMMLF Mineral Law Newsletter
(By Joseph K. Reinhart, Sean M. McGovern, Danial P. Hido and Gina N. Falaschi)
The Pennsylvania Department of Environmental Protection (PADEP) continues to move forward with its rulemaking to limit carbon dioxide (CO2) emissions from fossil fuel-fired electric generating units (EGUs) consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule and Governor Tom Wolf’s Executive Order No. 2019-07, 49 Pa. Bull. 6376 (Oct. 26, 2019), as amended, 50 Pa. Bull. 3406 (July 11, 2020) (which extended the deadline for PADEP to present the regulations to the Pennsylvania Environmental Quality Board (EQB) from July 31, 2020, until September 15, 2020). See Vol. XXXVII, No. 3 (2020) of this Newsletter.
As part of PADEP’s public outreach efforts, PADEP hosted an informational webinar on August 6, 2020, regarding the benefits of Pennsylvania’s participation in RGGI. See PADEP, “RGGI 101: How It Works and How It Benefits Pennsylvanians” (Aug. 6, 2020), https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx. The webinar focused on the structure of the RGGI program and how participation will lower greenhouse gas and other air pollution emissions from electric power plants, as well as a discussion of the health and economic benefits from participation in the program.
Consistent with Governor Wolf’s amended Executive Order 2019-07, PADEP presented its proposed cap-and-trade rule to the EQB, the independent body responsible for adopting proposed PADEP regulations, on September 15, 2020. Following significant debate and opposition to the rule, the EQB voted 13-6 to adopt the proposed regulation. As proposed, the regulation would amend 25 Pa. Code ch. 145 (relating to interstate pollution transport reduction) and add subchapter E (relating to a budget trading program) to establish a program limiting CO2 emissions from a fossil fuel-fired EGU with a nameplate capacity of 25 megawatts or greater that sends more than 10% of its annual gross generation to the electric grid. The rule would officially link Pennsylvania to the RGGI program, in which 10 Northeastern and Mid-Atlantic states already participate. RGGI establishes an emissions cap for each participating state that declines annually to reduce power sector CO2 emissions from the region. The proposed initial emissions cap for Pennsylvania is 78 million tons of CO2 in 2022, which gradually declines to 58 million in 2030. The emissions cap translates into “allowances,” each representing one ton of CO2, which are auctioned quarterly. Facilities subject to the regulation would be required to purchase and submit to the state an allowance for each ton of CO2 they emit. Currently, the proposed rulemaking intends for compliance obligations to begin in 2022.
The proposed rulemaking was published in the Pennsylvania Bulletin on November 7, 2020, initiating a 60-day public comment period during which time PADEP will hold at least five public hearings. See 50 Pa. Bull. 6212 (proposed Nov. 7, 2020). PADEP is expected to continue to meet significant opposition, as it did during the September 15 EQB meeting and numerous advisory committee meetings during the spring and summer.
Pennsylvania’s participation in RGGI has also met legislative opposition. In November 2019, members of the Pennsylvania House and Senate referred bipartisan companion bills, House Bill 2025 (HB 2025) and Senate Bill 950 (SB 950), both known as the Pennsylvania Carbon Dioxide Cap and Trade Authorization Act, to their respective Environmental Resources and Energy (ERE) committees for consideration. See HB 2025, 203d Leg., Reg. Sess. (Pa. 2019); SB 950, 203d Leg., Reg. Sess. (Pa. 2019). The legislation would have prohibited PADEP from adopting any measure to establish a greenhouse gas cap-and-trade program unless the general assembly specifically authorizes it by statute.
The House ERE committee voted on June 9, 2020, to move HB 2025 to the full House for consideration, and the House passed the bill with a vote of 130-71 on July 8, 2020. The Senate approved the bill on September 9, 2020, by a vote of 33-17. Governor Wolf vetoed HB 2025 on September 24, 2020, and released a veto message stating that the legislation is “extremely harmful to public health and welfare as it prevents [PADEP] from taking any measure or action to abate, control or limit [CO2] emissions, a greenhouse gas and major contributor to climate change impacts, without prior approval of the General Assembly.” Governor Wolf’s Veto Message for HB 2025 (Sept. 24, 2020).
GOVERNOR WOLF COMMITS TO ESTABLISH A REGIONAL CO2 TRANSPORT INFRASTRUCTURE PLAN
On October 1, 2020, Governor Tom Wolf announced that he had signed a memorandum of understanding (MOU) along with six other states—Kansas, Louisiana, Maryland, Montana, Oklahoma, and Wyoming—committing to establish and implement a regional carbon dioxide (CO2) transport infrastructure plan. Under the MOU, the signatory states will establish a coordination group, facilitated by the Great Plains Institute and informed by additional and ongoing work by the State Carbon Capture Work Group and the Regional Carbon Capture Deployment Initiative, that will develop an action plan that will include policy recommendation for and barriers to CO2 transport infra-structure deployment. This action plan is set for release in October 2021.
PADEP’S PROPOSED MANGANESE RULEMAKING UNDERGOING CONTENTIOUS PROCEDURAL REVIEW
As reported in Vol. XXXVII, No. 3 (2020) of this Newsletter, on July 25, 2020, the Pennsylvania Department of Environmental Protection’s (PADEP) Environmental Quality Board (EQB) published proposed revisions to the state’s water quality standards for manganese in 25 Pa. Code ch. 93. See 50 Pa. Bull. 3724 (proposed July 25, 2020). The proposed rule would change the numeric water quality criterion for manganese from 1.0 to 0.3 mg/L. The EQB also solicited comments on whether to set the point of compliance for the revised criterion at the point of discharge or the point of surface potable water supply withdrawals.
The 60-day public comment period closed on September 25, 2020. Approximately 950 comments were submitted, which can be viewed on PADEP’s eComment website. The EQB held virtual public meetings on the proposed rulemaking on September 8, 9, and 10, 2020. The state Senate Environmental Resources and Energy (ERE) Committee also held a hearing on the proposed rulemaking on September 9. The hearing included testimony of witnesses from PADEP, operators of surface water treatment systems, and the coal and non-coal mining industries. Testimony reportedly largely focused on the two proposed alternative points of compliance, but witnesses also presented arguments regarding the proposed revision of the numeric criterion from 1.0 to 0.3 mg/L. Expert witnesses testified both in support of and in opposition to the revised numeric criterion. See David E. Hess, “Senate Environmental Committee Hearing Pits Mining Industry Against Water Suppliers on Manganese Standard,” PA Env’t Digest Blog (Sept. 9, 2020). A recording of the hearing is available at https://environmental.pasenategop.com/090920/.
On September 30, 2020, Representative Daryl Metcalfe, Chairman of the House ERE Committee, sent a letter to the Independent Regulatory Review Commission (IRRC) on behalf of Republican members of the Committee expressing disapproval of the proposed rulemaking and asking the IRRC to disapprove the regulation. See Letter from Rep. Daryl Metcalfe, to IRRC (Sept. 30, 2020). On October 15, 2020, Senator Gene Yaw, Chairman of the Senate ERE Committee, sent a letter to the EQB on behalf of the Republican members of the Committee encouraging EQB to withdraw the proposed regulation. Letter from Senator Gene Yaw, to Hon. Patrick McDonnell, Chairman, EQB (Oct. 15, 2020).
The House and Senate letters both argue that the proposed rulemaking is contrary to Act 40 of 2017, which, as discussed in previous updates, directed PADEP to propose regulations setting the point of compliance at the point of surface potable water withdrawals. See Vol. XXXVII, No. 3 (2020); Vol. XXXVII, No. 1 (2020); Vol. XXXVI, No. 3 (2019) of this Newsletter. The letters, therefore, argue that the proposed rulemaking runs afoul of this statutory requirement by merely proposing such point of compliance as one of two potential alternatives for the final rulemaking. In addition, the letters state that proposing two alternatives in a single rulemaking is contrary to the Regulatory Review Act (RRA). The letters also challenge the legal and scientific basis for the proposed lower numeric water quality criterion.
