Emerging Technologies Alert
(by Justine Kasznica, Ashleigh Krick and Boyd Stephenson)
On January 8, 2020, the Trump administration, in collaboration with the U.S. Department of Transportation (US DOT), issued Automated Vehicles 4.0: Ensuring American Leadership in Automated Vehicle Technologies. This is the federal government’s fourth iteration of its voluntary guidance on autonomous vehicles (AVs). So far, the US DOT’s hands-off approach to AV regulation has allowed for technological innovation while allowing industry participants and states to explore different avenues for testing AV technologies on public roads. AV 4.0 does not disturb this approach, and instead focuses on explaining the research and development happening across the federal government and the opportunities for stakeholders to become involved.
Background
In September 2016, the National Highway Traffic Safety Administration (NHTSA) issued its first guidance on AVs called the Federal Automated Vehicles Policy. The Policy provided a model state policy framework, explained NHTSA’s current regulatory tools to address AVs, and described potential new tools and authorities that NHTSA could use in addressing AVs. NHTSA also provided vehicle performance guidance to AV manufacturers and developers for designing, testing, and deploying AVs.
NHTSA replaced this guidance in September 2017 with Automated Driving Systems 2.0 (ADS 2.0). ADS 2.0 established a “Voluntary Safety Self-Assessment”, recommending that entities engaged in the testing and deployment of AV technologies voluntarily submit an assessment of how they address safety to establish public trust and confidence in the technology. AV 2.0 outlined 12 safety elements (including system safety, operational design domain, crashworthiness and others). By the end of 2019, only a small fraction (under 25 percent) of AV testers published such assessments. ADS 2.0 also provided guidance to state legislatures on potential legislation and best practices for regulatory bodies charged with ensuring roadway safety.
US DOT released Automated Vehicles 3.0 (AV 3.0) in October 2018, which established six principles that US DOT and its operating administrations would use in establishing federal AV policy and regulations across all modes of transportation. AV 3.0 expanded on previous versions and included best practices for state, local, and tribal governments allowing testing within their jurisdictions. Together, ADS 2.0 and AV 3.0 provided a strong framework for companies designing and testing AVs in assessing system safety and provided states with an idea on how to approach regulating AVs in their states.
What is Automated Vehicles 4.0 (AV 4.0)?
AV 4.0 builds on ADS 2.0 and AV 3.0, but takes a different approach. AV 4.0 is not focused on US DOT alone, but instead compiles research, development, and efforts to support AVs across the federal government. AV 4.0 imposes no new legal or regulatory burdens for AV developers and testers, nor otherwise changes the current federal regulatory framework, but instead it supports stakeholders with voluntary guidance and issues a repository of programs that stakeholders can become involved in with the federal government.
AV 4.0 establishes 10 core principles that the federal government will follow in setting AV policy that will ensure safety, promote innovation, and lead to a consistent regulatory approach. Those principles build on the principles established in AV 3.0, and include:
- Prioritizing Safety
- Emphasizing Security and Cybersecurity
- Ensuring Privacy and Data Security
- Enhancing Mobility and Accessibility
- Remaining Technology Neutral
- Protecting American Innovation and Creativity
- Modernizing Regulations
- Promoting Consistent Standards and Policies
- Ensuring a Consistent Federal Approach
- Improving Transportation System-Level Effects
AV 4.0 signals a continuation of a federal policy designed to leave industry at the wheel of AV development. As such, the AV industry is left to continue to navigate and help shape state laws and regulations related to AV testing and development. State and local governments are similarly left to implement the principles and best practices established in prior US DOT guidance documents. Meanwhile, AVs continue to operate on public roads as interest in the technology increases, both from entities seeking to test and deploy AVs and from the public.
What’s Next?
Current federal regulations, when applicable to AVs at all, are antiquated and result in unintended barriers to AV deployment. For example, NHTSA’s Federal Motor Vehicle Safety Standards, promulgated pursuant to the National Traffic and Motor Vehicle Safety Act of 1966, include references to human drivers, foot pedals, steering wheels, or concepts that are unnecessary or inapplicable to AV technology. While NHTSA has issued several Requests for Information and Advance Notices of Proposed Rulemaking, the Agency has yet to propose any concrete changes that stakeholders can debate. Additionally, NHTSA has not yet responded to two requests for exemption from the Federal Motor Vehicle Safety Standards from companies requesting permission to deploy driverless-AVs on public roads.
Federal legislation remains stalled in Congress, resulting in a patchwork of state regulation. As a result, companies must juggle different requirements in each jurisdiction. Because companies cannot operate in all states, choosing a state can be tantamount to selecting winners and losers among them. A company’s operating decisions are necessarily based on each state’s laws and regulations, risking pitting states against each other in a race to the bottom where safety is the ultimate loser. Federal action is needed to promote nationwide deployment of AVs across state borders and in all modes of transportation. Currently, House and Senate committees are drafting legislation and have been periodically seeking input from stakeholders. But, a highly polarized Congress sitting in an election year may lack time to consider legislation on issues both parties agree merit their attention, including AV policy.
Babst Calland will be releasing a White Paper that comprehensively reviews current federal efforts and the patchwork of state approaches to AV regulation. To request a copy, contact info@babstcalland.com.
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Environmental Alert
(by Julie R. Domike and Gina N. Falaschi)
A new regional program under consideration in 12 Northeast and Mid-Atlantic states and the District of Columbia would create a cap-and-invest program for GHG emissions from fossil fuels used in transportation. The initiative proposed by the Transportation and Climate Initiative (TCI) – a regional collaboration of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia that seeks to improve transportation, develop the clean energy economy and reduce carbon emissions from the transportation sector – would be similar to the Regional Greenhouse Gas Initiative (RGGI), which administers a cap and trade program for power plant GHG emissions.
TCI released a draft memorandum of understanding (TCI MOU) on December 17, 2019, which anticipates that each participating jurisdiction will follow its legal process to adopt a program consistent with a jointly developed Model Rule to implement the final TCI MOU. TCI plans to finalize the Model Rule by the end of 2020 after a 60-day comment period and expects that the TCI cap-and-invest program could be implemented in 2022.
The cap and invest program would begin with an initial GHG emissions allowance cap assigned to each participating jurisdiction, which would then decline each subsequent year to bring about a reduction of emissions from the transportation sources. These emission allowances would be distributed at auctions, and funds generated from these auctions are anticipated to fund low-carbon and clean mobility options in urban, suburban, and rural communities. The contemplated program will cover all gasoline and on-road diesel fuel dispensed at the terminal rack and require fuel suppliers to hold emissions allowances equal to the GHG emissions from the fuel they distribute in the participating jurisdictions.
The proposed TCI MOU defines two types of regulated “State Fuel Suppliers:” “Position Holders” and “Enterers.” Position Holders are defined as owners of the fossil fuel component of motor vehicle gasoline and on-road diesel fuel at terminals delivering across a terminal rack upon removal from a storage facility. Enterers are defined as owners of the fossil fuel component of motor vehicle gasoline and on-road diesel fuel that is delivered into a participating state from a facility in another jurisdiction for final sale or consumption in the participating state. While not entirely clear from the definitions, potential regulated entities could include refining companies and large convenience store and fuel station operators with operations in the TCI member states. The TCI MOU also anticipates that other owners and operators of the fuel supply infrastructure, such as pipelines, terminals or distributors, may also be subject to reporting or recordkeeping obligations under the program.
Many key points remain unresolved in the draft MOU, including: the initial cap for covered fuels, allocation of emission allowances, schedule for future emission reductions, initial compliance period, stability mechanisms such as a reserve of allowances, whether to allow the use of carbon offsets, auction mechanisms and a minimum reserve price, investment of proceeds, and governance of the group.
TCI is seeking public comment on these and any other issues; comments must be submitted by Friday, February 28, 2020. The comment period presents the opportunity to share views and raise questions about the initiative, and to have an impact on the final program. Potentially regulated parties may want to comment on such issues as the anticipated impact of the program, administration of the program, reporting obligations, or interaction of the TCI cap-and-trade program with other regulatory schemes (such as the EPA Renewable Fuels Standard Program).
