January 30, 2018

Pennsylvania legislature attempts to inject new life into expired oil and gas leases

The PIOGA Press 

(by Nicholas J. Habursky)

On October 30, Governor Tom Wolf signed House Bill 74, which amended the Pennsylvania Fiscal Code. The 90-page bill included Section 1610-E, entitled “Temporary Cessation of Oil and Gas Wells,” which codified certain rights of oil and gas lessors and lessees to extend leases during periods of temporary cessation of production. This article explores how traditional savings clauses found in leases and existing legal precedent may be impacted by Section 1610-E, and provides an analysis of potential challenges arising out of the application of this new law.

The new law provides:

Section 1610-E: Temporary Cessation of Oil and Gas Wells

“(a) General rule.–An oil and gas lessor shall be deemed to acknowledge that a period of nonproduction under an oil and gas lease is a temporary cessation insufficient to terminate the lease and the lessor waives his right to seek lease termination upon those grounds if, prior to claiming the lease has terminated:

(1) production is recommenced and the lessor accepts royalty payments for the production. Any first royalty payment following recommencement of production after a period of more than one year of inactivity shall be accompanied by an explanation, in plain terms, that acceptance of the royalty payment shall constitute acknowledgment of an existing lease with the operator; or (2) the operator, after notifying the lessor of its intent to drill a new well and giving the lessor 90 days within which to object, drills a new well under the lease.

(b) Lease provisions.–Nothing in this section is intended to waive lease requirements related to commencement of operations during a lease’s primary term or affect a lease provision expressly providing for lease termination following a fixed period of nonproduction.”

Savings clauses preventing lease termination

Traditional Pennsylvania oil and gas leases typically terminate upon the: i) expiration of the primary term unless the lease entered its secondary term; …

January 25, 2018

U.S. Supreme Court Decision Revives Multiple Federal District Court Lawsuits Challenging the Clean Water Rule

Environmental Alert

(by Lisa M. Bruderly and Gary E. Steinbauer)

On January 22, 2018, the U.S. Supreme Court unanimously held that lawsuits challenging the Obama administration’s 2015 Clean Water Rule (Rule) – a landmark revision to the definition of “waters of the United States” (WOTUS) that arguably expanded the scope of the federal government’s authority under several regulatory programs, including those associated with wastewater discharges and dredge/fill activities under the Clean Water Act (CWA) – must be filed in federal district courts instead of the federal courts of appeal. Nat’l Assoc. of Mfrs. v. Dept. of Def., No. 16-299 (Jan. 22, 2018) (NAM). While the Supreme Court’s decision in NAM did not address the merits of the lawsuits challenging the Rule, it did determine the appropriate forum for those legal challenges.

The decision is significant because it will end the nationwide judicial stay of the Rule, dismiss all appellate-level judicial challenges, and revive more than a dozen federal district court lawsuits challenging the Rule filed by more than 100 parties, including industry groups and 31 states. Among other considerations, the revival of the numerous federal district court cases increases the likelihood that the Rule will be inconsistently interpreted across the United States and lengthens the amount of time before a challenge to the merits of the Rule could reach the Supreme Court. For example, one of the federal district courts with a pending challenge to the Rule previously held that it had jurisdiction and stayed the Rule in 13 states. North Dakota v. U.S. EPA, No. 3:15-cv-59 (D.N.D. August 27, 2015) (staying the Rule in Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, and Wyoming). …

January 23, 2018

The Pittsburgh Life Sciences Greenhouse Partners with Babst Calland to Assist Startups

Legal Services for Incorporation and Standard Business Agreements

The Pittsburgh Life Sciences Greenhouse (PLSG) has partnered with local law firm Babst Calland to offer startup companies in the PLSG portfolio access to legal assistance regarding certain corporate governance work and drafting of certain standard business agreements, under a flat fee arrangement*. This

Flat Fee Program is available to individuals and entities that come through PLSG for investment and development.

