Articles, Alerts & Perspectives

Pennsylvania Supreme Court Preserves Rule of Capture

RMMLF Mineral Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern and Casey Snyder)

On January 22, 2020, the Pennsylvania Supreme Court affirmed that the rule of capture, a 150-year-old legal doctrine that applies when a well drains oil and gas from a reservoir that crosses multiple properties, can be applied to hydraulic fracturing of unconventional wells. See Briggs v. Sw. Energy Prod. Co., 224 A.3d 334 (Pa. 2020). The decision reverses the April 2, 2018, ruling by the Pennsylvania Superior Court that the rule of capture did not apply to hydraulic fracturing. Briggs v. Sw. Energy Prod. Co., 184 A.3d 153 (Pa. Super. 2018); see Vol. XXXV, No. 2 (2018) of this Newsletter.

In Briggs, the plaintiffs owned property adjacent to land owned by Southwestern Energy Production Co. (Southwestern). Southwestern used hydraulic fracturing for natural gas extraction from the Marcellus Shale formation, and wells were drilled on and fluids injected only beneath its land. Briggs, 224 A.3d at 339, 343.

The court ruled that the rule of capture was applicable to hydraulic fracturing as it is to any other means of artificially stimulating the flow of oil and gas. Id. at 352. It emphasized that the application of the rule of capture did not rest on the distinction between using natural flow and hydraulic fracturing. However, the court did not answer the question of whether horizontal hydraulic fracturing could constitute a trespass by physical intrusion of properties adjacent to a well site. Id. at 350–51. The court remanded the case to the superior court to determine whether or not the plaintiffs’ claims could move forward in light of what it said were pleading deficiencies in the complaint for failing to allege a physical intrusion. Id. at 351–52.

After remand, Southwestern was granted leave in April 2020 to file a supplemental brief. See Supplemental Brief of Appellee, Briggs v. Sw. Energy Prod. Co., No. 1351 MDA 2017 (Pa. Super. Ct. filed Apr. 23, 2020). The superior court denied Southwestern’s request for oral argument and en banc review. See Order Denying Request for Oral Argument and En Banc Review Comment, Briggs, No. 1351 MDA 2017 (Pa. Super. Ct. Apr. 16, 2020).

PENNSYLVANIA MOVES FORWARD WITH RULE INCREASING UNCONVENTIONAL WELL APPLICATION FEE

On February 14, 2020, the Independent Regulatory Review Commission (IRRC), a state agency responsible for reviewing proposed regulations from most state agencies, received the Pennsylvania Department of Environmental Protection’s (PADEP) final regulation increasing the well application fee for vertical and non-vertical unconventional wells. Previously, the Pennsylvania Environmental Quality Board (EQB) voted to adopt the draft regulations as final on January 21, 2020. The final-form regulation can be viewed on the IRRC’s website at http://www.irrc.state. pa.us/regulations/RegSrchRslts.cfm?ID=3217. The IRRC was scheduled to hold a public meeting on the draft regulation on May 21, 2020, in Harrisburg, Pennsylvania. That meeting was subsequently canceled due to the ongoing COVID-19 pandemic and the May 21 agenda items have been tentatively set for the next public meeting on June 3, 2020. A copy of the May 21 agenda is available at http://www.irrc.state.pa.us/documents/uploads/meetings/05-21-2020_Agenda.pdf.

Every three years, PADEP is required to evaluate the unconventional well permit application fees and recommend regulatory amendments to the EQB to address any disparity between the cost of funding PADEP’s oil and gas program and income from the well permit application fees. See 25 Pa. Code § 78a.19(b). The fees were last amended in 2014. See Oil and Gas Well Fee Amendments, 44 Pa. Bull. 3517 (June 14, 2014). The final regulation increases well permit application fees from $5,000 for nonvertical unconventional wells and $4,200 for vertical unconventional wells to $12,500 for all unconventional well permit applications. See 25 Pa. Code § 78a.19(a) (current unconventional well permit application fees). It also removes definitions for “nonvertical unconventional well” and “vertical unconventional well” related to well permit applications, as well permit application fees will now be the same for all unconventional well permit applications. According to the preamble of the rule, PADEP determined the fee increase is necessary to maintain the administration of its Office of Oil and Gas Management by sustaining current staff level and operating costs despite recent staff reductions and the implementation of cost-saving measures. PADEP found that at the current well permit application fees, it would need to receive 5,000 nonvertical unconventional well permit applications a year to sustain the program. However, it anticipated only receiving approximately 2,000 based on recent annual totals, causing it to recommend raising the fees to $12,500.

The rulemaking must still be approved by the House and Senate environmental committees and the IRRC prior to publication. The final rulemaking will be effective upon publication in the Pennsylvania Bulletin.

PENNSYLVANIA HOUSE CONSIDERING PROPOSED CONVENTIONAL OIL AND GAS WELLS ACT

The Pennsylvania House of Representatives continues to deliberate legislation that would largely remove Pennsylvania conventional oil and gas operations from the requirements of the state’s current oil and gas law, Act 13 of 2012 (Act 13), 58 Pa. Cons. Stat. §§ 2301–3504.

On April 20, 2020, the House laid Senate Bill 790 (SB 790), titled “Conventional Oil and Gas Wells Act,” on the table for consideration but removed it the same day. Previously, in January 2020, the Pennsylvania House Environmental Resources and Energy Committee voted to report SB 790 to the House for a final vote. The Pennsylvania Senate passed SB 790 in October 2019.

Due to the differences in conventional and unconventional operations, there have been legislative efforts since Act 13’s replacement of the 1984 Oil and Gas Act (Act 223) to remove conventional operations from Act 13 jurisdiction and revert to the standards under Act 223. SB 790 would accomplish this by repealing all provisions of Act 13 as they relate to conventional wells, except the underground gas storage provisions of subchapter C. SB 709 would change several aspects of the Act 13 standards for conventional operators, including:

• the water supply replacement standard;
• the definition of public resources;
• inactive status;
• bonding requirements;
• voluntary plugging incentives;
• area of review; and
• restoration obligations.

A provision that would have permitted the use of produced water to treat roads as a dust suppressant was removed from the SB 790 version reported to and under consideration by the House.

It is unclear whether the bill will pass the House, but Governor Tom Wolf’s office has indicated that the Governor intends to veto the current version of the bill if it does pass in the state legislature.

PENNSYLVANIA SUPREME COURT ACCEPTS APPEAL OF RULING ON OIL AND GAS REVENUE TRANSFERS

Briefing continues on an Environmental Rights Amendment (ERA), Pa. Const. art. I, § 27, challenge to management of income generated from oil and gas leases on public land at the state supreme court level. The litigation stems from a 2017 opinion of the Pennsylvania Supreme Court that enumerated a new standard to determine violations of the ERA based on the text of article I, section 27 of the Pennsylvania Constitution and principles of Pennsylvania trust law. See PEDF v. Commonwealth, 161 A.3d 911 (Pa. 2017); see also Vol. XXXIV, No. 3 (2017) of this Newsletter. Using this standard, the court held that proceeds from the sale of oil and gas from the public trust remain in the trust under the ERA and may only be used to conserve and maintain public natural resources. 161 A.3d at 939.

The Pennsylvania Supreme Court agreed to review a July 29, 2019, commonwealth court ruling that rents and bonuses paid out under leases between the state and natural gas operators were not assets of the public trust established under the ERA because they were not intended as compensation for gas extracted from the ground. See PEDF v. Commonwealth, 214 A.3d 748, 773–74 (Pa. Commw. Ct. 2019). Instead, the rents and bonuses were consideration for the exploration of oil and gas on public land. Id. at 773. The court ruled that because the money did not have to be set aside exclusively for conservation and maintenance of public natural resources under the Pennsylvania Constitution, under statutory language in effect at the time the ERA was adopted one-third of the income from the rents and bonuses could be used for General Fund purposes of the commonwealth. Id. at 774.

The Pennsylvania Environmental Defense Foundation (PEDF) appealed the holding in August 2019. See Notice of Appeal, PEDF v. Commonwealth, No. 64 MAP 2019 (Pa. Aug. 12, 2019). The Pennsylvania Supreme Court agreed to review the case in December 2019, and the respective parties submitted briefs through March 2020. PEDF alleges the commonwealth court opinion ignores the 2017 opinion of the supreme court holding that revenue from oil and gas drilling on state forest land must be held in trust under the ERA and be used for conservation purposes only. See Appellant’s Brief at 43, PEDF v. Commonwealth, No. 64 MAP 2019 (Pa. Jan. 28, 2020). It argues that the bonus and rental payments are solely to find, extract, and transport the natural gas for sale, and, therefore, the payments are solely in exchange for the severance of resources from public land. Id. at 19. To date, oral argument has not been scheduled.

Updates on Changes to Coal Refuse Disposal Temporary Cessation Provisions

RMMLF Mineral Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern, Daniel P. Hido and Gina N. Falaschi)

In recent months there have been several notable updates regarding Pennsylvania’s statutory and regulatory provisions on temporary cessation of coal refuse disposal operations.

OSMRE Publishes Proposed Rule Regarding Pennsylvania Regulatory Program

As reported in Vol. XXXVI, No. 4 (2019) of this Newsletter, Act 74, P.L. 452 (2019), amending the 1968 Coal Refuse Disposal Control Act (CRDCA), 52 Pa. Stat. §§ 30.51–.66, went into effect on December 3, 2019. Act 74 amended section 6.1(i) of the CRDCA, 52 Pa. Stat. § 30.56a(i), regarding temporary cessation of operations. Prior to Act 74, section 6.1(i) required operators to install a system for preventing precipitation from contacting coal refuse disposal areas that have reached capacity, permanently ceased operation, or temporarily ceased operation for more than 90 days, but allowed the Pennsylvania Department of Environmental Protection (PADEP) to approve an extension of up to one year for reasons of labor strike or business necessity. Act 74 removed the one-year time limit on temporary cessation and the restriction that an extension beyond 90 days could only be granted for reasons of labor strike or business necessity.

On October 16, 2019, Pennsylvania submitted an amendment to its regulatory program under the Surface Mining Control and Reclamation Act to the Office of Surface Mining Reclamation and Enforcement (OSMRE) for approval. OSMRE published notice of the proposed program amendment in the Federal Register on February 14, 2020. See 85 Fed. Reg. 8494 (proposed Feb. 14, 2020) (to be codified at 30 C.F.R. pt. 938).

The public comment period on the proposed rule closed on March 16, 2020. Only two comments were submitted. OSMRE will now determine whether the proposed amendment should be approved. If OSMRE approves the amendment it will become part of Pennsylvania’s approved regulatory program upon publication of the final rule in the Federal Register.

