Articles, Alerts & Perspectives

The Legal Intelligencer

While Pennsylvania’s natural gas production is on the rise, energy lawyers in the state said that will not have an immediate impact on their practices. But, they said, the numbers forecast a bright future for multidisciplinary energy practices in Pennsylvania, as well as the overall state economy.

The Pennsylvania Department of Environmental Protection published its annual Oil and Gas Report earlier this month, which said Pennsylvania’s natural gas production rate increased to a record high, despite a nationwide downturn in oil and gas drilling activities.

“It reaffirms the idea that we have a stable and productive amount of natural gas,” said Joseph Reinhart, co-chair of Babst Calland’s energy and natural resources practice group. “That means good things for the economy including the lawyers.”

Lawyers said the production statistics will draw industry to Pennsylvania. But the positive consequences, particularly in the legal industry, may not be immediate, as infrastructure remains lacking and the industry overall is still experiencing a downturn.

“It’s going to take a few years for things to play out,” northeast Pennsylvania energy lawyer Stephen Saunders said. When it does, “people that are really committed to keeping up to the developments in the industry, they’re going to have work to do.”

According to the DEP report, more than 4.6 trillion cubic feet of natural gas was produced in Pennsylvania last year, up from about 4.1 trillion in 2014 despite a reduction in the number of natural gas wells being drilled.

Last week, acting DEP Secretary Patrick McDonnell said Pennsylvania’s Marcellus Shale natural gas wells are the most productive in the United States, according to a report in the Observer-Reporter, a southwestern Pennsylvania newspaper.

Reinhart noted that the annual report is not even up to date, since it is based on 2015 numbers. …

The PIOGA Press

On June 23, Governor Tom Wolf signed Act 52 of 2016, the Pennsylvania Grade Crude Development Act, formally Senate Bill 279. Act 52 abrogates the Environmental Quality Board’s (EQB) revisions to the Chapter 78 regulations concerning conventional oil and natural gas wells and creates the Pennsylvania Grade Crude Development Advisory Council.

In February, the EQB approved the Chapter 78 (conventional wells) and Chapter 78a (unconventional wells) Subchapter C revisions by a vote of 15-4. The Chapter 78 revisions would have altered or created new obligations for permit applications and renewals, water supply replacement, predrilling surveys and reviews, erosion and sediment control, emergency response plans, wastewater management, disposal of drill cuttings, site restorations, spills and releases, and production reporting. The revisions also included 31 different requirements for electronic applications, notifications and submittals.

Act 52 applies only to the conventional regulations. The Chapter 78a unconventional regulations are currently undergoing review at the Pennsylvania Office of Attorney General and are expected to be published in late summer.

In addition to abrogating the pending revisions to Chapter 78, Act 52 specifies that any future rulemaking concerning conventional wells must be undertaken separately and independently of unconventional wells and other subjects. Future rulemakings concerning conventional wells must include a regulatory analysis form submitted to the Independent Regulatory Review Commission (IRRC) that is restricted to the subject of conventional wells.

Act 52 addresses the primary criticism of PIOGA and other trade associations and the Department of Environmental Protection’s Conventional Oil and Gas Advisory Committee (COGAC) regarding EQB’s Chapter 78 revisions. Specifically, Act 126 of 2014 required EQB to promulgate proposed regulations relating to conventional wells separately from proposed regulations relating to unconventional wells, which should have removed pending revisions applicable to conventional operations proposed in 2013. …

Employment Bulletin

Many employers have implemented policies mandating employees involved in an accident at the workplace to undergo drug and alcohol screening. Effective August 10, 2016 such blanket, automatic policies will likely run afoul of the injury reporting requirements of the Occupational Safety and Health Act (Act).

On May 12, 2016, the Occupational Safety and Health Administration (OSHA) issued its Final Rule amending employers’ obligations to report and record injuries, and clarifying its interpretation of the injury reporting requirements of the Act. 29 CFR §1904.35(b)(1)(i) requires the employer to establish a “reasonable procedure for employees to report work-related injuries and illnesses ….” OSHA “clarified” this requirement by adding the following: “A procedure is not reasonable if it would deter or discourage a reasonable employee from accurately reporting a workplace injury or illness …”

In the comments accompanying the Final Rule, OSHA noted that many commenters to the proposed rule complained that employer policies requiring automatic post-injury drug and alcohol testing were a form of adverse action that discouraged reporting. The comments state that:

Although drug testing of employees may be a reasonable workplace policy in some situations, it is often perceived as an invasion of privacy, so if an injury or illness is very unlikely to have been caused by employee drug use, or if the method of drug testing does not identify impairment but only use at some time in the recent past, requiring the employee to be drug tested may inappropriately deter reporting.

OSHA concluded that “the evidence in the rulemaking record shows that blanket post-injury drug testing policies deter proper reporting.” OSHA did not ban all post-incident reporting, but the comments set forth the agency’s view that it should be severely limited:

[T]his final rule does not ban drug testing of employees. …

The Legal Intelligencer

The Rolling Stones said it best: “Time is on my side, yes it is.” This has never been more accurate after the publication of the much-anticipated final rule updating overtime regulations, as an estimated 4.2 million workers who were previously exempt from receiving overtime pay may be eligible for overtime starting Dec. 1, 2016.

On May 18, President Obama and Department of Labor Secretary Thomas E. Perez announced the publication of the Department of Labor’s Final Rule titled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees.” The final rule updated overtime regulations, including an update on the salary and compensation levels needed for employees to be considered exempt, (29 CFR Part 541).

