June 18, 2019

Report Highlights Federal, State and Local Challenges and Opportunities for the U.S. Oil and Gas Industry

Natural gas production continues to increase in each of the nation’s seven largest shale basins

Babst Calland today released its annual energy industry report: The 2019 Babst Calland Report – The U.S. Oil and Gas Industry: Federal, State and Local Challenges & Opportunities; Legal and Regulatory Perspective for Producers and Midstream Operators. 

In this Report, Babst Calland energy attorneys provide perspective on issues, challenges, opportunities and recent developments in the oil and gas industry that are relevant to producers and midstream operators.

According to the International Energy Agency, “the second wave of the U.S. shale revolution is coming” and the United States will account for a 70 percent increase in global oil production and a 75 percent expansion in LNG trade in the next five years.

On a year-over-year basis, natural gas production continues to increase in each of the seven largest shale basins in the United States. Most notably, oil and natural gas production is being driven by three of the largest producing basins including Appalachia in Pennsylvania, West Virginia and Ohio, the Permian Basin in Texas and New Mexico, and the Haynesville Basin in southwestern Arkansas, northwest Louisiana, and east Texas.

Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “Domestic shale producers and operators continue to face myriad legal and regulatory challenges by regulatory agencies, the courts, activists, and the market. This annual review is a snapshot of the issues and trends on the federal, state and local level in the oil and gas industry over the past year.”

The 92-page Babst Calland Report covers a range of topics from the industry’s business outlook, regulatory enforcement and rulemaking to developments in pipeline safety and litigation trends. …

June 14, 2019

The West Virginia Supreme Court Confirms the Right of Mineral Owners to “Reasonably Use” the Surface to Extract Minerals – for Now

Energy Alert

(by Timothy Miller and Mychal Schulz)

The West Virginia Supreme Court issued an opinion in Andrews v. Antero Resources Corp. and Hall Drilling, LLC, No. 17-0126 (W. Va. June 10, 2019), an eagerly-awaited decision arising out of the In re: Marcellus Shale Litigation, in which hundreds of lawsuits have been filed against E&P and midstream oil and gas companies alleging that activities related to the production, compression, and transportation of natural gas represented a private nuisance.

The Property Owners in Andrews, which represented the first trial group in In re: Marcellus Shale Litigation, alleged that the fracking operations of Antero and Hall Drilling “in relation to their development of the Marcellus shale have caused Property Owners to lose the use and enjoyment of their properties due to the annoyance, inconvenience, and discomfort caused by excessive heavy equipment and truck traffic, diesel fumes and other emissions from the trucks, gas fumes and odors, vibrations, noise, lights, and dust.”  They filed a complaint alleging claims for “private temporary continuing abatable nuisance and negligence” against Antero and Hall Drilling arising from their “natural gas exploration, extraction, transportation and associated activities in close proximity to [Property Owners’] properties.”

Eventually, the Property Owners voluntarily dismissed all claims for (1) property damages, (2) physical or medical injury, and (3) negligence.  By the time the Mass Litigation Panel (MLP) addressed the motions for summary judgment filed by Antero and Hall Drilling only the Property Owners’ private nuisance claims remained.

While the MLP granted Antero’s and Hall Drilling’s motion for summary judgment, it “declined to apply principles of nuisance law, and instead ruled on the summary judgment motions based upon Antero’s contractual and property rights.”  Specially, the MLP’s Order stated that “[b]ecause the Court resolves summary judgment based upon Antero’s contractual and property rights, it does not address the issues to which common law private nuisance principles would be applied.  …

June 11, 2019

State Supreme Court declines case rejecting challenge to zoning ordinance allowing drilling in all districts

The PIOGA Press

(by Blaine Lucas, Robert Max Junker and Jennifer Malik)

On May 14, the Pennsylvania Supreme Court entered an order denying the petition for allowance of appeal in Frederick v. Allegheny Township Zoning Hearing Board, et al., No. 449 WAL 2018 (Pa. 2019). The order concludes a battle of more than four years over the validity of the Allegheny Township, Westmoreland County, zoning ordinance. Previously in Frederick, the Commonwealth Court in a 5-2 en banc decision, rejected the contention that an unconventional natural gas well pad can be permitted only in an industrial zoning district, concluding that Pennsylvania law empowers municipalities to determine the location of oil and gas development and whether the same is compatible with other land uses within their boundaries. Frederick v. Allegheny Twp. Zoning Hr’g Bd., 196 A.3d 677 (Pa. Cmwlth. 2018).

