As reported by The Scranton Times-Tribune, Pennsylvania State Representative Scott Petri (R-178th Leg. Dist., Bucks County) recently introduced legislation that would allow the Turnpike Commission to grant pipeline operators the right to use its existing right-of-way for the construction of parallel gas pipelines in exchange for a transmission fee. Representative Petri asserts that passage of the bill will ultimately generate state revenue and minimize the impact of transmission line development on private property owners. Although the Turnpike Commission has not yet determined how much of the state’s 550 mile turnpike system may be suitable for parallel gas pipelines, the proposed legislation comes at a time when midstream development and operations in the Marcellus Shale are on the rise, as state officials predict that thousands of miles of new pipelines will be needed to transport gas to new markets. Representative Petri also suggests that Interstates 80 and 79, which span 311.07 miles and 182.72 miles in Pennsylvania, respectively, could provide additional opportunities for parallel gas pipelines upon federal approval.
As previously reported, in November 2014, the Lycoming County Court of Common Pleas granted the condemnation of a temporary construction easement to UGI Penn Natural Gas, Inc., a public utility. As a result, UGI was allowed to use the easement to park and store vehicles, equipment and materials related to the construction and maintenance of a pipeline which is to provide gas service to the Moxie/Panda Electric Generation Plant. Law360 reported that the Commonwealth Court of Pennsylvania recently issued a pair of opinions upholding the decision of the trial court. CourtListener recently posted a copy of the opinions. Among other findings concerning the timeliness of the landowners’ claims, the Commonwealth Court concluded that: (1) a pipeline meant to supply a power plant could constitute a public utility service; and (2) the scope of UGI’s taking was not greater than necessary to acquire the property rights in connection with the easement. In short, the court determined that the landowners’ challenges were meritless.
On October 14, 2015, the United States District Court for the Western District of Pennsylvania invalidated several provisions of a Grant Township, Indiana County, Pennsylvania local ordinance that was intended to prevent an oil and gas operator from operating an injection well that had been permitted by the U.S. Environmental Protection Agency. In Pennsylvania General Energy Company, L.L.C. v. Grant Township, C.A. No. 14-209, 2015 U.S. Dist. LEXIS 139921 (W.D. Pa. Oct. 14, 2015), Pennsylvania General Energy Company, L.L.C. challenged the constitutionality, validity and enforceability of the Grant Township ordinance that sought to establish a self-described Community Bill of Rights Ordinance. For additional information, read our recent Administrative Watch.
Earlier today, the Pennsylvania Commonwealth Court issued a unanimous decision in the much-anticipated case of Gorsline v. Board of Supervisors of Fairfield Township, reversing the decision of the Court of Common Pleas of Lycoming County. In reversing the lower court, the Commonwealth Court upheld Fairfield Township’s decision to grant conditional use approval to Inflection Energy, LLC for an unconventional well pad. This case is significant for several reasons. First, the Commonwealth Court made it clear that it is insufficient for objectors to sustain their burden by merely stating concerns or asking questions of the developer’s expert witnesses. Instead, they must present evidence to substantiate those concerns. Second, the Commonwealth Court criticized the lower court for making its own findings of fact when it did not take additional evidence and where the municipality made its own findings of fact. Third, the Commonwealth Court recognized that the lower court erred by focusing on truck deliveries during the construction phase of the project because zoning regulates the use of land and not the particulars of development and construction. Finally, the objectors attempted to raise issues based on the Pennsylvania Supreme Court’s Robinson Township decision, arguing that natural gas development is an industrial use that is per se incompatible with a residential/agricultural zoning district and that approval of the natural gas development violated the Environmental Rights Amendment of the Pennsylvania Constitution. The Commonwealth Court summarily rejected these two arguments and noted that, because the record supported the township’s determination that the proposed well pad was compatible with the permitted uses in the residential/agricultural district and the objectors presented no evidence of harm, the objectors’ claims were unsupported by the accepted evidence of record. This final point is especially significant because many anti-industry opponents cite both the lower court’s opinion and the Delaware Riverkeeper Network’s amicus brief from this case in other zoning proceedings as support for the now rejected view that oil and gas development must only occur in industrial zoning districts.
Horsehead Holding Corp. (Horsehead) announced Monday that it closed on the sale of its former zinc smelter to Shell Chemical (Shell), which is the proposed site for an ethane cracker plant in Beaver County. Although Shell has not made a final decision on whether to build the cracker plant, it has been considering the Horsehead property as a site for the plant, which would convert ethane, a component of natural gas, into polyethylene. Shell is moving forward with developing the site, having demolished the smelter plant and relocated power lines. Shell indicated that this is a necessary step in the plans to acquire permits and continue development of the site.