PADEP Unveils Proposed Changes to Coal Refuse Disposal Regulations

The requirements of section 6.1(i) of the CRDCA are further reflected in PADEP’s coal refuse disposal regulations at 25 Pa. Code § 90.167(d), which will therefore require amendment to conform to the new section 6.1(i). PADEP unveiled an initial draft of proposed amendments to the chapter 90 regulations in advance of the March 16, 2020, meeting of the Mining and Reclamation Advisory Board (MRAB) that would revise section 90.167, in addition to other provisions of chapter 90. The proposed amendments may change based on feedback from MRAB at future meetings.

PADEP has not announced its expected time frame for publishing the proposed rule in the Pennsylvania Bulletin, at which point there will be a public comment period prior to publication of the final rule. The current draft of the proposed rule is available at https://www.dep.pa.gov/PublicParticipation/AdvisoryCommittees/Mining/MiningReclamation/Pages/ 2020.aspx.

EQB FINALIZES FEDERAL CONSISTENCY RULEMAKING

On March 14, 2020, the Pennsylvania Environmental Quality Board (EQB) published a final rule titled “Federal Office of Surface Mining Reclamation and Enforcement Program Consistency” in the Pennsylvania Bulletin. See 50 Pa. Bull. 1508 (Mar. 14, 2020). The rule, which was first proposed on October 27, 2018, amends Pennsylvania’s coal mining regulations at 25 Pa. Code chs. 86–90 to address inconsistencies with federal requirements. See Vol. XXXV, No. 4 (2018) of this Newsletter.

The Pennsylvania Department of Environmental Protection (PADEP) initiated these revisions in response to the Office of Surface Mining Reclamation and Enforcement’s (OSMRE) identification of several state regulations that required revision because they were not as effective as federal requirements. These amendments include:

• The word “augmented,” referring to “augmented seeding,” was removed from the state bonding requirements regulations at 25 Pa. Code § 86.151(d) to clarify that seeding does not restart the period of bond liability.
• Bonding requirements at 25 Pa. Code § 86.158(b) were revised to clarify that PADEP will determine the value of collateral bonds at market value, less any legal and liquidation costs, and will require additional bond if necessary with each permit renewal.
• The definition of “haul road” under the anthracite coal mining regulations at 25 Pa. Code § 88.1 was revised to clarify that the term includes public roads used as an integral part of the mining operation.

While PADEP noted that the following changes were not required by OSMRE, the final rule also revises the following provisions to make them consistent with federal requirements:

Alternative effluent limitations for underground mine passive treatment systems were removed from 25 Pa. Code § 89.52(f).

• The one-year time limit on temporary cessation of surface mining operations was removed from 25 Pa. Code § 87.157. Section 87.157 was further revised to include new provisions regarding information required to be submitted by the operator in connection with temporary cessation and the circumstances under which temporary cessation status would terminate.
• The definition of “surface mining activities” in 25 Pa. Code §§ 86.1 and 87.1 was revised to incorporate by reference the federal definition at 30 C.F.R. § 701.5. Pennsylvania’s regulations previously had a separate definition of surface mining activities that closely followed the federal definition.
• 25 Pa. Code § 86.193, relating to assessment of civil penalties, previously required PADEP to issue a penalty if the calculated penalty amount was $1,100 or more. This provision was revised to instead incorporate the federal system of requiring assessment of a penalty based on a points system, where points then correspond to a dollar amount.

Finally, the final rule also includes the following changes unrelated to federal consistency:

• Tables in 25 Pa. Code chs. 87, 88, and 89 used for calculating the amount of precipitation for a 24-hour storm event were removed and replaced with a reference to data available from the National Oceanic and Atmospheric Administration to reflect updated information. According to the final rule, this change will generally result in calculations of amounts of precipitation lower than what was previously listed in the tables.
• 25 Pa. Code § 86.281, relating to remining financial guarantees, was revised to clarify how PADEP calculates and maintains the amount of the financial guarantee. Section 86.282 was revised to state that an operator is not eligible to participate in the remining financial incentives program if it received a notice of violation related to maintaining bonds within the last three years.
• The definition of a “preferred site” for a coal refuse disposal facility in 25 Pa. Code § 90.201 was revised to include “an area adjacent to or an expansion of an existing coal refuse disposal site,” consistent with a 2010 amendment to the CRDCA.

The Pennsylvania Bulletin notice states that the final rule is effective immediately, although the official version of the regulations has not yet been updated to reflect the changes.

PADEP PRESENTS DRAFT CARBON TRADING REGULATIONS FOLLOWING RGGI MODEL

As previously reported, the Pennsylvania Department of Environmental Protection (PADEP) continues to work toward developing a rule to limit carbon dioxide (CO₂) emissions from fossil fuel-fired electric power generators consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule and Governor Tom Wolf’s October 2019 Executive Order No. 2019-07, 49 Pa. Bull. 6376 (Oct. 26, 2019). See Vol. XXXVII, No. 1 (2020); Vol. XXXVI, No. 4 (2019) of this Newsletter.

On February 13, 2020, PADEP presented its preliminary draft proposed rulemaking to establish a CO2 budget trading program to the Air Quality Technical Advisory Committee (AQTAC). See Presentation by PADEP to the AQTAC, “Pennsylvania’s Proposed CO₂ Budget Trading Program” (Feb. 13, 2020). The draft proposed rule parallels the RGGI Model Rule with a few notable differences, including: (1) the draft proposed rule states that it is designed to reduce CO₂ emissions “in a manner that is protective of public health, welfare and the environment and is economically efficient,” while the RGGI Model Rule only mentions economic efficiency in its statement of purpose; and (2) the draft proposed rule does not require the establishment of multi-state allowance auctions, as performed within RGGI, but gives PADEP discretion to hold Pennsylvania-only auctions if it determines, among other things, that its participation in a multi-state auction process would not provide more benefits than costs to Pennsylvania versus a statewide auction. The draft proposed rule is available at https://www.dep.pa.gov/Business/Air/BAQ/AdvisoryGroups/Air-Quality-Technical-Advisory-Commit-tee/Pages/default.aspx.

In response to requests for further opportunities to learn about the program, PADEP held a virtual special joint informational meeting with the AQTAC and the Citizens Advisory Council (CAC) on April 23, 2020. See Presentation by PADEP to the AQTAC, “IPM Modeling Results Discussion Reference Case and RGGI Policy Scenario” (Apr. 23, 2020). At this meeting PADEP presented the modeling results from consulting firm ICF International, Inc. associated with Pennsylvania’s participation in a CO₂ budget trading program. PADEP proposes an initial CO₂ baseline budget allowance of 78 million short tons of CO₂, which would decrease by approximately 2.5 tons annually from 2022 to 2030. The budget of 58 million tons in 2030 would be a 25% decrease from 2020 emission levels.

PADEP asserted during the presentation that joining RGGI is critical to meet greenhouse gas reduction goals for Pennsylvania, and that Pennsylvania would realize “significant CO₂ reductions” beginning in 2022 while remaining a leading electricity exporter at roughly historical generation levels for the commonwealth. PADEP also stated that wholesale energy prices would increase only slightly, and that Pennsylvania’s generation mix over the next decade would favor gas over coal. PADEP offered relatively little data in its presentation that would support these assertions.

Further information regarding the CO₂ budget trading program regulation was presented at the May 7, 2020, AQTAC meeting, where the AQTAC members voted on the CO₂ budget trading program and heard public comment on the proposal. The draft proposed rule was also discussed at the May 19 CAC meeting.

Despite the COVID-19 pandemic, PADEP has stated it still anticipates that the proposed rule will be presented to the EQB on July 21, 2020, and that it will open a public comment period in fall 2020. PADEP then anticipates presenting the final rule to the agency’s advisory committees in spring 2021 and to the EQB in summer 2021, with an anticipated effective date in fall 2021. We will continue to monitor this process and provide updates accordingly.

EPA ROLLS BACK OBAMA-ERA MERCURY RULE FOR COAL REFUSE-FIRED POWER PLANTS

On April 15, 2020, the U.S. Environmental Protection Agency (EPA) released a final rule that creates a new subcategory in the Mercury and Air Toxics Standards (MATS) for certain existing electric utility steam generating units (EGUs) firing eastern bituminous coal refuse (EBCR) and is only for emissions of acid gas hazardous air pollutants (HAPs). See National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired EGUs—Subcategory of Certain Existing EGUs Firing EBCR for Emissions of Acid Gas HAPs, 85 Fed. Reg. 20,838 (Apr. 15, 2020) (to be codified at 40 C.F.R. pt. 63). (EPA released a pre-publication version of another MATS rule entitled “National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units—Reconsideration of Supplemental Finding and Residual Risk and Technology Review” on April 16, 2020. We do not address that rule here.) The new subcategory and emission standards will affect six existing EGUs (all small units operating in Pennsylvania or West Virginia) that fire EBCR. Id. at 20,847. These EBCR-fired EGUs achieved the new emission standards without the need for downstream acid gas controls. Id. at 20,846. The new emission standards will allow higher acid gas HAP emissions from these facilities compared to the emission standards in the 2012 MATS. Id. at 20,847.

In the original 2012 MATS, EPA determined that there was no basis for this subcategory and finalized hydrochloric acid and sulfur dioxide standards that apply to all coal-fired EGUs. See 77 Fed. Reg. 9304 (Feb. 16, 2012) (to be codified at 40 C.F.R. pts. 60, 63). That rule was challenged and EPA received a petition for reconsideration of the rule, which was also the subject of a legal challenge. See White Stallion Energy Ctr., LLC v. EPA, 748 F.3d 1222 (D.C. Cir. 2014), rev’d sub nom. Michigan v. EPA, 135 S. Ct. 2699 (2015).

In a February 2019 proposed rule, EPA, based on reevaluation of data available when the 2012 MATS was established and new information, determined that there were differences in the HAP emissions of EGUs firing EBCR and those firing other types of coal (including those firing other types of coal refuse, such as anthracite coal refuse) and solicited comment on establishing a subcategory of certain existing EGUs firing EBCR for emissions of acid gas HAPs. See National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired EGUs—Reconsideration of Supplemental Finding and Residual Risk and Technology Review, 84 Fed. Reg. 2670 (proposed Feb. 7, 2019) (to be codified at 40 C.F.R. pt. 63). The April 15, 2020, final rule is the result of EPA’s determination, after reviewing public comments and other information submitted in response to the February 2019 proposal, that such a subcategory is warranted.