For a more detailed assessment of this proposed initiative or assistance in drafting and submitting a comment before February 28, 2020, please contact Julie Domike at 202-853-3453 or jdomike@babstcalland.com or Gina Falaschi at 202-853-3483 or gfalaschi@babstcalland.com.
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(by Mychal Sommer Schulz)
The West Virginia Supreme Court of Appeals recently signaled that it would treat arbitration issues under the West Virginia Revised Uniform Arbitration Act, W. Va. Code § 55-10-8, et. al. (the “Act”), exactly the same as arbitration issues that arise under the Federal Arbitration Act (FAA).
In Golden Eagle Resources II, L.L.C. v. Willow Run Energy, L.L.C., No. 19-0384 (Nov. 19, 2019), the Court addressed a written contract by which Willow Run conveyed mineral interests in property to Golden Eagle. The written contract contained an arbitration provision by which the parties agreed that any “disagreement between the Parties concerning this Agreement or performance thereunder” would be submitted to arbitration. A dispute arose about whether a cloud on title existed on the mineral interests conveyed, which led Golden Eagle to withhold payment for those interests, after which Willow Run filed a breach of contract civil action in the Circuit Court of Pleasants County.
Golden Eagle sought to dismiss the civil action and have the dispute referred to arbitration. After the circuit court agreed to allow Willow Run to amend its complaint to include a declaratory judgment claim against additional defendants who allegedly may have created the cloud on title, the circuit court refused to refer Golden Eagle’s claims to arbitration because it found that (1) W. Va. Code § 51-2-2(d) (2017) grants circuit courts jurisdiction “to remove any cloud on the title to real property, or any part of the cloud, or any estate, right or interest in the real property[,]” and (2) the additional parties in the amended complaint, who were not signatories to the arbitration agreement, were necessary parties to the dispute as they allegedly may have cause the cloud on the title to the mineral interests conveyed to Golden Eagle.
The Court reversed the circuit court and found that disputes concerning clouds of title to any real estate, right, or interest in real property were subject to arbitration under the Act because § 51-2-2(d) does not grant exclusive jurisdiction over such disputes to a circuit court. More importantly, the Court rejected the circuit court’s reasoning that, “[a]s a matter of public policy, property rights are not subject to arbitration.” Golden Eagle at 13. Instead, the Court emphasized that the Act allows “any existing or subsequent controversy arising between the parties” to be submitted to arbitration. Golden Eagle at 14 (emphasis in original). The Court concluded that the West Virginia Legislature’s “use of the word ‘any’ . . . is not superfluous language, but was intended to mean that parties may craft binding arbitration agreements to cover disputes of whatever kind they may choose.” Golden Eagle at 14.
The Court also determined that the presence of non-signatories to the arbitration agreement in the civil action did not defeat the validity or application of the arbitration agreement between Golden Eagle and Willow Run. The Court recognized that sending the dispute between Golden Eagle and Willow Run to arbitration, while Willow Run’s declaratory judgment claim against the other defendants remained in the circuit court, would result in “piecemeal” litigation that was potentially inefficient and inconsistent. The Court, however, relying explicitly on its decision in State ex rel. Johnson Controls, Inc. v. Tucker, 229 W. Va. 486, 729 S.E.2d 808 (2012) (which addressed the arbitrability of claims under the FAA that resulted in piecemeal litigation), found that the circuit court “must enforce [under the Act] the bargain of the parties to arbitrate, even where the result might be the inefficient maintenance of separate proceedings in different forums.” Golden Eagle at 16.
Like many courts around the country, the West Virginia Supreme Court of Appeals has addressed a variety of arbitration issues in the past decade as businesses significantly increase the use of arbitration provisions in a wide variety of transactions, including mineral leases. Most of the resulting decisions have been decided under the FAA as the transaction in dispute involves interstate commerce. Golden Eagle offered the Court a rare opportunity to address an arbitration issue that arose solely under the Act instead of the FAA because the property involved was located completely within West Virginia.
Nonetheless, the Court adopted both an analysis and a result that mirrored its prior cases decided under the FAA, thereby signaling that it viewed West Virginia law in the Act as mirroring the law under the FAA. Because of this, parties to a mineral lease that include an arbitration provision can be confident that arbitration issues under West Virginia law will be treated the same as under federal law.
Law Journal Newsletters
(by Christian A. Farmakis)
Babst Calland and our technology affiliate, Solvaire, have been performing complex due diligence, discovery, and document management projects for clients for more than 20 years. Our clients look to us for due diligence guidance in the areas of acquisitions and divestitures, as well as complex corporate, commercial and real estate transactions.
The firm has a long history of utilizing the latest technologies to enhance contract review. And, in the last few years, the firm has taken a deep look at AI-assisted review and its ability to enhance efficiency and reduce cost for clients. Saying that we have become “AI Believers” in the process is an understatement. After many AI tool evaluations, trials, and getting numerous AI projects under our belts, we have become our clients’ go-to resource in leveraging AI for their benefit.
Taking Off On an AI Journey
In today’s business climate, clients demand greater efficiency when it comes to contract review for many complex deals and transactions. We have found that the combination of deep legal expertise, coupled with embracing carefully researched and vetted technology, is the most effective means of delivering high quality and timely review in an increasingly competitive marketplace.
Over the last few years, our firm has embarked on an exhaustive search for tools that will help us deliver more value to our clients. We spent the first 36 months of our AI journey reviewing nine different well-known contract review tools. Within the last 12-18 months, we have incorporated specific tools into the firm’s due diligence and contract management processes. We are particularly excited about our selection of Diligen, which we find to be a high-performance contract review platform. In the end, we chose Diligen for its intuitive and flexible interface, robust performance, and its ability to handle large volumes of contracts.
Many of the other vendors we vetted did not consider the time constraints under which acquisitions have to take place. We found that Diligen was flexible, enabling us to implement the product quickly to meet even the most unreasonable diligence deadlines. Diligen is quickly becoming one of our core engines within our processes for driving even more effective and reliable client service delivery for contract review.
With our new intelligent tools and enhanced processes in place, we are now able to identify specific language — such as assignment, change of control, term, or termination provisions — in hundreds of thousands of contracts. This allows us to provide our clients with rapid and deep insight into their contracts, uncover potential risk, and provide informed legal advice on much shorter timelines.
Beyond ROI
While much of the return-on-investment for AI tools is measured in time and cost savings, there is also significant value in risk mitigation. AI-assisted review enables comprehensive client contract review rather than limiting the review to a smaller subset of documents due to time and budget constraints. Highly trained machine learning systems can act as an “early warning system” to ensure all contracts with potential issues are surfaced and tagged for careful human review much earlier in the project. In the M&A due diligence process, for example, being able to identify all the change of control provisions in a set of contracts early in the review (as opposed to finding them sequentially as the reviewers plow through a portfolio of documents), reduces the risk of uncovering serious red flags in contracts that otherwise may not be discovered until just before closing. It can mean having enough time earlier in a project to obtain a necessary consent, send out a notice, or otherwise comply with other deal-damaging obligations, rather than requiring a last-minute scramble that may ultimately allow issues to slip through the cracks. Being able to thoroughly review a new last-minute set of contracts provides additional peace of mind that all critical issues have been identified, even under tight timelines.
Here are some key takeaways we have after our first year of AI-powered review:
- AI due diligence triage: We are able to quickly sort documents by type and content to get a better overall sense of the scope of the review, what resources will be needed on our side, and which contracts to review first. We are then able to advise the client within the first 48-72 hours with an update on our anticipated review timelines.
- Relevancy means speed: Completing large scale contract review the old-fashioned way can be painstaking, particularly when utilizing attorneys who are inexperienced in a given subject matter. Legal teams that don’t leverage the right AI tools spend a high proportion of their time sifting through volumes of lower priority documents, looking for the most relevant language. Leveraging Diligen, for example, we were able to identify all of the assignment provisions in a set of 350,000 contracts as a starting point for our review. With the right tools and processes, we were able to produce detailed, high quality review on an aggressive timeline.
