April 30, 2015

Zoning ordinance validity challenges persist in the wake of the Robinson Township plurality opinion

The PIOGA Press

In a somewhat ironic twist, anti-industry residents and environmental groups have been relying on their victory in Robinson Township v. Commonwealth, 83 A.3d 901 (2013), which invalidated the statewide standardized land use control set forth in Act 13 and restored local land use control over oil and gas operations, to challenge local zoning ordinances that regulate oil and gas development. The challengers in these validity actions generally argue that, per the plurality’s expansion of the Pennsylvania Constitution’s Environmental Rights Amendment (ERA) in Robinson Township, each municipality must engage in substantial environmental and safety analysis prior to enacting oil and gas regulations or issuing permits thereunder. According to the challengers, an ordinance enactment process or permit review process that does not satisfy these requirements is invalid.

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April 28, 2015

Pa. Supreme Court Continues to Clarify Property Right Protections: Land Use & Planning

The Legal Intelligencer

The Pennsylvania Supreme Court recently rendered a decision in Reading Area Water Authority v. Schuylkill River Greenway Association, 100 A.3d 572 (Pa. 2014), further narrowing the definition of what constitutes a “public purpose” for a taking by eminent domain in Pennsylvania. The Reading opinion is significant, as it constitutes yet another Pennsylvania decision favoring the protection of private property rights from seizure by the government. The decision is particularly noteworthy in the context of the U.S. Supreme Court’s controversial expansive view of the eminent domain power in Kelo v. City of New London, 454 U.S. 469, from 2005.

*Reprinted with permission from the 4/28/15 issue of The Legal Intelligencer. © 2015 ALM Media Properties, LLC. Further duplication without permission is prohibited.  All rights reserved.

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April 18, 2015

Final Rulemaking for Disposal of Coal Combustion Residuals Published in Federal Register

Administrative Watch

On April 17, 2015, the U.S. Environmental Protection Agency published the Hazardous and Solid Waste Management System; Disposal of Coal Combustion Residuals from Electric Utilities; Final Rule (Final Rule) in the Federal Register (see 80 Fed. Reg. 21302, April 17, 2015). The electric utility industry has been awaiting this rule to be published since the pre-publication copy was made publicly available on December 19, 2014. The Final Rule establishes minimum criteria for the placement of coal combustion residuals (CCR) in landfills and surface impoundments. The Final Rule applies to CCR generated by coal-fired power plants.

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April 6, 2015

Pennsylvania Supreme Court to Offer Clarity on the Scope of Local Tax Enabling Act’s Prohibition Against Taxing Leases or Lease Transactions

The Public Record

On April 8, 2015, the Pennsylvania Supreme Court agreed to hear an appeal from the Pennsylvania Commonwealth Court’s decision in Fish v. Township of Lower Merion. In Fish, the Commonwealth Court determined that the Local Tax Enabling Act (LTEA), the state law that authorizes and regulates local taxes, prohibits a political subdivision from imposing a business privilege tax on lease revenue. The Supreme Court’s decision in Fish will constitute an important development in the law as many municipalities currently collect business privilege tax on lease income.

In Fish, several individuals who own and rent property in Lower Merion Township (Township) challenged the Township’s collection of a 1.5 mill business privilege tax on their lease revenue. The property owners based their challenge on an exclusion set forth under Section 301.1(f)(1) of the LTEA, which expressly prohibits a political subdivision from taxing leases or lease transactions if the tax was not imposed prior to July 1, 2008. According to the property owners, a tax on gross receipts from lease revenue is the same as a tax on individual leases or lease transactions, as prohibited under Section 301.1(f)(1). The Township took the position that Section 301.1(f)(1) prohibits the imposition of a “direct tax,” e.g. a per-lease tax, but not the imposition of a tax on lease revenue. The Township argued that it was taxing the privilege of doing business in the Township, as authorized under the LTEA, not leases or lease transactions.