Under the Flat Fee program, Babst Calland can assist with:
• Incorporating a business, including preparing and filing with the Department of State the Articles of Incorporation, as well as preparation of other required documents.
• Assisting with the establishment of a single-member limited liability company, including the preparation and filing of a Certificate of Organization with the Department of State, and the preparation of an Operating Agreement.
• Preparing certain standard business agreements, including: (1) confidentiality agreement/non-disclosure agreement; (2) employment agreement/noncompete agreement.

“Our team can provide efficient and effective legal assistance to help companies new and old navigate the day-to-day issues commonly faced by businesses, and we look forward to working with PLSG and its exciting portfolio of emerging life sciences companies,” said Alana Fortna of Babst Calland. “The life sciences space is essential to the continued growth of our region.”

“PLSG believes in the mission of helping regional life sciences companies achieve successful commercialization, and Babst Calland’s offer to bring its legal expertise and insight to bear on behalf of our startups for a flat fee is both incredibly valuable and very much appreciated,” said Jim Jordan, PLSG President and CEO. “By developing this Flat Fee Program with Babst Calland, we can make sure that our companies have experienced counsel at a predictable cost.”

The PLSG kicks off this new program by giving away one free legal service* at a drawing during its B2B event, “Start-ups: Why and when to hire a lawyer?” scheduled from 5:30 to 6:30 p.m., Thursday, January 25, at PLSG offices on the South Side, featuring guest speakers Alana Fortna and Ben Milleville from Babst Calland. …

January 10, 2018

Babst Calland Names Milleville, Rorabaugh and Tysiak Shareholders

Babst Calland recently named Benjamin W. Milleville, Elena L. Rorabaugh and Nikolas E. Tysiak shareholders in the Firm.

Benjamin W. Milleville, a member of the Firm’s Corporate and Commercial Group, advises businesses and nonprofit organizations on corporate and transactional matters, including mergers and acquisitions, reorganizations, joint ventures, commercial contracts, governance matters, compliance, and real estate transactions.  Mr. Milleville advises businesses of varying size and complexity, and at various points in their lifecycles.  In his role as outsourced corporate counsel to a multinational public company, he counsels senior management in the U.S. and abroad on a broad range of legal matters.  Mr. Milleville also advises entrepreneurs and startup businesses on the legal issues faced by emerging companies, including business structuring and protection of intellectual property.  In his nonprofit practice, Mr. Milleville counsels clients, including charitable organizations and trade associations, on obtaining and maintaining tax-exempt status, nonprofit governance, and nonprofit mergers and strategic alliances.

Mr. Milleville is a 2008 graduate of the University of Pittsburgh School of Law.

Elena L. Rorabaugh, a member of the Firm’s Energy and Natural Resources Group, is experienced in assisting oil and gas companies navigate the legal obstacles involved with exploration and production. Her practice focuses on energy, oil, gas and mineral-related transaction matters, including title examination and title curative work. Ms. Rorabaugh also counsels clients with respect to the acquisition and disposition of oil and gas properties and has experience in all aspects of title due diligence.  Ms. Rorabaugh also has experience representing E&P, midstream and other energy companies in mergers and acquisitions, and she counsels clients on a variety of business and corporate transactional matters.

Ms. Rorabaugh is a 2009 graduate of Duquesne University School of Law.

Nikolas E. …

January 8, 2018

An Attorney’s Perspective: Tips for Commenting on a Draft Air Permit

Zephyr Currents

(by Meredith Odato Graham)

Draft permit review is an important part of the air permitting process. Careful evaluation of the draft permit enables the permittee to head off possible compliance issues and otherwise refine the permit before it becomes final. As the permittee, you will typically have at least two chances to comment on a draft permit—once on a pre-draft version and again during the official public comment period. Take advantage of these opportunities to craft an air permit that best suits your facility, and keep in mind the following tips as you prepare written comments for submission to the agency.