- Invisible AI: Well over a year into leveraging AI tools for our clients, we never hear “wow, we are so excited that you used AI”. Instead, we might get the occasional “I can’t believe how quickly you delivered that review, how did you do it?” For the most part, we have silently and effectively worked AI into our best practice service delivery.
- Processes and Methodologies Matter: Sound project management skills are still necessary to properly implement these types of projects. Effective setup, document intake and processing, project scheduling, employee management, and quality control are all heavily contributing factors to a successful project. Having these factors in addition to a robust AI tool are certainly the difference between an excellent and average (or below average) experience.
- (Self) Training makes perfect: Based on our evaluations and testing, only a small selection of tools on the market can be trained to recognize new types of clauses by the user. An even smaller number work well and quickly enough to be truly trustworthy and usable. This ability to train the tool to recognize new concepts extends our review capability by allowing the review team to quickly add to the library of pre-existing clause types that the tool can recognize when needed. This is especially critical when encountering varying subset types of documents within a portfolio.
- Thinking bigger with AI: Since deploying AI tools to help address our clients’ due diligence and review needs, we have been able to do thorough reviews far faster while offering pricing certainty. We can now take on bigger projects — and deliver them faster — thanks to our streamlined, best practices process.
After an extensive period of tracking the development of various contract review and other AI tools on the market we’ve selected best-in-class technology to work in tandem with our well-established processes for contract review. For law firms and legal teams, choosing the right tools — as well as having the right know-how to leverage them fully — is key to delivering high quality legal services effectively, affordably and on time.
Reprinted with permission from the January 2020 edition of Law Journal Newsletters. © 2020 ALM Media Properties, LLC. All rights reserved.
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Attorney Richard S. Wiedman Joins Firm
PITTSBURGH, PA – Babst Calland announced today the addition of veteran environmental attorney, Richard S. Wiedman, who joined as a shareholder at the Firm’s Pittsburgh headquarters.
Mr. Wiedman is joining Babst Calland’s team of highly-focused environmental attorneys in providing senior-level legal and regulatory counsel, particularly in the areas of environmental, permitting, environmental business counseling, and environmental litigation.
“We are very pleased to welcome Rick to our Firm and to our established team in Pittsburgh. I have known Rick for over 30 years and he is a natural fit for us as he shares our values, experience, and philosophy in serving clients, some with whom we already have existing relationships,” said Donald C. Bluedorn II, Managing Shareholder of Babst Calland. “Rick is a great addition as we continue to expand Babst Calland’s team and capabilities to serve the needs of existing and new clients across the country.”
Since 1980, Mr. Wiedman has represented clients before federal and state environmental agencies, and counseled clients on regulatory compliance issues and environmental considerations in a variety of business transactions. He also devotes significant time to the negotiation and prosecution of environmental permit and regulatory challenges, the defense of federal and state enforcement actions, and the representation of clients in remedial action/corrective action and cost recovery matters under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund), the Resource Conservation and Recovery Act (RCRA), and their state counterparts.
His experience reflects the interrelationship of the major regulatory programs as they pertain to industrial activities. Many of the projects with which he is involved require the coordination of multidisciplinary efforts where creative engineering and technical approaches are often critical to the development and success of legal and regulatory strategy. In this regard, he works closely with experts and outside consultants in diverse fields including engineering design, analytical and applied chemistry, hydro-geology, marine biology, meteorology, and computer dispersion modeling.
Commenting about his lateral move to the Firm, Mr. Wiedman said, “I am pleased to be joining Babst Calland’s well-established environmental team representing industry. It is an exciting time for me to become part of a nationally-recognized firm grounded in environmental law.”
Mr. Wiedman earned his B.A. from Tufts University and his J.D. from Case Western Reserve University School of Law.
Environmental Alert
(by Christopher B. “Kip” Power)
The West Virginia Department of Environmental Protection (WVDEP) recently released a new tool consisting of a standardized method for the functional assessment of wetlands, known as the West Virginia Wetland Rapid Assessment Method (WVWRAM). According to the WVDEP’s public notice accompanying its release, the WVWRAM represents the agency’s first effort to devise a state-specific protocol that will rate not just the quantity and type of wetlands, but also their chemical, physical, and biological integrity in arriving at a regulatory score. For permitting and mitigation scenarios (including off-site mitigation and creation of mitigation banks), that WVWRAM score will then be used as an input into the existing functional assessment tool known as the “West Virginia Stream and Wetland Valuation Metric” or “SWVM.”
The WVWRAM was developed as a part of the WVDEP’s federally-funded Wetland Program Plan and has been in the works for at least five years, with field testing in 2017 and 2018 that involved some 22 stakeholder organizations. In addition to the WVWRAM computer model, the WVDEP released an 11-page Field Form (data sheet), a User Manual, and a Reference Manual that were prepared by WVDEP scientists. The WVDEP plans to work with the U.S. Army Corps of Engineers and the Inter-Agency Review Team (IRT) to incorporate the WVWRAM into Clean Water Act Section 404 permitting for sites in West Virginia, and in the preparation of corresponding mitigation plans that are required to compensate for unavoidable loss or damage to wetland resources caused by permitted activities. According to the WVDEP press release, five two-day WVWRAM training workshops were held in 2019, with 122 participants from 40 organizations completing the necessary training to use the new protocol.
Generally, the agency does not expect there will be any change to the average amount of mitigation required for Section 404 projects in West Virginia, but mitigation required for individual projects will change, as the loss of low-functioning wetlands will require less mitigation than before and destruction of higher-functioning wetlands will require more mitigation. Given the amount and detailed nature of the data that will be required to be gathered and compiled, it is reasonable to expect that this new tool will increase both the time and expense associated with wetlands delineations in West Virginia.
The WVWRAM has not yet been adopted as a WVDEP policy mandate for projects involving wetland impacts but it is expected to be finalized early this year. The WVDEP has established a deadline of January 31, 2020 for interested persons to provide “comments and information” regarding the WVWRAM to its Watershed Assessment Branch. More information is available on the WVDEP’s website at https://dep.wv.gov/WWE/watershed/wetland.
If you have any questions about the WVDEP Wetlands Program, the WVWRAM, or Clean Water Section 404 permitting and mitigation in West Virginia, please contact Christopher B. “Kip” Power at (681) 265-1362 or cpower@babstcalland.com.
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RMMLF Mineral Law Newsletter
(By Joseph K. Reinhart, Sean M. McGovern, Hannah L. Baldwin)
EQB Approves Changes to Water Quality Criterion Limit
At its December 17, 2019 board meeting, the Pennsylvania Department of Environmental Protection’s (PADEP) Environmental Quality Board (EQB), a 20-member independent board that reviews and adopts all PADEP regulations before publication for public comment, approved PADEP’s proposed rulemaking to set a new ambient water quality criterion limit for manganese. See Proposed Rulemaking Preamble, PADEP, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019); see also Vol. XXXVI, No. 3 (2019) of this Newsletter.
The amendments to water quality standards and standards implementation for manganese were developed pursuant to an October 30, 2017, amendment to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, known as Act 40 of 2017, directing the EQB to promulgate a manganese water quality criterion within 90 days. See Water Quality Standard for Manganese, 48 Pa. Bull. 605 (Jan. 27, 2018) (advance notice of proposed rulemaking). The Pennsylvania General Assembly passed the Administrative Code change as part of a budget package, with the requirement related to manganese regulation added as an amendment in the Senate.
The amendments approved by the EQB in December 2019 propose to delete manganese from Table 3 at 25 Pa. Code § 93.7 (relating to specific water quality criteria) and add manganese to Table 5 at 25 Pa. Code § 93.8c (relating to human health and aquatic life criteria for toxic substances), changing the numeric water quality criterion standard for manganese from 1 mg/L to 0.3 mg/L. Additionally, the amendments propose two alternatives for a point of compliance with the manganese water quality standard:(1) the point of all existing or planned surface potable water supply withdrawals; or (2) maintenance of the existing point of compliance of all surface waters (i.e., near the point of discharge). If adopted, coal mines, power plants, and other manganese dischargers will face increased treatment costs, regardless of which point of compliance option is implemented. PADEP recommended a 45-day public comment period, including one public hearing to be held in the Harrisburg area.
