Articles, Alerts & Perspectives

PIOGA Press

(By Gary Steinbauer and Christina Puhnaty)

The U.S. Environmental Protection Agency’s highly anticipated November 2021 Clean Air Act (CAA) proposal regulating methane and volatile organic compound (VOC) emissions from the oil and gas sector drew a reported 400,000 individual submissions. Through the methane proposal (Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review, 86 Fed. Reg. 63,110 (Nov. 15, 2021)), EPA seeks to expand the current VOC and methane emissions regulations that apply to new, modified, and reconstructed sources within the crude oil and natural gas production sector that were promulgated by EPA in 2012 (40 C.F.R. Part 60, Subpart OOOO) and 2016 (40 C.F.R. Part 60, Subpart OOOOa). In addition, the methane proposal includes the first nationwide methane emissions guidelines for existing sources within the oil and gas sector.

It is no surprise that EPA received a significant number of comments on the methane proposal, especially considering the relatively brief and tumultuous history of the agency’s regulation of methane emissions from the oil and gas sector under the CAA. The commenters’ views on the proposal differ considerably. Many commenters, primarily those representing the oil and gas industry and certain states, raised serious legal concerns and also questioned the technical aspects and propriety of several key components of issues with the proposal. On the other hand, commenters from other states, local governments and environmental groups urged EPA to impose even more stringent requirements, beyond those included in the methane proposal. Several key themes and legal issues emerged from these comments. This article highlights some of the potentially pivotal legal issues raised by commenters, including those related to EPA’s proposed community- based monitoring program. …

The Wildcatter

(By Nikolas Tysiak)

There is much to report in Leg/Reg land this go around! Let’s dive right in…

PENNSYLVANIA

Murrysville Watch Committee v. Municipality of Murrysville Zoning Hearing Board, 2022 WL 200112 (Comm. Ct. Pa. January 24, 2022). The Murrysville Watch Committee sued appealing a decision of the Zoning/Hearing Board on the validity of the municipality zoning ordinances relating to oil and gas development. Specifically, the MWC alleged that the use of property zoned as residential for oil and gas development was improper – oil and gas development should have been reserved for industrial zoned property, indicated that allowing oil and gas development in residential zones was unconstitutional “spot zoning” (the “unreasonable or arbitrary zoning classification of a small parcel of land, dissected or set apart from surrounding properties, with no reasonable basis for the differential zoning . . .”), and that the allowance of oil and gas development in residential districts violated the Environmental Rights Amendment to the Pennsylvania Constitution (“ERA”). The Commonwealth Court found that the MWC failed to introduce evidence to establish that the oil and gas drilling was incompatible with the “uses or overall character” of the residential zoning districts in question and failed to adduce competent evidence that the ordinances at issue were unreasonable. The court further found that the MWC failed to present any credible evidence that the zoning ordinance violated the rights established under the ERA. The Commonwealth Court accordingly affirmed the decision by the Zoning/Hearing Board and denied the MWC’s legal challenges to the zoning districts.

OHIO

French v. Ascent Resources-Utica, L.L.C., 2022-Ohio-869 (March 24, 2022). In this case, the Ohio Supreme Court determined that a suit seeking the determination that an oil and gas lease expired by its own terms is a controversy “involving the title to or the possession of real estate” and therefore is exempt from arbitration clauses as a matter of Ohio law, overturning a decision of the 7th District Court of Appeals, and affirming a trial court case on the issue. …

The Legal Intelligencer

By Matthew Wood and Mackenzie Moyer

On Feb. 26, the Environmental Quality Board (EQB) took another meaningful step toward finalizing Pennsylvania’s first state-established maximum contaminant levels (MCLs) for regulating contaminants in drinking water. On that date, the EQB published a proposed rule to amend 25 Pa. Code Ch. 109 (Safe Drinking Water) to establish MCLs for perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), two of the most common PFAS. PFOA and PFOS are just two of a group of thousands of PFAS, manmade chemicals used in various consumer, commercial and industrial manufacturing processes since the 1940s. PFAS have commonly been used to imbue products with water-, stain-, and heat-resistant properties and as ingredients in aqueous film forming foams (AFFF) used to extinguish flammable liquid fires (e.g., those that might occur on airports or military bases). PFAS do not break down naturally in the environment and have thus been called “forever chemicals.” Due to these properties and their ubiquitous nature, PFAS have been found in various environmental media, such as groundwater (including drinking water), plants, animals, and in humans, and evidence suggests that PFAS exposure can lead to adverse health effects. In the absence of definitive federal action to regulate PFAS, many states, including Pennsylvania, have in recent years taken steps to investigate, understand, and regulate PFAS.