Establish an Internal Schedule: The very first thing you should do upon receiving the draft permit is confirm how much time is available for the review. Double check the comment deadline and plan to meet it. You’ll need ample time to review the relevant documents, gather internal input and prepare written comments. Make time to get feedback from the facility personnel who will actually implement the permit on a day-to-day basis. Mark the calendar and establish interim deadlines to keep the ball rolling. It may become necessary to request an extension, in which case you’ll want to show that a good faith effort was made to meet the original deadline.

Request the Draft Permit in a Writeable Format: Ideally, your submission will include a “marked up” or redlined version of the draft permit which clearly shows the changes you are requesting. This is much easier to do when the agency can provide the draft permit in a writeable format such as Microsoft Word. In situations where an existing permit is in effect, it will be helpful to make a comparison document showing the differences between the existing permit and the draft permit. …

December 12, 2017

End-of-the-year checkup concerning personnel files

The PIOGA Press

(by Stephen A. Antonelli)

It is officially that time of year again. The weather will soon be frightful, and if your place of employment is anything like mine, the first of many holiday parties is already in the rearview mirror. Please don’t worry, this is not another article about how to behave (or how not to behave) at an office party. No, this article is about a considerably less scandalous topic: whether and how employees and former employees may view their own personnel files. Please try to contain your enthusiasm, and demonstrate a bit of holiday charity by continuing to read.

Many employers use the month of December to wrap up financial matters and to plan for the coming year by preparing goals, budgets, forecasts and strategic plans. Many employers also use this time of year to conduct employee reviews and make determinations about employees’ compensation. Hopefully, most of your employees will receive good or even great reviews. Some may even receive yearend bonuses. (Side note: if paid to non-exempt employees, bonuses should either be (1) discretionary or (2) taken into consideration when calculating the regular rate for overtime purposes, but that is another article for another issue of The PIOGA Press).

Some employees receive a review that is the equivalent of a proverbial lump of coal. As you might imagine, employees who receive such reviews react in a number of different ways. Some react emotionally, others stoically. Some take constructive criticism to heart and address the problematic aspects of their review head-on, in a sincere attempt to improve upon their performance. Others immediately begin to search for a new place of employment. Most react somewhere in between.

Those employees who receive mediocre to problematic reviews may wish to review their personnel files. …

December 1, 2017

Air Permitting Documents for Oil and Gas Industry Released by DEP

Alert:  Environmental

On November 30, 2017, the Pennsylvania Department of Environmental Protection announced the details of highly-anticipated changes to its air permitting program for the oil and gas industry. The Department released in final draft form two air program general permits, “GP-5” and “GP-5A,” as well as a permit exemption known as “Exemption 38.” Plans to revise the air permitting framework were first announced in January 2016 as part of Governor Tom Wolf’s Methane Reduction Strategy for Pennsylvania. The recently updated permits and exemption are not yet in effect or legally binding, which means there may still be an opportunity to influence these critical air permitting documents.

The final draft permits and exemption will be presented to the DEP Air Quality Technical Advisory Committee (AQTAC) at a public meeting scheduled to occur on December 14, 2017 in Harrisburg, Pa. AQTAC advises DEP on the technical, economic and other social impacts of major program changes like this one. In addition to the AQTAC meeting, the Department is informally soliciting feedback from stakeholders to further refine GP-5, GP-5A and Exemption 38 before they become effective. DEP intends to finalize the permits and exemption in the first quarter of 2018 by publishing an official notice in the Pennsylvania Bulletin.