The proposed rule will be published for public comment in a forthcoming issue of the Pennsylvania Bulletin. It will take at least a year for the package to progress through the Regulatory Review Act review process, which will involve review by the public, the House and Senate Environmental Resources and Energy Committees, and the Independent Regulatory Review Commission.
Update on Mandamus Action to Compel Promulgation of Manganese Standards
On November 12, 2019, the Commonwealth Court of Pennsylvania dismissed the March 29, 2019, mandamus action filed by Senate President Pro Tempore Joe Scarnati (R-Jefferson) and Senator Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental and Natural Resources Committee, to compel PADEP and the EQB to set a water quality standard for manganese as required by Act 40 of 2017. See Scarnati v. PADEP, 220 A.3d 723 (Pa. Commw. Ct. 2019); see also Vol. XXXVI, No. 2 (2019) of this Newsletter.
The court found the petitioners failed to show how the regulator’s failure to propose new standards for manganese within 90 days of the legislature’s passage of Act 40 of 2017 affected the senators’ ability to introduce or vote on legislation, which is the criterion the court uses to determine if a lawmaker has legislative standing.
Senators Scarnati and Yaw filed a notice of appeal of the commonwealth court’s decision to the Pennsylvania Supreme Court on December 11, 2019. See Scarnati v. PADEP, No. 94 MAP 2019 (Pa. filed Dec. 11, 2019). Initial briefs are due to the court in early March.
PADEP ANNOUNCES RELEASE OF ACT 54 REPORT, ASSESSING MINING IMPACTS
On December 20, 2019, the Pennsylvania Department of Environmental Protection (PADEP) announced the release of the fifth report in a series that details the effects of underground mining on structures and water resources. See PADEP, “The Effects of Subsidence Resulting from Underground Bituminous Coal Mining in Pennsylvania, 2013-2018” (Dec. 20, 2019); see also Vol. XXXII, No. 1 (2015) of this Newsletter (coverage of 2008–2013 report). This report, known as the Act 54 Report, was prepared by researchers at the University of Pittsburgh in accordance with the 1994 amendments (Act 54) to the Bituminous Mine Subsidence and Land Conservation Act of 1966. Act 54 requires PADEP to compile data and report findings on the effects of underground mining on land, structures, and water resources to the Governor, the Pennsylvania General Assembly, and PADEP’s Citizens Advisory Council every five years. 52 Pa. Stat. § 1406.18a. The report covers 49 active underground bituminous coal mines underlying 28,854 acres of Pennsylvania. Out of the total mining acreage, 62% is classified as longwall, 29% as room-and-pillar, and 9% as pillar recovery mining.
The 995-page report covers effects related to structures, water supply, land damages, hydrologic balance, groundwater, streams, and wetlands in detail. Notable findings include a reduction in water supply impacts for which the mining company was liable—192 incidents, down from 371 in the last report (covering 2008–2013). The average length of time to resolve operator-liable water supply issues dropped from 415 days to 305.
The report’s primary recommendation focuses on PADEP’s current data tool, the Bituminous Underground Mining Information System (BUMIS), which PADEP has used to track impacts of mining operations on surface structures and water supplies since Act 54 was passed in 1994. Due to the age of the system, BUMIS does not easily integrate with modern tools, which, according to the report, strains the already limited resources of PADEP. The report suggests that modern data tools, including data standardization, written protocols, standard electronic data forms and electronic submission, and especially rapid error and standards checking following data submission, can improve PADEP’s efforts to track mining impacts and provide increased protection to the commonwealth and its citizens.
PADEP TO PRESENT DRAFT CARBON TRADING REGULATIONS FOLLOWING RGGI MODEL
As reported in Vol. XXXVI, No. 4 (2019) of this Newsletter, in October 2019 Governor Tom Wolf issued Executive Order No. 2019-07 instructing the Pennsylvania Department of Environmental Protection (PADEP) to develop and present to its Environmental Quality Board (EQB) a proposed rule to limit carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule. See Exec. Order No. 2019-07, “Commonwealth Leadership in Addressing Climate Change Through Electric Sector Emissions Reductions,” 49 Pa. Bull. 6376 (Oct. 26, 2019).
PADEP has now taken the first step toward following the Governor’s directive. On January 30, 2020, PADEP announced that it will present the concepts of the proposed rule at the meeting of the agency’s Air Quality Technical Advisory Committee (AQTAC) on February 13, 2020. See Press Release, PADEP, “DEP to Unveil Draft Regulations to Cap CO2 Emissions Using RGGI Model” (Jan. 30, 2020).
The draft proposed rule would also allow PADEP to determine whether to participate in the CO2 allowance auctions with other RGGI member states, or to conduct a separate Pennsylvania-run auction. See Draft Proposed 25 Pa. Code § 145.401. PADEP will determine to participate in the multi-state auction if one is available that can provide benefits to Pennsylvania that meet or exceed those conferred through the Pennsylvania-run auction and that would be consistent with the auction process outlined in sections 145.401–.414 of the draft proposed rule, which are provisions relating to the conduct of auctions that PADEP added to the RGGI Model Rule. Id.
Following the presentation of the draft proposed rule at the February 13 AQTAC meeting, PADEP indicated that its next steps in the development of the rule are: (1) continued engagement with the general assembly, stakeholders, and Pennsylvania residents and businesses; and (2) completion of power sector modeling and identification of allowance caps. While the current draft of the proposed rule is already available, PADEP has indicated that it will present the concepts of the rule at the February 13 meeting, and will present the proposed rule itself at the AQTAC’s next quarterly meeting in April 2020.
According to PADEP’s anticipated timeline, the proposed rule will then be presented to the EQB on July 21, 2020, and open for public comment 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. The February 13 AQTAC meeting is open to the public, and meeting minutes will be posted on the AQTAC’s website following the meeting.
On a parallel track, in November 2019 Republican lawmakers introduced companion bills, Senate Bill 950 and House Bill 2025, in response to Governor Wolf’s executive order. The bills would prohibit PADEP from joining RGGI, establishing a CO2 cap-and-trade program, or taking other action designed to limit, control, or abate CO2 emissions without submitting the proposal through the general assembly and going through a detailed review process set forth in the bills. The bills are currently with their respective Environmental Resources and Energy Committees.
We will continue to closely monitor what is likely to be a robust and contentious rulemaking and legislative process over the coming months and provide updates accordingly.
IRRC APPROVES TRIENNIAL WATER QUALITY STANDARDS
On January 31, 2020, the Independent Regulatory Review Commission (IRRC) issued an order approving the Environmental Quality Board’s (EQB) final proposed rule updating Pennsylvania’s water quality criteria (WQC) and designated water uses under 25 Pa. Code ch. 93. The IRRC’s approval order, the final draft of the updated regulations, and other related rulemaking documents are available on IRRC’s website at http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3193. The Pennsylvania Department of Environmental Protection (PADEP) is required to review and modify, as appropriate, the WQC at least every three years under section 303(c) of the Clean Water Act, 33 U.S.C. § 1313(c). PADEP uses the WQC to set designated uses of waters of the commonwealth, which is done by setting instream narrative and numerical criteria PADEP determines are necessary to protect those uses. These instream criteria are implemented through pollution control measures on individual sources that discharge to those waters, such as treatment requirements and effluent limitations in individual National Pollutant Discharge Elimination System permits, including those issued in connection with mining activities.
The revised WQC make several changes to 25 Pa. Code § 93.7 tbl.3 (specific water quality criteria) and 25 Pa. Code § 93.8c tbl.5 (human health and aquatic life criteria for toxic substances). First, PADEP updated the aquatic life WQC for ammonia and bacteria contained in Table 3. Second, PADEP updated the human health WQC for several toxic substances in Table 5 to adopt the U.S. Environmental Protection Agency’s 2015 updated recommended WQC. Specifically, the updated Table 5 creates more stringent criteria for 55 specific toxic substances. The updated Table 5 also sets less stringent criteria for 18 specific toxic substances than the previous criteria. Finally, the updated Table 5 adds nine additional toxic substances to the table.
