Oversupply and pandemic bring on need to adapt to a changing market
Babst Calland today published its 10th annual energy industry report: The 2020 Babst Calland Report – The U.S. Oil & Gas Industry: Federal, State, Local Challenges & Opportunities; Legal and Regulatory Perspective for Producers and Midstream Operators.
In this Report more than 50 energy attorneys provide perspective on the current state of the U.S. natural gas and oil production industry and its growth to historic highs due to more than a decade of advances in on-shore horizontal drilling and high-volume hydraulic fracturing. It asserts that despite current challenges, a maturing shale industry is poised for future growth as natural gas and oil producers have driven down the costs of production. Transportation options for moving these natural resources from growing areas of production to customers continue to be built, even with new hurdles from regulators and other stakeholders.
Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. natural gas and oil industry has experienced tremendous growth and change since we first published this Report in 2011. Fast forward to an unprecedented 2020 with a pandemic, a corresponding economic slow-down and oversupply of natural gas and crude oil. With increased public and government pressure, sustained low prices, and less-reliable financing options, resiliency will continue to be the driving force of a dynamic energy market that continues to evolve.”
Report highlights
The Babst Calland Report is an annual review of the issues and trends at the federal, state and local level in the oil and gas industry over the past year. The 102-page Report covers a range of topics from the industry’s business outlook, regulatory enforcement and rulemaking to developments in pipeline safety and litigation trends. The Firm’s collective legal experience and perspectives on these and related business developments are highlighted in this Report, including those summarized below:
- Long-term, U.S. energy production appears poised to continue to outstrip domestic consumption due in some measure to increased consumption efficiency, along with the obvious ramifications from the natural gas revolution.
- The regulatory environment is focused on climate change, reducing emissions, water quality developments, and enforcement. Increased volumes of written agency guidance, enforcement, and penalties continue to challenge the industry.
- Citizens groups continue to actively challenge federal and state initiatives designed to expand natural gas and oil development, creating delays and uncertainties.
- Land use and zoning challenges continue at the local level. Increasing industry headwinds have resulted in a slowdown of new permitting activity amid ongoing challenges and ordinance restrictions.
- Public interest in pipeline safety has grown amid opposition and new rules from the Pipeline and Hazardous Materials Safety Administration in response to increased public and congressional pressure to initiate and finalize new or revised pipeline safety regulations. Operators seek to install new or replace existing pipelines throughout the U.S. while advocacy groups aggressively oppose many pipeline projects.
- Title legislation and court decisions vary by state and basin. In Pennsylvania, for example, Act 85 took effect in January 2020 and defines the conditions in which oil and gas producers may drill a lateral wellbore that crosses between two or more pooled units.
- Although 2019 saw renewed claims of adverse health effects allegedly related to oil and gas development, support for such claims continues to be limited, as now noted by numerous publications.
- Unmanned aircraft systems take hold in the energy sector. Despite the pandemic and its impacts, unmanned aircraft systems (UAS) have emerged as essential tools for the energy industry for conducting complex inspection and monitoring of difficult to access infrastructure and locations.
- From a workforce standpoint, COVID-19 conditions and other wage and hour regulations, amendments to the Family Medical Leave Act, and expanded unemployment benefits under the CARES Act have had an impact on companies across the country.
The natural gas and oil industry continues to expand its reach and impact on U.S. energy supply and independence. Each company has its own set of opportunities and challenges to navigate based on its financing, debt, shareholder goals, and operations and infrastructure footprint. Nonetheless, the United States’ plentiful supply of natural gas and oil is expected to continue to fuel the country’s economic future and support national security.
Request a copy of the Report
Babst Calland’s Energy and Natural Resources attorneys support clients operating in multiple locations throughout the nation’s shale plays. To request a copy of the Report, contact info@babstcalland.com.
Smart Business
(by Adam Burroughs with Molly Meacham)
As states begin to relax restrictions on social gatherings, businesses are trying to reopen in a manner that is safe for their employees, vendors, customers and clients. They’re also trying insulate themselves from the legal exposures they face as they work out a plan to get their business up and running.
“I’m getting a lot of questions from employers who want to do right on all of those fronts,” says Molly Meacham, a shareholder at Babst Calland. “They are really working hard, thinking through the issues, listening to state, local and federal government advice, all while trying to keep their businesses running.”
Smart Business spoke with Meacham about addressing the legal risks that come with operating during the pandemic.
What legal concerns do companies have as they reopen?
The most significant concern is that a company will have an outbreak at their workplace. If that happens, it means considering the company benefits employees should be entitled to, such as sick leave or short-term disability, if they are eligible for leave under the Family and Medical Leave Act (FMLA), if they are covered by Families First Coronavirus Response Act (FFCRA) and eligible for those leaves, or if they’re entitled to any accommodation under the Americans with Disabilities Act.
Another risk is that contracting the illness could lead to a lawsuit or workers’ compensation claim. In a classic workers’ compensation scenario, the employee would need to prove they contracted the virus at the workplace. Some states are reducing employees’ burden of proof, or covering COVID-19 illness for certain groups of employees. For those states that are not making changes, whether or not COVID-19 is covered by workers’ compensation is likely to be a hotly litigated issue.
The regulatory and legal burden on employers has increased dramatically with this pandemic. For example, the Department of Labor has hired a number of new Wage and Hour Division investigators to enforce wage and hour laws, including the new FFCRA. The increased regulatory burden and increased enforcement could lead to administrative action or civil liability for companies found to be in violation.
How can companies reduce their litigation exposure?
