Articles, Alerts & Perspectives

RMMLF Mineral Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern, Danial P. Hido and Gina N. Falaschi)

The Pennsylvania Department of Environmental Protection (PADEP) continues to move forward with its rulemaking to limit carbon dioxide (CO2) emissions from fossil fuel-fired electric generating units (EGUs) consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule and Governor Tom Wolf’s Executive Order No. 2019-07, 49 Pa. Bull. 6376 (Oct. 26, 2019), as amended, 50 Pa. Bull. 3406 (July 11, 2020) (which extended the deadline for PADEP to present the regulations to the Pennsylvania Environmental Quality Board (EQB) from July 31, 2020, until September 15, 2020). See Vol. XXXVII, No. 3 (2020) of this Newsletter.

As part of PADEP’s public outreach efforts, PADEP hosted an informational webinar on August 6, 2020, regarding the benefits of Pennsylvania’s participation in RGGI. See PADEP, “RGGI 101: How It Works and How It Benefits Pennsylvanians” (Aug. 6, 2020), https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx. The webinar focused on the structure of the RGGI program and how participation will lower greenhouse gas and other air pollution emissions from electric power plants, as well as a discussion of the health and economic benefits from participation in the program.

Consistent with Governor Wolf’s amended Executive Order 2019-07, PADEP presented its proposed cap-and-trade rule to the EQB, the independent body responsible for adopting proposed PADEP regulations, on September 15, 2020. Following significant debate and opposition to the rule, the EQB voted 13-6 to adopt the proposed regulation. As proposed, the regulation would amend 25 Pa. Code ch. 145 (relating to interstate pollution transport reduction) and add subchapter E (relating to a budget trading program) to establish a program limiting CO2 emissions from a fossil fuel-fired EGU with a nameplate capacity of 25 megawatts or greater that sends more than 10% of its annual gross generation to the electric grid. …

Smart Business

(by Sue Ostrowski featuring Sara Antol)

Corporate venture capital (CVC) funds are gaining in popularity as established companies seek a competitive advantage in the marketplace.

“More large public and private companies are investing in startups, frequently with an end goal of making an acquisition,” says Sara Antol, a shareholder at Babst Calland PC.

Smart Business spoke with Antol about the rewards — and challenges — of these investments.

What is the difference between a venture capital fund and a CVC fund?

With a venture capital fund, the fund is formed with the sole purpose of investment and is looking for a positive financial return within a relatively short period of time.

With a CVC fund, an operating company puts funding into a startup, generally in its market space or a space the company wants to enter. It still seeks a financial return, but the investment is more likely strategically driven. The end goal is frequently to eventually acquire the startup, but the CVC fund can hedge its bets by first making an investment.

CVC investors want to know the startup’s strategy and be involved, and they may want a bigger voice than a typical venture fund would expect. The CVC fund generally avoids legal control — it wants the ability to make a difference but not to affect the company’s overall growth curve.

Recent reports have shown that CVC funds have accounted for almost 25 percent of all venture investments in 2020. It could be because technology companies have rebounded during the pandemic, giving them more access to capital. It may be that private equity has pulled back, creating more capacity for CVC investment. …

The Legal Intelligencer

(by Ben Clapp)

In September, the Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission (CFTC) issued a significant, yet perhaps under-publicized, report titled “Managing Climate Risk in the U.S. Financial System.” The report identified several key findings, including that: climate change “poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy;” “financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economywide price on carbon is in place at a level that reflects the true social cost of those emissions; and “disclosure of information on material, climate-relevant financial risks … has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators.” CFTC, Managing Climate Risk in the U.S. Financial System at i-iv (Sept. 2020). The report recommends that the U.S. establish a price on carbon that is consistent with the Paris Agreement’s goal of limiting global temperature rise this century to less than two degrees Celsius above pre-industrial levels.