Pennsylvania’s proposed rule is the result of years of investigation and evaluation. In 2018, Gov. Tom Wolf established by executive order (2018-08) Pennsylvania’s PFAS action team, which he tasked with the broad functions of, among other things, ensuring safe drinking water and managing environmental PFAS contamination. In June 2019, the Pennsylvania Department of Environmental Protection (PADEP) began sampling public drinking water systems within a half mile of potential PFAS sources such as manufacturing, fire training and military facilities. …

Smart Business

(By Sue Ostrowski featuring Kevin Wills)

As the deal market has heated up, the timeline for transactions has contracted, with deals being negotiated and closed in as few as 30 days.

“Transaction timelines are being compressed, and that has an impact on both buyers and sellers when completing a transaction,” says Kevin T. Wills, a shareholder in the Corporate and Commercial and Emerging Technologies groups at Babst Calland. “Compressed deal timelines are likely here to stay, at least for the foreseeable future, and buyers and sellers must be prepared to hit the ground running when considering a transaction.”

Smart Business spoke with Wills about how deal timelines have shrunk and the impact that is having in the deal-making space.

How have compressed deal timelines impacted buyers?

Buyers have less time to review a deal and conduct due diligence before making a determination with respect to closing, potentially forcing them to take on more risk than they previously would.

It is very much a seller’s market, both in the business and real estate deal space, and sellers are regularly in a position to move on to the next potential bidder if they don’t like the proposed deal terms. Buyers are offering compressed timelines and other concessions to be more attractive to sellers to give themselves a leg up on competitors and secure deals.

In order to mitigate the risk associated with compressed deal timelines, some buyers are starting due diligence while negotiating the purchase agreement, spending money on third-party reports to help manage the timeframe, but those are dollars lost if you can’t come to an agreement.

A risk associated more with real estate transactions specifically is that there are regularly deposits that become nonrefundable at the end of the due diligence period and, if a buyer’s third-party reports will not be completed timely, buyers run the risk of having their deposit become nonrefundable before their diligence is complete, forcing them to decide whether to put their deposit at risk or terminate the purchase agreement. …

GO-WV News

(By Mychal Schulz)

After many years of attempting to pass legislation to allow for efficient unitization of mineral interests for production purposes, the West Virginia Legislature passed Senate Bill 694 in the last week of the recent legislation session, which Governor Justice is expected to sign. The legislation represents a compromise between producers, mineral owners, and surface owners, including the agricultural sector.

As technology drove producers towards increased use of horizontal drilling, West Virginia struggled to modernize its code to allow the combination or “pooling” of mineral interests within a defined area (or “unit”) that would allow the efficient drilling for oil or natural gas through horizontal wells. Prior efforts in West Virginia usually foundered upon how to deal with mineral owners who either refused to agree to the “pooling” of their minerals into a larger “unit” or who could not be located. As a result, a single mineral owner could prevent the formation of a larger “unit” for drilling, which drove up costs and resulted in less efficient extraction of the minerals.

Many months of stakeholder negotiations resulted in SB 694, which passed with minimal changes or opposition in the Senate and House.