Some companies are looking at COVID-19 exposure liability waivers to provide some legal insulation. Those waivers are of limited utility against employee claims, as an employer typically cannot compel employees to waive future rights, their rights under workers’ compensation, or their right to make an OSHA complaint for an unsafe workplace. Therefore, employee waivers are likely to generate bad will and skepticism without much return.
The effectiveness and enforceability of waivers for customers, clients and third parties who are accessing a company’s premises depends on state law and the specifics of the waiver. Although those waivers may ultimately be enforceable in certain states, for some businesses the limited potential legal protection may be outweighed by the negative impact on the company’s business relationships. In addition, in some states those waivers may ultimately be unnecessary, as some states are passing legislation granting businesses immunity from liability for harm caused by COVID-19.
How can companies keep people safe and insulate themselves from legal repercussions?
It’s important to have a response plan in place. If there’s an incident or exposure in the workplace, the company should first care for the impacted employee, then ensure that other potentially impacted employees are promptly notified and removed from the workplace if necessary, and that steps are taken to disinfect the workplace.
For companies that have a plan in place that is compliant with federal, state and local guidelines and regulations, and the company clearly communicated that plan to employees and customers, it will be difficult for a court to second-guess those steps and say that a company should have done more.
These are difficult times. Through preparation, companies can balance safety with continued operations and maintain the safest possible premises for employees and third parties, such as vendors, customers and clients.
For the full article, click here.
For the PDF, click here.
The PIOGA Press
(by Lisa Bruderly and Ben Clapp)
On May 28, the Ninth Circuit denied the U.S. Army Corps of Engineers’ request for an emergency stay pending appeal of a Montana district court’s vacatur of Nationwide Permit (NWP) 12 in Northern Plains Resource Council, et al. v. Army Corps of Engineers, a challenge to the Keystone XL Pipeline. As a result of the denial, NWP 12 remains unavailable for the construction of new oil and gas pipelines. The ruling means continued permitting delays are likely for pipeline developers seeking federal authorization for 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).
A Montana district court’s April vacatur of NWP 12 was based on the judge’s determination that the Corps failed to comply with the Endangered Species Act (ESA) when NWP 12 was last issued in 2017. The decision was interpreted as a broad vacatur of NWP 12, extending beyond permitting of the Keystone XL Pipeline. In a significant positive development for permittees proposing work on existing pipelines, on May 11 the district court narrowed the scope of its original vacatur “to the construction of new oil and gas pipelines” with NWP 12 remaining “in place during remand insofar as it authorizes non-pipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects.”
For pipeline developers, however, the stay sought by the Corps represented the final possibility of continuing to conduct work under NWP 12 during the long appellate process. The Ninth Circuit denied the Corps’ request on grounds that the Corps had not demonstrated a likelihood of success on the merits or probability of irreparable harm if the stay was not granted.
The likely consequences of the denial are significant to pipeline developers and the producers that may have been relying on the construction of certain infrastructure. The ruling increases the possibility that construction windows will be missed for this year, resulting in potential cost overruns and liabilities for failure to meet construction milestones.
Until this matter is resolved judicially or the Corps issues a new NWP 12 consistent with the Montana district court’s remand, pipeline developers will likely need to apply for an individual Section 404 permit to proceed with stream and wetland crossings, generally a far more costly and time-consuming process than receiving authorization to work under an NWP. The timeframes for processing individual permit approvals may be further extended due to a likely influx of applications for projects that can no longer use NWP 12. Another option may be seeking coverage under a different NWP, if applicable.
Click here for PDF.
The PIOGA Press
(by Mike Winek, Gary Steinbauer and Gina Falaschi)
Pennsylvania’s Environmental Quality Board (EQB) published a proposed rulemaking in the May 23 Pennsylvania Bulletin entitled “Control of VOC Emissions from Oil and Natural Gas Sources.” 50 Pa.B. 2633 (www.pacodeandbulletin.gov/ Display/pabull?file=/ secure/pabulletin/data/ vol50/50- 21/684.html). 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 U.S. Environmental Protection Agency. The 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 explained that it moved forward with this proposed rulemaking because:
- DEP reviewed EPA’s reconsideration of the 2016 NSPS and, based on that proposed rule, modified this proposed rulemaking;
- adoption of the proposed rule would help the Commonwealth achieve and maintain the eight-hour ozone NAAQS;
- DEP estimates that proposed control measures would reduce VOC emissions by more than 4,000 tons per year; and
- 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 DEP’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 23 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. Additionally, EQB will hold three virtual public hearings regarding the proposed rulemaking on June 23, 24 and 25
Click here for PDF.
The Legal Intelligencer
(by Anna Skipper and Krista Staley)
For over 100 years, local governments have used zoning regulations, enabled by the police powers delegated from the states, to implement plans for the development of their communities. For just as long, objectors have challenged zoning regulations as exceeding this authority. The Commonwealth Court recently upheld such a challenge in Allen Distribution v. West Pennsboro Township Zoning Hearing Board, No 524 C.D. 2019 (Pa. Commw. Ct. May 11, 2020), finding that West Pennsboro’s decision to change the zoning of two parcels constituted illegal spot zoning.
Zoning ordinances generally enjoy a presumption of constitutional validity. However, an ordinance will be held to be unconstitutional if it is unreasonable, arbitrary or not substantially related to the police power interest it purports to serve. Thus, zoning enabling acts, such as the Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq. (the MPC), require all zoning measures to be substantially related to the protection and preservation of the public health, safety, morality and welfare interests of its community.