Rejecting the lessors’ argument, the Montgomery County Court of Common Pleas ruled in favor of the Township. On appeal, however, the Commonwealth Court, strictly construing Section 301.1(f)(1) of the LTEA against the Township, disagreed and reversed. In doing so, the Pennsylvania Commonwealth Court concluded that Section 301.1(f (1) of the LTEA “bars ‘any tax’ – i.e., privilege, transactional, or otherwise – on leases or lease transactions”, noting that it is thus immaterial that the challenged tax was characterized by the Township as a tax on the privilege of engaging in business, and not on a particular lease or lease transaction. …

April 4, 2015

EPA Releases Final Clean Power Plan Rulemaking

Administrative Watch

On August 3, 2015, the United States Environmental Protection Agency (EPA) released its highly anticipated final Clean Power Plan regulating carbon dioxide emissions from existing power plants. The Clean Power Plan makes several changes to EPA’s initial proposal that was published in June 2014. Implementation of the Clean Power Plan will significantly alter the landscape of power generation in the United States, and could seriously affect power plants and the energy industry.

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March 31, 2015

Pennsylvania Supreme Court decision makes operators bear risk of challenged lease’s expiration

The PIOGA Press

Should an operator in a lawsuit challenging the validity of its oil and gas lease have to risk having its lease expire during that suit by not commencing operations? Nearly all states whose courts have addressed this issue say, “No.” Those states’ courts allow operators to extend or “equitably toll” their challenged leases if they prevail in the suit. But not in Pennsylvania, where the Supreme Court has rejected equitable tolling in most situations and forced the operator to bear the risk that its lease will expire during the suit challenging that lease.

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February 28, 2015

The evolution of Act 13: Commonwealth Court limits applicability of Robinson Township plurality opinion

The PIOGA Press

Pennsylvania’s evolving law regarding regulation of oil and gas development has undergone yet another change, this time in a footnote to the Commonwealth Court’s January 7, 2015 en banc opinion in Pennsylvania Environmental Defense Foundation v. Commonwealth 2015 Pa. Commw. LEXIS 9 (2015). The Pennsylvania Environmental Defense Foundation (PEDF) case, in which PIOGA filed an amicus brief, rejected constitutional challenges to the leasing of state land for natural gas development and to the use of funds generated by those leases. In doing so, the Commonwealth Court took the opportunity to clarify the legal weight to be given to the analysis of the plurality decision in Robinson Township v. Commonwealth, 83 A.2d 901 (2013) interpreting Article I, Section 27 of the Pennsylvania Constitution (the Environmental Rights Amendment).

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February 24, 2015

Natural Gas Operator Prevails in Air Aggregation Case

Administrative Watch

In a highly-anticipated decision, the U.S. District Court for the Middle District of Pennsylvania has granted a motion for summary judgment in favor of a Pennsylvania natural gas operator in an air aggregation case filed by a citizen group. The decision was issued on February 23, 2015 in Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., and is the latest development in the debate over single source determinations. The Court found in favor of the operator, agreeing with the permitting decision made by the Pennsylvania Department of Environmental Protection (DEP) that the compressor stations at issue were not located on adjacent properties. The Court disagreed with the Citizens for Pennsylvania’s Future’s (PennFuture) arguments that the compressor stations were interrelated and, therefore, should be aggregated as a single source. While the Court left some room for the consideration of functional relationships in making single source determinations, such a determination would need to have unique facts that are outside the normal oil and gas configurations contemplated by DEP.

In 2011, PennFuture filed suit in federal district court against Ultra Resources, Inc. (Ultra), alleging that Ultra violated the nonattainment new source review (NSR) air permitting requirements by constructing a major source of nitrogen oxides (NOx) without the appropriate NSR permit. PennFuture contended that Ultra’s construction of eight compressor stations in Tioga and Potter counties without obtaining the appropriate NSR permit violated the Clean Air Act, despite the fact that Ultra obtained separate authorizations to use the General Plan Approval/General Operating Permit known as “GP-5” from DEP for each of its compressor stations. PennFuture viewed the compressor stations as functionally interrelated, operating in concert with a metering station as a single facility with potential NOx emissions exceeding the major source threshold of 100 tons per year, thus subjecting Ultra to heightened permitting requirements. …

February 18, 2015

Pennsylvania High Court Prohibits Tolling of Oil and Gas Leases During Litigation

Administrative Watch

On February 17, 2015, the Pennsylvania Supreme Court issued Harrison v. Cabot Oil & Gas Corp., a significant opinion in which the Court refused to apply equitable tolling principles that other oil and gas jurisdictions have adopted. Such principles prevent oil and gas leases from expiring during the pendency of lease litigation.