SB 694 adds a new article to the West Virginia Code beginning at §22C-9-1, which includes a description of the public policy addressed by the legislation. Not surprisingly, the statute declares that the Legislature “finds that horizontal drilling is a technique that effectively and efficiently recovers natural resources and should be encouraged as a means of production of oil and gas[.]” Notably, however, in addition to identifying the “development, production, utilization, and conservation of oil and gas resources by horizontal drilling in deep and shallow formations” as in the public interest, the statute also recognizes the desire to “[s]afeguard, protect, and enforce the property rights and interests of surface owners and the owners and agricultural users of other interests in the land.” See §22C-9-7a(a). …

The American College of Environmental Lawyers (ACOEL)

(By Chester Babst)

In 2022, the on-going debate will continue over the hotly contested definition of “waters of the United States” (WOTUS), a phrase that determines the scope of federal jurisdiction over streams, wetlands and other waterbodies under the Clean Water Act (CWA). The WOTUS definition is included in 11 federal regulations and affects, among others, NPDES and Section 404 permitting, SPCC plans and spill reporting. This year, both the executive and judicial branches of the federal government are expected to weigh in on this definition, without any guarantee that their interpretations will be consistent.

Proposed Rule 1

USEPA and the Corps have already taken the first step to revise the WOTUS definition, as promised by President Biden during his campaign, by publishing a proposed rulemaking on December 7, 2021 (Rule 1). While this proposed definition is similar to the pre-2015 definition of WOTUS, which is currently in effect, it also reflects relevant Supreme Court decisions (e.g., Rapanos v. United States) that occurred in the early 2000s.

Much of the controversy surrounding the WOTUS definition relates to the two tests identified in the Rapanos decision. Justice Antonin Scalia issued the plurality opinion in Rapanos, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters.” Justice Anthony Kennedy, however, advanced a broader interpretation of WOTUS in his concurring opinion, which was based on the concept of a “significant nexus,” meaning that wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered water.”

If promulgated, the December 2021 proposed WOTUS definition would incorporate Justice Kennedy’s significant nexus test into the regulations. …

Firm Alert

(By Justine Kasznica and Ember Holmes)

On March 21, 2022, President Biden issued a statement in response to evolving intelligence that Russia is exploring options for malicious cyberattacks against the United States. The statement highlights the measures taken by the Administration to strengthen cyber defenses within the federal government and, to the extent that it has authority, within critical infrastructure sectors. Additionally, President Biden called on private sector critical infrastructure owners and operators to accelerate and enhance their cybersecurity measures, urging them to take advantage of public-private partnerships and initiatives, including those administered by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA). Appended to President Biden’s statement was a Fact Sheet, which outlines specific steps that companies can take to bolster cybersecurity across the nation, and refers readers to various resources compiled by CISA, as part of a cybersecurity campaign.

Background

In November 2021, the Biden administration began ramping up its cybersecurity and defense measures in response to Russian President Vladimir Putin’s escalating aggression toward Ukraine. On January 11, 2022, CISA, the Federal Bureau of Investigation (FBI), and the National Security Agency (NSA) issued Alert AA22-011A, “Understanding and Mitigating Russian State-Sponsored Cyber Threats to U.S. Critical Infrastructure,” which provided an overview of Russian state-sponsored cyber operations; commonly observed tactics, techniques, and procedures (TTPs); detection actions; incident response guidance; and mitigations. The Biden administration, CISA, FBI, and NSA continued to monitor the level of risk posed by Russia, which recently escalated based on intelligence indicating that Russia is planning cyberattacks against the United States in response to economic sanctions that the United States has imposed. …

HART Energy

(By Gary Steinbauer and Sean McGovern)

Methane emissions are a chief concern across the oil and gas value chain. Gary Steinbauer and Sean McGovern, both shareholders with Babst Calland, discuss methane mitigation and how players in the energy space can best handle it in this three-part video.

In the first segment, Steinbauer discusses the Biden administration’s approach to methane emissions in the energy sector, including proposed regulatory changes in the EPA’s Methane Rule.

In the second segment McGovern discusses abandoned and orphaned wells, how they are being plugged, and the help that operators can receive from the Bipartisan Infrastructure Law that passed in 2021.

In the final segment, both attorneys offer step-by-step advice to operators in Appalachia trying to navigate a slew of updated regulations.

View the three-part video, here.