Copyright © 2020, The Foundation for Natural Resources and Energy Law, Westminster, Colorado

PADEP Proposes Significant Changes to Permitting Process for Stream and Wetland Impacts

RMMLF Water Law Newsletter

(by Lisa Bruderly and Dan Hido)

The Pennsylvania Department of Environmental Protection (PADEP) is proposing comprehensive changes to its regulations and guidance regarding the permitting of obstructions and encroachments of waters of the commonwealth. See 25 Pa. Code ch. 105. The regulatory revisions, if promulgated, are expected to significantly change the chapter 105 permitting process by increasing the amount of time and effort necessary to complete an individual (joint) permit application and likely causing delays in obtaining a permit.

PADEP has presented the regulations and guidance to several of its advisory committees, including, most recently, the Water Resources Advisory Committee (WRAC) on May 28, 2020. The proposed revisions are expected to be presented to the Environmental Quality Board in the second half of 2020, with a 60-day public comment period to follow. PADEP’s draft final technical guidance document (TGD) on alternatives analysis requirements is expected to be finalized and published in coordination with the proposed regulatory revisions. Documents related to the proposed rulemaking are available here.

Proposed Regulatory Changes to Chapter 105
According to PADEP, the proposed chapter 105 revisions are intended to clarify existing requirements, update/delete outdated references, and codify existing practices. The revisions would add or change 18 definitions, revise several existing permit waivers, and add six new waivers under 25 Pa. Code § 105.12, including waivers for temporary environmental investigation activities and for temporary mats and pads used to minimize erosion and sedimentation at a wetland crossing. The proposal would also significantly expand requirements for individual permit applications under 25 Pa. Code § 105.13. Some of the notable proposed revisions are discussed below.

Alternatives Analysis. The proposed revisions would add criteria required for the alternatives analysis accompanying a permit application under section 105.13(e)(1)(viii). For example, project alternatives impacting wetlands would be required to clearly demonstrate compliance with requirements for permitting a structure in a wetland, and project alternatives impacting other regulated waters would be required to demonstrate compliance with the requirements of 25 Pa. Code § 105.16, regarding environmental, social, and economic balancing. Identification of present conditions and the effects of “reasonably foreseeable future development” within the affected wetland or watercourse would also be required.

Impacts Analysis. The proposed revision to section 105.13(e)(1)(x), regarding impacts analysis, would require detailed analysis of the “potential secondary impacts” of a project on an expanded list of resources, including public water supplies, natural areas, wildlife sanctuaries, areas or structures of cultural or archaeological significance, parks, recreational areas, and certain designated streams.

A “narrative discussion and analysis” on a project’s water dependency would also be required, whereas the existing regulations require only a “statement.” Projects affecting wetlands would require a narrative discussion of the wetland delineation process, an analysis of whether a wetland is exceptional value, and a demonstration that the requirements for permitting structures or activities in wetlands under 25 Pa. Code § 105.18a have been met.

Antidegradation. Under the proposed revisions to section 105.13(e)(1)(xii), applicants would be required to demonstrate that the proposed project is consistent with antidegradation requirements under Pennsylvania regulations and the federal Clean Water Act.

Cumulative Impacts. The proposed revisions would add a potentially expansive new requirement under section 105.13(e)(1)(xiii) to perform a “projectwide cumulative wetland impact analysis.” The cumulative impact analysis would require a demonstration that the proposed project and “other potential” obstructions and encroachments would not result in an impairment of wetland resources or major impairment of the wetlands under section 105.18a. Identification of “piecemeal impacts” and consideration of “the wetland resource as part of a complete and interrelated wetland area” would be required.

Environmental Assessment for Aquatic Resource Restoration. The proposed revisions would create new PADEP criteria to evaluate environmental assessments of projects involving aquatic resource restoration under 25 Pa. Code § 105.15(a)(4). The environmental assessment would be required to consider, among other things, the project’s goals and objectives, wetland delineation and watercourse reports, an evaluation of the resource type and uses, historical and modern land uses, the anticipated aquatic resource restoration improvement and benefit, and geomorphic, geologic, and geotechnical data.

Compensatory Mitigation. The revisions propose replacement of existing wetland mitigation criteria under 25 Pa. Code § 105.20a with more comprehensive provisions applying to regulated waters of the commonwealth. Rather than specific ratios, compensatory mitigation for unavoidable impacts would require “replacing the resource functions that will be impacted” or providing substitute resources. The amount of compensatory mitigation would be determined based on new criteria, including the direct, indirect, and secondary impacts of the project, and the value of the proposed mitigation actions to “reestablish and rehabilitate environmental resources.”

PADEP would also be required to “track wetland losses and gains” occurring through chapter 105, with the goal of ensuring “no net loss of wetland resources within the service areas.” Although “service areas” are not defined, compensatory mitigation could be achieved through a PADEP-approved mitigation bank, in-lieu fee program, and/or permittee responsible mitigation site, as long as the mitigation site is located within the same State Water Plan subbasin as the project impacts or within the designated watershed boundaries identified by PADEP.

Draft Final Guidance Regarding Chapter 105 Alternatives Analysis
PADEP has also developed a draft final TGD on alternatives analysis requirements. See Bureau of Waterways Eng’g & Wetlands, PADEP, “Chapter 105 Alternatives Analysis Technical Guidance Document” (Apr. 17, 2020) (draft). The TGD is intended to (1) clarify the level of analysis required to evaluate alternatives to projects requiring an individual chapter 105 permit; (2) provide guidelines for determining whether an alternative is practicable; and (3) establish a “common, complete, and consistent” understanding of the information PADEP requests for review of alternatives analyses. Id. at 1.

The TGD addresses project-specific considerations for land development projects, linear utility projects, transportation projects, and restoration and pollution abatement projects. Among other information, the 21-page TGD provides an overview of the alternatives analysis process and a template checklist of the items PADEP expects to be submitted as part of the alternatives analysis demonstration. Example tables for the submittal of information are also provided. PADEP has indicated that the TGD may be issued for public comment in the second half of 2020 and published in coordination with the chapter 105 revisions.

Copyright ©2020, Rocky Mountain Mineral Law Foundation, Westminster, Colorado. 

Federal Court in West Virginia Rejects NPDES Permit Modifications through WVDEP Administrative Orders

Environmental Alert

(by Kip Power)

Companies holding National Pollutant Discharge Elimination System (NPDES) permits issued by the West Virginia Department of Environmental Protection (WVDEP) (known as WV/NPDES Permits) should take note that any adjustments to the effluent limits in those permits that are made through WVDEP administrative orders (as part of enforcement settlements or otherwise) may provide less than complete protection against future enforcement actions. On March 24, 2020, the federal District Court for the Northern District of West Virginia issued yet another decision in a line of cases establishing that WV/NPDES Permits may only be modified through a regulatory process that involves public notice, an opportunity for comments, and compliance with all of the other procedures mandated by WVDEP regulations for such permit changes. Ohio Valley Environmental Coalition and The Sierra Club v. Eagle Natrium, LLC, Civil Action No. 5:19-cv-00236 (March 24, 2020 Memorandum Opinion and Order) (Bailey, J.) (updated and revised, April 13, 2020).

In Eagle Natrium, Plaintiffs filed a citizen suit under the federal Clean Water Act (CWA) based on numerous self-reported discharges from the Defendant’s chlor-alkali plant located in Natrium, West Virginia that allegedly exceeded the effluent limits for (among other parameters) mercury and benzene hexachloride (BHC) found in the Defendant’s WV/NPDES Permit. The Defendant sought summary judgment on the basis that the WVDEP had previously commenced and was diligently prosecuting an enforcement action against it for the same violations, which serves as a statutory bar to CWA citizen suits.

In ruling against the Defendant with respect to the alleged violations of its mercury limits, the Court found that the WVDEP’s pending civil action sought to enforce interim mercury limits that had been established by that agency through an administrative order (and two subsequent extensions of that order) that had not been the subject of public notice and comment.  Accordingly, even though those limits were referenced during the initial NPDES permitting process as ones that might become effective at a later date, for purposes of the CWA citizen suit provision they were not considered to be true WV/NPDES permit limits. Given this (and because the interim limits were several orders of magnitude higher than the mercury limits set forth in the Defendant’s WV/NPDES Permit), there had been 117 exceedances of the permit’s mercury effluent limits over the last four years which were not being “diligently prosecuted” because they were not a part of the WVDEP’s civil enforcement action. The Court based its decision on several opinions issued by federal courts in West Virginia and other states, as well as the recent decision of the U.S. Court of Appeals for the Fourth Circuit in Sierra Club v. U.S. Army Corps of Engineers, 909 F.3d 635 (4^th Cir. 2018) (citing some of that precedent).

By contrast, the Court granted summary judgment to the Defendant as to Plaintiffs’ allegations concerning violations of the BHC effluent limits in its WV/NPDES Permit (about which there was no dispute regarding the applicable limits). The Court observed that the substances that were causing violations of those limits had been left in the groundwater and soil as a result of manufacturing activities that had ceased more than 50 years prior to the Defendant’s acquisition of the property. The Defendant had already spent more than $1 million in seeking to reduce the concentrations of BHCs emanating from the site and Consent Orders issued by the WVDEP assessed significant penalties for past BHC effluent limit violations. In addition, those Consent Orders will require that the Defendant spend significant additional funds in its continuing efforts to prevent future exceedances of the BHC limits. In light of these findings, the Court held that Plaintiffs had not satisfied their “heavy burden” of proving that the WVDEP’s Consent Orders did not represent diligent enforcement as to that aspect of the Defendant’s WV/NPDES Permit.

The decision in Eagle Natrium highlights the importance of considering the specific bases for a facility’s identified effluent limits during pre-acquisition due diligence efforts, and as a part of ongoing environmental compliance management. Where it appears that more favorable limits have been allowed though a mechanism that did not include the normal NPDES permitting process, it may be worth considering steps to solidify their legal validity. This is especially true as to water quality-based effluent limits that are scheduled to apply in the future, since the CWA’s anti-backsliding provision generally precludes the relaxation of such limits after they have become effective.

Should you have questions about the Court’s decision in Eagle Natrium or the WVDEP’s regulatory program that implements the Clean Water Act in West Virginia, please contact Christopher B. (Kip) Power at (681) 265-1362 or cpower@babstcalland.com.

Click here for PDF. 

Ninth Circuit Denies Emergency Motion for Partial Stay of Montana District Court’s NWP 12 Vacatur

Environmental Alert

(by Lisa Bruderly and Ben Clapp)

Project Labor Agreements Continue to Cause Controversy

The Legal Intelligencer

(by John McCreary and Benjamin Wright)

The Community College of Allegheny County (CCAC) recently decided to proceed with construction on its campus. In order to facilitate this project, CCAC entered into a project labor agreement (a PLA) with the Pittsburgh Regional Building and Construction Trades Council of Pittsburgh, AFL-CIO on Feb. 15, 2011. The Associated Builders Association of Western Pennsylvania (ABC) filed a lawsuit on behalf of multiple contractors who operate open shop in Western Pennsylvania seeking to enjoin the CCAC from enforcing the PLA. This suit is the latest in a long series of contentious disputes regarding the utilization of PLAs in the public sector.

