On August 23, 2018, the Commonwealth Court issued a unanimous opinion invalidating components of the new pre-permit process created in 25 Pa. Code §§ 78a.1 and 78a.15(f), and (g), pertaining to new “public resources.” The Marcellus Shale Coalition (MSC) challenged the provisions as unlawful and unreasonable, seeking declaratory and injunctive relief. The Marcellus Shale Coalition v. Department of Environmental Protection and Environmental Quality Board, 573 M.D. 2016.
Please read more about the opinion in this Alert.
Babst Calland today released its annual energy industry report: The 2018 Babst Calland Report – Appalachian Basin Oil & Gas Industry: Forging Ahead Despite Obstacles; Legal and Regulatory Perspective for Producers and Midstream Operators. This annual review of shale gas development activity in the Appalachian Basin acknowledges an ongoing rebound despite obstacles presented by regulatory agencies, the courts, activists, and the market. To request a copy of the Report, contact info@babstcalland.com.
In this Report, Babst Calland attorneys provide perspective on issues, challenges, opportunities and recent developments in the Appalachian Basin and beyond relevant to producers and operators. According to the U.S. Energy Information Administration’s May 2018 report, the Appalachian Marcellus and Utica shale plays account for more than 40 percent of U.S. natural gas output, compared to only three percent a decade ago. Since then, the Appalachian Basin has become recognized in the U.S. and around the world as a major source of natural gas and natural gas liquids.
The industry has been forging ahead amidst relatively low natural gas prices, infrastructure building, acreage rationalization and drilling plans that align with business expectations. The policy landscape continues to evolve with ever-changing federal and state environmental and safety regulations and tax structures along with a patchwork of local government requirements across the multi-state region.
Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “This Report provides perspective on the challenges and opportunities of a shale gas industry in the Appalachian Basin that continues to enjoy a modest rebound. While more business-friendly policies and procedures are emanating from Washington, D.C., threats of trade wars are raising concerns about the U.S. energy industry’s ability to fully capitalize on planned exports to foreign markets.”
To read more: click here.
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On June 7, 2018, Pennsylvania Governor Tom Wolf and Department of Environmental Protection (DEP) Secretary Patrick McDonnell announced the final issuance of air permitting documents affecting oil and gas operations in the Commonwealth. DEP shortly thereafter released a suite of new materials to mark the latest step forward in implementing Governor Wolf’s Methane Reduction Strategy. The new permitting documents are controversial in so far as they represent a significant departure from the status quo, requiring operators to take a fresh look at when and where an air permit may be needed. Please read more about these program changes in this alert.
A federal district court in Ohio recently upheld the constitutionality of Ohio’s forced pooling statute (R.C. § 1509.28) in Kerns v. Chesapeake Exploration, LLC, et al., N.D. Ohio No. 5:18 CV 389 (June 13, 2018). R.C. § 1509.28 establishes the procedure for owners to combine contiguous acreage and interests to efficiently and effectively develop the oil and gas resources underlying that land. Additionally, the statute grants the chief of the division of oil and gas resources management the authority to compel landowners unwilling to lease their land to join in drilling operations. The constitutional challenge in Kerns involved the same group of landowners whose writ of mandamus was rejected by the Ohio Supreme Court in January. Following their unsuccessful challenge at the Ohio Supreme Court, the landowners alleged that R.C. § 1509.28 violated their constitutional rights under the Fifth and Fourteenth Amendments by authorizing an impermissible taking of their property. In rejecting the constitutional challenge, the federal district court relied on previous decisions from the United States Supreme Court holding that the statute was a legitimate exercise of Ohio’s police powers to protect correlative rights and reduce waste. In deeming R.C. § 1509.28 constitutional, Ohio courts join the well-settled national consensus that unitization procedures do not constitute an impermissible taking of property.
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.
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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.
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In a recent op-ed published in the Post-Gazette, “Gas Pipelines Represent Prosperity” (Sept. 5 Perspectives), David Spigelmyer and James Kunz of the Marcellus Shale Coalition described the many benefits Read more ›
The West Virginia Senate unanimously passed Senate Bill 461, known as The Future Fund Bill, on February 21st. The Bill, as described in an Associated Press story published in the Charleston Gazette, would create a new fund that would be financed by 25 percent of the severance tax revenues collected from oil and gas exploration companies above a $175 million threshold. The fund would accrue interest for six years before it could be used to finance economic development projects, building infrastructure and increases in teacher salaries. As described in a Shale Energy Law Blog post from last September, the Bill was inspired by legislation passed in North Dakota that created that state’s Legacy Fund, a fund financed by extraction taxes that can be used to finance projects after 2017. The Bill must now be approved by the West Virginia House of Delegates.