On October 26, 2020, the IRRC issued comments on the proposed rulemaking that raise many of the same concerns identified by the House and Senate ERE committees. See Comments of the IRRC, EQB Regulation #7-553 (IRRC #3260): Water Quality Standard for Manganese and Implementation (Oct. 26, 2020). Regarding the proposed rule’s compliance with Act 40, the IRRC noted that “the mandate of Act 40 is clear and does not provide discretion to the EQB,” and requested that the EQB explain why the proposed rulemaking is consistent with Act 40. Id. at 2. Regarding the EQB’s decision to propose two alternative points of compliance in a single rulemaking, the IRRC asked the EQB to explain why it took this approach and why it is consistent with the RRA. Id. at 3.
The IRRC also requested that the EQB review the data provided by commenters and explain why the proposed lower criterion is necessary and justified, and explain why it is reasonable to regulate manganese at a lower level than other states and in a different manner from the U.S. Environmental Protection Agency. Id. The IRRC also noted that the EQB did not provide information regarding the cost of the proposed rulemaking sufficient to allow the IRRC to determine if the regulation is in the public interest, and directed the EQB to further evaluate the costs associated with the proposed rulemaking. Id. at 4.
The EQB is now required to review and respond to comments received from the IRRC, the ERE committees, and the public before issuing a final-form regulation. 71 Pa. Stat. § 745.5a(a).
PADEP PUBLISHES DRAFT REVISED POLICY ON CIVIL PENALTY ASSESSMENTS FOR COAL MINING OPERATIONS
On October 3, 2020, the Pennsylvania Department of Environmental Protection (PADEP) published a draft revision to Technical Guidance Document (TGD) No. 562-4180-306, titled “Civil Penalty Assessments for Coal Mining Operations.” See 50 Pa. Bull. 5545 (Oct. 3, 2020) (draft TGD). The current version of the TGD was last updated in 2005 (2005 TGD). PADEP first published draft revisions to the TGD on May 4, 2019. See 49 Pa. Bull. 2312 (May 4, 2019). However, PADEP republished an updated draft because substantial changes were made to the 2019 version in response to public comments.
One of the most notable changes in the draft TGD is the addition of new procedures for assessing civil penalties for water quality violations under section 605 of the Clean Streams Law (CSL), 35 Pa. Stat. § 691.605. These procedures would generally follow the 2005 TGD’s existing formula applicable to all violations, which is based on seriousness of the violation, culpability of the operator, costs to the commonwealth, savings to the violator, violation history, and speed of compliance. However, the application of these factors will evaluate components specifically relating to water quality, such as impacts to water resources or degree of exceedance of effluent limitations.
For instance, the “seriousness” component is based on several subcomponents. First, the “magnitude” of the violation will be calculated in one of two ways. If physical evidence is available, such as impacts to fish or invertebrate communities, sediment deposition, impacts to water use, or damage to land or water resources, the magnitude of the violation will be calculated using Method 1. If physical evidence is not available, the magnitude of the violation will be determined using Method 2, which is based on the degree of exceedance of applicable effluent limitations. There are five categories of seriousness under both Method 1 and Method 2: severe, significant, moderate, low, or de minimis.
The second subcomponent of the seriousness component, the “resource” component, evaluates the impact to aquatic life and recreation. In applying this factor PADEP will first examine the use of the impacted waterbody. There are five categories of use under the draft TGD: special protection, high use, moderate use, low use, and all other uses. PADEP will then examine the level of impact on aquatic life, water supply, recreation, and the extent of impacts. The draft TGD includes a matrix that provides a base penalty based on the results of the magnitude and resource components factors. This base penalty amount for the seriousness component may then be further adjusted based on the duration of the violation and the operator’s failure to report the violation.
The “savings to the violator” component may include costs associated with treating water to meet effluent limitations and the cost to construct and maintain treatment systems. The remaining factors (culpability, speed of compliance, costs to the commonwealth, and history of violations), will be calculated using the same procedures in the draft TGD applicable to all violations, as discussed below.
For violations other than those related to water quality, the draft TGD provides guidance to PADEP in assessing civil penalties based on the factors in 25 Pa. Code § 86.194. The draft TGD would make several changes to the application of these factors from the 2005 TGD, the biggest being with respect to assessment of penalties for high seriousness violations under the seriousness component. The draft TGD would instead allow PADEP to assess penalties of up to the statutory maximum for high seriousness violations. In contrast, under the 2005 TGD, penalties for high seriousness violations are to be assessed up to$2,000, and only violations meeting “extraordinary circumstances” criteria warrant a penalty up to the statutory maximum.
The draft TGD breaks the “culpability” component down into willful, reckless, negligent, or no culpability categories. The 2005 TGD only includes negligent and reckless categories. Under the 2005 TGD, penalties for negligent violations could be assessed up to $1,200, and penalties for reckless violations could be assessed up to the statutory maximum. Under the draft TGD, the maximum penalty of $1,200 for negligent violations remains unchanged; however, penalties for reckless violations would only be assessed up to $1,500, rather than the statutory maximum. The criteria for what constitutes a reckless violation would also be revised. For example, violations pertaining to situations previously identified in inspection reports or notices of violations, which are currently considered negligent violations under the 2005 TGD, would become reckless violations under the draft TGD.
Under the new willfulness criteria, a penalty up to the statutory maximum may be assessed if “[t]he operator made a conscious choice to engage in certain conduct with knowledge that a violation will result.” Finally, the draft TGD would create a new no culpability category, which would warrant no penalty assessment under the culpability component where the operator’s conduct was consistent with the standard of conduct to foresee and prevent the violation that a reasonable person would observe under the circumstances.
The other penalty components, speed of compliance, costs to the commonwealth, savings to the violator, and history of violations, remain generally the same as compared to the current 2005 version of the TGD.
The TGD may be further revised in response to public comments. The public comment period closed on November 2, 2020.
THIRD CIRCUIT VACATES EPA APPROVAL OF PENNSYLVANIA SIP PROVISIONS SPECIFIC TO COAL-FIRED EGUS
On August 27, 2020, the U.S. Court of Appeals for the Third Circuit vacated the U.S. Environmental Protection Agency’s (EPA) approval of an addition to Pennsylvania’s state implementation plan (SIP) specific to coal-fired electric generating units (EGUs), holding that EPA’s approval was arbitrary and capricious. Sierra Club v. EPA, 972 F.3d 290 (3d Cir. 2020). In April 2016, Pennsylvania promulgated a reasonably available control technology (RACT) requirement for coal-fired combustion units controlled by selective catalytic reduction (SCR) systems, requiring such units to meet a limit of 0.12 lb nitrogen oxide (NOx) per million Btu (MMBtu) heat input when the SCR inlet temperature is equal to or greater than 600 degrees Fahrenheit. 25 Pa. Code § 129.97(g)(1)(viii). Pursuant to the Clean Air Act, EPA approved the requirement as part of Pennsylvania’s SIP in May 2019. See 84 Fed. Reg. 20,274 (May 9, 2019) (to be codified at 40 C.F.R. pt. 52). On July 8, 2019, the Sierra Club filed a petition for review with the Third Circuit, challenging EPA’s approval of 25 Pa. Code § 129.97(g)(1)(viii) as part of Pennsylvania’s SIP.
