October 1, 2021

New court ruling relates to retroactivity of flat rate royalty law

GO-WV News

(by Katrina Bowers )

In Williams v. EQT Corp., No. 43-2020-C-26 (Ritchie Co. Cir. Ct. W. Va. Aug. 26, 2021), the Honorable Michael D. Lorensen, sitting by appointment in the Circuit Court of Ritchie County, West Virginia (“Court”), entered an Order finding that the 2018 amendments to W. Va. Code § 22-6-8(e) (“Flat Rate Statute”) did not apply retroactively to permits for oil or gas wells (“permits”) issued before the effective date of the amendments to the Flat Rate Statute.

The plaintiffs, successors in interest to a 1913 lease providing for a flat rate payment of four hundred dollars per year for each and every natural gas well drilled on the leasehold estate (“Lease”), challenged deductions by an operator for severance tax and certain post-production expenses from their royalties.

The West Virginia Legislature addressed the issue of flat-rate leases in 1982, when it enacted the Flat Rate Statute prohibiting the issuance of permits where the right to produce was based upon a lease providing for a flat-rate royalty, unless the permit applicant submitted an affidavit certifying that it would pay the lessor no less than one-eighth of the total amount paid or received by or allowed “at the wellhead” for the oil and gas extracted, produced, or marketed (“permit procedure for flat-rate leases”). Id. at *5-6.

In 2017, the Supreme Court of Appeals of West Virginia addressed the payment of royalties pursuant to flat-rate leases and held that royalty payments subject to the Flat-Rate Statute “may be subject to pro-rata deduction or allocation of all reasonable post-production expenses actually incurred by the lessee.” Id. at *6 (quoting Syl. …

September 20, 2021

Groups Petition Environmental Quality Board for Full-Cost Bonding for Oil & Gas Well Plugging

Energy Alert

(by Kevin Garber, Sean McGovern and Jean Mosites)

On September 14, 2021, the Sierra Club, PennFuture, Clean Air Council, Earthworks and other groups (Petitioners) submitted two parallel rulemaking petitions to Pennsylvania’s Department of Environmental Protection (DEP) asking the Environmental Quality Board (EQB) to require full-cost bonding for conventional and unconventional oil and gas wells, for both new and existing wells. The petitions do not address or consider the permit surcharges and other funding mechanisms for plugging wells, including the federal infrastructure bill that is expected to provide millions of dollars to plug abandoned wells.

Background

The Pennsylvania General Assembly addressed and increased bonding in 2012. Under Act 13, well owners/operators are required to file a bond for each well they operate or a blanket bond for multiple wells. Currently, the bond amount for conventional wells is $2,500 per well, with the option to post a $25,000 blanket bond for multiple wells. 72. P.S. §1606-E. For unconventional wells, the current bond amount required varies by the total well bore length and the number of wells, and is limited under the statute to a maximum of $600,000 for more than 150 wells with a total well bore length of at least 6,000 feet. 58 Pa.C.S. §3225(a)(1)(ii). EQB has statutory authority to adjust these amounts every two years to reflect the projected costs to the Commonwealth of plugging the well.

Proposed Changes to Bond Amounts

The Petitioners contend that a lack of full-cost bonding has resulted in the abandonment of thousands of wells and that such wells pollute the environment and adversely affect the health of communities, and allege that the EQB has an obligation to increase bond amounts pursuant to the petition under the Environmental Rights Amendment. …

September 16, 2021

Unemployment Compensation Roundup: Review of Recent Legislation, Cases, and Concerns

The Legal Intelligencer

(by Alex Farone)

The COVID-19 pandemic has broadly affected nearly every state’s unemployment compensation (UC) system in one way or another, and Pennsylvania is no exception. From extended appeal deadlines to an uptick in UC fraud claims, this article sets forth four of the most recent changes or proposed changes to Pennsylvania’s UC system that have arisen due to COVID-19.

  1. Appeal Deadlines: Extension and Refresher

The process for employees seeking UC benefits can involve several steps and multiple appeals. The first step involves the recently separated employee filing an application for benefits. Applications are processed by one of several UC Service Centers across the Commonwealth. These Service Centers are tasked with making an initial determination on claimants’ applications. The Service Centers’ determinations may be appealed by either the claimant or their former employer to a UC Referee, who will conduct an evidentiary hearing on the merits of the application. The decision of the UC Referee may then be appealed by either party to the UC Board of Review (Board).

