3 steps to manage the financial risks in your construction project

Smart Business

(By Sue Ostrowski featuring Marc Felezzola)

If you are building new commercial construction, or making improvements to your existing facility, it is critical before starting to take steps to protect yourself from potential mechanics’ liens. Failing to do so could result in making double payments, or potentially forfeiting your property to foreclosure, says Marc Felezzola, a shareholder in Babst Calland’s Construction, Environmental and Litigation groups.

For example, if a prime contractor — someone who contracts directly with the owner — fails to pay a subcontractor — anyone who supplies labor or materials to the prime contractor or its direct subcontractor — the subcontractor can file a mechanics’ lien against the property on which the project was built. And if the subcontractor is not paid the lien amount, it can foreclose on the lien, force a sheriff sale of the property and take its payment from the proceeds of that sale.

This is true even if the owner has paid the contractor for the subcontractor’s work, meaning the owner could be subject to the double jeopardy of having to pay for subcontractor labor and materials twice.

“When you improve real property with construction, contractors and subcontractors confer a benefit that increases the property’s value,” Felezzola says. “The law allows for a lien against the property to secure payment for the benefit someone has contributed to increasing that value. As an owner, protecting yourself requires forethought before construction starts, to set the project up for transparency about potential lienholders and limit the scope of that potential to those with whom the owner directly contracts.”

Smart Business spoke with Felezzola about three ways to protect yourself before beginning a construction project.

July 1, 2022

Intersection of wildlife and environmental regs

GO-WV

(By Robert Stonestreet)

What does the West Virginia oil and gas industry have in common with freshwater mussels, how the federal government chooses to define the term “habitat,” and drilling activity on federal lands in the west?  Quite a bit, actually.  As explained below, recent developments on each of these topics intersect with the regulatory programs that govern oil and gas operations in West Virginia.

WVDNR Mussel Guidance

On June 23, 2022, the West Virginia Division of Natural Resources (WVDNR) published final guidance reflecting the agency’s recommendations for other state and federal government agencies to consider when issuing environmental permits authorizing activities that may impact freshwater mussels.  Why does this matter to the West Virginia oil and gas industry?  Because the guidance hopefully resolves a long running effort to address what some viewed as improper efforts by the WVDNR to directly regulate oil and gas operations.

In addition to various permits required by the West Virginia Department of Environmental Protection (WVDEP) and the United States Army Corps of Engineers (Corps) for activities that impact certain streams, operators are required to obtain a “right of entry” permit from the WVDNR before any disturbance may take place in or under certain size streams.  This permit stems from the State of West Virginia’s claim to own the stream bed of certain waterways.  Activities requiring a “right of entry” permit include installation of equipment to withdraw water for use in well completion or other activities.

Several years ago, WVDNR began attempting to impose conditions in “right of entry” permits that would regulate the design of certain stream crossings and impose restrictions on when and how much water could be withdrawn from a stream. 

June 30, 2022

The Supreme Court Narrows EPA’s Authority to Regulate Greenhouse Gas Emissions

Environmental Alert

(By Varun Shekhar and Gina Falaschi)

On the final day of its 2021-2022 term, the United States Supreme Court released its 6-3 ruling in West Virginia v. EPA that narrows the EPA’s authority to regulate greenhouse gas emissions from power plants.

A coalition of states and power and coal companies led by West Virginia’s Attorney General Patrick Morrisey petitioned the Supreme Court to review a 2021 decision from the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit).[1] That decision struck down the Trump administration’s 2019 Affordable Clean Energy (ACE) rule, which had replaced the Obama administration’s 2015 Clean Power Plan. Specifically, the petitioners asked the Supreme Court to revisit the D.C. Circuit’s holding that EPA’s ACE rule, and simultaneous repeal of the Clean Power Plan, was based on a “mistaken reading of the Clean Air Act”—namely, that the “generation shifting” scheme employed by the Clean Power Plan cannot be a “system of emission reduction” under Section 111 of the Clean Air Act.

Under the Clean Power Plan, EPA calculated rate-based (amount of carbon dioxide emitted per megawatt hour generated) and mass-based (total amount of carbon dioxide emitted per year) targets for each state through application of three “building blocks” that were deemed to constitute the “best system of emission reduction…adequately demonstrated” (BSER). These “building blocks” include: (1) improvements to heat rates (a measure of heat input to power output efficiency) achieved at individual power generation facilities; (2) shifting power generation to natural gas-fired or combined cycle (NGCC) facilities; and (3) increased power generation from renewable and zero-emitting sources. The latter two “building blocks” constituted the Clean Power Plan’s “generation shifting” scheme,

June 28, 2022

Melissa Rounds Joins Babst Calland

Melissa M. Rounds recently joined Babst Calland as senior counsel in the Energy and Natural Resources Group. Mrs. Rounds has represented clients in the oil and gas industry for more than 15 years and has assisted producers in a variety of transactional matters, including real estate closings, preparation of documents for leasing purposes and examining and certifying title. Her work includes resolving complex title defects, coordinating urgent title projects, working in-house with major energy producers to provide comprehensive lease analysis and assistance with mineral purchases, and providing legal analysis for changes in statutory and case law.