Frederick is one of at least eight cases involving challenges to the validity of local zoning ordinances in Pennsylvania which authorize oil and gas development. Generally speaking, the challengers in these cases claim, based on the Pennsylvania Supreme Court’s decisions in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa.2013) and Pennsylvania Environmental Defense Foundation v. Commonwealth, 161 A.3d 911 (Pa. 2017) that the zoning ordinances violate substantive due process and Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA), because they permit an allegedly industrial use in non-industrial zoning districts.

In Frederick, the Allegheny Township zoning ordinance authorized oil and gas operations as a permitted use by right in all zoning districts.1 After the township issued a zoning permit to an operator for an unconventional well pad, three residents filed an appeal with the zoning hearing board challenging both the permit and the validity of the zoning ordinance. …

June 6, 2019

One of Pittsburgh’s biggest law firms enters Houston

Pittsburgh Business Times and Houston Business Times 
(by Patty Tascarella)
Babst Calland has opened its first Texas office via a merger with attorneys of The Chambers Law Firm, a firm based in Houston.
Les Chambers serves as managing shareholder of Babst Calland’s Houston office, which is located in The Woodlands.
Les Chambers, Ryan Chambers and Coleman Anglin have joined Babst Calland as shareholders, and Nataliya Tipton came aboard as an associate, according to a June 5 press release. They specialize in legal and regulatory matters related to oil and gas, property and transactional law as well as oil and gas title examination and analysis process for exploration and production companies in Texas, New Mexico, Oklahoma and the Appalachian Basin.
For the full Pittsburgh article, click here.
For the full Houston article, click here.

June 6, 2019

EPA’s Draft Study of Produced Water Management in the Oil and Gas Industry

The Legal Intelligencer

(by: Kevin Garber and Casey Snyder)

Background: Oil and Gas Produced Water Management 

Drilling and operating oil and gas wells, especially unconventional wells, generates a significant amount of flowback and produced water that must be managed properly under federal and state environmental laws (for this article, “produced water” will refer to all oil and gas extraction water). There are multiple produced water management strategies—and trends in the industry vary. The EPA’s newly released draft study, “Study of Oil and Gas Extraction Wastewater Management Under the Clean Water Act,” EPA‐821‐R19‐001 (May 2019), collected stakeholder input on produced water management options nationwide as part of its effort to determine whether future actions are appropriate to permit additional options to manage produced water.

Reviewing current management practices nationally, the EPA determined that injecting produced water into underground injection control (UIC) wells is the most common disposal option. Injection may be for disposal (Class II-D wells) or for enhanced oil recovery (Class II-R wells). The EPA and states with delegated authority implement these programs pursuant to the Safe Drinking Water Act. Pennsylvania has not applied for and does not have primacy to implement the federal UIC program in the commonwealth. Other management options include using produced water to hydraulically fracture new wells; using evaporation ponds or seepage pits in some states to contain produced water and subsequently collect precipitated solids for disposal or sale; using produced water from conventional operations for dust suppression and deicing; treating produced water onsite in mobile treatment units or treating it off site at centralized water treatment facilities (CWTs); disposing produced water from conventional operations at publicly owned treatment works (POTWs); and, in states west of the 98th meridian, discharging to surface water where suitable for agriculture or wildlife. …

June 6, 2019

West Virginia Supreme Court Opinion Limits Use of Surface Tract for Production of Gas from Neighboring/Unitized Tracts

Energy Alert

(by Timothy Miller and Paul Atencio)

On June 5, 2019, the West Virginia Supreme Court issued its opinion in EQT Production Company v. Crowder affirming a decision of the circuit court of Doddridge County, holding that a surface tract cannot be used to produce minerals from neighboring lands in the absence of an agreement with a surface owner, even if the mineral owners/lessees agreed to pooling and unitization.