Until recently, applicants and employers had just 15 days to appeal initial determinations and referees’ decisions. On June 30, 2021, Governor Tom Wolf signed Act 30, formerly H.B. 178, into law, extending the time period allowed for appeals of UC Service Center determinations and UC Referee decisions from 15 days to 21 days.

Act 30 does not impact the deadlines to file appeals with either the Pennsylvania Commonwealth Court or the Supreme Court of Pennsylvania. An appeal to the Pennsylvania Commonwealth Court from the Board is an appeal as of right, but any further appeal to the Pennsylvania Supreme Court must be specifically permitted by that Court in response to an appellant’s petition for allowance of appeal. …

September 16, 2021

DOE Releases Solar Futures Study Outlining a Plan to Reach 40% Solar Electricity by 2035

Washington, DC

Renewables Law Blog 

(By Ashley Krick)

On September 8, 2021, the Department of Energy (DOE) released its Solar Futures Study providing a blueprint for the role of solar energy in decarbonizing the nation’s power sector.  The 310-page Study outlines a future in which solar provides 40% of the nation’s electricity supply by 2035 through cost reductions, technological improvement, rapid deployment, and supportive policies.  And, with the electrification of buildings and the transportation sector, solar could also power 30% of all building end uses and 14% of transportation end uses by 2050.

The Study identifies several policy initiatives needed to support the deployment of solar at this scale, including decarbonization targets, R&D investments and cost reductions, changes to wholesale electricity market regulation, and transmission development, to name a few. In order to meet the 40% by 2035 goal, the Study estimates that the U.S. must install an average of 30 GW of solar capacity per year between now and 2025 and 60 GW per year from 2025-2030, with a total of 1,000 GW of solar deployed by 2035. If the solar industry sees this level of growth, the Study estimates that the industry could employ up to 1.5 million people by 2035. The Study also highlights the important role that battery storage and demand-side management will play given that solar power varies based on daily and seasonal patterns.

With solar power currently providing approximately 3% of the nation’s electricity supply, the DOE’s 40% goal will be contingent on many factors supporting the industry in the coming years, including cost reductions, supportive policies, and widespread deployment.

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September 15, 2021

EPA and Corps revert back to pre-2015 definition of ‘waters of the United States’

The PIOGA Press

(by Lisa Bruderly)

The U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers announced, on September 3 that they had halted implementation of the current definition of “waters of the United States” (WOTUS) effective immediately and reverted back to the pre-2015 definition until further notice. The switch follows an August 30 order from the U.S. District Court for the District of Arizona, which remanded and vacated the definition of WOTUS promulgated by the Trump administration in 2020 (commonly referred to as the Navigable Waters Protection Rule (NWPR)) in the case of Pascua Yaqui Tribe v. U.S. Environmental Protection Agency. While there was speculation that the court’s vacatur could be narrowly interpreted to apply only to states where the plaintiffs in the case were located (i.e., Arizona, Minnesota, Washington and Wisconsin), EPA and the Corps are applying the change in WOTUS definition nationwide.

Importance of the definition of WOTUS

The definition of WOTUS identifies which waters are federally-regulated under the Clean Water Act (CWA), and therefore determines when a federal permit is required for projects (e.g., pipelines, access roads, well pads) that involve dredging or filling of a waterbody (i.e., a Section 404 permit). The WOTUS definition also affects federal spill reporting and spill prevention planning.

With regard to Section 404 permitting, the more expansive the definition of WOTUS, the more waters that are federally-regulated. The extent of WOTUS impacts resulting from a project determines whether an individual or a general Section 404 permit is required, with the process for obtaining an individual permit typically resulting in more Corps involvement, delay and expense.