The Third Circuit vacated EPA’s approval of 25 Pa. Code § 129.97(g)(1)(viii) as part of Pennsylvania’s SIP, finding EPA’s approval arbitrary and capricious on three grounds. First, the court ruled that there was inadequate justification for the selection of a 0.12 lb NOx/MMBtu pollution limit. Sierra Club, 972 F.3d at 302–03. The court noted that the limit is the “average pollution output of the three plants that are already compliant over the last five years.” Id. at 300. Second, the court ruled that the addition of a 600-degree temperature threshold for SCR was not adequately explained. Id. at 305–06. EPA justified the threshold by arguing that SCR systems become less effective at lower temperatures. Id. at 303. However, the court found that reduced effectiveness did not adequately justify not requiring the use of the control technology at lower temperatures. Id. at 304. Third, the court ruled that the SIP also lacked a reporting requirement on power plant inlet temperatures. Id. at 309. The SIP did not contain specific requirements to report plant inlet temperatures. EPA and the Pennsylvania Department of Environmental Protection (PADEP) relied on existing language that requires plants to keep records that adequately demonstrate compliance and states that such records only have to be available to PADEP, not EPA or the public. Id. at 308–09. The Third Circuit held that this requirement was insufficient to meet the CAA’s requirement that EPA be able to bring an enforcement action. Id. at 307 (citing 42 U.S.C.
- 7502(c)(6)). The court found that, when coupled with the temperature threshold, this lack of reporting requirement creates a loophole that allows EGUs to avoid using an SCR system by claiming to have operated under 600 degrees without requiring data reporting that would verify that operation status. See id. at 306, 308–09.
On remand, EPA must either approve a revised SIP from PADEP within two years or formulate a new federal implementation plan (FIP) under 42 U.S.C § 7410(c)(1) (which provides two years for EPA to promulgate a FIP if a state does not make a sufficient submission or if EPA disapproves of a SIP and the state does not correct the deficiency). Sierra Club, 972 F.3d at 309. Either approach must be technology-forcing, in accordance with the RACT standard, and lack the loophole noted in this decision. Id.
Copyright © 2020, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Smart Business
(by Sue Ostrowski featuring Sara Antol)
Corporate venture capital (CVC) funds are gaining in popularity as established companies seek a competitive advantage in the marketplace.
“More large public and private companies are investing in startups, frequently with an end goal of making an acquisition,” says Sara Antol, a shareholder at Babst Calland PC.
Smart Business spoke with Antol about the rewards — and challenges — of these investments.
What is the difference between a venture capital fund and a CVC fund?
With a venture capital fund, the fund is formed with the sole purpose of investment and is looking for a positive financial return within a relatively short period of time.
With a CVC fund, an operating company puts funding into a startup, generally in its market space or a space the company wants to enter. It still seeks a financial return, but the investment is more likely strategically driven. The end goal is frequently to eventually acquire the startup, but the CVC fund can hedge its bets by first making an investment.
CVC investors want to know the startup’s strategy and be involved, and they may want a bigger voice than a typical venture fund would expect. The CVC fund generally avoids legal control — it wants the ability to make a difference but not to affect the company’s overall growth curve.
Recent reports have shown that CVC funds have accounted for almost 25 percent of all venture investments in 2020. It could be because technology companies have rebounded during the pandemic, giving them more access to capital. It may be that private equity has pulled back, creating more capacity for CVC investment.
Whatever the reason, it’s becoming more common for forward-thinking companies to make these types of investments as part of their strategy.
What are the challenges of this type of investment?
There can be a struggle between operating a larger business and being a startup. The investing companies have to understand how startups operate and the risks that go with that, without the controls in place that a large corporation will have.
Because of that gap, the investing companies should work with seasoned professionals who understand the ecosystem of startup financing, who can help them navigate the playbook of what their equity investment entitles them to. Larger companies tend to be risk-averse, and they have to understand there is a greater risk of losing their investment in this context. The investment must be small enough that it’s not a game-changer and that they are willing to risk losing it.
In addition, larger companies may face strict regulations on the kinds of investments they can make, and there may be issues with board representation. If the investment is large enough that the investor wants a board seat, it runs the risk of learning something that could benefit its business. You need to be aware of your fiduciary responsibility, and it needs to be very clear what information can be used by the investing company, if any.
How important is due diligence?
It is critical. Even with a very small investment, the larger company can face risks that can seem like a minor issue to the startup but that can have big impacts on the overall compliance of the larger company. It is imperative to do adequate due diligence, and an outside professional can help before you move ahead.
What advice would you give to companies considering a CVC fund-type investment?
Really think through working with another company and what it’s going to mean for the longer term. It can get ugly when a startup fails, so understand what that would mean for the investing company.
The key is to get experienced advisers. If you decide to engage in these types of investments — and more companies are doing so as part of their day-to-day strategy — understand the process and consider what issues it could create for the overall business.
For the full article, click here.
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The Legal Intelligencer
(by Ben Clapp)
In September, the Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission (CFTC) issued a significant, yet perhaps under-publicized, report titled “Managing Climate Risk in the U.S. Financial System.” The report identified several key findings, including that: climate change “poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy;” “financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economywide price on carbon is in place at a level that reflects the true social cost of those emissions; and “disclosure of information on material, climate-relevant financial risks … has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators.” CFTC, Managing Climate Risk in the U.S. Financial System at i-iv (Sept. 2020). The report recommends that the U.S. establish a price on carbon that is consistent with the Paris Agreement’s goal of limiting global temperature rise this century to less than two degrees Celsius above pre-industrial levels.
The report is particularly notable for its blunt assessment of the risks posed by climate change to the underpinnings of the U.S. economy, and its conclusion that comprehensive federal climate change legislation is required to mitigate these risks. (For those wondering at the unlikelihood of a report such as this being published by a federal agency in a presidential administration that has demonstrated a marked tendency toward deregulation, the report was not voted on by the commissioners of the CFTC and has been characterized as representing the perspective of private sector committee members.) Other federal agencies have been reluctant to take additional steps to address climate change investment risks. The Securities and Exchange Commission, for example, resisted calls to incorporate prescriptive climate change disclosure requirements when adopting final rules modernizing Regulations S-K, choosing instead to retain the principles-based materiality standard currently governing climate change disclosures. See Commissioner Allison Herren Lee, SEC, Regulation and ESG Disclosures: An Unsustainable Silence (Aug. 26, 2020)
The future of federal climate change regulation in the U.S. remains murky. Obviously, much depends on the results of the upcoming election, but even in the event of a shift in the balance of power to the Democratic party, it may be several years before climate change legislation is enacted, and the scope of such legislation is far from certain. Notably, however, even in the absence of federal action on climate change, private sector initiatives—in particular those of global investment firms, institutional investors, and insurers—to compel greenhouse gas intensive industries to reduce emissions and to disclose the climate change-related impacts of their operations, continue to gather momentum.
In the United States, a watershed moment occurred in January 2020, when BlackRock, Inc., the world’s largest asset manager, announced that it was asking the companies that it invests in to meet certain standards for disclosing the risks posed by climate change. Letter from Larry Fink, chairman and CEO, BlackRock, Inc. to CEOs (Jan. 2020) (BlackRock letter). BlackRock’s goal is “to ensure that companies are effectively managing the risks and opportunities presented by climate change and that their strategies and operations are aligned with the transition to a low-carbon economy—and specifically, the Paris Agreement’s scenario of limiting warming to two degrees Celsius or less.” See BlackRock, Our Approach to Sustainability (July 2020) (Sustainability Report). BlackRock believes that climate change presents a “defining factor in companies’ long-term prospects,” requiring a “fundamental reshaping of finance.” To that end, the asset manager has called for a global price on carbon and requested that the companies it invests in disclose their climate-related risks, including their greenhouse gas emissions and the expected impact of those emissions, the impact of climate change on their own facilities, and the “transition,” or business risk associated with operating under a scenario where the Paris Agreement’s goals are fully realized. The latter requirement is especially challenging for companies with greenhouse gas-intensive operations, as it requires an evaluation of how future operations and financial results will be impacted by legislation designed to fundamentally alter, and even restrain, the industries in which these companies operate. In July, BlackRock announced that it had placed 244 companies on watch and taken “voting action” against 53 companies, including 37 energy companies, for, in BlackRock’s opinion, failing to take sufficient action to incorporate climate risk into their business models or disclosures. Sustainability Report at 11.