The lessors in this case filed a declaratory judgment action and a fraudulent inducement claim in federal court challenging the validity of their lease, which was two years into its primary term. Out of an abundance of caution, the operator refrained from all operations during the pendency of the litigation. It then asserted a counterclaim seeking to equitably toll the lease in the event it prevailed. Though the operator successfully defeated the lessors’ claims, the District Court denied its equitable tolling claim. As a result, the lease expired while the case was being litigated.

The operator appealed to the Third Circuit, which certified the case to the Pennsylvania Supreme Court on the grounds that it was an issue “of first impression and of significant public importance, given that its resolution may affect a large number of oil-and-gas leases in Pennsylvania.”

In a unanimous decision, the Pennsylvania Supreme Court upheld the District Court’s decision not to toll the lease. In so ruling, the Court noted that its decision went against other jurisdictions that have decided this issue. The Court also noted that the operator should have addressed the issue in its lease by adding a tolling provision. The Court also held that the result may have been different if the lessors had prevented the operator from entering the property to conduct operations.

The case is significant in several respects. First, it opens the door for lessors to try to “run out the clock” on leases by filing frivolous lease litigation. …

February 1, 2015

Ohio Supreme Court Decides on Extent Local Governments May Regulate Oil and Gas Drilling and Production Operations

Administrative Watch

The Ohio Supreme Court rendered a decision on February 17, 2015, in a closelywatched case on the extent to which local governments may regulate oil and gas drilling and production operations, State, ex rel. Morrison v. City of Munroe Falls, 2015-Ohio-485. At issue was whether Beck Energy Corporation, having obtained a drilling permit from the Ohio Division of Oil and Gas Resources Management, must also comply with ordinances of the City of Munroe Falls in Summit County, Ohio, that required a well driller to obtain a drilling permit from the City, post a performance bond, and go through the process of obtaining a conditional zoning certificate for the well. The certificate may issue only upon demonstration of compliance with the permitting and bonding requirements and only upon approval of City council and several City agencies. The Court, voting four to three, held that the state oil and gas regulatory program preempted the City’s permitting, bonding, and conditional use ordinances imposed upon oil and gas operations, and Beck Energy is therefore not subject to those ordinances. The City’s ordinances addressing the use of City streets, however, were not preempted, and Beck Energy is subject to those ordinances insofar as those ordinances are indiscriminately and fairly applied to oil and gas activities.

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February 1, 2015

EPA Issues New Rules Governing Recycling That Will Impact Most Major Industries

Administrative Watch

The U.S. Environmental Protection Agency (EPA) recently revised its rules governing the recycling of spent materials, listed hazardous sludge and listed by-products associated with the Resource Conservation and Recovery Act (RCRA) definition of solid waste (DSW). See 80 Fed. Reg. 1693-1814 (Jan. 13, 2015). The revised rules now require generators of recyclable hazardous secondary materials (HSM) to send these materials to RCRA permitted treatment, storage and disposal facilities or to approved “verified recyclers.” In addition, generators of any hazardous materials that are destined for recycling will now be required to: (1) comply with new rigorous recordkeeping requirements designed to prevent the speculative accumulation of recyclable materials; and (2) demonstrate that the recycling of the material is legitimate. EPA also formalized its long-standing policy prohibiting sham recycling and introduced a requirement that HSM must be “contained” in order to prevent releases of the material during storage. Further, generators of and facilities that store or recycle HSM will be required to comply with new notification and emergency preparedness and response requirements.

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January 31, 2015

Department of Revenue issues guidance on ‘mining’ exemption to Pennsylvania sales and use tax

The PIOGA Press

Oil and gas developers and their vendors may claim an exemption from Pennsylvania sales and use tax on qualified purchases of certain property and services. Until the past few years, there was little published guidance available to the oil and gas industry on the availability of the socalled “mining exemption” for purchases of property and services used in conventional and unconventional oil and gas extraction.