Zoning regulations consist of a zoning map and zoning text. Those documents work in tandem; the map divides the municipality, or municipalities in cases of joint zoning, into “districts” while the text provides regulations for each district, imposes requirements for specific uses and outlines various procedures. Under the MPC, either the municipality or a landowner (including a leaseholder or potential buyer) can propose text and map amendments. The amendment process allows municipalities to improve their ordinances by, for example, adapting them to accommodate new and evolving uses. However, when used in a piecemeal fashion to achieve inconsistent goals, amendments may no longer have a reasonable relationship to the police power they must promote.
Objectors who believe a map or text amendment does not relate sufficiently to the police power can file a substantive validity challenge asserting the illegality of the ordinance. The local zoning hearing board, a quasi-judicial board appointed by the local governing body and required in any municipality with zoning, has jurisdiction to hear and decide substantive validity challenges to zoning ordinances. A zoning hearing board decision is appealable to the Common Pleas Court, and then the Commonwealth Court. Further appeal requires the Pennsylvania Supreme Court to grant an allowance of appeal. When engaged in appellate review of a zoning hearing board determination, the appellate court’s scope of review is typically limited to determining whether the board committed an error of law or a manifest abuse of discretion. Reversible error occurs where the zoning hearing board’s findings are not supported by substantial evidence. If the trial court has reason to take additional evidence, it will decide the appeal de novo.
In Allen Distribution v. West Pennsboro Township Zoning Hearing Board, the Commonwealth Court grappled with a substantive validity challenge alleging that a zoning map amendment constituted “spot zoning.” Spot zoning occurs where a parcel is singled out for different treatment than that accorded to similar surrounding land, creating an “island” on the zoning map. Spot zoning may occur organically and innocently through the zoning amendment process, or it may be the result of intentional rezoning of an area for the economic benefit or detriment of a landowner. In either instance, if there was no reasonable basis for the different treatment of the “island,” a challenged zoning ordinance will be stricken as unconstitutional and invalid.
The Allen Distribution v. West Pennsboro Township Zoning Hearing Board case considered the substantive validity of two ordinances amending the West Pennsboro Township (the township) zoning map. The amendments rezoned two large adjacent parcels, totaling 133 acres of land (the property), in anticipation of its sale and development. Allen Distribution, the proposed purchaser and equitable owner of both parcels, applied to the Township Board of Supervisors (the supervisors) to rezone the parcels from “high density residential” to “industrial.” Allen intended to construct industrial buildings on the property. Following public hearings, the Supervisors enacted two identical ordinances (the ordinances) rezoning the land as requested. Neighboring property owners (the objectors) subsequently challenged the substantive validity of both ordinances before the Township Zoning Hearing Board (the board). The board concluded that the objectors sustained their burden of establishing that the ordinances “unjustifiably, arbitrarily, and unreasonably single out land for different treatment than from that accorded to similar surrounding land of the same character for the economic benefit of Allen,” and therefore constituted invalid spot zoning.
Allen appealed to the Common Pleas Court, which affirmed the board’s decision, and Allen again appealed. While Allen did not challenge the board’s determination that the property was being treated differently, or that the property is similar in character to the adjoining properties, it attempted to show that there was reasonable basis for the different treatment, rendering the ordinances a valid exercise of the police power. Allen primarily argued that the large size of the lot, the nature of certain nearby uses, and the fact that the joint comprehensive plan of the township identified the property as a future industrial growth area created a reasonable basis for the different treatment of the property by the supervisors.
The Commonwealth Court engaged in an in-depth discussion of each argument and concluded that there was no error or abuse of discretion in the board’s determination, i.e., that there was no reasonable basis for the different treatment of the property, and the ordinances constituted invalid spot zoning as they unjustifiably, arbitrarily, and unreasonably singled out the property for treatment different than similar surrounding land of the same character for the economic benefit of Allen.
The court first addressed the large size of the property, which it considered a single integrated unit despite the fact that it was, at that time, two separate lots with legal title held by two separate owners. As the court noted, while spot zoning often is found in regards to relatively small parcels, the size of the property is only one factor in determining whether spot zoning has occurred. The main inquiries are whether the land at issue is a single, integrated unit and whether any difference in its zoning from that of adjoining properties can be justified with reference to the characteristics of the tract and its environs. The court concluded that there was no error or abuse of discretion in the board’s determination that the property was a single integrated unit. Therefore, the court dismissed Allen’s argument that the property’s size, in relation to the small size of the adjacent lots and the large size of other industrial-zoned properties in the vicinity, rendered it sufficiently different to warrant differential treatment.
Turning next to its comparison to the surrounding uses, the court noted that properties bordering the property in the township were generally zoned R-2, with the Pennsylvania Turnpike and the neighboring township abutting the remaining borders. Allen argued that the property’s proximity to an area of infrastructure and development, namely parcels located in the adjacent North Middleton Township that did not directly abut the property, justified the rezoning. Relying on Schubach v. Zoning Board of Adjustment (Philadelphia), 270 A.2d 397 (Pa. 1970), the court held that even if the Property rested on the border of industrial-zoned land, it would not automatically justify rezoning it to match. In addition, it noted that it could not “attribute more significance to the use of more distant properties than those properties adjacent to the subject property,” and that “spot zoning would have nothing to do with a spot or an island if the use of nonadjacent properties was more relevant than the adjacent properties.”