In its complaint, the ABC alleges that the terms of the PLA effectively preclude nonunion workers and workers who belong to unions other than those affiliated with the Pittsburgh Regional Building Trades Council from performing construction work, and that the PLA compels workers to associate, join or pay dues to these unions as a condition of employment.

Specifically, the ABC alleges that all contractors have a right under the First and Fourteenth Amendments to determine whether or not to unionize and with which unions to associate. The complaint alleges that the PLA’s requirement that contractors hire their employees through the signatory unions’ hiring halls is a violation of these constitutionally protected rights. The ABC also alleges that this requirement violates the National Labor Relations Act as Section 7 of the Act, 29 U.S.C. Section 157, gives employees the right to decide whether they want union representation. It alleges that the PLA violates the National Labor Relations Act because it requires nonunion members to become union members as the unions will not refer nonmembers through their hiring halls, effectively creating a compulsory union shop in violation of 29 U.S.C. Section 158(a)(3). Finally, the ABC alleges the PLA violates 29 U.S.C. Section 158(e)—the so called “hot cargo” prohibition—which forbids unions and employers from entering into contracts whereby the employer agrees to refrain from ceasing doing business with any other person. The sole exception to this rule is for employers engaged primarily in the building and construction industry, however the ABC alleges this exception does not apply to CCAC. Finally, the ABC alleges that the PLA violates Pennsylvania Competitive-Bidding Laws including Section 3911(a) of the Commonwealth Procurement Code and Article III, Section 22 of the Pennsylvania Constitution because contractors already signatory to agreements with unions affiliated with the Pittsburgh Regional Building Trades Council will be able to use their current workforce and collective bargaining agreements, while open shop contractors would be forced to hire new employees through the unions’ hiring halls. The ABC alleges that this amounts to a violation of the requirement that bidders for a public contract be on equal footing and enjoy the same opportunity for open and fair competition. On these grounds, the ABC seeks declaratory and injunctive relief against the enforcement of the PLA.

Pennsylvania courts have already considered numerous challenges to various project labor agreements in the commonwealth. In A. Pickett Construction v. Luzerne County Convention Center Authority, 738 A.2d 20 (Pa. Cmwlth. 1999), the Luzerne County Convention Center Authority commissioned one O’Neill to evaluate whether to include a PLA in the bidding process for the construction of a civic arena-convention center. O’Neill recommended the inclusion of PLA for multiple reasons, including the avoidance of delays caused by labor disputes, the promotion of labor harmony and the necessity to adhere to an inflexible construction schedule and completion deadline. The PLA required all contractors submitting bids to agree to employ a certain number of union laborers at union wages, regardless of whether the contractor was unionized. Nonunion contractors sought a declaratory judgment that the PLA was invalid under Pennsylvania competitive bidding statutes. The Commonwealth Court upheld the PLA on the grounds it was within the authority’s discretion to consider and take steps to assure the timely completion of the project. The court found that the PLA did not discriminate against nonunion contractors because it permitted the winning bidder to employ its own core personnel, did not contain provisions requiring discrimination based on union affiliation, and opened the bidding process to all union and open shop contractors. The court also determined that the appellants could not establish that the authority abused its discretion in relying upon the O’Neill report in adopting the PLA.

In Sossong v. Shaler Area School District, 945 A.2d 788 (Pa. Cmwlth. 2008), the Shaler Area School District required the successful bidder to execute a PLA with the Pittsburgh Building Trades and argued the PLA was designed to maintain the expeditious completion of the project on-time and on-budget. A contractor sought a preliminary injunction alleging that the PLA prevented nonunion contractors from effectively bidding on the project. The Commonwealth Court cited Pickett and denied the injunction because the PLA contained a “time is of the essence clause” and was related to the need for prompt completion of the project. It also found that there was no need for an expert recommendation of the PLA.

In Glenn O. Hawbaker v. Commonwealth, No. 405 M.D. 2009 (Pa. Cmwlth. 2009), the Commonwealth Court again upheld the inclusion of a PLA, relying on Pickett and Sossong. The court held that the inclusion of the PLA did not violate the requirement to award the contract to the lowest responsible bidder or illegally discriminate against nonunion contractors.

Most recently, the Pennsylvania Commonwealth Court examined the use of a PLA in Allan Myers v. Department of Transportation, 202 A.3d 205 (Pa. Commw. Ct. 2019). In Allan Myers, PennDOT issued bid solicitations for the second phase of a project involving improvements to Markley Street in Montgomery County. The first phase of the Project had no PLA requirement and had been completed ahead of schedule and on budget by a nonunion contractor. For Phase II of the project, however, a report prepared for PennDOT by the Keystone Research Center recommended the use of a PLA. Accordingly, PennDOT’s bid solicitation required contractors to sign a PLA with the Building and Construction Council. Unusually, the PLA provided that if the successful bidder already had a collective bargaining agreement with United Steelworkers (USW), that bidder was not subject to the hiring requirements under the PLA and was permitted to use its United Steelworkers workforce. Allan Myers filed a bid protest and argued that the PLA was discriminatory and unduly favored contractors affiliated with USW. PennDOT dismissed the protest and Allan Myers appealed to the Commonwealth Court.

The Commonwealth Court examined the history of PLA jurisprudence in Pennsylvania and concluded that USW and Building Trades contractors did not bid on equal footing with nonunion contractors. The court also determined that the project did not have a critical deadline, despite the presence of the boilerplate “time is of the essence” language. Thus, the court concluded that “the use of a PLA is permitted where the contracting agency can establish extraordinary circumstances, and PennDOT did not make that demonstration in this case.” On these grounds, the court found that the bid violated Pennsylvania’s competitive bidding laws and cancelled PennDOT’s solicitation.

Based upon this jurisprudence, it is expected that CCAC will raise numerous defenses in its response to the ABC’s complaint. Specifically, CCAC will allege that that the PLA is actually necessary to ensure that the project is completed on time and on budget. CCAC will have to demonstrate that the “time is of the essence” language contained in Article II, Section II of the PLA is more than mere boilerplate and that there exists an actual critical deadline. Further, CCAC will likely attempt to rely upon Article VI, Section 9 of the PLA regarding the exception for “core employees” to bring its PLA into the Pickett line of cases differentiate itself from the PLA in Allan Myers. Notably, however, the CCAC PLA allows a contractor to utilize “core employees” for up to ten percent of its workforce, while the PLA in Pickett permitted between twenty and fifty percent. Finally, CCAC will likely rely on Article VI, Section 8 of the PLA, which contains a “nondiscrimination” provision regarding union membership, as proof that the PLA allows all contractors to bid on equal footing. ABC’s complaint acknowledges this provision but dismisses it as “disingenuous.” Moving forward, ABC will attempt to rely upon the decision in Allan Myers whereas CCAC will look to earlier decisions such as Pickett and Sossong.

As of the date of this article, ABC’s complaint has been filed. Defendants have not yet filed responses to the complaint. Although civil litigation can often last years, the complaint seeks injunctive relief and therefore it is possible the court may conduct a hearing and issue a preliminary ruling on the merits of the plaintiffs’ claims within the next few months.

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Reprinted with permission from the May 28, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.

EQB Publishes Proposed Rulemaking for Control of VOC Emissions from Existing Oil and Natural Gas Sources

Environmental Alert

(by Michael Winek, Gary Steinbauer, Gina Falaschi)

Pennsylvania’s Environmental Quality Board (EQB) published a proposed rulemaking in the May 23, 2020, Pennsylvania Bulletin entitled “Control of VOC Emissions from Oil and Natural Gas Sources.”  50 Pa.B. 2633.  This proposed rulemaking would have Pennsylvania adopt reasonably available control technology (RACT) requirements and RACT emission limitations for existing oil and natural gas sources of volatile organic compound (VOC) emissions.  As proposed, the rule would apply to owners and operators of any of the following oil and natural gas sources of VOC emissions that were in existence on or before the effective date of this rulemaking: storage vessels (in all segments except natural gas distribution), natural gas-driven pneumatic controllers, natural gas-driven diaphragm pumps, centrifugal compressors and reciprocating compressors, and fugitive emission components.

This proposal is based on EPA’s October 2016 Control Techniques Guidelines (CTG) for the Oil and Gas Industry, which provide RACT requirements for VOC emissions from existing oil and gas sources.  Pursuant to the federal Clean Air Act, EPA established National Ambient Air Quality Standards (NAAQS) for six “criteria pollutants,” which includes ground-level ozone. Ground level ozone is created in a photochemical reaction of oxides of nitrogen (another criteria pollutant) and VOCs in the presence of sunlight.  The federal statute requires any (i) existing major source of VOC emissions (generally more than 50 tons per year of VOC depending on location) in an ozone nonattainment area and (ii) any other source (i.e., minor sources) for which EPA has issued a CTG to implement RACT to control emissions, consistent with the issued CTG.  Pennsylvania is in the northeast ozone transport region, which makes the Commonwealth nonattainment for ozone, and thus triggers RACT under federal law.

The Clean Air Act requires states to revise their State Implementation Plans to include RACT for sources of VOC emissions covered by a CTG issued by the EPA.  The US EPA proposed withdrawing the CTG in March 2018 but has not yet taken final action; Pennsylvania has continued to develop this rulemaking to meet the CTG implementation deadline of January 2021.

Despite the potential rollback of the CTG and other federal regulations by EPA, the Pennsylvania Department of Environmental Protection (PADEP) explained that it moved forward with this proposed rulemaking because: (1) PADEP reviewed EPA’s reconsideration of the 2016 NSPS and, based on that proposed rule, modified this proposed rulemaking; (2) adoption of the proposed rule would help the Commonwealth achieve and maintain the eight-hour ozone NAAQS; (3) PADEP estimates that proposed control measures would reduce VOC emissions by more than 4,000 tons per year; and (4) the rulemaking would provide consistency among all oil and gas sources for monitoring fugitive emissions.  These requirements are consistent with the leak detection and repair (LDAR) inspection requirements specified in PADEP’s General Plan Approval and General Operating Permit for Natural Gas Compression Stations, Processing Plants and Transmission Stations (GP-5), the General Plan Approval and General Operating Permit for Unconventional Natural Gas Well Site Operations and Remote Pigging Stations (GP-5A), and the Air Quality Permit Exemptions, Exemption 38.  EQB’s May 23rd proposal also notes that the rulemaking is consistent with Governor Tom Wolf’s strategy to reduce methane from the oil and natural gas industry because, while this rulemaking focuses on the reduction of VOC emissions, methane emissions would also be reduced as a co-benefit since both VOCs and methane are emitted from oil and gas operations.