Designated water uses and drainage lists are set forth in 25 Pa. Code § 93.9. PADEP revised the drainage lists for several waters of the commonwealth. However, according to PADEP, these changes were administrative and do not make substantive changes to the actual designated uses of these waters. Finally, PADEP revised 25 Pa. Code § 93.8d(c) to clarify that the Biotic Ligand Model now must be used, rather than may be used, for the development of new or updated site-specific criteria for copper in freshwater systems.
Copyright © 2020, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Employment and Labor Alert
(by Stephen Antonelli and Alexandra Farone)
The City of Pittsburgh recently announced that the Paid Sick Days Act is slated to take effect on March 15, 2020. This Act requires employers to provide their employees with paid sick leave based on hours worked. The Act will apply differently to employers of different sizes:
- For employers with 15 or more employees, eligible workers must be provided one hour of paid leave for every 35 hours worked, up to a maximum of 40 hours of paid leave per year.
- For employers with less than 15 employees, eligible workers must be provided one hour of unpaid leave for every 35 hours worked, up to a maximum of 24 hours of paid during the first year of enforcement. After one year from the effective date of the Act, these small employers must provide one hour of paid leave for every 35 hours worked, up to a maximum of 24 hours of paid leave per year.
- Employers based outside of Pittsburgh must begin offering leave under the Act for any of its employees that spend at least 35 hours working inside city limits.
Eligible employees include full- and part-time employees who work within the geographical limits of the City of Pittsburgh. The following types of workers are not eligible for leave under the Act: federal and state employees, independent contractors, construction workers in a collective bargaining unit, and seasonal employees as defined by the Act. Accrued leave may be carried over to the following calendar year unless the employer opts to “frontload” the maximum amount of leave at the beginning of each year. Sick time under the Act may only be used for the employee’s illness, injury, or health care; health-related care for an employee’s family member as defined by the Act; or for certain business or school closures due to public health emergencies.
The Act can be found at Title VI, Chapter 626 of the Pittsburgh Code. Employers should take notice that the Act creates a rebuttable presumption of unlawful retaliation whenever an employer takes an adverse employment action against a person within 90 days of that person (1) filing a complaint alleging violation of the Act, (2) informing any person about an employer’s alleged violation of the Act, (3) cooperating in the investigation or prosecution of a violation of the Act, (4) opposing any practice that is unlawful under the Act, or (5) informing any person of their rights under the Act. An employer may be monetarily fined for willful violations of the Act, starting after one year from the Act’s effective date.
The Paid Sick Days Act was adopted by the Pittsburgh City Council in 2015, but its implementation was delayed due to ongoing litigation. The Pennsylvania Restaurant and Lodging Association challenged the Act under the Home Rule Charter Law. The Pennsylvania Supreme Court upheld the Act in June 2019 pursuant to Pennsylvania’s Disease Prevention and Control Law.
Babst Calland’s Employment and Labor Group can assist employers that are subject to the Act by helping them evaluate eligible employees and hours worked, and structuring a sick leave policy that complies with the Act. For more information about the Act’s requirements and how Babst Calland can assist you, please contact Stephen A. Antonelli at (412) 394-5668 or santonelli@babstcalland.com or Alexandra G. Farone (412) 394-6521 or afarone@babstcalland.com.
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Emerging Technologies Alert
(by Boyd Stephenson and Justine Kasznica)
On December 18, 2019, the Federal Motor Carrier Safety Administration (FMCSA or Agency) published an information collection notice which proposes a limited scope for implementing the Beyond Compliance motor carrier safety program.[1] According to the notice, FMCSA personnel intend to query a little over 100 motor carriers with strong safety records about what technologies they employ and what programs or practices they engage in to achieve strong safety results. According to the notice, this research will be packaged into a technical report, which the Agency researchers will then incorporate into a Beyond Compliance report the Agency is required to transmit to Congress. If only motor carriers are consulted, technology providers may lose the opportunity to identify safety innovations that are not yet widely known to the trucking industry. The docket for comments will remain open through February 18, 2020.
Background
In the Fixing America’s Surface Transportation Act of 2015, (FAST Act) Congress directed the FMCSA to establish the Beyond Compliance program.[2] Congress designed Beyond Compliance to identify advanced trucking safety technologies and practices that are not required by regulation but which improve safety. After identifying these technologies, motor carriers would participate in the Beyond Compliance program by adopting these advanced safety technologies. FMCSA would then reward the carriers by publicly recognizing the motor carrier. Congress has also directed the Agency to deprioritize trucks operating for carriers that meet Beyond Compliance criteria for roadside inspection by either creating a new measurement category in FMCSA’s online CSA Safety Management System (SMS) or by designating that Beyond Compliant carriers’ CSA SMS scores are otherwise improved by participating in the program.
Congress also required FMCSA to adopt a process in which any interested party could submit a technology or process for inclusion in the program. The law will also require the agency to publicly post Beyond Compliance-certified technologies and processes on its website when the program is operational. Because of this public listing, the Beyond Compliance program represents an excellent opportunity for safety technology providers to expand their audience to include motor carriers interested in taking advantage of Beyond Compliance rewards. But, to do so, technology providers need to ensure that their product or process falls within the program’s scope.
FMCSA Notice
The notice contains no information about other information collection efforts. While FMCSA officials might intend to perform similar outreach to technology developers or providers in future information collections, the results from this first information collection are likely to determine next steps and the program’s ultimate contours. Additionally, FMCSA officials have not indicated if they intend to list specific providers and products on the Beyond Compliance website or only types of technology certified.
Motor carriers generally are not also technology developers or providers. A motor carrier’s safety director can identify technologies and processes that they believe make a difference and may even be able to provide data supporting their claim. But, because motor carriers are not typically designing the next generation of safety products, speaking only to them risks building status quo bias into the report and, eventually, into the Beyond Compliance program. Technology providers may have valuable information about what practices may be the most effective for improving safety.
Motor carriers and safety technology developers and providers should watch this issue closely and consider commenting on the proposal so that their products and processes can eventually be included in the program. For more information about the notice and guidance in preparing comments, contact Boyd A. Stephenson at (202) 853-3452 or bstephenson@babstcalland.com or Justine M. Kasznica at (412) 394-6466 or jkasznica@babstcalland.com.
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The Legal Intelligencer
(by Blaine A. Lucas and Alyssa E. Golfieri)
Now is the optimal time for municipalities to take a fresh look at their zoning ordinances to ensure they not only comply with state law, but that they are positioned to handle the influx of new and currently trending land uses.
As 2019 comes to a close and a new wave of elected local officials get ready to take their seats, now is the optimal time for municipalities to take a fresh look at their zoning ordinances to ensure they not only comply with state law, but that they are positioned to handle the influx of new and currently trending land uses.
Municipalities derive most of their authority to regulate the use of land from the Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq., (the MPC). The MPC was first enacted in 1968 and expressly authorizes municipalities to enact zoning ordinances to permit, prohibit, regulate and determine uses of land; the size, height, bulk, location, erection, construction repair, maintenance, alteration, razing, removal and use of structures; the area and dimensions of land to be occupied by uses and structures; the density of populations and intensity of uses; methods for protecting and preserving natural and historic resources; and methods for protecting and preserving prime agricultural lands and activities, see Section 603(b) of the MPC, 53 P.S. Section 10603(b).
Since the adoption of the MPC and the enactment of hundreds of local zoning ordinances pursuant to the same, land use types and development patterns have continued to change and evolve. Some of these changes have prompted the General Assembly to implement legislative solutions, while others are left for navigation at the local level and ultimately in the courts.
Below are four topics of that municipalities should be aware and may want to consider when examining their zoning ordinances in the coming new year.