The report is particularly notable for its blunt assessment of the risks posed by climate change to the underpinnings of the U.S. economy, and its conclusion that comprehensive federal climate change legislation is required to mitigate these risks. (For those wondering at the unlikelihood of a report such as this being published by a federal agency in a presidential administration that has demonstrated a marked tendency toward deregulation, the report was not voted on by the commissioners of the CFTC and has been characterized as representing the perspective of private sector committee members.) Other federal agencies have been reluctant to take additional steps to address climate change investment risks. …

The Legal Intelligencer

(by Molly E. Meacham)

It is a familiar scene to many employers. After searching for the right individual to fill an important position, a promising candidate emerges. The new employee will have top-level access to confidential information and customers, and their offer letter anticipates that the employee will sign restrictive covenants including noncompetition and nonsolicitation agreements as a condition of employment. Current operations are a bit chaotic—including some remote work—so the agreement isn’t provided prior to the first day of employment. The employee knows they will have to sign eventually, but the employer doesn’t press the issue and allows time for the new employee to review the terms. Is this a valid and enforceable restrictive covenant agreement?  According to the Pennsylvania Supreme Court’s June 16, decision in Rullex v. Tel-Stream, the answer is no.

A restrictive covenant such as a noncompetition or nonsolicitation agreement is a contract that must be supported by adequate consideration to be enforceable in Pennsylvania. Pennsylvania views starting a new job as sufficient consideration, provided that the agreement is executed at the start of the employment relationship. In Rullex, the subcontractor in question was aware that a non-competition agreement would be required as part of the relationship, in which the subcontractor would be performing cellphone tower work for a telecommunications company. Although the subcontractor was given a copy of the agreement on his first day of work, he was allowed to take time to review it and did not return a signed copy until at least two months later. The subcontractor later performed cellphone tower work for a competitor of the telecommunications company, resulting in a lawsuit seeking to prevent him from working with that competitor or any other competitors of the telecommunications company. …

The Legal Intelligencer

(by Gary Steinbauer)

Lawsuits pending before the U.S. Court of Appeals for the D.C. Circuit are likely to shape the U.S. Environmental Protection Agency’s (EPA’s) authority to regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act (CAA). These legal challenges involve two high-profile CAA deregulatory actions: The EPA’s Affordable Clean Energy rule (“Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations,” 84 Fed. Reg. 32520 (July 8, 2019)) (ACE Rule) and the EPA’s rule eliminating the transportation and storage segments from and rescinding methane requirements in the new source performance standards for the oil and gas industry (“Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review Rule,” 85 Fed. Reg. 57,018 (Sept. 14, 2020)) (policy Amendments rule) (collectively referred to as the rules). The rules repeal and replace Obama-era GHG emission regulations promulgated pursuant to Section 111 of the CAA, 42 U.S.C. Section 7411.

Section 111 of the CAA grants the EPA authority to establish national performance standards for categories of sources that cause or significantly contribute to “air pollution which may reasonably be anticipated to endanger public health or welfare.” Section 111 of the CAA establishes separate regulatory tracks for new, reconstructed and modified sources and existing sources that would otherwise qualify as regulated new sources. For new, reconstructed, or modified sources, the CAA requires the EPA to establish new source performance standards (NSPS), representing the “best system of emission reduction” (BSER), that apply directly to the particular source category. See 42 U.S.C. Section 7411(b). For existing sources, the EPA is to establish BSER-based emission guidelines that are to be applied through state-issued performance standards. …

Smart Business 

(by Sue Ostrowski featuring Carl Ronald)

When the economy started shutting down in March as a result of COVID-19 and employees began working remotely, keeping intellectual property and proprietary information safe didn’t top the list of companies’ concerns.

“Some businesses didn’t put procedures in place or have appropriate training classes because no one really thought the pandemic would extend as long as it has,” says Carl Ronald, shareholder at Babst Calland. “They didn’t instruct employees on how to identify important confidential information or safeguard certain proprietary documents when working from home.”

Smart Business spoke with Ronald about how to keep your company’s proprietary information safe when employees are working outside the office.

What approach should employers take to protect proprietary information?

There are different levels of confidentiality with different information, so I like to begin by identifying the information you have and classifying it accordingly. Some things are sensitive and you’d prefer them not to be disclosed, such as manufacturing schedules, production forecasts, or discounts for specific customers. But while those are things you don’t want your competitors to know, it isn’t going to be disastrous to the company if they are inadvertently disclosed.

Other information, such as a trade secret or the development of a new process that gives you a competitive advantage can devastate your business if it gets out. So, the first step is to identify the information you have and label it appropriately.