At the time that the century-old lease was executed, the lessor owned both the surface and minerals in fee.  The minerals were later severed from the surface as subdivided tracts were conveyed as “surface only.”  The plaintiff surface owners challenged use of their lands to drill horizontal wells extending beyond the limits of their property to produce and transport oil and gas to/from adjacent tracts.

The Circuit Court of Doddridge County agreed with the plaintiffs and entered an order granting partial summary judgment, finding EQT trespassed to the extent it used the plaintiffs’ surface lands to conduct operations under neighboring mineral estates.

The Court held that the long recognized implied right of a lessee to use so much of the surface as “reasonably necessary” to produce the minerals, was limited to use for production under the surface tract only; not neighboring lands, even if the mineral lessees had signed lease modifications allowing pooling and unitization.  The appeal resulted from a trial court order finding that production companies do not have the right to produce pooled production through a surface drill tract without an express reservation in a severance deed or surface owner consent.

In its opinion the Court noted it did not decide the case on the “excessive use” claim, but limited it holding to trespass and property law claims.  …

June 5, 2019

Babst Calland Opens Houston Office, Merges with Attorneys from the Chambers Law Firm, PLLC

Les Chambers, Ryan Chambers, Coleman Anglin and Nataliya Tipton Join the Firm’s Energy and Natural Resources Practice

Babst Calland today announced the opening of a new office in Houston, Texas, and merger with attorneys of The Chambers Law Firm, a prominent Houston law firm.

Les R. Chambers, Ryan A. Chambers, and Coleman G. Anglin join the Firm as shareholders, and Nataliya K. Tipton as associate.

These Houston-based attorneys represent clients on a variety of legal and regulatory matters, particularly in the areas of oil and gas, property, and transactional law and all aspects of oil and gas title examination and analysis process for exploration and production companies in the Mid-Continent (including Texas, New Mexico and Oklahoma) and Appalachian Basin.

Commenting on these developments, Donald C. Bluedorn II, managing shareholder of Babst Calland, said, “These highly-regarded oil and gas attorneys are a natural fit in advancing our Firm’s vision to continue to expand our geographic footprint to serve clients’ needs in the development of the Permian Basin and other major and emerging shale plays in the country.”

“Our nationally-recognized multidisciplinary team of experienced energy attorneys, along with the resources of our new Houston office, offer our clients exceptional regional and national legal representation to help navigate challenges and opportunities to succeed in the oil and gas industry.”

“We are very excited to be joining Babst Calland,” said Les Chambers.  “The vast experience of our respective firms in the energy and natural resource sector, along with the diversity of practice areas and significant support staff at Babst Calland, will create a synergy that will greatly enhance the services we can provide to both our individual and mutual clients across the country.”

Les Chambers, the managing shareholder of Babst Calland’s Houston office, concentrates his practice in the areas of oil, gas and mineral title examination and opinions, oil and gas transactions, property law, as well as assisting clients on a wide range of energy matters including negotiating and drafting oil and gas contracts, leases, due diligence examination and analysis, pipeline acquisitions and surface use and seismic agreements. …

June 4, 2019

DOT Sends Pipeline Safety Bill to Congress

Pipeline Safety Alert

(by James Curry, Keith Coyle and Brianne Kurdock)

On June 3, 2019, the U.S. Department of Transportation (DOT) sent a legislative proposal to Congress for reauthorization of the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) pipeline safety program.  If enacted and signed into law, the legislation would reauthorize PHMSA’s pipeline safety program for an additional four years, or through 2023.

As in previous reauthorizations, the bill includes provisions that respond to recent events—in this case, the September 13, 2018, natural gas distribution incident in Merrimack Valley, Massachusetts.  Consistent with the Trump Administration’s broader policy agenda, the bill also includes provisions to promote innovation by supporting new technologies and enhancing pipeline safety and reliability.