BlackRock is not alone in its efforts to leverage its influence in financial markets to combat climate change. Numerous financial institutions, including Goldman Sachs, have echoed BlackRock’s call for a global price on carbon. Investment banks, such as Morgan Stanley, Citigroup, and Bank of America, have committed to publicly disclosing the greenhouse gas emissions from projects and investments that they finance. In early October, JP Morgan Chase announced that it would adopt “a financing commitment that is aligned to the goals of the Paris Agreement,” see press release, “JP Morgan Chase Adopts Paris-Aligned Financing Commitment” (Oct. 6, 2020). In so doing, the investment bank intends to evaluate the carbon intensity of its investments and establish intermediate emission targets for 2030.
The movement extends beyond Wall Street. More than 500 institutional investors, with more than $47 trillion in assets under management, belong to the Climate Action 100+ initiative, which has the goal of ensuring that the world’s largest corporate greenhouse gas emitters take necessary action on climate change. The organization has a focus list of 100-plus companies (oil and gas, mining and minerals, transportation, industrials), that face investor pressure to create long‑term energy transition plans and quantitative targets for reducing emissions. Insurers, recognizing that climate risk equals insurance risk, have taken similar steps. For example, Swiss Re has announced it will stop providing insurance to, and investing in, the top 10% most carbon-intensive oil and gas companies by 2023, see press release, “Swiss Re takes further steps towards net-zero emissions” (Feb. 20, 2020). In addition, some major U.S. insurers, such as The Hartford, Chubb and AXIS Capital, are starting to restrict, or eliminate, insurance coverage for coal and tar sands companies, see Axis Capital, Thermal Coal and Oil Sands Policy (effective Jan. 1, 2020); press release, The Hartford Announces Its Policy on Insuring, Investing in Coal, Tar Sands (Dec. 20, 2019); Chubb, Chubb Coal Policy.
Some of these efforts, BlackRock’s in particular, have been met by a fair degree of cynicism from climate activists. In early October, five Senate democrats sent a letter to BlackRock chairman and CEO Larry Fink, asserting that the asset manager’s proxy voting record was inconsistent with its professed goal of incorporating climate change risk into its investment stewardship, including BlackRock’s failure to vote in favor of initiatives identified as key objectives by Climate Action 100+. The letter requests that BlackRock respond to several pointed questions that appear aimed at forcing BlackRock to provide more transparency on what, precisely, the firm aims to do in support of its climate change strategy.
The impact of these private sector initiatives can only be assessed over time. It is clear, however, that there is a growing certainty in the financial sector that climate change poses a serious risk to the U.S. financial system and the global economy as a whole. The current focus on requiring more robust climate change disclosures reflects investors’ desire to assess such risks sooner rather than later so that they can take appropriate actions. If investment firms, institutional investors, and insurers conclude that limiting global temperature rise to two degrees Celsius above pre-industrial levels will significantly limit their long-term exposure to risk, it is reasonable to conclude that these entities will determine that limiting the flow of capital into carbon-intensive industries, or declining to insure projects occurring within those industries, is the prudent course of action, thereby accelerating a transition to a low-carbon economy.
For the full article, click here.
Reprinted with permission from the October 29, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
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The Legal Intelligencer
(by Molly E. Meacham)
It is a familiar scene to many employers. After searching for the right individual to fill an important position, a promising candidate emerges. The new employee will have top-level access to confidential information and customers, and their offer letter anticipates that the employee will sign restrictive covenants including noncompetition and nonsolicitation agreements as a condition of employment. Current operations are a bit chaotic—including some remote work—so the agreement isn’t provided prior to the first day of employment. The employee knows they will have to sign eventually, but the employer doesn’t press the issue and allows time for the new employee to review the terms. Is this a valid and enforceable restrictive covenant agreement? According to the Pennsylvania Supreme Court’s June 16, decision in Rullex v. Tel-Stream, the answer is no.
A restrictive covenant such as a noncompetition or nonsolicitation agreement is a contract that must be supported by adequate consideration to be enforceable in Pennsylvania. Pennsylvania views starting a new job as sufficient consideration, provided that the agreement is executed at the start of the employment relationship. In Rullex, the subcontractor in question was aware that a non-competition agreement would be required as part of the relationship, in which the subcontractor would be performing cellphone tower work for a telecommunications company. Although the subcontractor was given a copy of the agreement on his first day of work, he was allowed to take time to review it and did not return a signed copy until at least two months later. The subcontractor later performed cellphone tower work for a competitor of the telecommunications company, resulting in a lawsuit seeking to prevent him from working with that competitor or any other competitors of the telecommunications company.
In its decision, the Pennsylvania Supreme Court considered whether these factual circumstances constituted an enforceable non-competition agreement. The court rejected a bright-line approach in favor of examining the timeline and circumstances of the inception of the relationship, finding that the test for whether or not an enforceable agreement has been reached is not whether it is physically signed on the first day. Instead, the facts must show that as part of beginning the employment relationship the parties contemplated and intended that the employee would be bound by the substantive terms. This means that the restrictive covenant agreement is not presented as an afterthought as the employee begins employment. Instead, there must be objective manifestations of consent. For example, under the reasoning in Rullex, a meeting of the minds is likely present if an employee receives the substantive terms of a non-competition or nonsolicitation agreement in advance of their first day and manifests assent by beginning the employment relationship under those known and accepted terms. Then, even if there is a brief delay in obtaining a physical signature, the agreement is still likely enforceable. If there was no meeting of the minds on the essential terms, then a restrictive covenant agreement signed after the first day of employment is not enforceable absent additional consideration.
The day before the Pennsylvania Supreme Court addressed the issue of how the onboarding process impacted the enforceability of a restrictive covenant, a federal court considered how the circumstances surrounding termination of employment can impact enforceability.
On June 16, in Schuylkill Valley Sports v. Corporate Images, the U.S. District Court for the Eastern District of Pennsylvania examined the enforcement of restrictive covenant agreements when the employees in question were let go as part of a COVID-19 temporary business closure.
A sporting goods retailer in the Philadelphia area temporarily closed in March 2020 as it was not considered to be a life-sustaining business. In doing so, it did not guarantee any employee continued employment upon its anticipated reopening. A group of the retailer’s employees therefore joined a screen-printing and embroidery company that competed against the sporting goods store in that it also produced and sold custom athletic apparel. The language in the restrictive covenant agreements at issue contained noncompetition and nonsolicitation clauses that, and by their plain terms, applied only after resignations or terminations for “just cause,” without mention of terminations without cause or layoffs. Under those circumstances the court denied the former employer’s request for a temporary restraining order and preliminary injunction, finding that the sporting goods retailer did not establish that the agreements were enforceable because the employees were laid off without cause.
Although the court’s analysis could have ended at enforceability, it went several steps further in the analysis and considered how the circumstances of the pandemic impacted the request for an injunction. To obtain injunctive relief, the party seeking the injunction must demonstrate that it will experience greater harm if denied an injunction, than will be caused to the other party if an injunction is granted. The court considered the stay-at-home orders issued by the governor of Pennsylvania and the resulting business closures, as well as the 70-year high in the national unemployment rate. The court found that the harm that would result by granting an injunction to prevent the employees from working at their new employer would be great, leaving them without jobs and income. In contrast, the harm to the former employer was much more limited, as it had laid off the employees and it was therefore no longer expecting to profit from their sales efforts. In balancing the equities, the court did not ignore the larger issues caused by the pandemic, but instead was careful to take them into account when examining the facts of the case.