Second, businesses should train employees on the different categories of information and make sure they are treating each properly. Make sure everyone understands the importance of keeping information safe and reiterate basic steps to create barriers to access, such as not sharing passwords and using privacy screens when laptops are used in public.Third, identify employees who have access to confidential information and make sure they are bound by confidentiality agreements. …

The Legal Intelligencer

(by John McCreary)

This is the third installment of the author’s episodic examination of the employment law implications of the legalization of medical marijuana. The first installment appeared in The Legal Intelligencer’s Feb. 9, 2017, online edition—shortly after Pennsylvania’s Medical Marijuana Act (MMA) became effective—and described some of the ambiguities of and practical difficulties with the MMA’s employment provisions. This was followed by an article in the March 21, 2019, edition of The Legal surveying how jurisprudence from other jurisdictions had addressed some of the issues identified in the first article. There now have been a few Pennsylvania decisions on the subject, which along with the courts elsewhere are slowly creating a body of law defining rights and obligations under the medical marijuana laws. From review of these recent cases we can conclude that the courts are sympathetic to medical marijuana patients, but to this point they have yet to squarely address the significant job safety issues likely to be encountered  in the workplace, issues recognized in the Pennsylvania MMA as well as in  the analogous legislation  from other states.

Pennsylvania cases

Two Pennsylvania decisions of note provide insight into the approach of the commonwealth’s courts to the issues raised by the use of medical marijuana.

Palmiter v. Commonwealth Health Systems, No. 19-CV-1315 (Lackawanna Cty. 2019) found an implied cause of action to enforce the MMA’s antidiscrimination provision. That section of the MMA creates a protected class of employees “certified to use medical marijuana,” who are protected against employment discrimination because of such “status” as a certified user. See 35 Pa.C.S.A. Section 10231.2103(b)(1). But uniquely among the commonwealth’s employee-protective laws, the MMA does not provide statutory remedies, nor does it explicitly confer jurisdiction on the courts to address violations. …

The PIOGA Press

(by Julie Domike, Michael Winek, Gina Falaschi and Gary Steinbauer)

On August 13, the U.S. Environmental Protection issued two prepublication final rules related to the New Source Performance Standards for the Crude Oil and Natural Gas Industry at 40 C.F.R. Part 60, Subparts OOOO and OOOOa (NSPS). The two rules―the “policy amendments” and “technical amendments”―arise from EPA’s review of the NSPS pursuant to President Trump’s 2017 Executive Order 13782, “Promoting Energy Independence and Economic Growth,” which directs the agency to review existing regulations that potentially “burden the development or use of domestically produced energy resources” and to revise or rescind regulatory requirements if appropriate. The rules become effective 60 days after publication in the Federal Register.

 Policy amendments

The agency’s policy amendments revise NSPS Subpart OOOO (promulgated in 2012), regulating volatile organic compound (VOC) emissions from certain new, reconstructed, and modified sources in the oil and natural gas industry, and NSPS Subpart OOOOa (promulgated in 2016), regulating VOC and methane emissions from specified new, reconstructed, and modified sources in the oil and gas industry.[1] This rule provides that:

(1) The transmission and storage segments are no longer included in any source category regulated by the NSPS. These excluded emissions sources include transmission compressor stations, pneumatic controllers and underground storage vessels. To regulate a source category under the NSPS, the agency must first make a finding that the emissions of air pollutants from that source cause or contribute significantly to air pollution. These segments were not included in the original NSPS, and no such finding was made when these segments were added to the NSPS in the 2012 and 2016 final rules, making the regulation of the segments improper under the Clean Air Act (CAA). …

The Legal Intelligencer

(by Blaine Lucas and Anna Skipper)

Most lawsuits settle before disposition by the courts. Any settlement agreement is just that, an agreement between the parties, which to be enforceable must possess all the elements of a valid contract—offer, acceptance, and consideration or a meeting of the minds. In Pennsylvania, when one of the parties to a settlement agreement is a public entity, additional considerations come into play, most notably the Sunshine Act, 65 Pa. C.S. Sections 701-716.