Moving on, the court addressed Allen’s argument that the rezoning’s consistency with the township Comprehensive Plan justified the change. Allen pointed to the identification of 31 parcels in the vicinity, including the Property, as “future industrial growth areas” on the comprehensive plan map. However, the township did not rezone any of the other referenced parcels in accordance with the map. Thus, while the rezoning of the property was consistent with the comprehensive plan map as it applied to the property, the court found it was not consistent as it applied to the area as a whole. Turning to the comprehensive plan text, the court noted the document’s acknowledgement of the need for “proper transition between uses as conflicts may arise in some circumstances between neighboring properties.” The court reviewed Schubach v. Silver, 336 A.2d 328, 338 (Pa. 1975) (Schubach II), where the Pennsylvania Supreme Court upheld a rezoning after finding the change creating a “transition zone” and represented the “best buffer” consistent with the comprehensive plan. The court distinguished Schubach II from the case before it on the facts, upholding the board’s determination that rezoning the property did not establish a land use that “best blends in with surrounding different uses.” According to the court, there were “significant differences” between the property and the adjoining parcels zoned R-2.
The court similarly dispensed with Allen’s additional arguments, holding that although “various government entities voted to recommend rezoning in conjunction with their review of the comprehensive plans” and “rezoning will create some benefit to persons other than the owner,” there was still no justifiable reason for treating the property differently than those that surrounded it.
Ultimately, the court found that substantial evidence supported the board’s determination that the rezoning did not promote the health, safety and welfare of the township residents, and therefore there was no error or abuse of discretion in the determination that the ordinances unjustifiably, arbitrarily, and unreasonably singled-out land for treatment different than similar surrounding land of the same character for the economic benefit of Allen, rendering the ordinances invalid as spot zoning.
For the full article, click here.
Reprinted with permission from the June 17, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Energy Alert
(by Robert Stonestreet and Jim Curry)
The United States Forest Service may grant permission for a natural gas pipeline to go underneath the Appalachian Trail, so says the United States Supreme Court in an opinion released on June 15, 2020. Seven of the nine justices voted to reverse a decision by the Fourth Circuit Court of Appeals that had concluded the Forest Service lacked authority to do so for the Atlantic Coast Pipeline (ACP). Only Justice Sonia Sotomayor and Justice Elena Kagan dissented from the decision.
The ACP is a proposed 604-mile pipeline stretching from West Virginia to North Carolina. Approximately 16 miles of the pipeline route goes through the George Washington National Forest, which requires approval from the Forest Service. The Appalachian Trail, a 2,200-mile federally designated footpath from Mount Katahdin in Maine to Springer Mountain in Georgia, also passes through the George Washington National Forest with permission from the Forest Service. The National Park Service administers the Appalachian Trail through various arrangements with the Forest Service. At issue in this case is a 0.1-mile segment of the pipeline that would pass under the Appalachian Trail at a depth of approximately 600 feet. Both the entry and exit locations for this segment of the pipeline would be on private land, would not be visible from the Appalachian Trail, and would not disturb the surface of the trail.
In 2018, the ACP developers obtained the necessary authorizations from the Forest Service to place the pipeline through the National Forest and under the Appalachian Trail. Several organizations challenged these authorizations by arguing that the Forest Service lacked authority to authorize a pipeline to cross under the trail. The Fourth Circuit agreed and vacated the authorizations issued by the Forest Service.
In an opinion by Justice Clarence Thomas, the Court concluded that the various statutes and regulations governing the Appalachian Trail and other national trail systems effectively created a means to establish a right-of-way for the trails to cross National Forest land and other lands. Those statutes and regulations did not, however, effectively convey the land traversed by the trail to the National Park Service or otherwise restrict the Forest Service’s statutory authority to grant rights-of-way to cross the trail. The Court rejected the notion that arrangements between the Forest Service and the National Park Service for maintenance and administration of the Appalachian Trail had effectively converted the trail into lands within the National Park system, which would place them beyond the Forest Service’s authority. Instead, the Court found that the trail enjoyed the benefit of a right-of-way easement through the National Forest while the underlying land is still controlled by the Forest Service. With most easements, the recipient receives rights to use land for a particular purpose, such as to install utility lines or cross into adjacent property. The recipient of an easement typically does not receive ownership or control over how the land is otherwise used. While the National Park Service received easement rights from the Forest Service for the Appalachian Trail, the land traversed by the trail remains under the jurisdiction of the Forest Service. The Forest Service may thus authorize others to cross under the trail. Although not noted in the Court’s opinion, more than 50 other pipelines have obtained easements to cross under the Appalachian Trail and do not interfere with the public’s use of the trail. As Justice Thomas aptly noted: “Sometimes a complicated regulatory scheme may cause us to miss the forest for the trees, but at bottom, these cases boil down to a simple proposition: A trail is a trail, and land is land.”
The Court also observed that portions of the Appalachian Trail crosses lands owned by states, local governments, and private landowners under the authority of easements obtained from those landowners. Under the reasoning adopted by the Fourth Circuit, those portions of the Appalachian Trail, as well as 20 other national trails administered by the National Park Service, could be considered lands controlled by the National Park Service. Such a determination would subject these non-federal lands to all the restrictions and limitations that accompany property governed by the National Park Service, which is something likely not contemplated by the property owners when granting an easement for the trails. As this case illustrates, such a designation could severely restrict the landowners’ ability to grant other easements or otherwise use their property.
If you have any questions about the Court’s decision or its implications, please contact Robert M. Stonestreet at 681.265.1364 or rstonestreet@babstcalland.com or James Curry at 202.853.3461 or jcurry@babstcalland.com.