Businesses and individuals alike continue to adapt to the unprecedented challenges and distractions that arise from the COVID-19 pandemic. However, the Rullex and Schuylkill Valley Sports decisions are reminders that, when dealing with restrictive covenant agreements, attention to detail is key to ensuring that the parties have achieved a meeting of the minds no later than the first day of employment when a new job is serving as the agreement’s consideration, and that the specific terms of the agreement are important to later enforceability. If a noncompetition or non-solicitation agreement will be part of the employment relationship, employers should provide a copy well in advance, making sure that a new employee understands that execution of the agreement as written is a condition of starting employment. Employees with questions regarding the terms of a restrictive covenant agreement or a desire to negotiate its terms should handle that circumstance before their first day, to avoid any delay in beginning employment. In the event that a party seeks enforcement of a restrictive covenant agreement and litigation results, all parties are well-served to remember that judges may consider global circumstances—not just those unique to the individual parties involved—when balancing the harms that may result from a requested injunction.
For the full article, click here.
Reprinted with permission from the October 25, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Pipeline Safety Alert
(by Keith Coyle and Varun Shekhar)
On October 14, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) containing potential changes to the federal gas pipeline safety regulations and reporting requirements. Citing PHMSA’s experience administering special permits, as well as the information provided in earlier studies and from various stakeholders, the NPRM proposed to amend the regulations to allow operators to apply integrity management (IM) principles to certain gas transmission line segments that experience class location changes. Comments on the NPRM are due December 14, 2020.
PHMSA relied heavily on the conditions included in class location special permits in developing the proposed rules. The IM alternative would only be available to pipeline segments that experience an increase in population density from a Class 1 location to a Class 3 location, subject to certain eligibility criteria. Operators using the IM alternative would be required to conduct an initial integrity assessment within 24 months of the class location change and apply the IM requirements in 49 C.F.R. Part 192, Subpart O to the affected segment. Operators would also be required to implement additional preventative and mitigative measures for cathodic protection, line markers, depth-of-cover, right-of-way patrolling, leak surveys, and valves.
PHMSA’s decision to propose an IM alternative for managing class location changes is a significant step forward for pipeline safety. The class location regulations are largely based on concepts established decades ago, and the pipeline industry has long advocated for an approach that reflects modern assessment tools and technologies. While the NPRM does not necessarily satisfy all of the industry’s objectives, PHMSA’s proposal sets the stage for the next phase of the rulemaking process and potential development of a final rule.
Background
In July 2018, the Agency published an advance notice of proposed rulemaking (ANPRM) asking for public comment on potential amendments to the class location regulations in 49 C.F.R. Part 192. As PHMSA explained in the ANPRM, Part 192 generally requires operators to respond to class location changes by (1) reducing the maximum allowable operating pressure (MAOP), (2) conducting a new pressure test, or (3) replacing the pipe in the affected segment. The Agency asked whether those requirements should be updated to allow operators to address certain class location changes through the use of IM measures. PHMSA also asked for public comment on several related questions, including whether the availability of the IM alternative should be limited to segments that meet certain eligibility criteria and whether the Agency should incorporate the conditions included in prior class location special permits in the regulations.
What’s in the NPRM?
PHMSA is proposing to establish an IM alternative for pipeline segments that experience a class location change from Class 1 to Class 3. The key features of the proposed IM alternative include:
- Designating the area affected by the class location change as a high consequence area (HCA) and applying the IM program requirements in 49 C.F.R. Part 192, Subpart O to the segment.
- Performing an initial integrity assessment within 24 months of the class location change.
- In performing the initial and subsequent integrity assessments of the affected segment with inline inspection (ILI) tools, inspecting all pipe between the nearest upstream ILI tool launcher and downstream ILI receiver.
- Replacing pipeline segments with discovered cracks exceeding 20% of wall thickness or a predicted failure pressure of less than 100% specified minimum yield strength (SMYS) or less than 1.5 times MAOP.
- Installing remote-control or automatic shutoff valves or upgrading existing mainline block valves downstream and upstream of the affected segment to provide that capability. The valves would need to be able to close within 30 minutes of rupture identification.
- Implementing additional preventive and mitigative measures, including conducting close interval surveys (CIS) every seven years, performing leak surveys on a quarterly basis, conducting monthly right-of-way patrols, and performing cathodic protection test station surveys.
- Complying with more stringent repair criteria, including treating additional anomalies as “immediate” repair conditions and requiring remediation of conditions reaching a 1.39 safety ratio and 40% wall loss (as opposed to a 1.1 safety ratio and 80% wall loss under the current IM regulations).
The Agency is proposing to limit the IM alternative to segments that experience a class location change after the effective date of the final rule, subject to a 60-day notification requirement. PHMSA is also proposing to prohibit the use of the IM alternative for pipeline segments with the following conditions or attributes:
- Bare pipe, wrinkle bends, missing material properties records, certain historically problematic seam types (including DC, LF-ERW, EFW, and lap-welded pipe or pipe with a longitudinal joint factor below 1.0), and body, seam, or girth-weld cracking;
- Pipe with poor external coating, tape wraps, or shrink sleeves;
- Leak or failure history within five miles of the segment;
- Pipe transporting gas that is not of suitable composition and quality for sale to gas distribution customers;
- Pipe operated at MAOP determined under the grandfather clause (49 C.F.R. § 192.619(c)) or under an alternative MAOP (49 C.F.R. § 192.619(d)); and
- Segments that do not have a documented successful eight-hour Subpart J pressure test to at least 1.25 times MAOP.
What’s Not Included in the NPRM?
- The Agency did not propose an IM alternative for Class 2 to Class 4 location changes. PHMSA reasoned that given the high population density associated with Class 4 locations, there would not be adequate, feasible measures that could be used to provide Class 4 locations with an equivalent level of public safety instead of replacing pipe.
- Although raised in industry comments on the ANPRM, PHMSA did not propose any amendments to the so-called “cluster rule”. That rule allows operators to adjust endpoints of a Class 2, 3, or 4 location based on the presence of a “cluster” of buildings intended for human occupancy. Industry commenters had asked the Agency to either clarify or revise the existing clustering methodology. PHMSA declined that request and simply noted that the NPRM contained provisions that would apply to segments covered under the cluster rule.
- PHMSA did not propose to limit the availability of the IM alternative based on pipeline diameter, operating pressure, or potential impact radius (PIR) size. Some of the commenters who responded to the ANPRM asked the Agency to include a more conservative PIR-based limitation, but industry commenters had opposed that provision as unnecessary.
What’s Next?
After the public comment period closes, the Agency will consider the information provided and decide whether to present the NPRM to the Gas Pipeline Advisory Committee (GPAC) for consideration. GPAC is a 15-member federal advisory committee that reviews and provides non-binding recommendations to PHMSA on proposed changes to the gas pipeline safety regulations. Once the GPAC process is complete, the Agency can develop a final rule for consideration by the Office of the Secretary and Office of Management and Budget and eventual publication in the Federal Register. Completion of these steps is not likely to occur until 2021 or later.
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The Legal Intelligencer
(by Anna Z. Skipper and Krista-Ann M. Staley)
In exceptional circumstances, where strict application of the zoning ordinance to a particular parcel would result in an unnecessary hardship, a variance acts as a “relief valve;” it allows a deviation from the strict terms of a zoning ordinance to permit the owner’s reasonable use of the property.
While landowners have a constitutionally protected right to use and enjoy their property as they desire, that right is not without legal, or practical, limits. Many development plans, whether for a large shopping complex or a small garden shed, are thwarted by the limitations of the relevant zoning ordinance, the unique physical characteristics of the property, or both. Most of the time, the landowner must simply revert to a plan that fits within the confines of both law and land. However, in exceptional circumstances, where strict application of the zoning ordinance to a particular parcel would result in an unnecessary hardship, a variance acts as a “relief valve;” it allows a deviation from the strict terms of a zoning ordinance to permit the owner’s reasonable use of the property.