The legislation addresses other areas of concern to the pipeline industry, such as requiring more timely review of technical standards and imposing additional criminal sanctions for pipeline vandalism.  Finally, the bill includes rulemaking mandates that focus on items of importance to PHMSA—namely, expanding the operator qualification (OQ) program to pipeline construction and establishing regulations for inactive pipelines.

How does the DOT Pipeline Safety Bill Respond to the Merrimack Valley Natural Gas Distribution Incident?

  • Secondary or Back-Up Overpressure Protection: Requires gas distribution pipeline operators to provide a secondary or back-up means of overpressure protection, which is capable of shutting the flow of gas or relieving gas to the atmosphere, for regulator stations serving low pressure distribution systems that use the primary and monitor regulator design.
  • Management of Change:  Permits PHMSA to require all pipeline operators
    to prepare and implement pipeline tie-in procedures that address management of change and active monitoring of pressures and control of gas and liquid sources.

    • …

May 30, 2019

Guidance: Shift Toward Classifying Workers as Independent Contractors

The Legal Intelligencer

(by Carla Voigt and Molly Meacham)

Recent guidance from two federal agencies indicates a push by the current administration toward classifying gig economy workers as independent contractors under federal workplace laws. Last month, the Department of Labor’s Wage and Hour Division (WHD) and the National Labor Relations Board (NLRB) each authored guidance declaring certain workers in the gig economy independent contractors, rather than employees.

In an opinion letter issued on April 29, the WHD analyzed whether workers for an unnamed “virtual marketplace company” (VMC) are employees or independent contractors under the Fair Labor Standards Act (FLSA). In refining the definition of independent contractor, the WHD focused on the economic reality test, which considers the totality of the circumstances to determine the degree of economic dependence the worker has on his employer. The WHD opinion letter describes workers’ “economic dependence” on businesses as “the touchstone of employee versus independent contractor status” and evaluated the nature of the relationship using the existing six-factor test previously developed by the U.S. Supreme Court in Rutherford Food v. McComb, 331 U.S. 722, 729 (1947).

Shortly after the WHD issued its opinion letter, in May the NLRB published its own advice memorandum dated April 16, in which it declared a group of Uber drivers to be independent contractors under the National Labor Relations Act (NLRA). Applying the board’s SuperShuttle classification test, the NLRB determined that the drivers have “significant opportunities for economic gain and, ultimately, entrepreneurial independence.” Accordingly, the NLRB opined that the drivers were properly classified as independent contractors and therefore not eligible to unionize under the NLRA. These publications indicate a significant trend by the current administration in favor of classifying workers as independent contractors. …

May 29, 2019

Artificial intelligence is changing the way lawyers practice

Smart Business

(by Jayne Gest with Chris Farmakis)

Artificial intelligence (AI) is adding efficiencies and transforming businesses everywhere, and legal practices are no exception.

“General counsels and executives that are hiring lawyers need to understand that this technology is available now, so they can make sure their lawyers leverage the latest technology tools,” says Christian A. Farmakis, shareholder and chairman of the board at Babst Calland. “AI can increase speed, increase efficiency and lower costs for clients — if the law firm has the right tools, but more importantly knows how to use those tools.”

Smart Business spoke with Farmakis about the advancement of AI technology in the legal space, which business executives may want to take advantage of.

How is AI technology disrupting the legal industry?

AI is a term generally used to describe computers performing tasks normally viewed as requiring human intellect.

AI legal technology won’t replace lawyers, but these tools will drastically change the way lawyers provide services for their clients. While estimates vary, 23 percent to 35 percent of a lawyer’s job could be automated. As a result, lawyers will need to be more strategic and supervisorial, able to act as project managers and supervise the information being fed into systems, and knowledgeable about the assumptions underlying the machine learning algorithms.

So far, projects that classify data have been impacted the most, allowing those projects to be done faster and more efficiently. This includes:

  • E-discovery.
  • Due diligence.
  • Research.

Law firms can already pass these savings on to clients, but this is only the beginning of the transformation.

What will be the next wave of AI legal technology? …

May 20, 2019

Legal Spotlight: Babst Calland Expands Energy, Environment Work

Legal Spotlight: Babst Calland Expands Energy, Environment Work

Bloomberg Environment

(by Chuck McCutcheon)

Pittsburgh-based Babst, Calland, Clements and Zomnir PC is making moves to expand its energy and environment practice.