On May 27, 2015, Pennsylvania Governor Tom Wolf announced the formation of a task force to help the Commonwealth, the natural gas industry and communities partner for the development of new pipeline infrastructure to allow natural gas and related byproducts to more effectively reach the market. The task force will focus on creating a series of best practices for the planning, siting and routing of pipelines. It is projected that Pennsylvania may see the construction of up to 25,000 miles of gathering lines in the next decade, and possibly another 4,000 to 5,000 miles of midstream and transmission lines. John Quigley, the acting Secretary of the Pennsylvania Department of Environmental Protection, will serve as chairman of the task force. The Governor will seek representatives from state agencies, the legislature, federal and local governments, the pipeline and natural gas industries and environmental groups to join the task force. Some of the goals of the task force are to plan construction practices that reduce environmental impact, establish a predictable and efficient permitting process, develop long-term operations and maintenance plans and engage in meaningful public participation.
The Center for Sustainable Shale Development (CSSD), a collaborative of environmental organizations and energy companies that encourages responsible practices in development of shale gas resources in the Appalachian region, and CONSOL Energy, Inc. each announced the certification of CONSOL Energy’s Appalachian Basin operations. In order to be certified, CONSOL had to show that it met CSSD’s 15 Performance Standards by meeting or exceeding state and federal air and water management regulatory requirements. CONSOL joins Royal Dutch Shell and Chevron Corp. as the third natural gas producer to earn the certification.
FuelFix.com reports that the U.S. District Court for the Middle District of Pennsylvania recently ruled that the Constitution Pipeline can be built across seven northeastern Pennsylvania properties despite the fact that the respective landowners had not agreed to the construction. The Constitution Pipeline is a 124-mile pipeline project designed to transport Marcellus Shale gas from Pennsylvania to New York and New England. It would connect with the existing Tennessee and Iroquois pipelines in New York. Its partner companies, including Williams Partners LP and Cabot Oil & Gas Corp., sought access to 130 properties in Pennsylvania and filed condemnation proceedings regarding 20. Agreements were reached with 13 of the 20 landowners. Judge Malachy Mannion ruled that the pipeline has the necessary permits from the Federal Energy Regulatory Commission, and that it serves the public interest by increasing gas pipeline capacity. Judge Mannion also noted that the landowners stood to gain adequate compensation from the pipeline’s owners. A spokesman for Williams stated that the group hopes to begin construction by June 1st after obtaining additional permits and posting the necessary bond.
In a recent non-precedential opinion, the Third Circuit affirmed a decision of the Middle District of Pennsylvania dismissing an action on the basis that a doctor lacked standing to challenge what he refers to as the “Medical Gag Rules” of Act 13. In Rodriguez v. Secretary of Pennsylvania Department of Environmental Protection, the plaintiff, a doctor specializing in the treatment of renal diseases, hypertension and advanced diabetes, asserted he is unable to obtain critical information about the quality of local water. Specifically, he claimed that he needed the information to properly diagnose and treat patients whose illnesses or medical conditions allegedly resulted from contact with environmental contaminants. He therefore challenged Section 3222.1 of Act 13, which provides two mechanisms for health professionals to learn proprietary information about the chemicals used in hydraulic fracturing—one for medical emergencies and one for non-emergency situations. Dr. Rodriguez argued Act 13’s non-emergency provision, which requires a written statement and the execution of a confidentiality agreement, impermissibly restricts his speech and is unconstitutionally vague and overbroad.
The Middle District of Pennsylvania held that Dr. Rodriguez’s alleged injury was too speculative to satisfy the requirements of standing under Article III of the U.S. Constitution. In this regard, Dr. Rodriguez did not allege that he had ever been in a situation where he needed or attempted to obtain such information, or that he had ever been forced to sign a confidentiality agreement under Act 13. In short, he never suffered an injury-in-fact.
On appeal, the Third Circuit agreed with the District Court, holding that it was insufficient for Dr. Rodriguez to rely on “naked assertions devoid of further factual enhancement.” Rather, he must allege that he suffered an invasion of an interest that is actual or imminent, not conjectural. The Third Circuit also distinguished Dr. Rodriguez’s reliance upon the Supreme Court of Pennsylvania’s 2013 opinion in Robinson Twp., Washington Cty. v. Com. The court ruled that Dr. Rodriguez’s reliance on Pennsylvania law as authority regarding federal standing requirements was misplaced.
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.
Yesterday, the Pennsylvania Supreme Court issued Harrison v. Cabot Oil & Gas Corp., a significant opinion in which the Court refused to apply equitable tolling principles that other oil and gas jurisdictions have adopted. Such principles prevent oil and gas leases from expiring during the pendency of lease litigation.