EQB is accepting written comments regarding this proposed rulemaking until July 27, 2020, through the online comment system, by email, or by mail.  Additionally, EQB will hold three virtual public hearings regarding the proposed rulemaking on June 23, 2020, at 6 p.m., June 24, 2020, at 2 p.m., and June 25, 2020, at 6 p.m.

For additional information and assistance with draft comments, please contact Michael H. Winek at mwinek@babstcalland.com or (412) 394-6538, Gary E. Steinbauer at gsteinbauer@babstcalland.com or (412) 394-6590, or Gina N. Falaschi at gfalaschi@babstcalland.com or (202) 853-3483.

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Why useful public/private partnerships often go undiscovered

Smart Business

(by Adam Burroughs with Moore Capito)

Governments offer many funding and other partnership opportunities to assist private enterprises. Businesses can benefit greatly from these public/ private partnerships, but first they need to be aware of what funding is out there. Awareness is often driven by government agencies, and industry and trade associations. However …

“There is no substitute for having a relationship with a trusted adviser who is well educated on both public and private funding mechanisms,” says Moore Capito, a shareholder at Babst Calland.

Smart Business spoke with Capito about public/private partnerships and strategies to better connect businesses with potentially helpful government opportunities.

Why isn’t there more participation in public programs by businesses?

How often or how readily businesses take advantage of government programs can depend on the type of program and the market sector. For example, agricultural businesses are heavy users of government programs — subsidies, for instance — because that’s been inculcated into that business segment. Many recent partnership opportunities have been geared toward the small business sector (i.e. Small Business Administration (SBA) programs; programs for Disadvantaged Business Enterprises; Minority-owned Businesses Enterprises; Women-Owned business Enterprises; and 8(a)/Minority or Women Owned Small Businesses; as well as SBA loans, including recent high-profile SBA loan programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan that were designed to support small businesses through the COVID-19 pandemic). However, there are plenty of existing government programs available to established businesses that are willing to take the time to look.

While lack of awareness can be a barrier, the administrative burden can also discourage participation. There tends to be significant paperwork necessitated by regulations designed for oversight. That takes time, and that can mean time away from day-to-day operations, something that not many businesses are positioned to absorb. Such regulations can frustrate the purpose of the programs because the true targets might find the time costs outweigh the financial benefits.

How has the Paycheck Protection Program increased overall awareness of government partnership opportunities?

The SBA’s PPP, offering forgivable loans to support small business payrolls through eight weeks of the COVID-19 pandemic, has shown that when attractive capital is put before companies, they’re going to snatch it up quickly. The initial PPP funds were exhausted in less than two weeks.

Long-term, a program like this could be something that triggers more interest among businesses in exploring other government programs. Perhaps, the awareness of the PPP loan program will cause businesses to look for other partnership opportunities. So, there’s some tangential learning that is likely to be a byproduct from this that stands to heighten awareness.

How do private businesses typically find out about public programs?

Good sources of information for available public programs are trade associations, chambers of commerce, farm bureaus, and business and industry councils. It’s also a good idea for businesses to call their local representatives, whether
at the state or federal level. Those representatives should be knowledgeable about what programs are out there.

Additionally, there are many tools available at the government level to help businesses succeed, even if they don’t consist of some type of funding. Some of these tools exist just to help steer businesses in the right direction, whether they’re established businesses or startups. Economic development entities are one example.

It’s always to a business’s benefit to be tuned in with what’s going on at the government level. The lesson from the current crisis is that it’s a good idea to develop a relationship with an adviser that can knowledgeably consult on the pros and cons of available programs and partnerships.

For the full article, click here.

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West Virginia DEP Receives Notice of Intent to Sue Under SMCRA Based on Deficiencies in Mine Reclamation Fund

Environmental Alert

(by Kip Power and Robert Stonestreet)

For many years, national and regional environmental interest groups have objected to the alternative bonding system (ABS) administered by the West Virginia Department of Environmental Protection (WVDEP) as a part of WVDEP’s approved coal mine regulatory program under the federal Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. 1201, et seq., (SMCRA). Unlike other bonding programs that require full-cost bonds to secure performance of reclamation requirements under mining permits, the West Virginia ABS involves two components: (1) site-specific bonds posted by mine permittees based on the anticipated costs of reclamation, limited to a maximum of $5,000 per acre; and (2) a Special Reclamation Fund (SRF), funded by a tax on coal production (currently set at 27.9 cents per clean ton). The SRF is intended to fund reclamation expenses in the event WVDEP revokes a permit and the proceeds of site-specific bonds are insufficient to cover the costs to reclaim a disturbed area governed by the revoked permit.

In February 2016, the Ohio Valley Environmental Coalition and other groups filed a petition with the U.S. Department of the Interior’s Office of Surface Mining Reclamation and Enforcement (OSM – the oversight agency under SMCRA), asking that OSM take over the bonding program for mining permits in West Virginia. That petition (which also raised concerns about allowing large companies to self-bond) was never acted upon prior to the change in presidential administrations in January 2017. Long before that, a SMCRA citizens suit was brought in early 2000 in the federal District Court for the Southern District of West Virginia, challenging OSM’s failure to invalidate the West Virginia ABS and impose a federal mine permit bonding system. In response to that suit, the court declined to order OSM to take the requested actions in light of commitments by agency officials to address the groups’ concerns. The court held the case open for further proceedings in the event OSM did not fulfill its promises. See West Virginia Highlands Conservancy v. Norton, 190 F.Supp.2d 859 (S.D. W.Va. 2002).

Those same groups have now seized upon a new basis for challenging the ABS. They served their first volley in that renewed effort on WVDEP Secretary Austin Caperton on May 8, 2020, in the form of a Notice of Intent to Sue under SMCRA (the NOI). Technically, the NOI only requests that WVDEP perform its nondiscretionary duty under SMCRA to notify OSM as to “significant changes in funding or budgeting” related to WVDEP’s mine regulatory program approved under SMCRA. However, as explained in more detail in the NOI, the point of requiring that notification is to alert OSM to the need to fully explore the apparent insolvency of the West Virginia ABS. If the ABS is determined to be insolvent, that could lead to OSM taking over the administration of at least that part of WVDEP’s SMCRA program.

Though the NOI alludes to various coal company bankruptcies, the precipitating event is identified as WVDEP’s recent filing of civil action and emergency motion for appointment of a special receiver against mine permittee ERP Environmental Fund (ERP). ERP accepted the transfer of nearly 100 mining permits (along with related WV/NPDES water discharge permits) from Patriot Coal Corporation during Patriot’s bankruptcy in 2015. WVDEP strongly opposed those proposed transfers in bankruptcy court before agreeing to a multi-party settlement. As described in a WVDEP affidavit filed in the special receivership case, as of March 25, 2020, ERP had ceased all operations, with more than 200 WVDEP enforcement actions pending against it.

WVDEP has sixty (60) days to address the concerns raised in the NOI. If WVDEP does not address those concerns to the satisfaction of the environmental groups within that time frame, a new lawsuit could be filed against the agency.

Should you have questions about the WVDEP coal mine regulatory program or other environmental permitting matters, please contact Christopher B. “Kip” Power at (681) 265-1362 or cpower@babstcalland.com or Robert M. Stonestreet at (681) 265-1364 or rstonestreet@babstcalland.com.

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Opportunities: Leveraging Technology to Meet New Demands

Emerging Technologies in a Time of Pandemic

(by Ben Clapp, Julie Domike, Gina Falaschi, Justine Kasznica and Boyd Stephenson)

Most of the world is staying home, but businesses must still pay their bills. In late April the federal government estimated the U.S. economy contracted by 4.8 percent in the first quarter of 2020, mostly due to the Coronavirus pandemic. Because the real economic consequences of social distancing occurred in April, future numbers will likely be as bleak, if not worse.

Yet, some businesses are taking bold steps, innovating in communications with their customers, and leveraging pre-existing tools to retool how their customers interact with the company and its product. Companies that never before offered delivery are experimenting with last mile logistics. Farms whose regular restaurant or hotel customers are closed due to public health orders are retooling their supply chains to supply local households. And companies that previously relied on face-to-face interactions are turning to virtual solutions to bring their product to market, even in a field like wine production—where taste is an essential part of the purchasing decision. These companies described here provide just a few examples of how creatively leveraging existing technologies can allow a company to maintain operations.

Last Mile Logistics

The Coronavirus pandemic has shined a spotlight on last-mile delivery, with demand for food, medicine, and other deliveries skyrocketing due to social distancing requirements. While pandemic-driven demand has unquestionably strained existing last-mile delivery resources, retail suppliers that never before relied on delivery have developed their own solutions, provided by a number of companies with technology-based delivery systems and logistics platforms to demonstrate how emerging technologies can be employed to safely and efficiently bridge gaps between suppliers and their customers.

A sharp increase in food delivery orders from homebound individuals combined with the need to limit person-to-person contact creates an opportunity that delivery robots are uniquely positioned to fill. Previously confined almost exclusively to college campuses, robots like those developed and operated by the startup Starship have been successfully deployed in cities in England, Estonia, Virginia, Arizona, and California, as well as in the District of Columbia. Starship and similar companies are taking steps to expand their services even as they ramp up robot production for a growing number of interested customers.

Delivery drones are another last-mile delivery technology that may be poised to “take off.” While drones face more regulatory hurdles than their sidewalk-bound counterparts, deep-pocketed players, such as Alphabet’s Wing, UPS’s Flight Forward, and Amazon’s Prime Air, are actively pursuing FAA approvals that could change the way customers receive goods—today and after the Coronavirus recedes. UPS recently announced a partnership with CVS to deliver prescription medicines via drone to residents of a retirement village in Florida. After the Coronavirus pandemic struck, UPS and CVS expanded drone prescription medicine deliveries to assist people who are sheltering in place. Wing, currently in testing in Finland, Australia, and Virginia in the U.S., reports that it has seen a significant increase in demand for its drone delivery services. Both companies emphasize that delivery drones significantly reduce the chance of person-to-person viral transmission by reducing the opportunity for physical contacts.

Perhaps the most significant drone-delivery accomplishments have been achieved by the U.S. health-care logistics company Zipline, founded in 2014. Zipline uses drones to deliver blood products and medicines to rural clinics in Rwanda and Ghana, and recently began using the drones to deliver Coronavirus test samples from rural clinics to labs in urban areas for analysis. With this capacity under its belt, Zipline has accelerated its plan to initiate operations in the U.S. and is actively seeking FAA approval to begin flights as soon as possible. The company intends to initially focus its U.S. operations on delivery of virus test kits and personal protective equipment.