The firm recently brought aboard Julie Domike as a shareholder in its Washington, D.C., office. Domike’s background includes working as an attorney for the EPA, and she has represented numerous clients in negotiations with that agency and the Justice Department.

It also this month hired Gina Falaschi, who had worked at Haynes and Boone LLP, as an associate in its D.C. office. In addition to counseling on compliance issues, Falaschi has worked with energy companies in developing new projects and advised clients on regulatory issues.

The hirings came partly in response to client requests to provide environmental and mobile-source emissions services before the EPA, California Air Resources Board, and other regulatory agencies, said Donald C. Bluedorn II, Babst Calland’s managing shareholder.

“We think it’s a natural fit, because we do a tremendous amount of stationary-source emissions work,” Bluedorn said of the hiring of Domike and Falaschi.

Babst Calland also has grown with the boom in the Marcellus Shale in the Northeast and has decided to open an office in Houston. That office will initially focus on mineral title work and eventually expand into other areas, Bluedorn said.

https://news.bloombergenvironment.com/environment-and-energy/carbon-capture-backers-seek-to-keep-momentum-going-49

 

May 14, 2019

Trump executive order puts spotlight on DOT LNG rules

The PIOGA Press

(by Keith Coyle)

On April 10, President Donald Trump signed an executive order, “Promoting Energy Infrastructure and Economic Growth.” In addition to outlining U.S. policy toward private investment in energy infrastructure and directing the U.S. Environmental Protection Agency to take certain actions to improve the permitting process under the Clean Water Act, the executive order instructs the U.S. Department of Transportation (DOT) to update the federal safety standards for liquefied natural gas (LNG) facilities.

The executive order notes that DOT originally issued those safety standards nearly four decades ago and states that the current regulations are not appropriate for “modern, large-scale liquefaction facilities[.]” Accordingly, the executive order directs DOT to finalize new LNG regulations within 13 months, or by no later than May 2020, an ambitious deadline given the complex issues involved and typical timeframe for completing the federal rulemaking process.

Why does dot regulate LNG safety?

The LNG industry has a long history in the United States. The first LNG plant went into service in West Virginia in the World War I era, and a commercial liquefaction plant in Cleveland, Ohio, went into operation in the 1940s. In 1944, the Cleveland plant experienced an LNG tank failure that led to a fatal explosion and fire and resulted in extensive property damage. The first commercial shipment of LNG by vessel occurred 15 years later, in 1959, when the Methane Pioneer sailed from Louisiana to the United Kingdom. Several large-scale LNG terminals were constructed during the late 1960s and 1970s in places like Alaska, Louisiana, Georgia, Maryland, and Massachusetts, a period that coincided with DOT’s initial efforts to establish federal safety standards for LNG facilities.

In the Natural Gas Pipeline Safety Act of 1968, Congress authorized DOT to prescribe and enforce minimum federal safety standards for gas pipeline facilities and persons engaged in the transportation of gas. …

May 14, 2019

EPA releases interpretive statement excluding releases to groundwater from NPDES program

The PIOGA Press

(by Lisa Bruderly and Gary Steinbauer)

On April 23, the U.S. Environ – mental Protection Agency published a notice of availability of an interpretive statement concluding that releases of pollutants to ground – water should be categorically excluded from Clean Water Act (CWA) permitting requirements. 84 Fed. Reg. 16810. The notice opens a 45-day public comment period, ending on June 7. EPA is requesting comments on its analysis and rationale and is also soliciting input on additional actions that may be needed to provide further clarity and regulatory certainty on whether the National Pollutant Discharge Elimination System (NPDES) permit program regulates releases of pollutants to groundwater.

With the issuance of the interpretive statement, EPA has reinjected itself into the ongoing debate, federal circuit court split and pending U.S. Supreme Court case over whether the CWA’s NPDES permit program regulates point source discharges that travel through groundwater before reaching a jurisdictional surface water. The interpretive statement and the related, ongoing judicial decisions are of interest to the natural gas industry, among other industries, given the potential implications related to leaks/spills from pipelines, impoundments and other structures.

