The Federal Aviation Administration (FAA) recently issued regulations permitting the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. On July 13, 2016, Congress passed several provisions specific to drone use by the energy industry as part of the reauthorization bill for the FAA. Babst Calland’s Pipeline and HazMat Safety team has prepared a Pipeline Safety Alert noting observations on some of the key provisions in the FAA Extension, Safety, and Security Act of 2016.
On June 23, 2016, Governor Tom Wolf signed the Pennsylvania Grade Crude Development Act (S.B. 279), which abrogates the Environmental Quality Board’s revisions to the Chapter 78 regulations concerning conventional oil and natural gas wells. The Act provides that any future EQB rulemakings concerning conventional oil and natural gas wells must be undertaken “separately and independently” of those applicable to unconventional wells and must include a regulatory analysis form submitted to the Independent Regulatory Review Commission that is restricted to the subject of conventional wells. The Act also creates the Pennsylvania Grade Crude Development Advisory Council (“PGCDAC”), which will consist of 17 members, including representatives from the Pennsylvania Independent Oil and Gas Association, Pennsylvania Grade Crude Oil Coalition, and the Pennsylvania Department of Environmental Protection. The PGCDAC is tasked with, among other items: (1) examining and making recommendations regarding certain existing technical regulations; (2) reviewing and commenting on the formulation and drafting of all technical regulations promulgated under the Oil and Gas Act; and (3) exploring the development of a regulatory scheme that provides for environmental oversight and enforcement specifically applicable to the conventional oil and natural gas industry. The Act takes effect immediately.
On June 22, 2016, the President signed into law the PIPES Act, reauthorizing the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) federal pipeline safety program through fiscal year 2019. Among several amendments to the Pipeline Safety Laws, the PIPES Act provides PHMSA with significant new authority to issue industry-wide emergency orders and requires PHMSA to develop underground gas storage standards. Babst Calland’s Pipeline and HazMat Safety team has prepared a Pipeline Safety Alert offering observations on some of the key provisions in the PIPES Act.
On June 13, the U.S. Senate unanimously approved the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act) legislation that reauthorizes the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) federal pipeline safety program through fiscal year 2019 and contains a number of amendments to the Pipeline Safety Act. The U.S. House of Representatives passed the PIPES Act last week, and the bill will now be sent to the President for his signature.
Among the more noteworthy provisions, Section 12 of the PIPES Act requires PHMSA to develop underground gas storage standards within two years and authorizes the collection of user fees from operators of these facilities. Section 16 also provides PHMSA with significant new authority to issue industry-wide emergency orders if an unsafe condition or practice results in an imminent hazard, meaning a substantial likelihood that death, serious injury, severe personal injury, or a substantial endangerment to health, property or the environment may occur. PHMSA may use emergency orders to impose operational restrictions, prohibitions or safety measures. While PHMSA can issue these emergency orders without a prior hearing, the legislation provides for an expedited process of administrative and judicial review.
Stay tuned for further updates once the PIPES Act of 2016 is signed into law.
On May 13, 2016, West Virginia Governor Early Ray Tomblin signed into law Senate Bill No. 702 which amends §44-8-1 of the Code of West Virginia dealing with the real estate of decedents. Under this amended law, if a decedent devises the proceeds of the sale of real estate to certain individuals, but the real property is never sold, then those individuals entitled to the proceeds would automatically acquire title to the real estate upon the closing of decedent’s estate, absent contrary testamentary intent. If the decedent’s estate is not closed, then title would vest with such individuals five years after the death of the testator. Senate Bill No. 702 provides a title examiner with greater certainty in determining current ownership of decedents’ oil and gas property and will serve to reduce title risks to oil and gas companies in leasing or acquisition activities.
On May 3, 2016, the Pennsylvania House Environmental Resources and Energy Committee (“ERE Committee”) voted 19-8 to advance a concurrent resolution that would disapprove the Chapter 78/78a regulations that were approved for promulgation by the Environmental Quality Board (“EQB”) in February of this year. The concurrent resolution states that the regulations: (1) violate Act 126 of 2014, which requires EQB to promulgate conventional and unconventional regulations separately; (2) disregard the Pennsylvania Supreme Court’s ruling in Robinson Township, which enjoined portions of Section 3215 of the Oil and Gas Act (also known as Act 13 of 2012); and (3) do not comply with the Regulatory Review Act. The House and Senate have 30 calendar days, or 10 voting session days, whichever is longer, from the date the resolution is reported out of committee to pass the concurrent resolution and present it to the Governor. If the Governor does not veto the concurrent resolution, or if his veto is overridden by the General Assembly, EQB will be barred from promulgating the regulations.