The Fair Labor Standards Act

Pursuant to the Fair Labor Standards Act (FLSA), an employee is entitled to overtime of one and one-half times the employee’s regular rate of pay for hours worked over 40 in a workweek. However, certain executive, administrative, and professional employees are exempt from this rule. These employees are commonly referred to as “exempt employees.” To be considered exempt, three tests must be met: The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (salary basis test); the amount of salary paid must meet a minimum specified amount (salary level test); and the employee’s job duties must primarily involve executive, administrative or professional duties as defined by the regulations (duties test).

Combination of ‘Long’ and ‘Short’ Duties Test

Prior to 2004, the regulations implemented both a “long” and “short” duties test. The long test paired a lower salary requirement with a more stringent duties test—meaning that to qualify a worker could perform no more than 20 percent of their time on nonexecutive, administrative, or professional duties. …

The Legal Intelligencer

On March 2, the Commonwealth Court rendered a decision in Embreeville Redevelopment v. Board. of Supervisors of West Bradford Township, 134 A.3d 1122 (Pa. Commw. Ct. 2016), which clarified when a zoning ordinance amendment, although solely textual on its face, constitutes a zoning map change and triggers the additional notice requirements under Section 609(b) of the Municipalities Planning Code, 53 P.S. Section 10609(b).

The Municipalities Planning Code, 53 P.S. Section 10101 et seq., (MPC), which establishes the framework for zoning and land use regulation in Pennsylvania, sets forth the detailed procedure a municipality must follow when adopting or amending a zoning ordinance. In pertinent part, a municipality intending to amend its zoning ordinance, regardless of whether the proposed amendment is a text amendment or a zoning map change, must: transmit a copy of the proposed amendment to the county planning agency (if one has been created) for review and comment; transmit a copy of the proposed amendment to the municipality’s planning commission for review and comment (if the planning commission did not prepare the amendment); hold a public hearing on the proposed amendment; and publish notice of the public hearing on the proposed amendment twice, in two successive weeks, in a newspaper of general circulation in the municipality no more than 30 and no less than seven days before the public hearing, (see MPC Sections 304(a)(3) and 609; 53 P.S. Sections 304(a)(3) and 609). In addition to the foregoing requirements, if a proposed amendment involves a zoning map change, Section 609(b) of the MPC requires that a municipality also conspicuously post notice of the public hearing on the properties affected by the proposed map change; and mail notice of the public hearing to the owners of property affected by the proposed map change. …

Marcellus Drilling News

The legal beagles of top energy law firm Babst Calland recently released their sixth annual energy industry report called, “The 2016 Babst Calland Report – An Unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead; Legal and Regulatory Perspective for Producers and Midstream Operators.” This annual review of energy and natural resources development activity acknowledges the continuing evolution of this industry in the face of economic, regulatory, legal and local government challenges. In an MDN exclusive, we have the first six pages of the 68-page report (see below), along with details on how you can request a full copy. Worth the read!…

Read more.

The PIOGA Press

This article is an excerpt of the 2016 Babst Calland Report – “An unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead. Legal and Regulatory Perspective for Producers and Midstream Operators.

In 2015, 42 North American oil and gas exploration and production companies filed for bankruptcy protection.  At least another 29 have filed in 2016, and continuing price pressure may result in more bankruptcy filings.  Given this state of affairs, companies operating in the oil and gas sector should understand how their rights and obligations are affected when their contractual counterparties become bankruptcy debtors, and how to take advantage of business opportunities presented through the bankruptcy process.

Assumption or Rejection of Contracts

One of the main purposes of the Bankruptcy Code is to afford a commercial debtor the opportunity to rehabilitate and reenter the stream of commerce as a productive enterprise.  One tool afforded to debtors is the right under Section 365 of the Bankruptcy Code to determine which of its “executory contracts” dating from prior to the bankruptcy filing are beneficial, and which are burdensome, and to reject those that are burdensome, thereby relieving the debtor of the obligation to perform burdensome contracts going forward.  The Bankruptcy Code does not define the term “executory contract,” but the term is generally understood to encompass those contracts where the obligations of both parties are unperformed to the degree that the failure of either party to complete performance would constitute a material breach.  Section 365 also permits a debtor to reject its unexpired leases.

The question of whether a debtor can reject particular sorts of contracts can hinge on issues determined under state law.  More specifically, the treatment of oil and gas leases, gathering agreements and transportation agreements can vary, depending on the treatment of those agreements under the state law governing those agreements. …

Pipeline & Gas Journal

The department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency charged with administering the nation’s pipeline safety program, published a long-awaited notice of proposed rulemaking (NPRM) for gas transmission and gathering pipelines

Under development for more than four years, the NPRM proposes significant changes to PHMSA’s safety standards for gas pipeline facilities in 49 C.F.R., Part 192. Of particular importance to the upstream and midstream sectors, the NPRM includes a proposal to modify the federal safety standards for onshore gas gathering lines in four significant ways.

Read more.

Pittsburgh Post-Gazette

No one wants to drill for oil and gas in South Fayette anymore.

That’s not part of a new settlement that aims to put to bed a years-long conflict between the township and a group of landowners who felt South Fayette was trying to exclude drilling from its borders.

But it’s a loud unsaid.

The low price of natural gas has likely dampened the appetite of Range Resources, the Texas-based shale operator that once leased land from the Kosky family and their business interests, and of the landowners who continue to spend hundreds of thousands of dollars fighting the township.

Read more.