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January 1, 2015

Department of Labor, Plaintiffs Target the Energy Industry for Alleged Wage Violations

Employment Bulletin

Last month, the United States Department of Labor (DOL) announced in a press release that it has helped more than 5,300 oil and gas workers recover nearly $4.5 million in back wages for unpaid overtime and other wage violations as a result of an “ongoing multiyear enforcement initiative.” The DOL attributed the wage violations, in part, to the structure of the oil and gas industry in Pennsylvania and West Virginia. According to the DOL, job sites “that used to be run by a single company can now have dozens of smaller contractors performing work, which can create downward economic pressure on lower level subcontractors,” which can lead to noncompliance with wage and hour laws and regulations.

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December 16, 2014

Established Ordinance Interpretation and Special Exception Standards; Land Use and Planning

The Legal Intelligencer

With the rise of unconventional shale development in many portions of Pennsylvania, there has been a corresponding increase in litigation stemming from local government actions approving and disapproving of a wide variety of oil and gas facilities. In a case with origins predating both Act 13 of 2012 and the ensuing challenge to it in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa 2013), on Sept. 26, the Commonwealth Court rendered a decision in MarkWest Liberty Midstream & Resources v. Cecil Township Zoning Hearing Board, 2014 Pa. Commw. LEXIS 470 (Pa. Commw. Ct. 2014), addressing the scope of a zoning hearing board’s authority when considering an applicant’s request for land use approval related to a natural gas compressor station.

In 2010, MarkWest Liberty Midstream & Resources applied to the Cecil Township Zoning Hearing Board for a special exception to construct and operate a natural gas compressor station in the township’s I-1 light industrial district, pursuant to a provision in its unified development ordinance (UDO), which authorized “comparable uses which are not specifically listed” in that district, provided any such use: would have an equal or lesser impact than, and is of the same general character as, any of the township’s permitted conditional uses or uses by right; meets the township’s area and bulk requirements; complies with the express standards and criteria specified for the most nearly comparable I-1 use; and is consistent with the intent set forth in the UDO for industrial districts. The board denied MarkWest’s application, finding that it failed to satisfy these criteria, a decision the Washington County Court of Common Pleas affirmed. However, the Commonwealth Court reversed and remanded the case with direction that the special exception be granted, subject to the board’s determination as to whether any conditions are needed to ensure compliance with the UDO. …

December 5, 2014

EPA Proposes More Stringent Ozone Standards

Administrative Watch

On November 25, 2014, the U.S. Environmental Protection Agency (EPA) signed a proposed rule to promulgate more stringent primary and secondary National Ambient Air Quality Standards (NAAQS) for ozone. The proposed rule would limit air ozone concentrations to between 65 and 70 parts per billion (ppb), down from the current 75 ppb human health-based primary NAAQS standard that was enacted in 2008. The proposal would also tighten the environmental effects-based secondary NAAQS standard to between 13 and 17 parts per million-hours (ppm-hrs) under the W126 index, which determines a three-year average daily ozone concentration during a three-month summer time period.

These revisions to the ozone NAAQS were released by EPA following an order by a federal district court to propose revised standards by December 1, 2014. The order was issued pursuant to a lawsuit brought by several environmental groups after EPA withdrew a proposal to lower the ozone NAAQS to between 60 and 70 ppb in 2011, which was estimated to impose compliance costs of up to $90 billion.

To attain the ozone standards under the current proposal, many states and local jurisdictions will ultimately be required to implement significantly stricter limits on nitrogen oxides (NOx) and volatile organic compound (VOC) emissions from industrial sources, which are precursors of ground-level ozone formation. As a result, many industrial facilities will likely be required to implement alternative work practices or install control equipment to comply with emissions limitations. EPA projects that enactment of these lowered ozone standards would cumulatively cost between $4.7 billion for the 70 ppb standard and $16.6 billion for the 65 ppb standard by 2025.

EPA will hold three public hearings on the proposal in January 2015 and will accept public comments until 90 days after the proposal is published in the Federal Register. …

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