As reported by the Wheeling Intelligencer, for the fifth year out of the last six, pooling legislation has been introduced in the West Virginia House of Delegates (HB 4426). A similar measure failed to pass in 2015 after a 49-49 vote on the final day of the legislative session. HB 4426 allows drillers who own or have leased 80 percent of the acreage in a proposed unit to unitize the remaining acreage if mineral owners cannot be located or refuse to sign leases. However, unlike prior versions, the current bill would forbid companies from deducting post-production expenses from royalty checks payable to such mineral owners. Opponents of “lease integration,” as it has been called in West Virginia, maintain that drillers should not be allowed to incorporate unleased oil and gas interests into planned well units because such incorporation co-opts landowners’ rights to execute oil and gas leases affecting their separate property. HB 4426 is currently under consideration by the West Virginia House Energy Committee.
As reported by the Charleston Gazette-Mail and Natural Gas Intelligence, the West Virginia Senate recently passed SB 419, which, if enacted, would eliminate certain volumetric fees that natural gas producers pay in addition to the state’s severance tax. The tax was implemented as part of the Workers’ Compensation Debt Reduction Act of 2005 in order to generate revenue to pay state workers’ compensation debts. It imposes a 4.7 cent per Mcf fee on natural gas production and a 56 cent per ton fee on coal producers. Although the fees generated $122 million for the state in fiscal year 2015, a spokesperson from Governor Earl Ray Tomblin’s office stated that the tax was only intended to be in force until the workers’ compensation debts were paid off. These debts have just about been repaid, more than 10 years ahead of schedule, due in large part to increased production from the Marcellus Shale in recent years. SB 419 was introduced on January 28, was unanimously passed by the Senate last Thursday and is now before the House of Delegates.
Senate Bill 257 was introduced in the Ohio General Assembly on December 30, 2015. The Bill, introduced by Senators Bill Seitz and Michael Skindell and co-sponsored by Senator John Eklund, would revise current Ohio Revised Code Section 5301.07. The current version of Section 5301.07 provides that certain defects in recorded real property instruments, such as a defective acknowledgement or improper witnessing, are cured and the instrument is deemed to be valid and enforceable after 21 years after the instrument was recorded. Prior to 21 years, a challenge can be made to the enforceability of the instrument based on such defects. Under the proposed revisions in Senate Bill 257, there is a rebuttable presumption that the defective instrument which is signed and acknowledged by a person owning an interest in real property conveys or otherwise affects the interest of such person and is valid, enforceable and effective as if legally made without any defects. Such instrument shall also provide constructive notice to all third parties of the instrument, notwithstanding any defect. The presumption can only be rebutted by clear and convincing evidence of fraud, undue influence, duress, forgery, incompetency or incapacity. In addition, the time period after which such defects are cured is lessened from 21 years to 4. The changes proposed by the Bill also include an expansion of the type of defects which are covered by Section 5301.07. Under Senate Bill 257, the Section will apply to several specified defects, but is not limited to the defects listed, arguably expanding the application of the Code Section to any defect in a real property instrument. The Bill would also make the Code Section applicable to all “real property instruments,” which include deeds and leases. Therefore, if Senate Bill 257 is passed into law, litigation is likely to arise as to the section’s applicability to and effect on oil and gas leases.
Ohio’s biennial budget legislation, House Bill 64, signed by the Governor on June 30, 2015, includes changes and additions to Ohio’s oil and gas regulatory program appearing in Chapter 1509 of the Revised Code. The changes and additions take effect on September 29, 2015. The more significant enactments are the following:
- A new section requiring the Chief of the Division of Oil and Gas Resources Management to create a program for the electronic submission of EPCRA reports to the Chief; state and local agencies required by EPCRA to receive the reports will have access to that database (Section 1509.231);
- A new section requiring the reporting of fires and explosions and certain releases of oil, gas, brine, or other substances to the Chief by telephone within thirty minutes of the event, unless such reporting is “impractical” (Section 1509.232);
- New language authorizing the Chief to include land owned by the Ohio Department of Transportation in drilling units approved by the Chief under Section 1509.28;
- An increase in the maximum civil penalty that may be imposed for certain regulatory violations from $4000 per day of violation to $10,000 per day of violation (Section 1509.33(A)); and,
- A significant expansion in the scope of regulatory violations for which the violator is liable to persons affected by the violation for the payment of damages and “the actual cost of rectifying the violation and conditions caused by the violation” (Section 1509.33(G)).