Also slated for discussion at the AQTAC meeting is a forthcoming rulemaking to reduce volatile organic compound (VOC) emissions from existing oil and gas industry sources. In October 2016, the U.S. Environmental Protection Agency finalized a “control techniques guidelines” document that provided states with recommendations for reducing VOC emissions from a range of equipment and processes used by the oil and gas industry. As a result, DEP has until October 2018 to submit regulations for EPA approval. DEP anticipates that this rulemaking will have a collateral effect of reducing methane emissions. …

November 17, 2017

The Pennsylvania Environmental Hearing Board's Second Analysis of the Environmental Rights Amendment

Alert: Environmental

On November 13, 2017, the Pennsylvania Environmental Hearing Board issued its second opinion analyzing Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment, in light of the Pennsylvania Supreme Court’s June 20, 2017 decision in Pennsylvania Environmental Defense Foundation v. Commonwealth (PEDF).  In Friends of Lackawanna v. DEP and Keystone Sanitary Landfill, EHB Dkt. No. 2015-063-L (November 10, 2017) the EHB applied the principles set out in PEDF and upheld a landfill permit renewal.

In its PEDF decision, the Pennsylvania Supreme Court established a new standard of review based on the text of the ERA and Pennsylvania trust law principles but did not provide a definitive test regarding how the ERA is to be applied in the permitting context.  Earlier this year, on August 15, 2017, the EHB issued its first opinion interpreting and applying the new ERA standard in a third-party appeal of longwall mining permit revisions issued to Consol Pennsylvania Coal Company in Center for Coalfield Justice and Sierra Club v. DEP, EHB Dkt. No. 2014-072-B (August 15, 2017) (CCJ). The EHB reviewed the Department of Environmental Protection’s consideration of the potential environmental effects of its permitting action and whether the activity authorized by the permit was likely to cause, or in fact did cause, unreasonable degradation or deterioration of a public natural resource.

Friends of Lackwanna Decision

In Friends of Lackawanna, a citizens group, the Friends of Lackawanna (FOL), appealed a landfill permit renewal issued to Keystone Sanitary Landfill.  Keystone has been operating a permitted landfill for more than 30 years, with the Department renewing its permit several times over that period, most recently in 2015. …

November 16, 2017

The DEP Releases a Trio of Draft Technical Guidance Documents

Alert: Environmental 

On October 14, 2017, the DEP published notices of availability for a trio of draft Technical Guidance Documents (TGD) in the Pennsylvania Bulletin. Each of these TGDs proposes policy departures from current practices in both the form and substance of the respective TGD. Two of them, Policy for the Development and Publication of Technical Guidance and Policy for the Development and Review of Regulations, are significantly less detailed than their predecessor TGDs. For instance, the draft TGDs omit internal procedural steps and checkpoints involved in the DEP’s promulgation of new technical guidance documents and regulations. The revisions, if finalized, will affect those regulated and public entities who routinely participate in the DEP’s TGD and regulatory development process.

Overview

1. Policy for the Development and Review of Regulations (012-0820-001)

The draft policy proposes substantial formatting changes – including a name change – from the current Policy for Development, Approval, and Distribution of Regulations, which was published by the DEP in 1996 and last updated in November 1999. The proposed TGD is notably shorter in the current version because it abandons 11 extensive attachments that provide guidance on both form and substance the DEP is to follow throughout the rulemaking process. Key differences in the proposed TGD include:

• A new section entitled “Purposes of Environmental Regulations,” which refers to Constitutional rights, including the Environmental Rights Amendment of Article I, Section 27. The DEP refers to its duty, as an agency of the Commonwealth, as a trustee to conserve and maintain public natural resources.
• A statement that the General Assembly establishes the framework and scope of the environmental programs administered to the DEP but that it “defers” to the DEP to  implement the laws. …

November 14, 2017

Babst Calland’s Expansion Results in Move to New D.C. Office

Washington, D.C., November 14, 2017 – Babst Calland has moved its Washington, D.C. office to a new location.  Following a period of growth and expansion, the firm has outgrown its previous location and has moved to its new location at 505 9th Street NW, Suite 700, Washington, DC 20004.

“Our team of attorneys in the Washington, D.C. office welcomes the move,” said James Curry, transportation safety attorney and managing shareholder of Babst Calland’s D.C. office.  “The new space will accommodate our growth while enabling us to continue to serve current and new clients,” he added.