Significance of the change in WOTUS definition

When the Trump administration promulgated the NWPR in 2020, environmental groups criticized and challenged the new WOTUS definition, claiming it was too narrow and did not federally regulate enough types of waters. …

September 14, 2021

Federal Court Certifies Questions to West Virginia Supreme Court of Appeals About Deductibility of Post-Production Expenses and the Viability of Tawney

The United States District Court for the Northern District of West Virginia has certified questions to the West Virginia Supreme Court of Appeals asking whether the seminal decision in Estate of Tawney v. Columbia Natural Resources, LLC, 219 W.Va. 266, 633 S.E.2d 22 (2006) regarding the deductibility of post-production expenses remains the law of West Virginia, and if so, the proper interpretation of Tawney.

In Charles Kellam, et al. v. SWN Production Company, LLC, et al., No. 5:20-CV-85, a class action royalty case, the District Court, Judge John Preston Bailey, certified on his own motion whether Tawney remains the law of West Virginia, whether the lease in question allowed the deductions, and the proper application of Tawney.  The District Court certified the questions without ruling on the defendants’ pending Motion for Judgment on the Pleadings which argued the Kellam’s lease complied with Tawney and the District Court was bound by the decision in Young v. Equinor USA Onshore Properties, Inc., 982 F.3d 201 (4th Cir. 2020), where the Fourth  Circuit Court of Appeals reversed Judge Bailey and held a similar lease clearly and unambiguously allowed the deduction of post-production expenses. The Kellam’s lease states the lessee agrees to pay the lessor “as royalty for the oil, gas, and/or coalbed methane gas marketed and used off the premises and produced from each well drilled thereon, the sum of one-eighth (1/8) of the price paid to Lessee per thousand cubic feet of such oil, gas, and/or coalbed methane gas so marketed and used . . . less any charges for transportation, dehydration and compression paid by Lessee to deliver the oil, gas, and/or coalbed methane gas for sale.”

In Young, the Fourth Circuit Court of Appeals rejected the finding by Judge Bailey that the lease did not contain sufficiently explicit language about the method of calculating deductions and therefore did not comply with Tawney, noting that “Tawney doesn’t demand that an oil and gas lease set out an Einsteinian proof for calculating post-production costs. …

September 7, 2021

Infrastructure Bill Includes Substantial New Pipeline Safety Grant Program for Upgrades to Gas Distribution Infrastructure

Pipeline Safety Alert

(by James Curry and Evan Baylor)

If enacted, the Senate Infrastructure Investment and Jobs Act of 20211 (Infrastructure Bill) would provide $1 billion for the newly established Natural Gas Distribution Infrastructure Safety and Modernization Grant Program (Program) to be administered by the Pipeline and Hazardous Materials Safety Administration (PHMSA). The program would offer $200 million in grant funding each year for five years, starting in fiscal year 2022. The funding would be available only to municipal and community owned utilities. Eligible projects would include the repair, rehabilitation, or replacement of natural gas distribution pipeline systems and the acquisition of equipment to improve pipeline safety and avoid economic losses. In choosing projects, PHMSA would consider: (1) the risk profile of applicant’s current pipeline systems, including if they are prone to leaks; (2) whether a project may generate jobs; (3) whether a project may benefit disadvantaged communities; and (4) and how a project would impact economic growth.

If enacted, the $1 billion Program would reflect a substantial expansion of PHMSA’s current grant programs both in terms of the amount of funding available and because it would authorize spending on capital projects.

Given the scope of this program, if it is adopted into law, stakeholders may have practical questions on how PHMSA would implement it. For example, would capital projects funded through the Program trigger NEPA? Or would a Categorical Exclusion apply? Current DOT Categorical Exclusions may not cover projects and PHMSA does not have its own set of Categorical Exclusions.2 Would PHMSA need to propose implementing regulations for the Program or could it adopt a less formal application process and criteria? How would PHMSA choose projects, given the broad criteria outlined in the Infrastructure Bill? …

September 7, 2021

EPA and the Corps Revert Back to Pre-2015 Definition of “Waters of the United States”

Environmental Alert

(by Lisa Bruderly)

The U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps) announced, on September 3, 2021, that they would halt implementation of the current definition of “waters of the United States” (WOTUS) effective immediately and revert back to the pre-2015 definition until further notice. The switch is the result of an August 30, 2021 order from the U.S. District Court for the District of Arizona in the case of Pascua Yaqui Tribe v. U.S. Environmental Protection Agency, which remanded and vacated the definition of WOTUS promulgated by the Trump administration in 2020 (commonly referred to as the Navigable Waters Protection Rule (NWPR)). While there was speculation that the court’s vacatur could be narrowly interpreted to apply only to states where the plaintiffs in the case were located (i.e., Arizona, Minnesota, Washington and Wisconsin), EPA and the Corps have changed the WOTUS definition nationwide.