Sidewalk delivery robot and delivery drone companies are but two examples of creative solutions to solving last mile delivery challenges posed by the Coronavirus. In doing so, these technologies could disrupt the traditional last mile delivery system, changing the playing field long after the people return to work.

All indicators suggest that, irrespective of the pandemic, the FAA is moving forward with defining the regulatory landscape to enable these activities. On May 5th, the FAA announced its partnership with technology developers Airbus, AirMap, Amazon, Intel, One Sky, Skyward, T-Mobile, and Wing to collaboratively establish requirements for Remote Identification (Remote ID), which would provide real time identification and location information on drone operations conducted in the nation’s airspace. Remote ID is seen as a critical path in authorizing widescale “beyond visual line of sight” (BVLOS) and cargo delivery drone operations.

Supply Chain Agility

In a similar manner, albeit using lower-tech assistance, the flow of farm products to consumers is finding new paths. Farmers traditionally enter into contracts with restaurants, their wholesale suppliers, and other eateries, such as hotels and school cafeterias. When the pandemic disrupted these long-standing orders for farm fresh products, it left farmers with excess supply. Meanwhile, households filled with consumers working from home need groceries, yet prefer to limit the health risk of visiting a public place such as a grocery store. Farmers’ markets provide a small outlet for this extra produce, but, in the local jurisdictions where they are allowed to continue operating, they are now subject to strict distancing and contact rules. Yet again, the supply is present and demand exists, but the challenge is connecting the two.

The fractured food supply chain is hitting the northern hemisphere just as abundant spring produce begins to emerge from the fields. Established farm-to-table delivery companies such as Imperfect Foods and Hungry Harvest have experienced such a rapid and large uptick in membership demand that they have temporarily suspended acceptance of new members or delayed deliveries while building staff to support demand. Similarly, existing Community Supported Agriculture farms have accepted multiple new members seeking to receive farm-fresh local foods. Despite this, large volumes of farm products remain available.

Enter the solution from the grass-roots: building makeshift supply chains between the farms and households in nearby cities by setting up delivery directly from area farms.

One such service is a D.C.-area program, established by a chef, his spouse and neighbors, to distribute produce from Earth N Eats, an Amish family farm co-op that, before the pandemic, supplied high-end D.C. restaurants with heirloom produce. The farm lost roughly 90 percent of its business when restaurants were shut down, and this program has nearly restored their sales to pre-Coronavirus levels – only now the produce is boxed and sold to individuals. Subscribers receive weekly boxes containing free-range eggs, milk, salad and other greens, apples, and potatoes. In addition, one can purchase prize-winning artisan sheep’s milk cheeses and small batch corn meal, as well as other seasonal produce.

Word of the program and the farm co-op’s diverse and delectable offerings spread via local community list-servs and lower-tech word-of-mouth. Within days, Earth N Eats sold enough subscriptions to make boxed shipments a viable business. All orders are submitted online, and boxes are distributed locally for pickup. The entire program is conducted without direct contact – not in person, not by phone – exclusively via the internet.

Remote Learning and Communications

Remote learning is not only for school-age children. Adults are also looking for opportunities to learn, and businesses are connecting with customers virtually to meet demand. Wineries, with their tasting rooms closed to the public, have started offering virtual wine tastings.

The Napa Wine Company’s vineyard is in Oakville, Calif., the heart of Napa Valley. From there, the family-owned and operated company produces and markets the Ghost Block, Oakville Winery and Elizabeth Rose wines. In normal conditions, close to four million people visit Napa Valley’s famous wineries each year. Social distancing has shut down the winery’s tasting room, but wine enthusiasts can still enjoy the Napa experience from home. “People cannot come to us right now, but I can show them the property where the wines come from,” said Morgaen Hoxsey, the Napa Wine Company’s Director of Sales and Marketing, who hosts virtual tastings from the vineyard. Hoxsey admits there has been a technology glitch or two along the way, including a poor WiFi connection when broadcasting directly from among the vines, but integrating technology has provided a welcome boost to the winery’s sales.

Hoxsey manages five employees who process orders and man the company’s tasting room. California’s stay home order meant shutting down the tasting room in March, but rather than laying off a single employee, Hoxsey refocused her team’s efforts on direct-to-consumer sales, breaking records by utilizing technology to bring the wine tasting experience directly to clients’ homes.

What started as a request for a video presentation for a local social club blossomed into new ways to connect directly with customers. The Ghost Block Estate Tasting Room now offers “virtual tastings” by appointment to wine club members. Tasters order a pre-set selection of wines. Once they arrive, wine club members tune in virtually via Zoom for an intimate—but distant—session with their favorite vintners.

Remote communication, a bonus before COVID-19, has become an essential element to keep the winery in business. Remember Hoxsey’s five employees? She still hasn’t let a single one go.

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Babst Calland Lands 2024 Space Mission Legal Work for Astrobotic

Firm to Develop Legal/Commercial Framework for Payload Service for NASA’s Artemis Human Landing System

Babst Calland today announced that under a recently announced NASA award, Astrobotic Technologies, Inc. (Astrobotic) has selected the firm to develop what could become the first-of-its-kind blueprint for commercial payload delivery to space for the Artemis human missions as well as future human-crewed space missions.

Pittsburgh-based Astrobotic will be developing the commercial payload service for Dynetics (a Leidos subsidiary), one of three prime contractors (alongside SpaceX and Blue Origin) selected by NASA to design and build a commercial Human Landing System (HLS) and compete to build a privately-developed system to take the first woman and next man to the lunar surface in 2024 as part of the NASA Artemis program.

“As the leading lunar payload delivery provider, we are thrilled to begin setting up this new business model onboard the Dynetics human lander,” said Astrobotic CEO John Thornton. “With payload expertise from our Peregrine and Griffin lunar lander programs, we are well-positioned to extend our payload services to include the new lunar lander. We’re helping to develop and set the standard for the commercial payload market, and that is very exciting,” added Thornton.

Dynetics is leading a broad coalition of industry partners, including Astrobotic, to not only send humans back to the lunar surface, but to also help companies, governments, universities, and nonprofits across the globe send non-human payloads onboard the Artemis Human Lander System. Such payloads can include critical instruments, project and infrastructure products and materials that can support human activities on the lunar surface.

“Helping to launch this new mission to the Moon and to develop the commercial, policy and regulatory framework for its payload delivery business is an exciting opportunity for Astrobotic, all of its partners, and for our team of attorneys at Babst Calland, “ said Justine M. Kasznica, Outside General Counsel for Astrobotic, and Chair of the Firm’s Emerging Technologies practice.

“It’s exciting to be a part of such a groundbreaking opportunity as a legal partner to Astrobotic,” said Donald C. Bluedorn II, Managing Shareholder at Babst Calland.  “We are thrilled to be involved in this important role for our national space program.”

Potential Clean Water Act Liability extends to discharges to groundwater that reach surface water

The PIOGA Press

(by Lisa Bruderly and Kevin Garber)

On April 23, the Supreme Court, in a landmark decision, ruled that in certain circumstances discharges of pollutants through groundwater to navigable waters could be required to have an NPDES permit under the Clean Water Act (CWA). While the court remanded the Hawai’i Wildlife Fund v. County of Maui litigation to the Ninth Circuit to reconsider the specific issue of injected wastewater that reached the Pacific Ocean through lava tubes, it more broadly provided a new “functional equivalent” test to address whether the CWA requires an NPDES permit when pollutants originating from a point source are conveyed to navigable waters by a nonpoint source, such as groundwater.

Justice Stephen Breyer, writing for the 6-3 majority, held that an NPDES permit is required “when there is a direct discharge from a point source into navigable waters or when there is the functional equivalent of a direct discharge” (emphasis added). The court’s new test for CWA liability has far-reaching implications, creating potential exposure for agency permitting and enforcement and citizen suit pressure under many scenarios where pollutants may intentionally or unintentionally enter surface water by way of groundwater through Class V injection wells, pipeline leaks, spills and releases to ground, waste impoundments/ lagoons, existing groundwater contamination, leaking underground storage tanks and even septic tanks.

New “test” creates more questions than clarity
Subjective, conflicting interpretations of the new “functional equivalent” test are inevitable. Focusing primarily on considerations of time and distance, Justice Breyer offered the following two contrasting examples of how the test might be applied: (1) “where a pipe ends a few feet from navigable waters and the pipe emits pollutants that travel those few feet through groundwater (or over the beach), the permitting requirement clearly applies; and (2) “if a pipe ends 50 miles from navigable waters and the pipe emits pollutants that travel with groundwater, mix with much other material, and end up in navigable waters only many years later, the permitting requirements likely do not apply.”

The court offered that other factors, including the following, “may prove relevant,” depending on the specific circumstances:

• The nature of the material through which the pollutant travels;
• The extent to which the pollutant is diluted or chemically changed as it travels;
• The amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source;
• The manner by or area in which the pollutant enters the navigable waters; and
• The degree to which the pollution (at that point) has maintained its specific identity.

The court also acknowledged that application of this test is not clear, offering that there are “too many potentially relevant factors applicable to factually different cases for this Court now to use more specific language.” Rather, the court seemingly opened the door for interpretations by the lower courts, encouraging them to “provide guidance through decisions in individual cases,” and, where appropriate, to “mitigate any hardship or injustice when they apply the statute’s penalty provision.”

The court also looks to the U.S. Environmental Protection Agency (EPA) to provide “administrative guidance” through issuance of individual permits and promulgation of general permits. However, there is a tension relying on current EPA guidance given the conflict between the court’s “functional equivalent” test and EPA’s April 23, 2019 Interpretive Statement, under which the agency considers releases of pollutants to groundwater to be categorically excluded from CWA permitting requirements. EPA plans to provide additional guidance in response to the court’s opinion.

Dissenting, Justice Samuel Alito captured the frustration and uncertainty likely to be felt by many in the regulated community when he wrote: “If the Court is going to devise its own legal rules, instead of interpreting those enacted by Congress, it might at least adopt rules that can be applied with a modicum of consistency. Here, however, the Court makes up a rule that provides no clear guidance and invites arbitrary and inconsistent application.”

Path forward for regulated entities is unclear

With similar matters currently before several circuit and district courts, interpretations of the “functional equivalent” test are expected to vary greatly, creating more confusion for entities that could now be subject to CWA liability, even if they are already regulated under a federal and/or state program. For example, in the County of Maui case, the injection wells were approved by EPA and the Hawaii Department of Health and had been operating since the 1970s. Similarly, the court’s ruling creates the potential for claims by agencies and citizens groups, even when, for example, groundwater remediation projects with potential surface water connections, are being conducted under a state or federally approved cleanup plan.