Variance applications fall under the exclusive jurisdiction of the municipality’s zoning hearing board, a quasi-judicial entity appointed by the governing body. A zoning hearing board may grant variances only under exceptional circumstances and an applicant faces a heavy burden of both proof and production. The Municipalities Planning Code (the MPC), 53 P.S. §10910.2(a), which sets forth standards and procedures for zoning in all Pennsylvania municipalities except Pittsburgh and Philadelphia, authorizes a municipality’s zoning hearing board to hear requests for variances based on allegations of unnecessary hardship. A zoning hearing board may grant a variance provided the following findings are made:
- That there are unique physical circumstances or conditions, including irregularity, narrowness, or shallowness of lot size or shape, or exceptional topographical or other physical conditions peculiar to the particular property and that the unnecessary hardship is due to such conditions and not the circumstances or conditions generally created by the provisions of the zoning ordinance in the neighborhood or district in which the property is located.
- That because of such physical circumstances or conditions, there is no possibility that the property can be developed in strict conformity with the provisions of the zoning ordinance and that the authorization of a variance is therefore necessary to enable the reasonable use of the property.
- That such unnecessary hardship has not been created by the appellant.
- That the variance, if authorized, will not alter the essential character of the neighborhood or district in which the property is located, nor substantially or permanently impair the appropriate use or development of adjacent property, nor be detrimental to the public welfare.
- That the variance, if authorized, will represent the minimum variance that will afford relief and will represent the least modification possible of the regulation in issue.
Recently, in In re Appeal of Ridge Park Civic Association, No 420 C.D. 2019, (Sept. 28, 2020), the Pennsylvania Commonwealth Court reviewed a variance decision, focusing on the requirement that a variance be the least modification possible to afford relief. The case involved two adjacent parcels in Philadelphia’s residential single-family attached-2 (RSA-2) Zoning District under the Philadelphia Zoning Code (the Zoning Code). The parcels, elongated lots with narrow frontage, backed onto a commercial lot. The applicants proposed consolidating the two parcels, demolishing the existing single-family dwelling on one lot, and erecting nine single-family townhomes in three sets of three. The city’s Department of Licenses and Inspections refused the application because the Zoning Code permitted no more than one principal structure per lot, and prohibited multi-family uses in the RSA-2 District. In addition, it denied the applicants’ requests for variances from the required front setback and maximum curb cut width.
The applicants appealed to the City Zoning Board of Adjustment (the board), arguing the property’s unique characteristics prohibited strict compliance with the terms of the Zoning Code. Specifically, the applicants requested relief in the form of a use variance and several dimensional variances. A “use” variance authorizes a use of the property otherwise prohibited under the zoning ordinance. In the case at hand, the applicants sought to use property for multi-family development where the Zoning Code only permitted single-family dwellings. A “dimensional” variance, on the other hand, authorizes a property or structure to deviate from the dimensional requirements of the ordinance. Here, the applicants’ requests to decrease the required front-yard setback from 47 to 17 feet and to increase the maximum curb cut width from 12 feet to 16 feet were deviations from the dimensional requirements of the Zoning Code, and thus were requests for dimensional variances.
The applicants presented arguments and evidence to the Board supporting their argument that the strict application of the Zoning Code to the subject property resulted in unnecessary hardship. In particular, the applicants showed the property had severe geotechnical issues that rendered the property challenging for building purposes. The geotechnical characteristics of the site required a pillar-pier foundation system, which would cost around $1.135 million and make single-family development economically unfeasible. The Park Ridge Civic Association (the objectors) opposed the application, arguing the neighborhood consisted of detached single-family homes and the proposed townhome development was “too much density” for the space. The Board unanimously voted to grant the application.
The trial court affirmed upon appeal without taking additional evidence. Critically, the trial court determined the requirement for a variance to be the minimum necessary to afford relief (a requirement of both the MPC and the Zoning Code) only applied to the dimensional variances. The trial court upheld the determination that the dimensional variances satisfied this requirement. It did not determine whether the variance to allow the multi-family development constituted the minimum variance to afford relief. The objectors subsequently appealed to Commonwealth Court.
The objectors argued, and the court agreed, the trial court erred by finding the applicants did not need to establish the use variance constituted the minimum variance to afford relief. Although the MPC does not apply to properties within Philadelphia, the court noted the Zoning Code’s variance criteria “essentially mirror” the requirements in the MPC. It also noted the Zoning Code explicitly required both use and dimensional variances to represent the minimum variance to afford relief.
The court noted it is easier to determine whether a dimensional variance is the minimum necessary to afford relief than it is to determine whether a use variance meets this standard. This is because a dimensional variance relates to quantifiable requirements such as distance or size, while a use variance requires a qualitative analysis that is not quantifiable. However, the assessment is not impossible in the context of a use variance. The court pointed to its prior guidance on the matter. As clarified by the court, once an applicant establishes it is not viable to the use a property in strict conformance with the ordinance, it is possible for the applicant to establish the resulting use variance as the minimum variance to afford relief. For example, the applicant can establish that of all the viable alternatives, the proposed use is the least departure from the terms of the ordinance, or the most similar to the uses in the surrounding neighborhood. In addition, a use variance request may have quantifiable factors. Here, the applicants sought to change the intensity of the permitted residential use of the property, not to change its residential nature. Thus, despite being a request for a use variance, the applicants sought, in part, a quantifiable departure from the ordinance, and the board was required to determine the minimum number of units necessary to afford relief.
While the court agreed that the evidence suggested the property could not be viably developed in accordance with the strict terms of the Zoning Code, it refused to affirm the board’s approval of the multi-family use, as no findings had been made as to exactly how many townhomes would be the minimum number needed to afford relief. Furthermore, while the court found the evidence suggested the applicants’ proposed development would require dimensional variances from the front setback and curb cut width requirements, the applicants had similarly failed to establish the dimensional variances requested were the minimum necessary. Therefore, the Court remanded the case to the trial court to make the appropriate findings as to the minimum variances necessary to make the project viable.
In re Appeal of Park Ridge Civic Association, reinforces the extremely high burden placed upon applicants for all variances; even where an applicant successfully establishes a reasonable use of the property is not possible under the strict terms of the ordinance, and an unnecessary hardship would occur should those terms be enforced, it must still show the specific relief requested to be the minimum required deviation from those terms.
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. Staley focuses her practice on representation of diverse private and public sector clients on land use and other local regulatory matters. Anna Z. Skipper 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 them at kstaley@babstcalland.com and askipper@babstcalland.com.
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Reprinted with permission from the September 17, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
The PIOGA Press
(by Kevin Garber and Jean Mosites)
September saw Pennsylvania take two major steps toward locking the Commonwealth into the Regional Greenhouse Gas Initiative (RGGI). On September 15, the Environmental Quality Board (EQB) voted 13-6 to adopt proposed cap-and-trade regulations to limit carbon dioxide emissions from fossil-fuel-fired electric generating units greater than 25 megawatts capacity. Nine days later on September 24, Governor Wolf vetoed House Bill 2025 that would have prohibited the Department of Environmental Protection from taking any action to control or limit CO2 emissions without General Assembly approval.
Since it seems unlikely at this point that the General Assembly will be able to stop the administration’s effort to adopt RGGI regulations by the end of 2021, the next several months will be critical to comment on, shape or oppose these regulations.
The proposed RGGI regulations
Governor Wolf’s October 3, 2019, Executive Order No. 2019-07 directed DEP to develop a proposed rulemaking to abate, control or limit CO2 emissions from fossil fuel-fired electric power generators (EGU) and present it to the EQB by July 31, 2020. The deadline later was extended to September 15, 2020. As presented to and considered by the EQB on September 15, the proposed RGGI regulations would amend 25 Pa. Code Chapter 145 (relating to interstate pollution transport reduction) and add Subchapter E (relating to a budget trading program) to establish a program to limit the emissions of CO2 from a fossil-fuel-fired EGU with a nameplate capacity of 25 MW or greater that sends more than 10 percent of its annual gross generation to the electric grid. The proposed rulemaking is intended to reduce CO2 emissions as a contributor to adverse climate change and establish a CO2 budget trading program that can link with similar regulations in the 10 Northeast and Mid-Atlantic states that comprise RGGI.