Mrs. Rounds’ work on behalf of the oil and gas community is primarily focused in Morgantown, West Virginia. Her representation in the Morgantown area includes working with operators to reach drilling commitments, and interactions with county officials in major producing counties in northcentral West Virginia.

Prior to joining Babst Calland, Mrs. Rounds was the owner and attorney for Melissa Rounds Law. She is a 2006 graduate of West Virginia University College of Law.

June 28, 2022

Pennsylvania Joins RGGI

The Foundation Mineral and Energy Law Newsletter

Pennsylvania- Mining

(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)

After a lengthy rulemaking process, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule was published in the Pennsylvania Bulletin. See 52 Pa. Bull. 2471 (Apr. 23, 2022). As previously reported in Vol. XXXVI, No. 4 (2019) of this Newsletter, on October 3, 2019, Governor Tom Wolf signed Executive Order No. 2019-07, “Commonwealth Leadership in Addressing Climate Change Through Electric Sector Emissions Reductions,” directing PADEP to initiate a rulemaking to join the Regional Greenhouse Gas Initiative (RGGI). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid. The CO2 Budget Trading Program links Pennsylvania’s program to RGGI.

Following approval of the rule by the Environmental Quality Board (EQB) in July 2021 and approval by the Pennsylvania Independent Regulatory Review Commission in September 2021, the final form rulemaking was submitted to the Pennsylvania House and Senate Environmental Resources and Energy standing committees. Both houses of the legislature passed Senate Concurrent Regulatory Review Resolution 1 (S.C.R.R.R.1), which disapproved of the rulemaking, and Governor Wolf vetoed the resolution on January 10, 2022. See Vol. 39, No. 1 (2022) of this Newsletter. The Governor’s veto sent the resolution back to the legislature, where each chamber had 30 calendar days or 10 legislative days, whichever was longer,

June 28, 2022

PADEP Issues Draft Guidance for Use of Trenchless Technology

The Foundation Water Law Newsletter

(By Lisa M. Bruderly & Mackenzie Moyer)

On March 19, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a draft technical guidance document entitled “Trenchless Technology Guidance,” PADEP Doc. No. 310-2100-003 (Mar. 19, 2022). See 52 Pa. Bull. 1693 (Mar. 19, 2022). The purpose of this draft guidance document is to outline the steps and options to consider, and implement as appropriate, when proposing to use a trenchless technology installation method on any portion of a project. PADEP intends for this draft guidance to help “avoid, minimize, or eliminate environmental impacts” associated with trenchless technology installation. Trenchless Technology Guidance at 2. The public comment period on the draft guidance closed on May 18, 2022.

The draft guidance developed out of a stakeholder workgroup required as part of a settlement with the Clean Air Council, the Delaware Riverkeeper Network, and the Mountain Watershed Association regarding the PADEP-issued permits for the Mariner East II pipeline project. Two workgroups were formed out of that settlement to create guidance related to two topics: (1) alternatives analysis and (2) trenchless technology. The draft “Alternatives Analysis Technical Guidance Document” was published for public comment in October 2021. PADEP is currently working to revise the guidance in response to comments. The draft Trenchless Technology Guidance is the second draft guidance to come from these workgroups.

Trenchless technology is defined in the draft guidance as “[a] type of subsurface construction work that requires few trenches or no trenches which includes any trenchless construction methodology, including, without limitation: horizontal directional drilling, guided auger bore, cradle bore, conventional auger bore, jack bore, hammer bore, guided bores, and proprietary trenchless technology .

June 28, 2022

After Commonwealth Court Denies Challenge to Municipality’s Unconventional Drilling and Operations Ordinance, Citizen Group Petitions Pennsylvania Supreme Court for Review

The Foundation Mineral and Energy Law Newsletter

Pennsylvania- Oil & Gas

(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)

On February 23, 2022, the Murrysville Watch Committee (MWC) petitioned the Supreme Court of Pennsylvania to allow an appeal of its unsuccessful challenge of the Municipality of Murrysville’s Oil and Gas Ordinance (Ordinance), which authorized oil and gas wells as a conditional use in Murrysville’s Oil and Gas Recovery Overlay District (Overlay District), including parts of the rural residential zoning district. As adopted, the Ordinance’s geographic and other limitations (e.g., required setbacks from well pads) restricted unconventional oil and gas development to only 5% of Murrysville’s land mass. MWC originally filed a validity challenge to the Ordinance in October 2018 before the Murrysville Zoning Hearing Board (Board), claiming, among other things, violations of due process, equal protection, and the Environmental Rights Amendment (ERA) to the Pennsylvania Constitution, Pa. Const. art. I, § 27. Broadly, MWC contended that unconventional oil and gas drilling is an industrial activity incompatible with residential zoning districts. The Board held multiple hearings, denied MWC’s challenge, and issued 167 findings of fact related to its decision. Without presenting any additional evidence, MWC appealed the Board’s decision to the Westmoreland County Court of Common Pleas, which affirmed the Board’s decision, noting that the record showed that MWC provided no evidence to differentiate the Ordinance from other, similar ordinances upheld on appeal, the precedential application of which foreclosed MWC’s challenges. MWC subsequently appealed that decision to the Commonwealth Court of Pennsylvania.