Short-Term Rentals in Residential Districts
On April 26, the Pennsylvania Supreme Court rendered a decision in Slice of Life v. Hamilton Township Zoning Hearing Board, 207 A.3d 886 (Pa. 2019), addressing the permissibility of short-term vacation rentals (e.g., Airbnb and Vrbo) in residential zoning districts. See “A Second Slice: Practical Considerations for Short-Term Rentals,” Krista-Ann Staley and Jenn Malik of Babst, Calland, Clements and Zomnir, published on June 20, 2019, by The Legal Intelligencer. In sum, the Pennsylvania Supreme Court held that the purely transient use of a single-family dwelling is not permitted in a residential zoning district when a municipality affirmatively limits the use of such dwellings to a “single housekeeping unit” (i.e., when a municipality limits the use of a single-family dwelling to situations where the person or persons residing in the home function as a family, are sufficiently stable and permanent, and are not purely transient).
The decision to allow or prohibit the use of single-family dwellings in a residential zoning district for purely transient purposes is one left to the discretion of local government officials. If a municipality wants to prohibit such uses, it needs to amend its zoning ordinance to expressly state that single-family dwellings may only be used by a “single housekeeping unit.” Alternatively, if a municipality finds such transient uses attractive and consistent with the character of its residential districts, it should evaluate and consider implementing regulations aimed at limiting the potentially negative impacts accompanying these uses, such as attendant noise, traffic generation, ingress and egress issues, parking needs, structure occupancy limits and signage.
- Agritainment, Agritourism and Agribusiness
Section 603(g) of the MPC, 53 P.S. Section 10603(g), requires that local zoning ordinances protect prime agricultural land and encourage the continuity, development and viability of agricultural operations. In addition, the Right-to-Farm Act, 3 P.S. Section 951 et seq., and the Agricultural, Communities and Rural Environment Act, 3 Pa.C.S. Section 311 et seq., limit municipal regulatory authority over certain agricultural uses and activities. See “Municipal Regulation of Agricultural Operations in Pennsylvania,” Blaine A. Lucas and Alyssa E. Golfieri of Babst, Calland, Clements and Zomnir, published on Dec. 20, 2018, by The Legal Intelligencer.
Notwithstanding these statutes, the current state of the law extends no protections to, nor does it limit a municipality’s ability to regulate, agritainment, agritourism and agribusiness, which are generally defined as farm-related activities that are conducted on agricultural land and are open to the public for recreational, educational and/or entertainment purposes. Thus, similar to short-term, transient uses in a residential district, the decision to allow or prohibit the use of property for agritainment, agritourism or agribusiness is left to the discretion of local government officials.
With the recent rise in popularity of agritainment, agritourism and agribusiness uses, municipalities should examine their zoning ordinances and maps to determine how, where, and in what manner these uses are currently permitted, and what, if any, regulations are necessary to protect the public’s health, safety and welfare, such as regulations to control noise, lighting, traffic, parking, ingress and egress, the use of agricultural structures by the public, structural occupancy limits, hours of operation and setbacks from neighboring properties.
- No-Impact Home-Based Businesses
In an effort to promote small business development and foster a business-friendly environment in the commonwealth, the General Assembly amended the MPC in 2002 to require that all local zoning ordinances permit, by right, no-impact home-based businesses in every residential district. See Section 603(l) of the MPC, 53 P.S. Section 10603(l). “No-impact home-based business” is define under the MPC as: A business or commercial activity administered or conducted as an accessory use which is clearly secondary to the use as a residential dwelling and which involves no customer, client or patient traffic, whether vehicular or pedestrian, pickup, delivery or removal functions to or from the premises, in excess of those normally associated with residential use. The business or commercial activity must satisfy the following requirements:
- The business activity shall be compatible with the residential use of the property and surrounding residential uses.
- The business shall employ no employees other than family members residing in the dwelling.
- There shall be no display or sale of retail goods and no stockpiling or inventory of a substantial nature.
- There shall be no outside appearance of a business use, including, but not limited to, parking, signs or lights.
- The business activity may not use any equipment or process that creates noise, vibration, glare, fumes, odors or electrical or electronic interference, including interference with radio or television reception, which is detectable in the neighborhood.
- The business activity may not generate any solid waste or sewage discharge in volume or type that is not normally associated with residential use in the neighborhood.
- The business activity shall be conducted only within the dwelling and may not occupy more than 25% of the habitable floor area.
- The business may not involve any illegal activity.
Many municipal ordinances contain regulations for “home occupations” that were adopted well before the 2002 amendment to the MPC. These municipalities should examine their zoning ordinances to determine whether they are consistent with the MPC’s mandate regarding no-impact home-based businesses.
- Civil Versus Criminal Penalties
Prior to 1988, zoning enforcement proceedings initiated pursuant to the MPC were considered criminal in nature, and, as a result, municipalities were authorized to impose imprisonment for violation and convictions. However, treatment of these actions as criminal brought with it certain procedural hurdles for municipalities attempting to enforce their zoning ordinances, ranging from criminal burden of proof standards to a defendant’s right against self-incrimination. In 1988, the MPC was amended to eliminate the criminal nature of zoning enforcement actions. They are now classified as civil enforcement proceedings, and the penalty after a finding of liability is limited to fines, which can be assessed on a daily basis, plus court costs and reasonable attorney fees. See “Zoning Hearing Board: Overlooked, Misunderstood or Misapplied Principles,” Blaine A. Lucas and Alyssa E. Golfieri of Babst, Calland, Clements and Zomnir, published on July 27, 2018, by The Legal Intelligencer.
Despite this significant overhaul to the MPC’s enforcement provisions, some zoning ordinances still reflect, and some municipalities still attempt to impose, criminal penalties for violations. Municipalities should examine their zoning ordinances enforcement provisions to ensure that they are consistent with the MPC.
Blaine A. Lucas is a shareholder and Alyssa E. Golfieri a senior associate in the public sector services and energy and natural resources groups of the Pittsburgh law firm of Babst, Calland, Clements & Zomnir. In these capacities, Lucas coordinates the firm’s representation of energy clients on land use and other local regulatory matters. He also teaches land use law at the University of Pittsburgh School of Law. Golfieri focuses her practice on zoning, subdivision, land development. Contact them at blucas@babstcalland.com and agolfieri@babstcalland.com.
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Reprinted with permission from the December 12, 2019 edition of The Legal Intelligencer © 2019 ALM Media Properties, LLC. All rights reserved.
Attorney Ben Clapp Joins Firm
Babst Calland announced today the lateral move of Ben Clapp, who joined as associate in the firm’s Washington, D.C. office in the Environmental, Energy and Natural Resources, and Emerging Technologies practice groups.
For the past decade, Ben Clapp has advised clients on environmental and transactional matters across a wide range of industries including the upstream, midstream, and downstream oil and gas sectors, renewable energy, real estate, utilities, chemicals, manufacturing, mining, pharmaceuticals, pulp and paper, and food and beverage.
“Ben’s move to Babst Calland further represents the firm’s commitment to continue to meet the environmental and regulatory needs of our clients,” said James Curry, Managing Shareholder of the D.C. office. “Ben Clapp is well-known in industry and among key regulators. We’re very pleased that he has joined our team.”
Mr. Clapp has significant experience advising clients on the environmental components of complex transactions, including identifying and analyzing significant environmental liability and compliance issues arising in connection with mergers and acquisitions, asset sales, securities offerings, project financings, and corporate restructurings. He works to manage, allocate or mitigate these environmental risks in the client’s best interest.
Mr. Clapp also advises project developers and investors as they encounter state and federal environmental review, facility siting, and permitting requirements, with a particular focus on providing advice on National Environmental Policy Act requirements to clients seeking government agency approvals for large-scale energy and infrastructure projects.
Mr. Clapp earned his J.D., cum laude, from American University Washington College of Law in 2008 and B.A. from the University of Richmond in 1996.
Smart Business
(by Jayne Gest with Julie Domike and Gina Falaschi)
Recent enforcement efforts by the Environmental Protection Agency (EPA) have resulted in a marked upswing in cases — civil and criminal — against parts manufacturers and installers of aftermarket defeat devices on vehicles, including some less than obvious targets.