The proposed rule establishes an initial emissions budget of 78M tons of CO2 in 2022 that declines by roughly 3 to 4 percent per year to 58M tons in 2030. DEP anticipates this will reduce CO2 emissions in Pennsylvania by approximately 31 percent compared to 2019, an expected 188M ton reduction overall. The declining annual emissions budget is equivalent to the CO2 allowance budget (i.e., the number of CO2 allowances available each year). The number of available allowances decreases each year along with the emissions budget. One CO2 allowance provides authorization to emit one ton of CO2. EGUs and other sources affected by the rule must submit allowances for every ton of emitted, and may trade CO2 allowances within Pennsylvania or with participating RGGI states to meet the regulatory obligation.
DEP estimated that as of the end of 2019, 57 CO2 budget sources (i.e., facilities with one or more budget units) with 140 CO2 budget units (EGUs) would have a compliance obligation under this proposed rulemaking. Based on announced closures and future firm capacity builds resulting from the dynamic nature of the electricity generation sector, DEP projects that 62 CO2 budget sources with 150 CO2 budget units will have compliance obligations by January 1, 2022, the intended implementation date of a final regulation. DEP also estimates that around 99 percent of Pennsylvania’s power sector CO2 emissions would be covered under this proposed rulemaking.
The EQB September 15 meeting
Before the September 15 EQB meeting, DEP had solicited input from its Air Quality Technical Advisory Committee (AQTAC) on three occasions, at meetings on February 13, April 16 and May 7. AQTAC declined to concur with the proposed regulation, as did DEP’s Citizens Advisory Council. The Senate and House Environmental Resources & Energy (ERE) Committees held information meetings on RGGI and HB 2025 on June 23 and July 21, respectively. Witnesses from the regulated community at these hearings commented that, among other things, the RGGI regulations are unnecessary because Pennsylvania is on pace to reduce CO2 emissions commensurate with policy goals in the absence of RGGI; lack statutory authority and would impermissibly divert auction proceeds outside the Clean Air Fund; will result in the immediate retirement of Pennsylvania coal-fired EGUs, especially those in Indiana County, with employment losses upward of 18,000 jobs; will increase retail electricity prices; do not satisfactorily address the problem of leakage, pushing increased generation and job growth to Ohio and West Virginia; will not result in any measurable reduction of United States or global CO2 emissions; will not spur meaningful growth of renewable energy sources; and are ill-timed in view of economic conditions created by the COVID-19 pandemic.
The September 15 EQB meeting lasted nearly four hours and saw heated debate at times. Many of the comments made during the ERE committee hearings were voiced again at the EQB meeting. In addition, House ERE Chair Metcalfe questioned whether the proposed regulations are an unlawful tax that only the General Assembly may impose. Senate ERE Chair Yaw observed that RGGI is not a good fit for Pennsylvania because, as an energy exporting state, it has very little in common with the RGGI states, each of which is a net energy importer. Nevertheless, EQB voted to adopt the package as a proposed rule with a 60-day public comment period including five virtual public hearings. EQB voted down proposed amendments to lengthen the comment period to 180 or 120 days, to table the matter until the advisory councils concur with the regulations and to hold at least one in-person public hearing in Indiana County.
The 60-day public comment period will begin upon publication of the proposed regulations in the Pennsylvania Bulletin, which could occur in late October or November. Interested parties and the regulated community should begin preparing comments and testimony now to submit during the abbreviated comment period. Before the regulation is finalized, a cost-effectiveness analysis will be required under Pennsylvania’s Regulatory Review Act, Commonwealth Attorneys Act and the Climate Change Act. The Wolf administration intends to have final regulations in effect on or before January 1, 2022.
House Bill 2025
Representative Jim Stuzzi (R-Indiana) and a bipartisan group of House members introduced HB 2025 in November 2019 to require DEP to obtain General Assembly approval of any measure or action to abate, control or limit CO2 emissions, including joining RGGI or establishing a separate greenhouse gas cap-and-trade program. If DEP intended to propose such a measure, HB 2025 would have required the agency to solicit public comment for at least 180 days, hold public hearings in those locations where regulated sources of CO2 emissions would be directly economically affected by the proposal, and carefully analyze the effect of the measure on the cost of electricity at the wholesale, retail and industrial level, cost implications to municipalities and private industry, and prices of goods and services, productivity or competition. Senator Joe Pittman (R-Indiana) introduced an identical bipartisan bill in the Senate at the same time. In essence, these two bills were intended to give Pennsylvanians through their elected officials a voice in whether to regulate CO2 emissions and how to do it.
HB 2025 was reported out of the House ERE Committee on June 9 and passed the full House by a bipartisan vote of 130-71, just a few votes short of a two-thirds majority in favor. The Senate approved it on September 9 by a 33-17 bipartisan vote and sent it to the governor.
Governor Wolf vetoed HB 2025 on September 24. Returning the bill without his approval, the Governor stated that the legislation is “extremely harmful to public health and welfare as it prevents [DEP] from taking any measure or action to abate, control or limit CO2 emissions, a greenhouse gas and major contributor to climate change impacts, without prior approval of the General Assembly.”
The governor remarked that the Regulatory Review Act and the Air Pollution Control Act “afford the opportunity for extensive public participation, including public comment and public hearings, in the rulemaking process.” Given that the administration is determined to have final RGGI regulations promulgated by the end of next year, as evidenced by the governor’s veto of HB 2025 and the fact that all 11 of the EQB members who are secretaries or executive directors of state agencies or commissions voted in favor of the proposed rulemaking and against a longer public comment period, it remains to be seen whether public comment can or will change the trajectory of the RGGI regulations.
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The Legal Intelligencer
(by Gary Steinbauer)
Lawsuits pending before the U.S. Court of Appeals for the D.C. Circuit are likely to shape the U.S. Environmental Protection Agency’s (EPA’s) authority to regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act (CAA). These legal challenges involve two high-profile CAA deregulatory actions: The EPA’s Affordable Clean Energy rule (“Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations,” 84 Fed. Reg. 32520 (July 8, 2019)) (ACE Rule) and the EPA’s rule eliminating the transportation and storage segments from and rescinding methane requirements in the new source performance standards for the oil and gas industry (“Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review Rule,” 85 Fed. Reg. 57,018 (Sept. 14, 2020)) (policy Amendments rule) (collectively referred to as the rules). The rules repeal and replace Obama-era GHG emission regulations promulgated pursuant to Section 111 of the CAA, 42 U.S.C. Section 7411.
Section 111 of the CAA grants the EPA authority to establish national performance standards for categories of sources that cause or significantly contribute to “air pollution which may reasonably be anticipated to endanger public health or welfare.” Section 111 of the CAA establishes separate regulatory tracks for new, reconstructed and modified sources and existing sources that would otherwise qualify as regulated new sources. For new, reconstructed, or modified sources, the CAA requires the EPA to establish new source performance standards (NSPS), representing the “best system of emission reduction” (BSER), that apply directly to the particular source category. See 42 U.S.C. Section 7411(b). For existing sources, the EPA is to establish BSER-based emission guidelines that are to be applied through state-issued performance standards. See 42 U.S.C. Section 7411(d).