The ruling also creates interesting questions as to whether a court could hold an entity liable for not obtaining an NPDES permit when the discharge to surface water through groundwater is caused by a spill. For example, in Kinder Morgan Energy Partners, L.P. v. Upstate Forever, a pipeline ruptured and, though promptly repaired with state cooperation, resulted in residual gasoline in the soil and groundwater. The Fourth Circuit upheld a citizens’ suit action, concluding that the continued seepage of gasoline into surface water constitutes an “ongoing violation” of the CWA, even if the NPDES point source (i.e., the pipeline) is no longer releasing the pollutant. In deciding this matter, the Fourth Circuit examined whether pollutants in groundwater enter surface water by a “direct hydrological connection.” In response to a petition for writ of certiorari from the Fourth Circuit decision, the Supreme Court on May 4 vacated the Fourth Circuit’s judgment and remanded the matter for further consideration based on the County of Maui decision (i.e., the “functional equivalent” test). This remand demonstrates that, at this time, the Supreme Court does not intend to hear additional arguments regarding CWA liability for groundwater discharges.

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PHMSA proposes new guidance for farm taps

The PIOGA Press

(by Keith Coyle and Ashleigh Krick)

On April 20, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a request for comments on proposed frequently asked questions (FAQs) for the regulation of farm taps under 49 C.F.R. Parts 191 and 192. The proposed FAQs come nearly two years after the agency posted, and then withdrew, an earlier set of farm tap FAQs on its website. Consistent with the Department of Transportation’s policy on guidance documents, PHMSA is seeking public comment before finalizing the latest version of the farm tap FAQs. The deadline for submitting comments is June 19.

Why did PHMSA issue the proposed FAQs?

The regulatory status of farm taps has generated significant controversy in the past decade. In 2010, PHMSA issued FAQs for the new Distribution Integrity Management Program (DIMP) regulations stating that the DIMP requirements applied to farm taps, even though that issue had not been specifically discussed or addressed during the rulemaking process. The agency defended that position in the years that followed, but eventually allowed operators to choose to include farm taps in a DIMP plan or follow the three-year periodic inspection requirement for regulators and overpressure protection equipment.

In January 2018, PHMSA published a set of new FAQs for farm taps on its website. The FAQs addressed a range of topics, including the new three-year periodic inspection requirements, annual reporting requirements, operator identification number (OPID) requirements, regulatory status of existing farm taps and those installed prior to 1960, operator qualification, definitional clarifications, and excess flow valve installation. After receiving significant adverse feedback, the agency withdrew the farm tap FAQs for further review and development. Then in March 2019, the agency issued an Announcement of Enforcement Discretion stating that owners and operators could choose whether to address farm taps under the three-year periodic inspection requirements in 49 C.F.R. § 192.740 or under DIMP requirements.

As discussed in more detail below, the agency’s proposed farm tap FAQs address all the significant developments from the past decade.

What do the proposed FAQs cover?
The following important topics are covered in the proposed farm tap FAQs:

• What is a farm tap? Citing the Part 192 definition of service line, PHMSA states that a farm tap is a distribution service line if any portion “transports gas from a common source of supply to an individual customer, to two adjacent or adjoining residential or small commercial customers, or to multiple residential or small commercial customers served through a meter header or manifold,” regardless of whether a sale of gas occurs. However, the agency also recognizes that a farm tap may be used to refer to other piping applications that do not satisfy the service line definition, including where customer-owned piping connects directly to the first isolation point or the farm tap meets the definition of a transmission line.
• Where does a farm tap begin and end? In an important clarification, PHMSA explains that a farm tap service line “begins at the first point where the downstream service line can be isolated from source piping (e.g. the inlet to a valve or regulator…)” and “terminates at the outlet of the customer’s meter or the connection to a customer’s piping, whichever is further downstream.” Some of the agency’s other guidance in recent years had suggested that the service line classification begins at the tap on the mainline or source piping in a farm tap configuration. Note that PHMSA’s clarification indicates that the valve or regulator at the first isolation point is part of the distribution service line, not the source piping.
• What reporting and notification obligations apply to farm tap operators? If a farm tap is a regulated service line, PHMSA states that the operator must obtain an OPID and submit a distribution annual report form, including operators of production and unregulated gathering lines. PHMSA also explains that only the operator of the service line downstream from the first isolation point is responsible for reporting the service line in its annual reports, and that the most-downstream entity operating the service line is responsible for notifying farm tap customers of their responsibility to maintain customer-owned buried piping under § 192.16(a).
• What are PHMSA’s expectations with respect to testing farm taps under 49 C.F.R. § 192.740? PHMSA states that the three-year inspection requirement in § 192.740 for pressure regulating, limiting, and overpressure protection devices applies to all service lines that directly connect to production, gathering or transmission lines, and which are not part of a distribution system, regardless of installation date. The agency clarifies that the regulation does not require testing regulators for lockup, and that other methods may be used to comply with the regulation. PHMSA also explains that operators can use any practicable method to test regulators with an internal relief, so long as the method is documented in the operator’s O&M Manual. The agency provides examples of practicable methods, such as installing a test port and then a valve downstream from the regulator with an internal relief.
• What design and installation requirements apply to service-line farm taps? Consistent with the nonretroactivity requirement in the Pipeline Safety Act, PHMSA acknowledges that a farm tap installed prior to March 12, 1971, does not need to be redesigned to meet the requirements in § 192.197. However, the agency notes that if the regulators are modified or replaced after the effective date in § 192.13(b) then the affected components must meet the requirements of § 192.197. PHMSA also notes that operators of service-line farm taps must meet the excess flow valve requirements in § 192.381, 192.383, or 192.385, as applicable.
• What are other requirements operators should be aware of? PHMSA states that an operator of a service line must comply with all applicable requirements in Parts 191 and 192. The agency notes that production or unregulated gathering operators with regulated serviceline farm taps are required to comply with the operator qualification requirements in Subpart N for covered tasks performed on the regulated service line and prepare an O&M Manual with respect to the regulated service line. PHMSA also notes that states with certified pipeline safety programs may adopt additional safety regulations applicable to farm taps.

What are the implications of PHMSA’s proposed farm tap FAQs?

The long-running effort by interested stakeholders to clarify the agency’s farm tap policy continues to produce results. After hearing the industry’s concerns with the 2010 DIMP FAQs, particularly the effect of requiring interstate transmission operators and production and unregulated gathering operators to apply DIMP to farm taps, PHMSA added an exception that allowed operators to comply with the three-year inspection requirements in § 192.740 instead of the DIMP regulations. The agency also issued a notice of enforcement discretion in response to continued industry concerns that allows operators to manage farm taps under either § 192.740 or DIMP, which remains in effect today. Finally, the latest version of the proposed farm tap FAQs seeks to accommodate many of the concerns that industry expressed with the prior farm tap FAQs and other recent guidance documents, including with respect to the classification of source or mainline piping and the applicability of certain requirements in the Part 192 regulations. The industry has the opportunity to further influence these FAQs in the pending comment period.

Notably, PHMSA is no longer taking the position that the service line starts at the tap on the mainline in a farm tap configuration. Instead, the FAQs state that the service line starts at the first isolation point (the inlet of the valve or regulator) downstream from the source or mainline piping. That clarification is very important because the agency’s prior guidance indicated that operators had to treat all piping downstream from the tap as a distribution service line in a farm tap scenario, even if all of the other piping in the system was production, gathering, or transmission. Treating all piping downstream from the tap as part of a distribution service line would have imposed significant compliance burdens on operators without producing any meaningful benefits.

PHMSA has never actually analyzed the costs, benefits or other impacts of applying the gas distribution service line regulations to farm taps. The agency has never added a definition of a farm tap to Part 192 or instituted a specific rulemaking proceeding to acknowledge the status of farm taps as gas distribution service lines. Rather, PHMSA adopted that position in letters of interpretation, guidance documents, and through other rulemakings. Operators have the opportunity to provide cost data to PHMSA through this docket, which would invite the agency to consider such data before issuing final FAQs.

PHMSA notes in the request for comments that as part of the agency’s regulatory review process, it is considering changes to the requirements in § 192.740 due to industry comments that PHMSA had underestimated the costs of compliance with the three-year inspection requirements and that existing DIMP requirements, in conjunction with other current requirements such as leak surveys, could provide an equivalent level of safety. PHMSA previously indicated during public meetings that farm taps would be included in the Gas Pipeline Regulatory Reform proposed rule, which is currently under review at the Office of Management and Budget and will likely be published by the agency in the coming months.

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Litigation Challenges Before the Pa. Environmental Hearing Board

The Legal Intelligencer

(by James Corbelli)

Pennsylvania employs a unique judicial mechanism to resolve legal disputes which arise from final decisions made by the Pennsylvania Department of Environmental Protection (DEP or department). The Environmental Hearing Board (EHB or board) has been hearing appeals from department decisions for almost 50 years. During that time, the EHB has had the exclusive authority to hear and decide appeals from DEP actions. This article will summarize what can be expected in EHB legal proceedings, and highlight certain unique features of EHB litigation. While matters before the board are similar in many ways to matters litigated in state and federal courts, there are written and unwritten aspects of litigation in front of the Board that can only be fully appreciated through experience in matters before the Board.

An initial limitation of the board is that it has limited jurisdiction, as the board can only consider final actions of the department. As a general matter, the department’s issuance of an order, permit or any other DEP final action can be appealed to the board. The DEP action must be a “final” action, which has been the subject of substantial EHB case law.

The final actions before the board can be quite varied and address a wide range of environmental matters, such as DEP decisions that involve oil and gas rights, landfills, mining of coal and noncoal minerals, dams and encroachments, air, drinking water, storage tanks, stormwater management and more. The EHB can hear actions commenced by the DEP, a member of the regulated community, individuals or citizens groups. Matters that are brought before the EHB may involve an appeal of a permit denial, permit approval, order by the DEP for an operator to take a certain action, a penalty assessment for an alleged violation of law, etc. The board sees its role, essentially, as “a buffer between the regulators and the regulated, providing all citizens a forum where they can challenge the actions of the department and receive judicial-like relief.”

The EHB is independent from the DEP. The administrative law judges are appointed by the governor and, after Senate confirmation, have six-year terms. There are currently five EHB judges, and there have been only 24 since the Board’s inception. The judges have considerable subject matter experience, either from prior positions with the department, handling environmental legal matters in the private sector, through years of overseeing cases before the Board, and often a combination of each. As a result, it can be expected by litigants before the Board that the judges will understand and have had substantial experience with similar fact issues, as well as the pertinent environmental statutes and regulations. In contrast, while a state or federal court judge may only rarely hear cases that are governed by an environmental law, the Board only considers matters that are governed by Pennsylvania environmental statutes and regulations. In addition, the board is supported by an experienced staff that equally has considerable experience with Pennsylvania’s environmental laws and the unique characteristics of EHB practice.