On Saturday, March 14, 2015, the last day of the West Virginia legislative session, the Fair Pooling bill (H.B. 2688) was defeated by a tie vote in the West Virginia House of Delegates. The Fair Pooling bill, which we first discussed two weeks ago, was passed initially in the House of Delegates by a vote of 60-40. The Senate subsequently passed an amended version of the bill early on Saturday morning before sending the bill back to the House of Delegates for approval. However, by a tie vote of 49-49, the House of Delegates ultimately voted to reject the Fair Pooling bill in the final hours of the 2015 legislative session.
During his March 3, 2015 budget address, Pennsylvania Governor Tom Wolf again proposed higher energy taxes. In response, the Marcellus Shale Coalition issued a statement, reiterating the vast benefits that have been realized by the Commonwealth as a result of natural gas development, including job creation and tax revenue. According to MSC President Dave Spigelmyer, the proposed budget “would undercut Pennsylvania’s positioning in the global fight to attract capital investments and stunt this economic momentum rather than fully capitalize on it.” Spigelmyer also stressed the concerns shared by small businesses, labor unions and local governments alike that higher energy taxes could result in job losses and revenue losses. In light of the fact that Pennsylvania voters overwhelmingly support policies that lead to the creation of affordable energy supplies and local jobs, the MSC stated that it will continue to collaborate with Governor Wolf and the General Assembly to help advance policies that seek to grow and expand opportunity.
On January 23, 2015, Pennsylvania Senator Gene Yaw introduced Senate Bill 313 (SB 313), which would provide a process for persons actively engaged in the business of extracting oil or gas, who own or leased at least 65% of the working interests in a proposed unit, to apply to the Public Utility Commission for an order integrating the remaining interests owned by other persons similarly engaged in the business of extracting of oil or gas. SB 313 allows for the integration of working interests for the purpose of extracting oil or gas from formations below the base of the Elk Sandstone or its geologic equivalent. The proposed bill would also repeal the act of July 25, 1961, known as the Oil and Gas Conservation Law (P.L. 825, No. 359). SB 313 is currently awaiting approval from the Senate Environmental Resources and Energy Committee.
U.S. Representative Tom Reed (R-NY) recently introduced into Congress the Defense of Property Rights Act (H.R. 510), which would allow landowners affected by New York’s hydraulic fracturing ban to sue the government over agency action that “unreasonably impedes the use of property or the exercise of property interests or significantly interferes with investment-backed expectations.” The bill was introduced in response to the December 17, 2014 announcement by New York Governor Andrew Cuomo of a statewide ban on hydraulic fracturing. Representative Reed stated in a press release that “these actions by government entities often leave our neighbors and friends with property that is worth much less, hurting their families and leaving them little choice but to accept the lower value.” Under the proposed legislation, property owners could receive compensation if the agency action diminishes the fair market value of their property by at least 20 percent or $20,000. The bill has been referred to the House Judiciary Committee.
A Pennsylvania senate committee recently unanimously approved two bills regarding oil and gas royalty calculations. StateImpact Pennsylvania reported that Senate Bills 147 and 148 were approved by the Senate Environmental Resources and Energy Committee on Wednesday, January 21, 2015. If passed into law, SB 147 would require operators to disclose more information on royalty checks, including calculations and joint ventures between companies. The bill would also permit landowners to inspect company records, even if that right is not set forth in an oil and gas lease. SB 148 would prohibit operators from retaliating against landowners who question the calculation of their royalty payments. The bills are two of several that have been introduced in the state house and senate in the last year.
A third bill, Senate Bill 279, also passed the senate committee with unanimous approval. This bill would create the Pennsylvania Grade Crude Development Advisory Council, which would advise and assist the state Department of Environmental Protection with the differing regulations for conventional oil and gas operations and unconventional oil and gas operations. All three bills will move forward for consideration by the full senate.