- The Policy Amendments Rule—Regulating GHG Emissions From New Sources Under Section 111(b) of the CAA Background
The Policy Amendments Rule revised an Obama-era NSPS for the oil and gas industry located at 40 C.F.R. Part 60, Subparts OOOO and OOOOa. There are three inter-related components of the policy amendments rule: the removal of the transmission and storage segments of the oil and natural gas sector from the category of sources regulated in NSPS OOOO and OOOOa; the rescission of NSPS OOOOa’s methane requirements for the production and processing segments of the oil and natural gas sector (i.e., the sources remaining within the category after removing the transmission and storage segments); and a legal determination that Section 111 of the CAA must or should be interpreted to require a finding that a pollutant causes or significantly contributes to dangerous air pollution before it can be added to an existing NSPS.
The EPA’s rationale for rescinding the NSPS OOOOa methane requirements is that methane-specific controls are redundant. Notably, methane emission controls from the production and processing segments are no different than the VOC-specific controls, and the same was true for the VOC and methane emission controls that previously applied to the transmission and storage segment. The consequence of this determination is that the EPA will no longer be required to regulate methane emissions from existing sources in the industry’s production and processing segment. The EPA also justifies the rescission of methane requirements by finding that, contrary to Section 111 of the CAA, the Obama administration failed to find that methane contributes significantly to dangerous air pollution when it added the methane requirements to NSPS OOOOa in 2016.
What’s at Stake?
Opponents wasted no time filing lawsuits challenging the policy amendments rule. Environmental groups, 20 democratic states attorney general (including Pennsylvania), the District of Columbia, and two municipalities have challenged the policy amendments rule. These consolidated actions are moving forward on an expedited schedule. The D.C. Circuit has issued an order temporarily staying the policy amendments rule, while the court considers the merits of the challenges. The court was careful to note that its temporary stay order “should not be construed in any way as ruling on the merits.” The court has issued an expedited schedule for briefing on the challengers’ motions to stay and summarily vacate the Policy Amendments Rule, with final briefs due Oct. 5.
At issue in the policy amendments rule litigation is what the EPA must do to expand an NSPS source category to include sectors beyond those included in the original category of sources. In addition, the D.C. Circuit will be deciding what the EPA must do to add pollutants to those already regulated in its approximately 90 existing NSPSs. More specifically, the D.C. Circuit must determine whether Section 111 of the CAA requires the EPA to find that a proposed new pollutant, such as a GHG, significantly contributed to dangerous air pollution or merely that there is a rational basis for regulating such a pollutant. If the D.C. Circuit adopts the interpretation of Section 111 advanced by the EPA by in the policy amendments rule, it decreases the likelihood that both new and existing sources within the oil and natural gas industry sector and many other industry sectors will be subject to GHG emission standards under an NSPS.
- The ACE Rule—Regulating GHG Emissions From Existing Sources Under 111(d) of the CAA
Background
The ACE rule is comprised of three separate regulatory actions: the repeal of the Obama-era Clean Power Plan; the replacement of the CPP with the new ACE rule emission guidelines; and a set of revisions to the rules implementing Section 111(d) of the CAA. As compared to the Obama-era CPP, the ACE Rule’s definition of BSER from existing coal-fired power plants or electricity generating units (EGUs) is far more limited. The ACE rule adopts a carbon dioxide (CO2) emission rate comprised of heat rate improvement measures for existing coal-fired EGUs. States are responsible for adopting plans to establishing performance standards on a unit-by-unit basis, based on candidate technologies identified by the EPA, source-specific factors, and the remaining useful life of the source. States will have three years, or until 2022, to submit these plans to the EPA.
The BSER in the ACE rule is the product of the Trump administration’s more limited view of Section 111(d) of the CAA. More specifically, the CO2 emission rates adopted in the ACE rule apply solely within the plant sites at issue. In sharp contrast, the Obama administration interpreted its Section 111(d) more broadly, establishing emissions guidelines that would have required states to direct coal-fired EGUs offset their CO2 emissions by obtaining credits from lower-or zero-emitting power generation sources.
What’s at Stake?
Public health groups challenged the ACE rule the same day it was finalized. In addition, 22 states (including Pennsylvania), the District of Columbia, and six municipalities filed a separate challenge, and environmental groups have also joined the fray with a third challenge. These now-consolidated lawsuits are pending in the D.C. Circuit, with numerous industry groups, power companies and others intervening to support and oppose the ACE rule. Oral argument on the ACE rule challenges is scheduled for Oct. 8.
The D.C. Circuit will be tasked with interpreting the scope of the EPA’s authority to regulate GHG emissions from existing sources under 111(d). Because the U.S. Supreme Court stayed the CPP before it became effective and the lawsuits challenging the CPP were subsequently dismissed as moot after the ACE rule was promulgated, the ACE rule lawsuits will be the first time a court has ruled on the merits of the Trump and Obama administration’s competing views of the scope of Section 111(d).
Conclusion
Based on the current litigation schedules, it is expected that the D.C. Circuit will decide the fate of the rules through the lens of the Trump administration’s narrower interpretation of Section 111 of the CAA. It remains to be seen whether the ACE rule and policy amendments rule survive the D.C. Circuit Court challenges and whether the challenges will ultimately reach the Supreme Court. In the meantime, the EPA’s authority to regulate GHG emissions from stationary sources under the CAA hangs in the balance.
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Reprinted with permission from the October 6, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Smart Business
(by Sue Ostrowski featuring Carl Ronald)
When the economy started shutting down in March as a result of COVID-19 and employees began working remotely, keeping intellectual property and proprietary information safe didn’t top the list of companies’ concerns.
“Some businesses didn’t put procedures in place or have appropriate training classes because no one really thought the pandemic would extend as long as it has,” says Carl Ronald, shareholder at Babst Calland. “They didn’t instruct employees on how to identify important confidential information or safeguard certain proprietary documents when working from home.”
Smart Business spoke with Ronald about how to keep your company’s proprietary information safe when employees are working outside the office.
What approach should employers take to protect proprietary information?
There are different levels of confidentiality with different information, so I like to begin by identifying the information you have and classifying it accordingly. Some things are sensitive and you’d prefer them not to be disclosed, such as manufacturing schedules, production forecasts, or discounts for specific customers. But while those are things you don’t want your competitors to know, it isn’t going to be disastrous to the company if they are inadvertently disclosed.
Other information, such as a trade secret or the development of a new process that gives you a competitive advantage can devastate your business if it gets out. So, the first step is to identify the information you have and label it appropriately.
Second, businesses should train employees on the different categories of information and make sure they are treating each properly. Make sure everyone understands the importance of keeping information safe and reiterate basic steps to create barriers to access, such as not sharing passwords and using privacy screens when laptops are used in public.Third, identify employees who have access to confidential information and make sure they are bound by confidentiality agreements. While those may not ultimately prevent someone from disclosing, it makes it easier to claw back information that was improperly disclosed and it does strengthen your defense to allegations that you didn’t properly safeguard your trade secrets.
How does having employees working remotely change the equation?
Leadership should consider where employees are working and who may have access to proprietary information of the company. If an employee shares a computer at home with a child — whether a work-issued device or an employee-owned device — it is possible the child could accidentally install a key logger or some other malware that could compromise the security of the company’s infrastructure and information. Employees should use a dedicated work computer and family members should not use it without adequate safeguards.
For example, if an engineer is working from home and developing new technology on behalf of the company, who has access to that workspace? If the product may be patentable, it’s vital to keep that work from being disclosed, because disclosure could jeopardize a potential patent. It’s harder when employees are working remotely to monitor them, and you need to ensure information is treated appropriately.
It’s important to consistently remind employees to protect information and reinforce basics such as being cautious about printing documents, not leaving screens open and ensuring sensitive information isn’t shared on unsecured networks.
What other steps can companies take to protect IP?
Have a VPN connection to a secure server maintained by the company. If employees are working in a public place, have them use their phones to create hotspots that no one else can access. Involve your IT staff in talking about device use. And designate a point person for employees if they have questions about how a document should be treated.
Good information hygiene requires diligence on the part of both management and employees. It’s really important to consistently identify information you want to protect, determine how it should be protected and communicate that to employees, both through written guidance and virtual training.
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