Importance of the Definition of WOTUS

The definition of WOTUS identifies which waters are federally-regulated under the Clean Water Act (CWA), and, therefore, determines when a federal permit is required for projects that involve dredging or filling of a waterbody (i.e., a Section 404 permit) or the discharge of pollutants into a surface water (i.e., a NPDES permit). The WOTUS definition also affects federal spill reporting and spill prevention planning.

With regard to Section 404 permitting, the more expansive the definition of WOTUS, the more waters that are federally-regulated. The extent of WOTUS impacts caused by a project determines whether an individual or a general Section 404 permit is required, with the process for obtaining an individual permit typically resulting in more Corps involvement, cost and delay.

Significance of the Change in WOTUS Definition

When the Trump administration promulgated the NWPR in 2020, environmental groups criticized and challenged the new WOTUS definition, claiming that it was too narrow and did not federally regulate enough types of waters. …

September 1, 2021

Pennsylvania State Programmatic General Permit-6 Finalized and Effective Through June 2026

The Foundation Water Law Newsletter

(By Lisa M. Bruderly)

On June 25, 2021, the U.S. Army Corps of Engineers (Corps) released the finalized Pennsylvania State Programmatic General Permit-6 (PASPGP-6). See Corps, Special Pub. Notice No. SPN-21-28 (June 25, 2021). Going into effect on July 1, 2021, the permit will expire in five years, on June 30, 2026. Under section 404 of the Clean Water Act, 33 U.S.C. § 1344, and section 10 of the River and Harbor Act of 1899, 33 U.S.C. § 403, PASPGP-6 authorizes work in “waters of the United States” (WOTUS) within Pennsylvania that causes no more than minimal adverse environmental effects. State authorization under the Pennsylvania Department of Environmental Protection’s (PADEP) chapter 105 regulations (typically, a general permit or a waiver) is still required for most activities authorized by PASPGP-6.

For projects that meet the threshold criteria, PASPGP-6 typically provides a quicker and less complicated alternative to obtaining an individual section 404 permit. The permit identifies reporting activities, which require Corps review and coordination, as well as non-reporting activities, which can be authorized by PADEP without Corps involvement. Compensatory mitigation, at a minimum one-to-one ratio, will typically be required for impacts to WOTUS that are greater than 0.1 acre and are a reporting activity.

PASPGP-6 updates include new eligibility and reporting guidelines. Key changes from PASPGP-5 to PASPGP-6 include:

  1. The 1.0 acre eligibility threshold for temporary and/or permanent impacts to WOTUS was changed to an eligibility threshold for permanent loss, both direct and indirect, of 0.5 acre of WOTUS and 1,000 linear feet of jurisdictional stream channel.
  2. The eligibility threshold for temporary impacts to WOTUS, including jurisdictional wetlands, was changed from 1.0 acre to unlimited acreage, provided the work is determined to result in no more than minimal impact.

    3. …

September 1, 2021

How to prevent employees from stealing — and detect theft if they are

Smart Business 

(by Sue Ostrowski featuring Kevin Douglass)

You’ve just discovered someone is stealing from your company. Worse yet, what if a high-level person — a partner, an owner, a director or an officer — is involved?

“Particularly if the theft involves a substantial amount of money, an accomplice outside of your business, or if criminal investigatory agencies are involved, you should consult with an attorney about how best to interact with authorities, respond to possible subpoenas, conduct an internal investigation and craft a consistent message to employees and customers,” says Kevin Douglass, a shareholder at Babst Calland.

Of course, every employee with access to company financials poses a risk, and every company should take steps to protect itself.

Smart Business spoke with Douglass about how to keep your business from falling prey to a theft — and what to do if it happens anyway.

How can a company protect its assets?