On January 24, 2022, the commonwealth court affirmed the trial court’s and Board’s decisions.

June 24, 2022

The power of hydrogen in our region

Pittsburgh Business Times

(Featured Babst Calland panelists Kevin Garber and Jim Curry)

Sparked by the newly released Allegheny Conference for Community Development’s long-term vision for achieving 70% reduction in carbon dioxide emission by 2050 and anticipating an upcoming Department of Energy funding opportunity announcement (FOA), local industry leaders gathered recently to discuss the benefits of a hydrogen economy.

The panelists included University of Pittsburgh Swanson School of Engineering Professor and Researcher, Gotz Veser; Babst Calland Shareholder and Environmental Attorney, Kevin Garber; Babst Calland Shareholder and Energy Attorney, Jim Curry; and Vice President, Corporate Strategy for Duquesne Light Company, Brian Guzek. The conversation was moderated by Chief Strategy and Research Officer for the Allegheny Conference on Community Development, Vera Krekanova.

Collaboration is key

These leaders all agreed that in order to build momentum toward a hydrogen economy in this region now, a collaboration of community resources, academia, energy and other industries, and public entities is key to producing a successful application proposal. More specifically, according to Krekanova, “if hydrogen and carbon capture utilization and storage (CCUS) could be well understood and thoughtfully negotiated, they can produce positive benefits for the environment, for the economy, and for the people.”

“One of the strengths … in the region here is, we have the industry base, we have the academic base, the research base,” Veser said.

Creating and strengthening opportunities for public and private partnerships and using those pooled resources and expertise will create additional opportunities in this region, he added.

“We can make hydrogen from natural gas, we can do carbon capture, we know how to do this.

June 23, 2022

Commonwealth Court Makes a Use Variance a Little Less Scary

Legal Intelligencer

(By Robert Max Junker)

There is one in every town. The abandoned lot, corner or block. Maybe it once housed a building that was torn down long ago. Perhaps it served as the neighborhood sandlot for pick-up baseball games in the summer before the new all-season turf field was installed in the athletic complex. Might be one owner or several parcels with various owners. Likely it has delinquent taxes piling up. Possibly there was an approval in the past with much fanfare, but then the market collapsed, the groundbreaking was canceled and permits expired. People drive past all the time and wonder, “What are they ever going to build there?”

Although land is valuable because they are not making any more of it, a variety of factors can prevent otherwise viable property from being developed. In situations where there are local government hurdles to development, a would-be developer can have several options. A rezoning to change the zoning map and the type of permitted uses on the property is one option. But rezoning comes with risks both to the developer including a spot zoning challenge by neighbors and to the local government due to the possibility that the developer does a project that is now permitted in the new zoning district even though it was not what was proposed during the legislative rezoning process.

Another option for a more targeted development where the local government will have assurances that it will get what was promised is a use variance. Although not as common as the ubiquitous dimensional variance that seek to alter building setbacks or heights beyond what is allowed in the zoning ordinance, a use variance in the right circumstances can be a viable path for both the local government and the developer.

June 22, 2022

The 2022 Babst Calland Report Highlights Legal and Regulatory Challenges and Opportunities for the U.S. Energy Industry

Babst Calland today published its 12th annual energy industry report: The 2022 Babst Calland Report – Legal & Regulatory Perspectives for the U.S. Energy Industry. Each of our nation’s energy sectors is impacted by local, state and federal policies, many of which are addressed in this inclusive report on legal and regulatory developments for the energy industry in the United States.

The Babst Calland Report represents the timely and insightful perspectives of the firm’s energy attorneys on some of the most critical issues facing the industry, including climate change, cybersecurity, ESG and environmental justice, hydrogen and carbon capture sequestration, pipelines, and renewables.

Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. energy industry, and the U.S. economy as a whole, is reacting to shifting market forces and potential significant new changes in laws and regulations. Importantly, Russia’s invasion of Ukraine earlier this year and the resulting worldwide shortage of oil and gas has spotlighted the world’s continued reliance on fossil fuels and reinforced the value of America’s relative energy independence even as the nation and the world continue to seek alternative energy sources.”

Report Features Video Commentary from U.S. Senator Joe Manchin

This edition of The Babst Calland Report also features commentary from Senator Joe Manchin (D-WV), Chairman of the U.S. Senate Energy and Natural Resources Committee, who spoke with Babst Calland energy clients at a special briefing on May 26, 2022 called “A Perspective on U.S. Energy Policy with Senator Joe Manchin.” 

To request a copy of The 2022 Babst Calland Report, click here.

The Babst Calland Report is provided for informational purposes for our clients and friends and is not intended to constitute legal advice. 

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