Aftermarket parts are replacement or additional vehicle or engine parts not made by the original equipment manufacturer. Most aftermarket parts do not violate the Clean Air Act, but some are designed to reduce or eliminate the effectiveness of required emissions controls.
“Business owners need to ensure their company-owned vehicles and engines are legal,” says Julie Domike, shareholder at Babst Calland. “Many of these enforcement cases have been against companies or individuals that produce or install ‘tuners,’ engine control module reprogrammers that disable emission control systems with preloaded software (tunes). These defeat devices are obvious enforcement targets. However, other devices or software could also fall in this category; therefore, liability could extend to other aftermarket suppliers.”
Smart Business spoke with Domike and Gina Falaschi, associate at Babst Calland, about the EPA’s enforcement efforts.
Where might businesses be at risk?
Mechanics sometimes look to increase fuel economy, boost the performance of the vehicle, reduce maintenance costs, or reduce vehicle downtime associated with routine maintenance, such as regenerating diesel particulate filters. The illegal methods of doing this involve removing or disabling emissions control devices on vehicles, such as the diesel particulate filter, exhaust gas recirculation valve and selective catalytic reduction system. Because removing vehicle hardware will result in a check engine notification or may put the vehicle into ‘limp home’ mode, severely limiting power, these changes must be accompanied by an illegal alteration of the software to override its response to missing or disabled hardware.
It is important to realize when employees add aftermarket defeat devices to company vehicles, businesses could have significant Clean Air Act liability, and right now the EPA is actively looking for these violations.
Why is the EPA so concerned?
The EPA has significant enforcement power under the Clean Air Act to ensure that national air quality standards are maintained. The EPA is particularly concerned about the increase in air pollution from the transportation sector. While EPA enforcement against stationary sources has recently decreased, the EPA has increased enforcement against vehicle and equipment manufacturers in both criminal and civil venues. When vehicles are tampered with, they have significantly increased emissions, especially nitrogen oxide (NOx), which contributes to ground level ozone, a criteria pollutant regulated by the EPA.
The EPA reports its enforcement efforts have uncovered over half a million vehicles that have been tampered with, potentially increasing emissions by the equivalent of 9 million trucks.
Who exactly could be liable?
The EPA has historically brought civil enforcement actions against vehicle and engine manufacturers for engine software that allowed NOx emissions to increase. The agency, however, has expanded enforcement to manufacturers, retailers and installers of tuners, as well as individuals who remove emissions control systems from vehicles, especially trucks. Those who modify vehicle fleets by adding equipment may also violate the Clean Air Act by causing excess emissions due to weight increases. The EPA sees this as tampering.
With the EPA’s current emphasis on enforcement, retailers could be subject to civil enforcement for selling aftermarket defeat devices. Additionally, those who manufacture and sell devices that they know or should know are being used to tamper with emissions control equipment could be targeted by EPA enforcement.
What action should business owners take?
Be aware of the issue; ensure it is not happening in your organization or with your vehicles. Inform your employees that this is not condoned behavior and if anyone has touched a vehicle in this fashion, it needs to be fixed. Beyond that, add education about the Clean Air Act, and what’s permissible under it, to your company’s environment, health and safety training.
For the full article, click here.
The State Journal
(by Mychal S. Schulz)
In early August 2019, the West Virginia Department of Environmental Protection (WVDEP) announced that oil and natural gas production in West Virginia reached record levels in 2018, the latest of 10 straight years of production increases.
Just a few weeks later, the Business Roundtable, an association of CEOs for some of the largest companies in the United States, released a new Statement on the Purpose of a Corporation (“Statement”) signed by 181 of the association’s members.
How are these events related? And how, together, can they significantly shape the future of West Virginia?
By now, the natural gas within the Marcellus and Utica formations no longer represents a “potential” source of energy. That potential is being tapped, as represented by the announcement from the WVDEP that over 1.8 trillion cubic feet (Tcf) flowed from wells drilled in West Virginia in 2018, a 17% increase over the previous year.
The scramble on what to do with all that natural gas continues to play out throughout the region, from increasing the capacity to carry the gas away through the Mountain Valley and Atlantic Sunrise Pipelines, to the construction of a cracker facility in Beaver County, Pennsylvania, and (perhaps) Belmont County, Ohio, to the continued efforts to build large underground storage areas such as the Appalachian Storage Hub and the Mountaineer Storage Facility.
Each of those efforts, however, assumes something that is already happening — the production of a tremendous amount of natural gas beneath West Virginia’s surface.
Even a casual observer of West Virginia history sees parallels between this moment in time and the period when West Virginia produced coal that fueled American industrialization starting in the late 19th Century. With the benefit of hindsight, few West Virginians want to repeat the blueprint of development that left communities adrift and, in some cases, devastated when coal reserves became depleted.
One needs only to travel the backroads of Boone County or McDowell County to witness the failure of political, civil, and business leaders to adequately plan for life after coal.
That brings us to the Statement recently issued by the Business Roundtable. Starting in 1978, the Business Roundtable began to periodically issue Principles of Corporate Governance that outline what its members view as standards of corporate responsibility.
For decades, those principles reflected the words of Milton Friedman, who famously wrote in the New York Times in 1970 that “the social responsibility of business is to increase its profits.” Put more extremely in the 1987 movie Wall Street, Gordon Gekko declared, “Greed is good.”
The principles from the Business Roundtable through the years reflected these values by emphasizing that the primary purpose of a corporation was to maximize the value to shareholders — the so-called “shareholder primacy” ideology of corporate governance. In 1997, the Business Roundtable announced that “the paramount duty of management and of boards of directors is to the corporation’s stockholders.”
Apparently, times have changed.
Whether driven by increasing criticism of income inequality and excessive executive pay, shaken by an uptick in social activism from institutional investors, or sensitive to popular demands that businesses do more to address climate change or public health, the Business Roundtable’s Statement no longer pays homage to shareholder primacy.
Instead, the Statement emphasizes that, “[w]hile each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” The Statement outlines exactly what those commitments are:
“Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
“Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
“Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
“Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
“Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.”
While the Business Roundtable did not abandon its commitment to generating value for shareholders, the list of commitments in the Statement does not mention shareholders until the last bullet point — immediately after a commitment to support, respect, and protect communities, the people who live in those communities, and the environment in which those people live.
And it is here that the Statement should resonate for both businesses in the oil and natural gas industry and for those who live in West Virginia communities where such businesses operate.
Oil and natural gas producers should support and protect West Virginia communities by adopting best practices that limit impacts on roads, bridges, and the environment wherever drill pads, pipelines, compressor stations, and other such infrastructure are built.
They should respect the people who live in those communities by engaging in meaningful and constructive dialogue about their operations so that communities know and understand — as far in advance as possible — what is happening near their homes, near their businesses, and near their places of worship.
West Virginians, in turn, should appreciate those oil and natural gas businesses that seek to become better partners with their neighbors because the positive economic impact of this industry cannot be reasonably denied. And it’s not just about the money, as this partnership should be based upon respect and trust, not simply the payment of corporate largesse.
To be clear, the foundation for such a productive partnership can be seen in many parts of the state. Community groups benefit from the volunteer efforts of oil and natural gas workers.
Simply open a program for a local sports team, theatrical production, or other cultural event in the northern part of West Virginia to observe the monetary support of the industry for those local events. Municipal governments work closely with the industry on emergency response training for first responders and similar planning.
More, however, can be done, and more must be done before a true, mutually beneficial partnership can be established. The Business Roundtable has figured that out.
The oil and natural gas companies that do business in West Virginia, and the communities in which they operate, should figure this out, too.
Partnerships are built on trust, and everyone involved should consider tearing down walls and allow these partnerships to flourish.
Mychal Schulz is an attorney at Babst Calland in Charleston focusing on energy, employment and commercial litigation. He is a member of the West Virginia Business & Industry Council and sits on the Board of Directors of Leadership West Virginia and the West Virginia Defense Trial Counsel.