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EmTech Law Blog
(by Justine Kasznica)
An artist’s rendering of NASA’s VIPER rover, which will roam the Moon’s south pole looking for water ice.
(Source: NASA)
Today, we are thrilled to celebrate with Astrobotic Technology, Inc., a Pittsburgh-based space robotics and lunar transportation and logistics company, on receiving a $199.5 NASA award to send the NASA Volatiles Investigating Polar Exploration Rover (VIPER) to the lunar surface in 2023 to search for water-ice. Not only is this a historically significant mission, as it is the first “resource-mapping” mission of its kind, this is an amazing achievement for a company that that has worked tirelessly for 13 years to prove a new commercial space market. For more information, click here.
Our Emerging Technologies attorneys are fortunate to work with incredible innovators, entrepreneurs and visionaries pushing the frontiers of technology and industry. We love to showcase our clients, especially when they hit notable milestones that may be of interest to our entire Babst Calland EmTech family.
Our newly launched EmTech Blog will enable us to do more of these Client Spotlights, so stay tuned! If you would like your company to be featured, please send accomplishments or highlights to jkasznica@babstcalland.com.
Tags: Emerging Technology, Industry News, Innovation, NASA, Robotics, Technology
The Legal Intelligencer
(by Lisa Bruderly and Daniel Hido)
The Pennsylvania Department of Environmental Protection (PADEP) is proposing significant revisions to its regulations and guidance regarding the permitting of obstructions and encroachments of waters of the commonwealth under 25 Pa. Code Chapter 105. The regulatory revisions, if promulgated, are expected to significantly change the Chapter 105 permitting process by increasing the level of required effort to complete an individual (joint) permit application and potentially increasing the time for the PADEP to review such applications.
The 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. Later this year, the proposed revisions are expected to be presented to the Environmental Quality Board, with a public comment period to follow. The 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.
Proposed Regulatory Changes to Chapter 105
Proposed revisions to Chapter 105 include the following:
Permit Waivers—Addition of six new permit waivers to 25 Pa. Code Section 105.12, including new waivers for temporary environmental investigation activities and for temporary mats and pads used to minimize erosion and sedimentation at wetland crossings.
Alternatives Analysis—Addition of criteria to the alternatives analysis requirements at 25 Pa. Code Section 105.13(e)(viii), including identification of the effects of “reasonably foreseeable future development” within the wetland or watercourse upstream and immediately downstream of the proposed project and demonstration that project alternatives impacting other regulated waters would meet the requirements of 25 Pa. Code Section 105.16, regarding environmental, social and economic balancing.
Impacts Analysis—Addition of requirements for impacts analyses under 25 Pa. Code Section 105.13(e)(x), including detailed analysis of the “potential secondary impacts” (undefined) of a proposed project on an expanded list of resources, including public water supplies, natural areas, areas or structures of cultural significance, parks, recreational areas, historical sites and certain designated streams.
Projects would also require a “narrative discussion and analysis” on water dependency. Projects affecting a wetland 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 Section 105.18a have been met.
Antidegradation—Addition of a requirement under 25 Pa. Code Section 105.13(e)(xii) to demonstrate that the proposed project is consistent with antidegradation requirements under applicable Pennsylvania regulations and the Clean Water Act.
Cumulative Impacts—Addition of a requirement under 25 Pa. Code Section 105.13(e)(xiii) to perform a “projectwide cumulative wetland impact analysis,” including a demonstration that the proposed project does not result in an impairment of wetland resources or major impairment of the wetlands under 25 Pa. Code Section 105.18a.
Environmental Assessment for Aquatic Resource Restoration—Creation of new PADEP criteria to evaluate environmental assessments of projects involving aquatic resource restoration under 25 Pa. Code Section 105.15(a)(4), including consideration of the project’s goals and objectives, wetland delineation and watercourse reports, the resource type and uses, historic and modern land uses, the anticipated aquatic resource restoration improvement and benefit, and various geomorphic, geologic and geotechnical information.
Compensatory Mitigation—Replacement of existing wetland mitigation criteria under 25 Pa. Code Section 105.20a with more expansive provisions applying to all 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 by the PADEP 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.”
The 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 or permittee responsible mitigation site, so long as the mitigation site is located within the same state water plan sub-basin as the project impacts or within the designated watershed boundaries identified by the PADEP.
Draft Final Guidance Regarding Chapter 105 Alternatives Analysis
Among other information, the 21-page Chapter 105 Alternatives Analysis TGD provides an overview of the alternatives analysis process and a template checklist of the items the PADEP expects to be submitted as part of the alternatives analysis demonstration. Example tables for the submittal of information are also provided. The PADEP has indicated that the TGD may be issued for public comment in the second half of 2020. A trenchless technology TGD has also been drafted and is expected to be finalized with the alternatives analysis TGD.
Key Takeaways
The proposed revisions would create expansive new requirements, almost certainly increasing the time and effort required to complete individual/joint Chapter 105 permit applications. These new requirements, if promulgated, will also likely increase PADEP application review times, particularly at the outset when the agency and the regulated community are becoming familiar with the new requirements. Additionally, revised compensatory mitigation criteria could expand the extent of mitigation required for a project. On the other hand, the addition of six new permit waivers means that certain projects may no longer be required to obtain a Chapter 105 permit.
For the full article, click here.