Babst Calland opened its Washington, D.C. office in January 2016 representing clients throughout the U.S. on matters relating to pipeline safety and the transportation of hazardous materials. This year, the firm expanded its team to support clients in a broader range of transportation safety matters, including its motor vehicle safety, regulatory and compliance practice (including automated driving system issues).

The Washington, D.C.-based transportation safety practice focuses on representing clients through a multi-disciplinary team approach and is integrated with the firms’ Energy and Natural Resources, Environmental and other practices, which allows us to provide comprehensive multi-issue services to our clients. The group’s strength is its deep understanding of the federal government’s approach to safety regulation and its collective experience in the transportation and energy sectors.

November 9, 2017

Recent Lawsuits Reflect EEOC's Continued Scrutiny of Hiring Practices

The Legal Intelligencer
(by Molly E. Meacham and Sean R. Keegan)

Over the past 20 years, the Equal Employment Opportunity Commission (EEOC) has annually received anywhere between 75,000 and 100,000 charges of discrimination (charges). In Fiscal Year 2016, the EEOC received 91,503 charges, responded to more than 585,000 calls and received more than 160,000 inquiries in field offices. In that same time period, EEOC legal staff filed 86 lawsuits alleging discrimination–less than one-tenth of 1 percent of the total charges received. Those lawsuits included 55 individual suits and 31 suits involving multiple individuals or discriminatory policies. Given the volume of demand for its assistance and the fractional number of lawsuits it pursues, the EEOC issues a multi-year strategic enforcement plan to maximize its use of resources and provide direction to its staff.

In October 2016, the EEOC released its strategic enforcement plan for Fiscal Years 2017-2021, which followed the conclusion of its strategic enforcement plan for Fiscal Years 2012-2016, see U.S. Equal Employment Opportunity Commission Strategic Enforcement Plan, Fiscal Years 2017-2021, available at https://www.eeoc.gov/eeoc/plan/sep-2017.cfm. Both plans list “eliminating barriers in recruitment and hiring” as the first national substantive priority. The 2017-2021 plan continues the EEOC’s focus on discriminatory hiring practices and pledges to “focus on class-based recruitment and hiring practices that discriminate against racial, ethnic and religious groups, older workers, women, and people with disabilities.” The 2017-2021 plan names “the growth of the temporary workforce, the increasing use of data-driven selection devices, and the lack of diversity in certain industries and workplaces” as “areas of particular concern,” and notes that this priority “typically involved systemic cases” but may also be included “if it raises a policy, practice or pattern of discrimination.” As the EEOC embarks on its 2017-2021 plan, it is also significantly increasing the number of suits it filed in 2016. …

November 10, 2017

New PHMSA administrator confronts outstanding pipeline safety rulemaking proceedings

The PIOGA Press
(by Keith J. Coyle)

Howard R. Elliott was officially sworn in on October 30 as the new administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA). Administrator Elliott, who spent four decades in the freight rail industry and received a lifetime achievement award from the Association of American Railroads for hazardous materials transportation safety, is well positioned to lead the federal agency that administers the nation’s hazardous materials transportation safety program. However, his tenure is likely to be defined, at least in the near term, by how he handles two significant pipeline safety rulemaking proceedings that PHMSA initiated during the previous administration.

Pipeline Safety: Safety of Hazardous Liquid Pipelines, PHMSA-2010-0229

In October 2015, PHMSA issued notice of proposed rulemaking (NPRM) that contained significant changes to the hazardous liquid pipeline safety regulations in 49 C.F.R. Part 195. The proposed changes included requiring operators of gravity lines and unregulated rural gathering lines to submit certain reports; requiring inspections of pipelines in areas affected by extreme weather, natural disasters and other similar events; requiring periodic assessment of pipelines not already subject to the integrity management (IM) program regulations; requiring operators to have leak detection systems on non-IM pipelines; establishing more stringent pipeline repair criteria; and requiring operators to make pipelines in high consequence areas (HCAs) capable of accommodating inline inspection tools within 20 years, unless the pipeline’s construction would not permit that accommodation.