For the full article, click here.
The Legal Intelligencer
(by Megan Mariani and Nicholas Habursky)
On Nov. 7, Pennsylvania Gov. Tom Wolf signed into law Senate Bill No. 694 that permits cross-unit drilling for unconventional oil and gas wells. This new law takes effect on Jan. 6, 2020. A cross-unit well (also known as an allocation well) is a lateral wellbore that crosses between two or more pooled units.
Benefits of Cross-Unit Wells
Standard oil and gas lease forms commonly contain acreage limitations regarding the maximum size of a pooled unit within which development can occur. As a result, prior to the passage of this new cross-unit well legislation, operators in Pennsylvania faced inefficiencies in the form of limitations on the length of laterals and required additional surface locations to develop the entirety of the resource. Operators may desire to utilize cross-unit wells because the wells can increase drilling efficiencies and allow for more strategic operations. Landowners also benefit from cross-unit wells because the use of longer lateral wellbores reduces the surface impact of horizontal drilling by limiting the number of surface locations and vertical wellheads needed to produce from the various units. Lawmakers hope this bill will allow operators to maximize the benefits of drilling technologies and practices. Additionally, legislators believe the passage of the bill will increase tax revenue and reduce the workload on the Department of Environmental Protection.
What Does the Law Do?
Senate Bill No. 694 amended the act of July 20, 1979 (P.L. 183, No. 60—known as The Oil and Gas Lease Act) by adding Section 2.2 that expressly allows an operator to drill a cross-unit well if two conditions are met. First, an operator may drill and produce a cross-unit well if the operator reasonably allocates production from the well to or among each unit the operator reasonably determines to be attributable to each unit. The operator may allocate production from the cross-unit well on an acreage basis if the allocation has a reasonable correlation to the portion of the horizontal wellbore in each unit. Second, an operator may drill a cross-unit well as long as the well is not expressly prohibited by the terms of a lease.
Further, the bill mandates that the 330-foot spacing requirement of the Oil and Gas Conservation Law (the act of July 25, 1961-P.L. 825, No. 359), which requires that a well be located at least 330 feet from an outside boundary line, shall not apply to unit lines traversed by a cross-unit well. The bill also explicitly states that it does not authorize an operator to drill an oil and gas well without a valid lease or royalty agreement. Additionally, the bill does not impact the current surface rights of an operator to include operations related to any existing unit or any well drilled between existing units.
Future Trends and Considerations
The production allocation language in Senate Bill No. 694 is likely to be the most significant portion of the law. Prior to Senate Bill No. 694, there was limited authority in Pennsylvania as to the appropriate production accounting method since no Pennsylvania court or legislative body had fully addressed how cross-unit royalties should be allocated. Senate Bill No. 694 attempts to provide operators with guidance on cross-unit production accounting.
The new law employs a reasonableness standard by emphasizing that the operator must be able to “reasonably” allocate the production that it reasonably determines to be attributable to each unit. Senate Bill No. 694 further states that an operator may allocate production on an acreage basis for cross-unit wells, provided the allocation has a reasonable correlation to the portion of the horizontal wellbore in each unit.
Based upon the law’s usage of the word “may,” it appears that an operator could potentially use accounting methods not necessarily tied to acreage. However, aside from applying the “reasonable” standard to production allocation, the new law does not specifically explain any other nonacreage based accounting methods that an operator could utilize. Senate Bill 694 provides operators with the freedom to determine how best to reasonably allocate production between the units.
The new law eliminates any question as to whether Pennsylvania permits cross-unit wells. Although operators may still have to decide how best to allocate production from cross-unit wells, the ability to drill cross-unit wells should lead to increased efficiencies that will benefit both operators and landowners. As the industry’s technological evolution continues, it is likely that cross-unit wells will be a new tool for future oil and gas operations in Pennsylvania.
For the full article, click here.
Reprinted with permission from the December 12, 2019 edition of The Legal Intelligencer © 2019 ALM Media Properties, LLC. All rights reserved.
The PIOGA Press
(by Kevin Garber and Jean Mosites)
On November 20, members of the Pennsylvania House and Senate referred bipartisan companion bills House Bill 2025 and Senate Bill 950, both known as the Pennsylvania Carbon Dioxide Cap and Trade Authorization Act, to their respective Environmental Resources and Energy Committees for consideration.
Sponsors Senator Joe Pittman (R-Armstrong) and Representative Jim Struzzi (R-Indiana) announced the bills in a press conference on November 19 in response to Governor Tom Wolf’s October 3 Executive Order 2019-07. That order directed the Environmental Quality Board to propose, by July 31, 2020, a carbon dioxide cap-and-trade program for fossil fuel-fired electric power generators which is at least as stringent as that developed under the Regional Greenhouse Gas Initiative (RGGI). (For more detail on RGGI, see the October issue of The PIOGA Press.)
The bills each provide a declaration of policy, procedures for the proper introduction of any program governing carbon dioxide emissions by the Pennsylvania Department of Environmental Protection and the process for submitting that program to the General Assembly for approval.
No current authority to regulate CO2 emissions
Section 2 of the bills finds there is currently no statutory or constitutional authority allowing a state agency to regulate or impose a tax on carbon emissions, and therefore the General Assembly, in consultation with DEP and other agencies, must determine whether and how to do so.
No rulemaking without specific statutory authority
Other than a measure required by federal law, Section 4 prohibits DEP from adopting any measure or taking any action to abate, control or limit carbon dioxide emissions (including joining or participating in RGGI or other state or regional greenhouse gas cap-and-trade program) or establishing a greenhouse gas cap-and-trade program unless the General Assembly specifically authorizes it by statute.
If DEP plans to propose such an action, Section 5 directs the agency to publish proposed legislation in the Pennsylvania Bulletin for at least 180 days and hold at least four public hearings in locations where regulated sources of carbon dioxide emissions would be directly economically affected by the proposal.
Following the public comment period, DEP must prepare a detailed report for both the Senate and House Environmental Resources and Energy Committees that addresses the ramifications of the proposal on affected facilities and Pennsylvania’s economy. The report must identify the individual facilities, by county, that would be subject to the proposed action and must include:
- The amount of carbon dioxide emitted from each facility;
- The estimated cost of compliance;
- The effect the proposed action would have on the price of electricity;
- A list of facilities that would be unlikely to continue operating;
- An assessment of the decrease of electricity that would be exported from Pennsylvania; and
- An assessment of any impact on the resilience and diversity of Pennsylvania’s electric generation fleet if an identified facility is forced to close.
The report must also address effects on the statewide economy, including:
- Direct and indirect costs to the Commonwealth, political subdivisions and the private sector;
- The wholesale and resale prices of electricity for residential, commercial, industrial and transportation consumers;
- Adverse effects on the prices of goods and services, productivity and competition; and
- The administrative, legal, consulting and accounting costs imposed by the proposal.
The report must also: i) estimate the net carbon dioxide reduction that the proposal would engender within PJM Interconnection (the regional transmission organization that coordinates the movement of wholesale electricity within Pennsylvania and 12 other states), considering electric generation in other PJM members that are not a part of RGGI or do not regulate or tax carbon dioxide emissions; ii) summarize and justify actions that would address leakage (an increase in emissions by facilities outside Pennsylvania in response to reductions in Pennsylvania); and iii) evaluate whether less costly or less intrusive alternative methods to achieve the goal of the proposed action have been considered for an employer or facility otherwise subject to the action.
Other implications
Although the sponsors centered the implications of their bills on the governor’s attempt to unilaterally join RGGI, the bills were written broadly enough to require a General Assembly review and authorization process for any proposed cap-and-trade program, which would include any rulemaking that would result from the economy-wide cap-and-trade petition currently under consideration by DEP or the Environmental Quality Board. (For more information on the cap-and-trade petition, see the April PIOGA Press.)
Next steps
The bills will be discussed and voted on by their respective committees before reaching the floor of each chamber. As of this writing, there are no Environmental Resources and Energy Committee meetings scheduled for either the House or Senate through the end of the year.
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