 Interpretive statement content and reasoning

EPA describes the interpretive statement as the agency’s “most comprehensive analysis” of the CWA’s text, structure and legislative history in relation to whether the NPDES permit program regulates point source releases to groundwater. Most of the 63-page interpretive statement discusses EPA’s legal analysis of the statutory provisions that implement and enforce the NPDES permit program, the forward-looking, information-gathering statutory provisions that explicitly reference groundwater, and the relevant legislative history. Based on its analysis of this information, EPA concludes that Congress deliberately chose to exclude discharges of pollutants to groundwater from the NPDES permit program, even when those pollutants are conveyed to a jurisdictional surface water via groundwater. …

May 14, 2019

EPA determines that revisions to Subtitle D regulations for oil and gas wastes are unnecessary

The PIOGA Press

(by Jean Mosites)

In May 2016, various environmental groups, including the Environmental Integrity Project and the Natural Resources Defense Council, filed a lawsuit in federal court alleging that the United States Environmental Protection Agency failed to evaluate its regulations for managing wastes associated with oil and gas development activities as non-hazardous under Subtitle D of the Resource Conservation and Recovery Act (RCRA). The suit alleged that EPA had a non-discretionary duty under RCRA to periodically review and, if necessary, revise its Subtitle D regulations for solid waste disposal facilities and state solid waste management plans with respect to oil and gas development wastes. It further alleged that EPA had not done so since 1988 and that EPA should be ordered to conduct a subsequent review. The 1980 Bentsen Amendment to RCRA had exempted oil and gas wastes from regulation under RCRA Subtitle C as hazardous waste and permits regulation of such wastes under Subtitle D as non-hazardous. Earlier, EPA had declined a 2010 petition by NRDC requesting E&P waste be regulated as hazardous under Subtitle C.

The May 2016 lawsuit was resolved in December 2016 through the entry of a consent decree in which EPA agreed to either propose revisions to its Subtitle D regulations for oil and gas wastes or make a determination that revision of such regulations is unnecessary by April 23, 2019. On April 23, EPA determined that revising its Subtitle D regulations was not necessary.

To arrive at its determination, EPA examined regulatory programs in states such as Pennsylvania accounting for the vast majority of oil and gas production in the United States. EPA reviewed current waste management practices, waste characteristics, and E&P waste release/spill incidents in these states. …

May 13, 2019

Babst Calland Expands Washington, D.C. Environmental and Mobility, Transport and Safety Practices

WASHINGTON, DC and PITTSBURGH, PA – May 13, 2019 – Babst Calland announced today the lateral move of Gina Falaschi, who joined as associate in the firm’s Washington, D.C. office in the Environmental, Mobility, Transport and Safety, and Litigation practice groups.
Ms. Falaschi’s move to Babst Calland, along with Julie Domike, another seasoned environmental attorney who recently joined Babst Calland as shareholder in late April, further represents the firm’s commitment to meet clients’ needs related to environmental and emissions mobile source services before EPA, the California Air Resources Board, and other regulatory agencies as a part of its best-in-class team.
Ms. Falaschi provides advice to clients in the energy, transportation, and technology sectors regarding environmental regulatory compliance.  She has assisted companies with disclosure of regulatory violations to state and federal agencies, and has counseled clients in negotiations with the U.S. Department of Justice, U.S. EPA, and California Air Resources Board. In addition to counseling on compliance issues, she has worked with technology and energy companies in developing new projects and has advised clients on regulatory issues arising from joint ventures, mergers, and acquisitions.
She has litigated cases in federal court, represented clients in administrative cases before various federal agencies, and has experience with administrative rule challenges before the U.S. Court of Appeals for the District of Columbia Circuit.  Ms. Falaschi is admitted to practice in the District of Columbia, California, U.S. Court of Appeals for the District of Columbia Circuit, and U.S. District Court for the Eastern District of California.
Ms. Falaschi earned her J.D. from Georgetown University Law Center in 2016 and her A.B., magna cum laude, from Georgetown University in 2013.

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