Reprinted with permission from the June 11, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
Emerging Technologies in a Time of Pandemic
(by Ben Clapp, Julie Domike, Gina Falaschi, Justine Kasznica and Boyd Stephenson)
On May 1st, Amazon Prime premiered Upload, the story of a software engineer whose consciousness is transferred to the cloud after his fully autonomous vehicle (AV) rear-ends another car. The accident takes place in 2033. By then, the show imagines, vehicles that drive themselves will be the default. We won’t spoil the ending. But, in the fictional 2033—only 13 years from now—the public is astounded when the vehicle is involved in a wreck. It is an entertaining take on the future. In reality, however, we’ve got a lot of regulations to update if autonomous vehicles (AVs) are going to play the role imagined in Upload.
That’s too bad, given the current state of affairs. As industry commentators have noted, in this time of pandemic AVs could have provided much needed assistance with long-haul shipments, non-contact deliveries of food and other goods, and contact-free transportation of the sick or elderly to and from medical appointments. Some have predicted that the benefits AVs provide during public health crises will help propel them to wider acceptance and regulatory approval. And while there is still much work to be done on that front, there is a solid foundation to build on.
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Pipeline Safety Alert
(by Keith Coyle and Ashleigh Krick)
On June 9, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Notice of Proposed Rulemaking (NPRM) proposing amendments to the gas pipeline safety regulations at 49 C.F.R. Parts 191 and 192. PHMSA explained that the purpose of the NPRM is to ease regulatory burdens identified through internal agency review, petitions for rulemaking, and public comments. The Agency estimates that the proposed amendments will result in approximately $129 to $132 million in annualized cost savings, with the largest cost savings due to amendments related to farm taps and atmospheric corrosion inspections. Comments are due August 10, 2020.
The NPRM covers the following topics:
Proposed Exemptions from the Distribution Integrity Management Program Requirements
- PHMSA is proposing to codify the policy announced in its March 2019 Exercise of Enforcement Discretion by allowing operators of farm taps to maintain pressure regulating devices on farm taps under either the distribution integrity management program (DIMP) requirements or 49 C.F.R. § 192.740. While not defined in the proposed Part 192 amendments in the NPRM, the preamble describes a farm tap as “individual gas service line directly connected to a gas transmission, production, or gathering pipeline.” PHMSA estimates that, based on information submitted by distribution operators, the proposal to allow operators to manage farm taps under DIMP or § 192.740 will result in nearly $42 million in annualized cost savings.
- PHMSA is also proposing to exempt farm taps originating from unregulated production and gathering pipelines from the DIMP requirements, the overpressure protection inspection requirements in § 192.740, and the annual reporting requirements in Part 191. PHMSA’s current position, recently reiterated in the Agency’s proposed farm tap Frequently Asked Questions posted on April 20, 2020, is that farm taps are regulated as distribution service lines and subject to all applicable Part 191 and 192 requirements. PHMSA estimates that the proposed exemptions for farm taps that originate on unregulated production and gathering lines will result in $25 million in annualized cost savings to operators. However, these costs savings are predicated on the assumption that the Agency’s position that any piping downstream from the first aboveground point where downstream piping can be isolated from source piping is subject to regulation as a distribution service line until the outlet of the customer’s meter or the connection to a customer’s piping is legally supported. The NPRM does not result in any meaningful cost savings without these assumptions.
- Lastly, the Agency is proposing to exempt master meter operators from DIMP requirements acknowledging that the DIMP requirements provide little safety benefits as applied to these operators.
Corrosion Control
- PHMSA is proposing to allow operators to remotely monitor cathodic protection rectifier stations. This proposal would codify the position the Agency had already taken in a 2019 interpretation. If operators remotely monitor rectifiers, the proposed amendments would require a physical inspection of the rectifier whenever a cathodic protection test is conducted under § 192.465(a).
- PHMSA is also proposing to extend the atmospheric corrosion control inspection interval for distribution service lines from three years to five years, not to exceed 63 months. If atmospheric corrosion is identified, the inspection interval would revert to the three-year period. Going forward, if no atmospheric corrosion is identified in a subsequent inspection, then the operator could then return to the five-year inspection interval. PHMSA estimates this proposal will result in $61 million in annualized cost savings to distribution operators.
Reporting and Information Collection
- PHMSA is proposing to adjust the monetary property damage threshold in the definition of an “incident” from $50,000 to $122,000 to account for inflation. This threshold has not been updated since 1984 and includes losses to the operator and third parties, but not the cost of lost gas. Regarding gas transmission, gathering, and underground storage, PHMSA found that increasing the monetary property damage threshold to $122,000 would reduce the percentage of events qualifying as reportable due solely to the monetary damage threshold by approximately 27 percent; for distribution pipelines that figure is 48 percent. Although PHMSA proposes $122,000 as the threshold in the NPRM, the Agency committed to base the final figure used in the final rule on the inflation-adjusted amount at the time of publication of the final rule. Equally as important, PHMSA stated that it intends to periodically update the monetary damage threshold in the future. PHMSA is seeking comment on the frequency and method used to update the threshold.
- PHMSA is also proposing to remove the requirement to submit mechanical fitting failure (MFF) reports from §§ 192.12 and 192.1009. Operators would still be required to file incident reports for MFFs. Operators would also need to include a count of MFF incidents in gas distribution annual reports.
Standards Incorporated by Reference for Plastic Pipe
- PHMSA is proposing to incorporate by reference the 2018a edition of ASTM D2513-18a, “Standard Specification for Polyethylene (PE) Gas Pressure Pipe, Tubing, and Fittings” and to adopt corresponding amendments to the plastic pipe design standards to allow a design factor of 0.40 for pipe with a diameter of 24 inches or less.