The EHB is not part of Pennsylvania’s judicial system, yet in almost every way, the board acts like a court. While the board generally follows the Pennsylvania Rules of Civil Procedure, it also has its own rules, and has developed and regularly updates a detailed practice manual, with citations to opinions, that any practitioner before the Board must regularly consult.

A matter before the board is generally commenced through a notice of appeal, which acts to challenge an action by the DEP and is in some ways similar to a complaint. While there is generally no equivalent to an answer, the progress of an appeal before the EHB proceeds much like a case pursued in state or federal court, although often at a quicker pace. A single EHB judge will be assigned with primary responsibility for each appeal. The board, through the assigned judge, requires that the parties engage in some effort to discuss early settlement and report to the board that such an effort has been made. Of course, many state courts do not require such efforts. Throughout an EHB proceeding, the Board may seek to promote settlement discussions, but there is typically no additional formal process or requirement for the parties to seek an agreed resolution in a case.

Discovery can be robust in matters before the EHB. The board requires that the parties consider electronic discovery issues early in the case, and develop a plan to address electronically stored information. Written discovery is permitted, and generally the Pennsylvania Rules of Civil Procedure apply to the methods and types of discovery. It can also be expected that parties will engage in fact depositions of parties and non-parties. The board will set a pre-hearing discovery schedule at the inception of an appeal, which establishes most pre-hearing deadlines, such as the close of fact discovery and the filing of summary judgment motions. It is generally expected that expert reports will be provided during the fact discovery period, although the EHB rules do not make it clear when expert reports are to be exchanged. Expert depositions are not to be expected in matters before the EHB.

Although the EHB does not conduct what it calls a trial, the Board holds fact hearings, which are in every meaningful way a bench trial. Juries are not available in matters before the board. The EHB does require pre-hearing submissions, which are detailed pleadings which set forth the proposed key facts and legal theories expected to be presented and relied upon at the hearing, the witnesses to appear at the hearing and the documents to be introduced as evidence at the hearing. Parties also have the ability to file motions in limine. The hearing itself is a bench trial before the judge assigned to the appeal. EHB judges are experienced trial judges, with vast experience handling evidence and expert issues. The Pennsylvania Rules of Evidence will typically, but not always, apply and the trial lawyer must be prepared to take the proper steps to introduce evidence, present testimony through witnesses and develop a case theory like they would in any court. Depending on the nature of the appeal, it is common for the judge to request or agree to a site visit. Finally, matters before the board are almost always complex and require expert testimony. As a result of the nature of the disputes before the EHB, a variety scientific disciplines are typically behind the DEP’s final action and need to be evaluated by the board. As a result, expert testimony and the quality of the expert opinions often are the most critical advocacy components of an EHB appeal.

One of the unique features before the EHB is that it hears cases in a de novo capacity. As a result, the Board renders decisions based on evidence presented at the hearing, and is not limited to facts considered by the DEP when the Department decided the final action under appeal. By way of example, if the DEP failed to consider information that the EHB later considered pertinent, the board could consider new evidence at the hearing that had not been before the DEP and then substitute its own discretion for the department’s. The board can also remand the matter back to the department for the department to take additional action. As a result of the de novo nature of EHB appeals, creative lawyering opportunities exist to address possible weaknesses in final actions made by the department.

Following a hearing, parties to an appeal will be required to submit post-hearing briefs, which will include arguments of the parties based on the evidence presented. The board then prepares a detailed adjudication, which sets forth the ruling of the board, including the factual findings and legal conclusions reached by the board. EHB adjudications, which are often quite lengthy and detailed, are determined by all five EHB judges, although an adjudication need not be unanimous. Decisions by the EHB may be appealed to the Commonwealth Court.

In sum, the EHB provides a critical judicial function in important environmental matters in the commonwealth. There is often much at stake for the regulated community, the department and other interested parties. While appeals before the board are frequently complex, the most effective advocacy is found in the presentation of understandable and straightforward fact and expert evidence. Even within the framework of detailed and often convoluted Pennsylvania environmental laws and regulations, the trial lawyer’s role is to present a compelling a story. Classic trial skills, in conjunction with a thorough understanding of the underlying environmental laws and an awareness of the distinctive practice and procedural rules of the board, written and unwritten, are critical in advocating before the EHB.

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Reprinted with permission from the May 7, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.

Montana District Court’s Vacatur of NWP 12 Impacts Pipeline Projects Across United States

Environmental Alert

(by Lisa Bruderly and Ben Clapp)

Repercussions of a Montana District Court’s vacatur of the U.S. Army Corps of Engineers (Corps) Nationwide Permit (NWP) 12 continue to unfold. NWP 12 is widely utilized by pipeline developers, other energy project proponents, and utilities to authorize certain stream and wetland crossings, and any resulting discharge of dredged or fill material into waters of the United States under Section 404 of the Clean Water Act (CWA).

NWP 12 was cast into a state of confusion in mid-April, when a federal judge in Montana, presiding over a challenge to the Keystone XL Pipeline, vacated the nationwide permit, asserting that the Corps failed to comply with the Endangered Species Act (ESA) when the NWPs were last issued in 2017. The court enjoined the Corps from authorizing any activities under the permit, pending completion of Corps consultations with the U.S. Fish and Wildlife Service and National Marine Fisheries Service (collectively, Services) regarding the permit’s impact on listed species or critical habitat. The order, issued in Northern Plains Resource Council, et al. v. Army Corps of Engineers, has resulted in an immediate halt to the review of thousands of pending NWP 12 requests and, unless stayed, is expected to result in lengthy delays and increased costs for companies engaged in the construction and maintenance of pipelines and other utility lines throughout the country.

NWP 12 Scope and Authorization

NWPs are general permits that the Corps issues under Section 404 for certain regulated activities, under certain thresholds of disturbance, which the Corps has determined will have minimal adverse environmental effects. The NWPs are published by the Corps approximately every five years, with the last publication in 2017, when 52 NWPs were issued. Obtaining coverage under a NWP is typically more efficient and less costly than obtaining an individual permit, which triggers project-specific environmental analysis and public comment periods and can take between six months and a year.

NWP 12 is widely relied upon by energy and utility project proponents to permit eligible discharges of dredged or fill material in connection with the construction, maintenance, repair and removal of utility lines, including oil and gas pipelines, water and sewer pipes, and electric, internet, and cable lines. To obtain coverage under NWP 12, the regulated entity must meet the 32 general conditions for all NWPs, as well as any conditions specific to NWP 12, including, in some instances, the submittal of a pre-construction notification (PCN).

The Northern Plains Ruling

In Northern Plains, although the Corps authorized coverage under NWP 12, plaintiffs challenged the validity of the permit, asserting that the Corps violated the ESA when it reissued the permit in 2017 without consulting with the Services for a Biological Opinion.  The court agreed, noting that Corps regulations require formal consultation with the Services if the Corps determines that an action “may affect” listed species or critical habitat. The court found that the dredged and fill activities authorized by NWP 12 may affect such species or habitat, and concluded that the Corps’ failure to initiate formal consultation was arbitrary and capricious. Notably, while the plaintiffs sought only to vacate NWP 12 as applied to the Keystone XL Pipeline, the Corps has signaled that it considers the order to broadly enjoin authorization of any dredged or fill activities under NWP 12 across the country.

On April 27, 2020, the Corps requested a stay pending appeal of that portion of the court’s order that enjoined the Corps from authorizing activities beyond the specific context of the Keystone XL Pipeline, calling the court’s ruling “extremely disruptive.” The court declined to impose an immediate stay but agreed to consider the motion according to an expedited briefing schedule that would allow the court to rule by May 11, 2020. In its motion, the Corps signaled its intent to appeal the order to the Ninth Circuit Court of Appeals if its request for a stay is denied. Upon filing a Notice of Appeal, the Corps would be able to seek another stay pending appeal, this time from the Ninth Circuit. In support of the Corps, on April 29, 2020, the pipeline developer, the state of Montana and industry groups urged the district court to stay the order vacating NWP 12 until the Ninth Circuit resolves the appeal, claiming that the vacatur would have significant consequences for the state and the energy industry in general.

Repercussions for Proposed and Ongoing Pipeline and Utility Line Projects

The Northern Plains ruling and vacatur of NWP 12 broadly affects the permitting of oil and natural gas pipelines, electric utility lines, power lines from wind turbines and generating stations, water and sewer lines and other critical infrastructure. The Corps has reportedly stopped reviewing NWP 12 PCNs, and it appears that the soonest that it could begin processing PCNs again would be after May 11, if the judge grants the Corps’ request for a stay. The Corps has estimated that approximately 5,500 NWP 12 PCNs are currently awaiting review in Corps district offices. The interruption in obtaining NWP 12 coverage will cause delays and, likely, increased costs for completion of projects. Construction windows may be missed for this year, depending on the length of the delay and restrictions related to weather and certain protected wildlife.

If a stay pending appeal is not granted, the Corps may opt to correct the deficiencies identified by the district court by initiating consultation with the Services and then reissuing NWP 12. Given the lengthy timeframes associated with these options, neither would be welcomed by regulated entities with pending PCNs or with plans to soon submit them. Entities may want to proceed with an individual permit or evaluate whether a proposed project may be eligible for Corps coverage under another NWP (e.g., NWPs for certain linear transportation projects (e.g., roads and trails) (NWP 14), minor discharges (NWP 18) or applicable land-based renewable energy production facilities (NWP 51)).

The ruling also raises issues for entities that have received NWP 12 authorization and are proceeding with construction. NGOs have already cited the Northern Plains decision in other lawsuits seeking to stop stream crossing activities for projects authorized under NWP 12. For example, the Sierra Club has filed a lawsuit claiming that prior NWP 12 authorizations issued by the Corps for the Permian Highway Pipeline are no longer valid in light of the Montana District Court decision.

More broadly, the ruling could also affect authorizations under other NWPs, beyond NWP 12, and other types of general permits issued by the Corps, including Pennsylvania’s State Programmatic General Permit (PASPGP-5). We will continue to follow new developments.

Babst Calland’s environmental attorneys have substantial experience with Clean Water Act Section 404 permitting. If you have questions about the ongoing repercussions of the Northern Plains order or Section 404 permitting in general, please contact Lisa Bruderly at (724) 910-1117 or lbruderly@babstcalland.com, or Ben Clapp at (202) 853-3455 or bclapp@babstcalland.com.

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