PHMSA received more than 100 comments on the NPRM, including from several pipeline industry trade organizations and companies. These industry commenters expressed significant concerns with many aspects of the NPRM. The American Petroleum Institute (API) also submitted a third-party cost-benefit analysis of the proposals, which indicated that the total annualized costs would exceed $600 million, more than 25 times the $22.4 million estimate that PHMSA provided in its preliminary regulator impact analysis. …

November 3, 2017

Going Global

Best Lawyers
(by Joseph K. Reinhart and Meredith Odato Graham)

Government agencies tasked with reviewing energy projects may take a harder look at anticipated greenhouse gas emissions following recent federal court decisions that call for a broader scope of environmental review. In a 2–1 ruling issued August 22, 2017, a panel of the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) vacated a decision by the Federal Energy Regulatory Commission (FERC) to approve a major interstate pipeline project, holding that FERC failed to adequately consider the greenhouse gas emissions that will result from burning the natural gas in downstream power plants. (See Sierra Club v. FERC, D.C. Cir., No. 16-1329.) The D.C. Circuit faulted FERC’s project review under the National Environmental Policy Act of 1969 (NEPA), which requires federal agencies to evaluate the environmental and related socioeconomic impacts of proposed actions prior to making decisions. Although FERC addressed climate change in its NEPA review, the agency declined to engage in what it referred to as “speculative analyses” concerning the “relationship between the proposed project and upstream development or downstream end-use.”

In remanding the case to FERC, the D.C. Circuit held that FERC should have either quantified the downstream greenhouse emissions that will result from burning the natural gas being carried by the pipelines or explained in more detail why it could not be done.

Without estimating and quantifying the project’s greenhouse gas emissions and comparing them to regional emission reduction goals; for example, the D.C. Circuit said it would be impossible for FERC and the public to engage in the kind of meaningful review required by NEPA.

A recent decision in the mining context signals that climate change concerns are complicating more than just the pipeline projects. …

November 2, 2017

Deduction of Post-Production Expenses from Royalty Payments in Ohio

Legal Perspective

A federal court recently addressed two contentious issues affecting calculation of royalty payments from production of shale gas in Ohio: (1) whether operators may deduct post-production expenses (costs for gathering, compression, treatment, processing, transportation, and dehydration) when calculating royalty payments; and (2) whether operators are required to pay royalties on all gas extracted at the wellhead – including gas that is lost between the wellhead and the point of sale (i.e. “line loss” gas).  Lutz v. Chesapeake Appalachia, L.L.C., No. 4:09-cv-2256, Dkt. 142 (N.D. Ohio, Oct. 25, 2017) (Judge Sara Lioi).

In 2009, a group of five lessors commenced a putative class action suit in the federal District Court for the Northern District of Ohio against Chesapeake Appalachia, L.L.C., Columbia Energy Group, and NiSource, Inc.  The lessors claimed that, since 1993 the producers had been “deliberately and fraudulently” underpaying the gas production royalties owed to the lessors by (1) deducting post-production expenses from the royalty payments, (2) calculating royalty payments on volumes less than the amount of gas produced at the wellhead, and (3) using a sale price that was less than the market price for gas.  In response to a motion by the producers, the court dismissed the entire complaint as time-barred by the statute of limitations.  On appeal of that order, the Sixth Circuit determined that the breach of contract claim was not entirely time-barred because each alleged monthly underpayment would constitute a separate breach of contract that triggered a new accrual period under the statute of limitations. Lutz v. Chesapeake Appalachia, L.L.C., 717 F.3d 459, 470 (6th Cir. 2013).  As a result, the lessors may assert a breach of contract claim for alleged underpayments that occurred during the four years prior to commencement of the action.  …

October 23, 2017

EPA Administrator Pruitt Issues “Sue and Settle” Directive and Institutes New Public Participation Requirements for EPA Settlements of Defensive Lawsuits

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