- PHMSA is also proposing to incorporate by reference the 2019 edition of ASTM F2620, “Standard Practice for Heat Fusion Joining of Polyethylene Pipe and Fittings” and make corresponding amendments to the requirements for joining procedures in §§ 192.281 and 192.283 to clarify that procedures that provide an equivalent or superior level of safety to ASTM F2620 are acceptable. The procedures must be proved to produce strong, gastight joints, operators must document the difference between ASTM F2620 and the alternative procedures, and demonstrate how the alternate procedure provides an equivalent or superior level of safety. PHMSA also proposes other clarifying amendments to § 192.285 and corrects errors from the Agency’s Plastic Pipe Rule published on November 20, 2018.
Test Factor for Pressure Vessels
- PHMSA is proposing to change the test factor for pressure vessels installed since July 14, 2004, from 1.5 times maximum allowable operating pressure (MAOP) to 1.3 times MAOP for consistency with the ASME Boiler and Pressure Vessel Code, and exempt these pressure vessels from the testing requirements in §§ 192.505(b) and 192.619(a)(2) and the test duration requirements in Subpart J. This proposed change is associated with a petition for reconsideration filed by the Interstate Natural Gas Association of America challenging PHMSA’s 2015 final rule that required pressure vessels be tested to 1.5 times MAOP.
- PHMSA is also proposing that pressure vessels that are new, replaced, or relocated after the effective date of the final rule would not be exempt from the test duration requirements in Subpart J. PHMSA proposes to accept pre-installation and manufacturer tests, with certain conditions, for newly manufactured pressure vessels installed after the effective date of the rule.
Other Proposed Amendments
- Welder Requalification: PHMSA is proposing to amend the requirement that welders may not weld with a welding process if they have not engaged in welding with that process within the last six months by extending the time period to 7 ½ months.
- Fabricated Assemblies Pre-test Applicability: PHMSA is proposing to extend the allowance for testing fabricated units and short segments of pipe prior to installation if a post-installation test is not practicable, which is currently permitted for steel pipelines that operate at a stress level greater than 30 percent SMYS, to steel pipelines that operate at a stress level less than 30 percent SMYS and at or above 100 psi. PHMSA is not proposing to extend the pre-testing provisions to pipelines operating below 100 psi, service lines, or plastic pipelines.
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Environmental Alert
(by Lisa Bruderly and Daniel Hido)
The United States Environmental Protection Agency (USEPA) has pre-published a final rule that streamlines the water quality certification requirements under Section 401 of the Clean Water Act (CWA), 33 U.S.C. § 1341 (the 401 Rule). Section 401 requires any applicant for a federal license or permit which will, or may, result in a discharge to waters of the United States (WOTUS) to obtain a certification that the discharge will comply with applicable water quality requirements from the applicable state, authorized tribe or interstate agency (Certifying Authority).
The rulemaking, found at 40 CFR Part 121, is in response to President Donald Trump’s April 10, 2019 Executive Order 13868, which identified Section 401 as “one source of confusion and uncertainty hindering the development of energy infrastructure” and directed USEPA to update its regulations and guidance. USEPA characterizes the 401 Rule as the agency’s first “holistic” analysis of Section 401 since the 1972 Federal Water Pollution Control Act amendments (i.e., the CWA).
The 401 Rule is expected to benefit applicants for federal permits or licenses which will, or may, result in a discharge from a point source to WOTUS, including applicants seeking National Pollutant Discharge Elimination System (NPDES) and Section 404 permits, as well as hydropower and pipeline licenses issued by the Federal Energy Regulatory Commission (FERC) by (1) narrowing and streamlining the certification process, (2) limiting the scope of Certifying Authority review/response, and (3) capping the amount of time that Certifying Authorities can review a certification. The Rule comes in response to state attempts to delay natural gas pipelines and other energy-related facilities through extended Section 401 certification processes, requiring applicants to address a number of considerations unrelated to water quality, including climate change.
Key takeaways from the 401 Rule include the following:
The scope of Certifying Authority review has been significantly restricted. The 401 Rule restricts a Certifying Authority to determining whether the discharge will comply with “water quality requirements” (limited to only certain enumerated sections of the CWA or state water quality requirements for point source discharges to WOTUS) and prohibits consideration of: (1) impacts from the activity as a whole, (2) state requirements unrelated to water quality, and (3) compliance with water quality requirements for waters that are not WOTUS. This provision specifically restricts a Certifying Authority’s ability to impede projects by requesting information on climate change, “air quality or transportation concerns, public access to waters, energy policy, or other multi-media or non-water quality impacts,” or to deny certifications based on such considerations.
Appropriate responses to certification requests have been clarified. The Certifying Authority must take one of four actions in response to a certification request: (1) grant; (2) grant with conditions necessary for the discharge to meet water quality requirements; (3) deny; or (4) waive the certification requirement. If the Certifying Authority denies the request, it must identify the specific water quality requirements with which the discharge will not comply, explain why the discharge will not comply, and, if the denial is due to insufficient data or information, identify what data or information would be needed to assure the discharge will comply.
While Section 401(d) allows the Certifying Authority to grant the certification with conditions necessary for the applicant to comply with water quality requirements or “any other appropriate requirement of state law,” the 401 Rule clarifies that a Certifying Authority may only impose conditions related to state water quality requirements for point source discharges into WOTUS. In addition, when imposing such conditions, a Certifying Authority must explain why the conditions are necessary to assure the discharge will comply with water quality requirements and include a citation to the law that authorizes the condition. This provision will require Certifying Authorities to be very clear in their response to certification requests.