Pittsburgh, PA

Renewables Law Blog

(By Bruce Rudoy)

While long term goals of lowering greenhouse gas emissions and employing sustainable energy sources have gained momentum across all industries, Chevron Corp., through its New Energies division, has stated it has shorter term goals as well – it says its planned growth in renewable fuels, hydrogen and carbon capture is expected to enable about 30 million tones of annual CO2 equivalent emission reductions by 2028. Technology adoption, policy and consumer behavior will drive energy choices, says a top sustainability executive, as companies focus on carbon management along the path to net zero. All three factor into whether one form of energy or another is sought to supply demand created by income and population growth, according to Bruce Niemeyer, vice president of strategy and sustainability for Chevron Corp. “Keeping supply and demand balanced through the transition is important so the transition works for all and doesn’t become a negative event for those most vulnerable,” Niemeyer said earlier this month during UT Energy Week. He added, “We’re going to need many forms of energy, which means we need to work on reducing the carbon intensity of all of them.” Chevron is among the many companies working to lower its emissions amid a heightened focus on global warming and future energy supplies. Like the smartphone, technologies with features that meet consumers’ needs or low-cost technologies will gain market share, he said, noting consumer preference is a strong factor. Take, for example, the automotive sector. EVs are expected to play a key role in the energy transition, giving their lower emissions, compared to vehicles with internal combustion engines. However, “last year, our best estimate is there were 6.6 million electric vehicles sold. At the same time, there were 35 million SUVs. …

Marley R. Kimelman recently joined Babst Calland as an associate in the Environmental Group. Mr. Kimelman assists clients with matters encompassing a broad range of environmental issues, including those related to state and federal permitting, regulatory compliance, and environmental litigation.

Prior to joining the Firm, Mr. Kimelman worked as an Environmental, Health, and Safety Regulatory Consultant at Enhesa, Inc. In this role, he was responsible for analyzing federal and state EHS regulations and drafting legal compliance reports used to advise clients on a course of action to achieve regulatory compliance. Mr. Kimelman is a 2021 graduate of George Washington Law School.

Environmental Alert

(By Robert Stonestreet, Kip Power and Ben Clapp)

During its 2022 60-day Session, the West Virginia Legislature took action to promote development of “rare earth element” recovery in the state, although it failed to deliver on all of the proposed legislative action on the last day of the Session.

On March 10, 2022, the Senate unanimously approved House Bill 4003, which is intended to clarify the ownership of rare earth elements present in mine drainage. The bill creates a new section of the West Virginia Abandoned Mine Lands Act, addressing valuable materials (not limited to rare earth elements) that may be produced through treatment of mine drainage. The new statute declares that these materials are part of the “waters of the state” and that they “can only be separated from the water with expensive and continuing investments of resources which may last for decades.” The new statute provides that any materials extracted through treatment of mine drainage “which have economic value” may be used, sold, or transferred for commercial gain by whoever successfully removes the materials from the mine drainage. To the extent the West Virginia Department of Environmental Protection is engaged in such activity through its mine drainage treatment activities, any proceeds the agency derives from the use, sale, or transfer of extracted materials must be deposited in the Special Reclamation Water Trust Fund or the Acid Mine Drainage Set-Aside Fund. Governor Jim Justice is expected to sign the bill into law.

A related bill that would have suspended for five years the severance tax on recovery of specifically identified rare earth elements (House Bill 4025) failed to complete legislative action before the end of the Session. …

Ember K. Holmes and Audra E. Hutter recently joined Babst Calland as associates in the Corporate and Commercial Group.

Ember Holmes focuses primarily on corporate and transactional matters, including commercial contracts, corporate structuring, mergers and acquisitions, and copyright and trademark issues. Prior to joining Babst Calland, she was an associate with Dickie, McCamey & Chilcote, P.C. Ms. Holmes is a 2018 graduate of the University at Buffalo School of Law.

Audra Hutter focuses primarily on corporate and transactional matters, including commercial contracts, corporate structuring, mergers and acquisitions. Prior to joining Babst Calland, she was an associate with Leech Tishman Fuscaldo & Lampl, LLC. Ms. Hutter is a 2019 graduate of the University of Pittsburgh School of Law.