Employees with the greatest access to the company’s finances are in the best position to take advantage. The easiest way to prevent stealing is to ensure that there are checks and balances built into your company’s financial system, regardless of the trust you have in employees or colleagues responsible for managing that system.

The easiest way to do that is to require that more than one person monitor the company’s cash flow, including approval or review of checks, credit and debit card usage, petty cash and invoicing. If that is not possible, consider an audit every couple of years by an independent accounting firm and provide them with full access to the company’s internal financial records.

An individual may only take small amounts in the beginning, increasing the amount and frequency as they gain confidence. …

August 20, 2021

NHTSA Opens Investigation into Tesla Crashes Involving Autopilot

Washington, DC

EmTech Law Blog

(by Ashleigh Krick)

On August 13, 2021, the National Highway Traffic Safety Administration’s (NHTSA) Office of Defect Investigations (ODI) opened a Preliminary Evaluation (PE21-020) into crashes with in-road or roadside first responders involving Tesla vehicles where Autopilot was confirmed to have been engaged during the approach to the crash.  NHTSA cites to 11 crashes involving emergency vehicles that involved 17 total injuries and 1 fatality.  The earliest cited crash is the January 22, 2018, crash in Culver City, California, where a Tesla Model S rear-ended a firetruck parked along a California freeway. A National Transportation Safety Board investigation into the crash found that the driver was overly reliant on Autopilot and that Autopilot allowed the driver to disengage from the driving task.

In the investigation report, ODI described Tesla’s Autopilot as an SAE Level 2 Advanced Driver Assistance System (ADAS) system “in which the vehicle maintains its speed and lane centering when engaged within its Operational Design Domain (ODD).” Even with the ADAS active, ODI noted that the driver continues to hold primary responsibility for Object and Event Detection and Response (OEDR).  As such, ODI explained that the investigation will “assess the technologies and methods used to monitor, assist, and enforce the driver’s engagement with the dynamic driving task during Autopilot operation.”  ODI will also evaluate Autopilot’s ODD and OEDR.

While the investigation focuses on a relatively narrow issue—the ability of Autopilot to identify and respond to parked emergency vehicles—it reinforces the Agency’s interest in crashes involving SAE Level 2 ADAS systems that are being deployed on public roads.  Particularly, the Agency’s interest in how vehicle manufacturers are perhaps enforcing the driver’s engagement when these systems are activated.   …

August 19, 2021

Keith Coyle Gives Testimony on the Environmental and Economic Benefits of Pipelines

Pennsylvania House Environmental Resources and Energy Committee Hearing

In his testimony on August 17, 2021 at the Pennsylvania House Environmental Resources and Energy Committee public hearing on the Environmental and Economic Benefit of Pipelines, Babst Calland Attorney Keith Coyle, chairman of the Marcellus Shale Coalition’s Pipeline Safety Workgroup, explains, “As long as we are relying on fossil fuels to produce power, we need pipelines to deliver them safely. …It’s pretty clear we are going to be relying on natural gas and petroleum for some time. There is no other way to do this safely and to move product in bulk besides these pipelines.”

To view the video of the full public hearing of the House Environmental Resources & Energy Committee on the Environmental and Economic Benefits of Pipelines, click here.

August 19, 2021

Privilege under Texas Audit Act Not Applicable in Federal Court

Environmental Alert

(by Julie Domike)

An August 10, 2021 decision by Judge Michael J. Truncale of the U.S. District Court for the Eastern District of Texas may upend assumed privilege for documents and studies gathered as part of an environmental self-audit in Texas. The Order on Motion to Quash Subpoena, Sierra Club v. Woodville Pellets, LLC, No. 9:20-cv-178, 2021 WL 3522443 (E.D. Tex. Aug. 10, 2021) addressed the subpoena for stack test reports sought by the Sierra Club in a Clean Air Act enforcement case against the wood pellet manufacturing facility in Woodville, Texas.