The lessors in this case filed a declaratory judgment action and a fraudulent inducement claim in federal court challenging the validity of their lease, which was two years into its primary term. Out of an abundance of caution, the operator refrained from all operations during the pendency of the litigation. It then asserted a counterclaim seeking to equitably toll the lease in the event it prevailed. Though the operator successfully defeated the lessors’ claims, the District Court denied its equitable tolling claim. As a result, the lease expired while the case was being litigated.
The operator appealed to the Third Circuit, which certified the case to the Pennsylvania Supreme Court on the grounds that it was an issue “of first impression and of significant public importance, given that its resolution may affect a large number of oil-and-gas leases in Pennsylvania.”
In a unanimous decision, the Pennsylvania Supreme Court upheld the District Court’s decision not to toll the lease. In so ruling, the Court noted that its decision went against other jurisdictions that have decided this issue. The Court also noted that the operator should have addressed the issue in its lease by adding a tolling provision. The Court also held that the result may have been different if the lessors had prevented the operator from entering the property to conduct operations.
The case is significant in several respects. First, it opens the door for lessors to try to “run out the clock” on leases by filing frivolous lease litigation. Second, it imposes on operators the obligation and risk to continue operations even in the face of suits challenging the validity of their leases. Third, if a lessor files suit to challenge a lease’s validity, and simultaneously denies the operator the right to conduct operations, the operator must now consider filing for equitable relief through an injunction before seeking to toll the lease term. Lastly, it essentially requires operators to add tolling provisions to their new leases.
The West Virginia Division of Air Quality will release a new general air quality permit, the G80-A, which will regulate air quality in regard to natural gas production, compressor and dehydration facilities. On February 5, 2014, the DEP will host a meeting to release the draft of the G80-A and cover the timeline, procedures for the official public notice for the draft permit, and subsequent public meetings.
Currently, General Permits G30-D and G35-A cover air quality relating to natural gas compressor facilities while G70-A covers air quality relating to natural gas facilities which are designed and operated for natural gas production at a well site. The general air quality permits currently in existence will continue, but there will be no future registrations, modifications or administrative updates to the G30-D, G35-A or G70-A permits. After the rollout of the new general permit, registrants wishing to modify an existing registration must register under the General Permit G80-A.
The meeting will take place from 9 a. m. to 4 p. m. at the DEP’s headquarters and will also be live-streamed over the internet.
The Oil & Gas Financial Journal reported on January 14, 2015 that Jeffrey A. Fisher has been named CEO of newly created American Energy Appalachia Holdings, LLC (“AEA”). AEA was recently created through the combination of American Energy Partners’ (“AEP”) affiliates, American Energy-Utica LLC and American Energy – Marcellus LLC. Fisher was previously COO of AEP and Executive Vice President of Production for Chesapeake Energy Corporation, which AEA’s Chairman of the Board, Aubrey K. McClendon co-founded. Fisher also served in a number of other engineering management positions at Chesapeake, BP and Vastar Resources. In addition to adding Fisher to the management team, AEA also named John K. Reinhart and Jeffrey A. Agosta as the COO and CFO, respectively. Similar to Fisher, Reinhart held several operational leadership positions at Chesapeake Energy in the Anadarko, Marcellus and Utica areas. Agosta previously served as CFO of Oklahoma City based Devon Energy, as well as a manager at D. R. Payne & Associates, a financial consulting firm. The executive team will oversee the management and operation of AEA’s estimated proven reserves of 1.5 trillion cubic feet equivalent of oil and gas (77% of which is gas) and the operation of seven drilling rigs in eastern Ohio and northern West Virginia.
As reported by The State Journal, Robert A. Fala has been appointed to serve as the director of the West Virginia Division of Natural Resources (“WVDNR”), effective January 1, 2015. Fala was appointed by WV Governor Earl Ray Tomblin and will replace Frank Jezioro, who served as director since 2005 and retired on December 31, 2014. Fala began his career with the Pennsylvania Game Commission and has recently held positions with the West Virginia Department of Environmental Protection, the U.S. Fish and Wildlife Service and the WVDNR Natural Resource Commission. The WVDNR controls bids for the leasing of state game lands, such as the Conaway Run Wildlife Management Area in Tyler County, WV, and administered the recent leasing of West Virginia’s oil and gas interests underlying the Ohio River.
StateImpact reported that the Federal Energy Regulatory Commission recently approved an addition to the interstate Transco pipeline that will transport Marcellus shale gas to New Jersey, where there is a high demand. The approval comes after several other pipeline expansions to New York and New England were recently approved. The Leidy Southeast line will total approximately 30 miles in Pennsylvania and New Jersey and is scheduled to be completed by late 2015.