On a conference call following the announcement of CONSOL Energy Inc.’s $3.5 billion sale of its longwall coal mines in West Virginia to Murray Energy, CONSOL President Nick DeIuliis stated that the deal would allow CONSOL to go from a coal company with natural gas exploration and production to a natural gas exploration and production company that now has coal, reported the Charleston Daily Mail. CONSOL’s press release for the deal states that it will enable the company to extend its gas growth production targets beyond 2014, citing expected 30% annual gas production growth rates in 2015 and 2016.
West Virginia Senate President Jeff Kessler is leading the drive to create an oil and natural gas trust fund named the “Future Fund” that would support education, economic development or tax relief decades from now, reports the Global Post. Kessler recently led a group of West Virginia lawmakers to visit North Dakota, where 30 percent of oil and gas tax collections are placed into the state’s Legacy Fund, which cannot be spent until 2017. Kessler indicated that he would like to present the Future Fund proposal as a constitutional amendment in January 2014, stating that he believes that constitutional protections would lock down the fund from lawmakers and interest groups that would like to spend the money prematurely.
The Pittsburgh Post-Gazette reports that some southwestern Pennsylvania energy companies have begun to research the Upper Devonian formation and its interplay with other formations, including the Marcellus. The Upper Devonian formation is a group of shales that lie a few hundred feet above the Marcellus. The companies are beginning to determine: (i) well profiles and production totals from Upper Devonian wells; (ii) the impact of developing the Upper Devonian formation prior to developing the Marcellus; and (iii) the ability to reuse well pads and access roads that were originally drilled for Marcellus. EQT Corporation has been monitoring four Upper Devonian wells for several years and CONSOL Energy Inc. has drilled one well to the Burkett, the closest Upper Devonian shale to the Marcellus.
West Virginia Governor Earl Ray Tomblin and the West Virginia Oil and Natural Gas Association, both enthusiastic advocates for utilizing natural gas produced from the Appalachian basin to fuel natural gas vehicles (NGVs), sponsored the 2013 Appalachian Basin NGV Expo and Conference this past week in Charleston, West Virginia. The conference agenda included discussions on the economic and environmental benefits of converting to NGVs, converting existing fleet vehicles into NGVs, and how to expand the NGV market. The conference featured speakers from Appalachian Basin natural gas producers, including Chesapeake Energy and CONSOL Energy, and fleet vehicle operators who are transitioning their gasoline and diesel vehicles to compressed natural gas, including Waste Management, which has more than 1,000 natural gas-powered trucks, and school bus manufacturer Blue Bird Body Company. The public had the opportunity to browse an exhibit hall that displayed various NGVs, including the world’s first natural gas-powered chopper.
As reported in the Fayette Tribune, West Virginia Governor Earl Ray Tomblin’s Natural Gas Vehicle Task Force has released its final report on how the state can utilize its natural gas resources to reduce transportation costs and boost the local economy. The Task Force identified locations within the state that contain large concentrations of government fleet vehicles, and therefore have the greatest demand for fueling infrastructure (map). The Task force suggested tax credits for the purchase of natural gas vehicles and for private investments in the construction of fueling stations. The Task Force also recommended that the state develop programs to educate West Virginians about natural gas vehicles, including the benefits of adopting these vehicles and information on how to maintain and operate them.
James Cutler, CEO of Houston-based Appalachian Resins, Inc., indicated to the State Journal that his company is preparing to announce the details of its planned $500 million integrated polyethylene facility in Marshall County, south of Wheeling. Funding for the project has appeared to come together, reports the State Journal. The plant will include an ethane cracker that would consume 15,000 barrels of ethane per day. Ethane is produced with the “wet gas” found in the Marcellus Shale formation in northern West Virginia, Southwestern Pennsylvania and Ohio. The plant’s cracker will produce ethylene, and the facility will ultimately produce polyethylene resins, such as HDPE. The plant is projected to produce upwards of 120 permanent jobs.
The Kanawha County Commission is accepting bids for the development of a compressed natural gas (CNG) fueling port to service the County’s CNG-powered Chevrolet Tahoe and future CNG-powered fleet vehicles, reports the Charleston Gazette. Kanawha County Commission President Kent Carper stated that he would like “a good portion of the fleet to go toward natural gas.” Local government and business leaders in Kanawha County created the “Kanawha Converts” consortium in January 2012 to work on initiatives to convert local fleets to CNG in order to take advantage of the economic and environmental benefits offered by the cheaper and cleaner-burning fuel.