Background

On August 18, 2020, Sierra Club filed a complaint under the citizen suit provisions of the federal Clean Air Act, alleging that Woodville Pellets, LLC had violated the statute by emitting unpermitted amounts of air pollutants from its facility. The matter will be tried before a jury in November; during discovery, the Sierra Club sought reports of stack testing that Trinity Consultants conducted as part of a facility audit under Texas law. Failing to receive the documents from Woodville Pellets, the Sierra Club served a subpoena on Trinity, which is not a party to the litigation, seeking these and other documents. Woodville and Trinity moved to quash the subpoena on the grounds that the documents sought are privileged under the Texas Environmental, Health, and Safety Audit Privilege Act (Audit Act) and this prevents their production.

The Decision

The Court accepted that the stack tests were done as part of an audit under the Audit Act, which extends a privilege to documents gathered as part of an environmental self-audit. The privilege provides these documents are not admissible as evidence or subject to discovery in a civil action under state law. …

August 19, 2021

Three Babst Calland Attorneys Named as 2022 Best Lawyers® “Lawyers of the Year”, 31 Selected for Inclusion in The Best Lawyers in America©, and 13 Named to Best Lawyers® “Ones to Watch”

Babst Calland is pleased to announce that three lawyers were selected as 2022 Best Lawyers “Lawyer of the Year” in Pittsburgh, Pa. and Charleston, W. Va. (by BL Rankings). Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant.

Receiving this designation reflects the high level of respect a lawyer has earned among other leading lawyers in the same communities and the same practice areas for their abilities, professionalism, and integrity. Those named to the 2022 Best Lawyers “Lawyer of the Year” include:

Kevin K. Douglass, Natural Resources Law “Lawyer of the Year” in Pittsburgh, Pa.

Mark D. Shepard, Bet-the-Company Litigation “Lawyer of the Year” in Pittsburgh, Pa.

Robert M. Stonestreet, Environmental Law “Lawyer of the Year” in Charleston, W. Va.

In addition, 32 Babst Calland lawyers were selected for inclusion in the 2022 Edition of The Best Lawyers in America (by BL Rankings), the most respected peer-review publication in the legal profession:

  • Chester R. Babst – Environmental Law, Litigation – Environmental
  • Donald C. Bluedorn II – Environmental Law, Water Law, Litigation – Environmental
  • Dean A. Calland – Environmental Law
  • Matthew S. Casto – Commercial Litigation
  • Frank J. Clements – Corporate Law
  • Kathy K. Condo – Commercial Litigation
  • James Curry – Oil and Gas Law
  • Julie R. Domike – Environmental Law, Litigation – Environmental
  • Kevin K. Douglass – Natural Resources Law
  • Christian A.

    • …

August 19, 2021

New Legislation Providing for Deployment of Small Cell Wireless Facilities Becomes Effective August 29th

The Legal Intelligencer

(by Krista Staley and Anna Jewart)

On June 30, 2021, Governor Tom Wolf signed Pennsylvania House Bill 1621, the Small Wireless Facilities Deployment Act as Act 50 of 2021 (“Act 50”), into law. This Act reflects years of negotiations between industry groups and municipalities over the balance of local land use authority and ease of deployment in small cell infrastructure deployment.  Effective August 29th, the Act standardizes the local permitting process for small cell facilities located within municipal rights-of-way.

As demand increases exponentially for faster and more reliable wireless service, so does the demand to develop infrastructure capable of providing greater coverage and capacity.  A decade ago, a single large cell tower on the outskirts of town could meet a community’s wireless voice and data service needs.  However, the reliability of these large “macro cell” wireless facilities has decreased as mobile data traffic exploded. The telecommunications industry responded by developing “small cell networks” distributed throughout communities and buildings to better meet to the constant on-the-go data needs of the modern age.  Instead of utilizing a single tower, possibly hundreds of feet high, small cell networks use multiple low-power antennas that connect to fiber optic cables. These small cell systems allow for greater speeds and more uniform coverage where they are deployed. However, they require a greater level of “wireless density” in order to function as intended.  In other words, small cell facilities must be installed every few blocks rather than every few miles.

To achieve the desired wireless density providers have sought to utilize existing utility poles, street lights, or other structures within municipal rights-of-way. This allows for ease of installation as well as proximity to users.  While the use of the right-of-way, and the existing infrastructure therein, is a convenient solution for wireless providers, the rapid development of these technologies has forced municipalities across the country to scramble to determine how to handle permits for the installation of small cell facilities within their communities.  …

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