Enacted by the General Assembly to facilitate more transparent means of governmental decision-making, the Sunshine Act has existed in some form since 1974, and places restraints upon a local agency’s ability to enter into contracts, including settlement agreements. Specifically, the Sunshine Act requires that all “official action,” including final decisions on the creation of liability by contract or the adjudication of rights, duties and responsibilities, must be taken at a duly advertised meeting open to the public. On the other hand, the Sunshine Act permits “deliberations” in six enumerated categories to take place in private “executive session.” One permissible reason to deliberate in private is to consult with the agency’s attorney regarding information or strategy in connection with litigation or with issues on which identifiable complaints are expected to be filed. However, any official action arising out of deliberations in executive session still must be taken at an open meeting. Thus, even if  settlement of a lawsuit is discussed in executive session, it still must be voted upon at a public meeting subject to all of the Sunshine Act’s requirements.

Recently, the Pennsylvania Commonwealth Court considered the fate of a settlement agreement that was agreed upon by a public agency in executive session, but never voted upon at a public meeting. …

RMMLF Mineral Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern and Casey J. Snyder)

In a June 25, 2020, press release and live press conference, Pennsylvania Attorney General Josh Shapiro announced the findings and recommendations of Pennsylvania’s 43rd Statewide Investigating Grand Jury report on the inquiry into the unconventional oil and gas industry. See Office of Att’y Gen., Commw. of Pa., “Report 1 of the Forty-Third Statewide Investigating Grand Jury.” As a result of the two-year investigation, the grand jury’s report outlined its opinion that the Pennsylvania Department of Environmental Protection (PADEP) and the Pennsylvania Department of Health (PADOH) failed to oversee the hydraulic fracturing industry and fulfill their responsibilities to protect Pennsylvanians from the impact of the industry’s operations.

The opinions in the report relied on testimony from Pennsylvania residents about environmental and health impacts from unconventional operations, in addition to testimony of witnesses who worked for PADEP and PADOH. The grand jury’s supervising judge permitted the report to be shared with the Secretaries of PADEP and PADOH, allowing them, or their designees, to respond to the allegation in the report.

The report concluded that PADEP was unprepared for the introduction and expansion of the unconventional oil and gas industry and failed to adequately regulate the industry, train its staff, communicate information within the agency, adequately test water samples, adequately inspect operators, notify landowners near fracking operations of environmental issues, take adequate enforcement action (including failing to refer cases to the state attorney general), or listen to the public. Despite acknowledging PADOH’s efforts under the current gubernatorial administration, the grand jury found that PADOH failed to sufficiently recognize or respond to the public health consequences of fracking, create a collective public outreach or education response to health complaints, or work with PADEP to gather data about health impacts. …

RMMLF Mineral Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern, Daniel P. Hido and Gina N. Falaschi)

As previously reported, the Pennsylvania Department of Environmental Protection (PADEP) continues its rulemaking to limit carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators consistent with the Regional Greenhouse Gas Initiative (RGGI) Model Rule and Governor Tom Wolf’s October 3, 2019, Executive Order No. 2019-07, 49 Pa. Bull. 6376 (Oct. 26, 2019). See Vol. XXXVII, No. 2 (2020); Vol. XXXVII, No. 1 (2020); Vol. XXXVI, No. 4 (2019) of this Newsletter. PADEP’s efforts, however, have met significant resistance in recent months.

On June 22, 2020, Governor Wolf amended his original executive order to extend PADEP’s deadline to present the rulemaking to the Environmental Quality Board (EQB), the independent body responsible for adopting proposed PADEP regulations, from July 31, 2020, until September 15, 2020. See Exec. Order No. 2019-07, as amended, 50 Pa. Bull. 3406 (July 11, 2020). This extension provides PADEP with additional time to conduct further outreach needed due to disruption caused by the COVID-19 global pandemic and to respond to advisory committee and community feedback.

Advisory Committee Activities

Several advisory committees have recently voted against presenting PADEP’s draft rulemaking to the EQB. First, PADEP presented its preliminary draft proposed rulemaking to establish a CO2 budget trading program to the Air Quality Technical Advisory Committee (AQTAC) on February 13, 2020, and held a virtual special joint informational meeting with AQTAC and the Citizens Advisory Council (CAC) on April 23, 2020, to present further information on the program. …