The time frame for review has been capped at one year. Section 401 requires the Certifying Authority to act on a certification request within a “reasonable” time not to exceed one year. The 401 Rule clarifies that the one-year limit is an absolute deadline, after which the Certifying Authority will be deemed to have waived certification. The time frame may not be tolled for any reason, including the Certifying Authority requesting the applicant to provide additional information or to withdraw and resubmit the request. However, an applicant voluntarily withdrawing and resubmitting a request restarts the time frame.
It is important to note that the required review time frame can be less than one year. Within 15 days of receiving an applicant’s request for certification, the federal permitting agency will prescribe the “reasonable” time for the Certifying Authority to act on the request by issuing one of the four decisions discussed above.
The certification will be deemed waived if the Certifying Authority: (1) does not act on the request, (2) does not issue one of the four required decisions, or (3) issues a decision that does not comply with the requirements of the 401 Rule. Imposing a one-year (or shorter) time frame for responding to certification requests will assure that the Section 401 certification process will not unnecessarily delay federal projects for extended time frames.
A meeting with the Certifying Authority must be requested prior to submitting a request for certification. The 401 Rule requires an applicant to request a meeting with the Certifying Authority a minimum of 30 days prior to submitting a request for certification. However, the Certifying Authority can decline such a request.
Next Steps
The final rule will be effective 60 days after publication in the Federal Register. NGO and state challenges to the final rule are expected.
Babst Calland’s environmental attorneys are closely monitoring this rulemaking. If you have questions about the final rule, please contact Lisa M. Bruderly at 412.394.6495 or lbruderly@babstcalland.com or Daniel P. Hido at 412.394.6580 or dhido@babstcalland.com.
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The Legal Intelligencer
(by Brian Lipkin)
The Occupational Safety and Health Administration (OSHA) is the federal agency that enforces workplace safety and health rules. On May 19, OSHA issued two enforcement memos outlining its plans to inspect workplaces during the COVID-19 pandemic. These memos took effect on May 26.
As workplaces reopen, here is what employers can expect:
- High Exposure Workplace Inspections
When employees go back to work, OSHA anticipates an influx of COVID-19-related complaints. As a result, OSHA will prioritize inspections of workplaces with “high” and “very high” risks of COVID-19 exposure, including medical facilities, nursing homes and clinical laboratories.
OSHA is less likely to visit workplaces with medium- and low-risk levels, meaning that employees have less frequent and less close contact with the public. So, retail stores and offices are unlikely to have an OSHA compliance officer pay a visit. If OSHA receives a complaint about a medium- or low-risk workplace, it will typically send a letter, ask the employer to respond in writing and close the inspection without any in-person contact.
- Allowances for Unavailable Equipment
OSHA requires all businesses to provide workers with personal protective equipment. Depending on the type of workplace, equipment to protect against COVID-19 can include masks, gloves and hand sanitizer.
Having shopped at Target recently, OSHA compliance officers understand many businesses can’t purchase these items because they are in limited supply. OSHA will use its discretion in citing employers that have acted in good faith, so employers should document their attempts to purchase any equipment that is unavailable.
If a business can’t purchase the right protective equipment, it should consider changing workplace rules to limit exposure risks. For example, capacity controls or schedule changes could limit the number of people who come close into close contact with each other.
Next, the enforcement memos suggest that businesses should consider the pros and cons of using any expired equipment they may have. As a last resort, businesses can consider improvising with the protective equipment they are able to obtain.
- Recordkeeping Requirements
As part of an inspection, OSHA is likely to ask employers for written records. For example, OSHA requires all employers to conduct a “hazard assessment,” which involves deciding whether the workplace presents risks which require employees to use personal protective equipment. OSHA also requires employers to document in writing that they have done this assessment. Employers may need to update hazard assessments to take into account COVID-19 risks, and should document any changes.
Employers should also be prepared to share with OSHA any policies and training materials relating to COVID-19. When employers provide training, it is a best practice to create a sign-in sheet documenting the name and date of each employee’s session.
Finally, OSHA requires certain employers to keep an OSHA 300 Log listing work-related injuries and illnesses. (Employers with 10 or fewer employees, and employers in certain low-risk industries, are exempt from this requirement.) In deciding whether an illness is work-related, the employer must consider whether an exposure in the workplace caused or contributed to the condition. While this standard might seem straightforward, it can be difficult or impossible to identify how an employee contracts COVID-19, leading employers to be uncertain about how they should report these illnesses.
In its enforcement memos, OSHA clarifies that if an employee gets the COVID-19 virus, the employer does not need to “undertake extensive medical inquiries” to determine whether to report the illness on its OSHA 300 Log. Instead, the employer should use common sense to evaluate the most likely source of infection. For instance, if an employee does not have frequent contact with the general public, and was the only employee in the workplace with COVID-19, the transmission probably occurred outside of work, and likely would not need to be reported.
Now is the best time for employers to prepare for a potential OSHA inspection. Based on these enforcement memos, we expect OSHA to prioritize inspections of high-risk workplaces, require employers to use good faith to obtain appropriate protective equipment, and request records showing efforts to limit COVID-19 risks.
For the latest updates on OSHA’s response to COVID-19, employers can visit OSHA’s website at osha.gov/covid-19.
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Reprinted with permission from the June 4, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.
RMMLF Mineral Law Newsletter
(By Joseph K. Reinhart, Sean M. McGovern 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.
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
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.