Articles, Alerts & Perspectives

The American Oil & Gas Reporter

(By Gary Steinbauer)

The U.S. Environmental Protection Agency’s highly anticipated November 2021 Clean Air Act proposal regulating methane and volatile organic compound emissions from the oil and gas sector has drawn a reported 400,000 individual comment submissions. EPA seeks to use the methane proposal to expand VOC and methane emissions regulations that apply to new, modified and reconstructed sources within the crude oil and natural gas production sector, which the agency promulgated in 2012 and 2016. In addition, the methane proposal includes the first nationwide methane emissions guidelines for existing oil and gas sector sources.

It is no surprise EPA’s proposal has received a significant number of comments, especially considering the agency’s relatively brief and tumultuous history of regulating oil and gas methane emissions under the CAA. Feedback on the proposal differs considerably. Many commenters, primarily those representing the oil and gas industry and certain states, have raised serious legal concerns and question the proposal’s technical aspects and the propriety of several of its key components.

On the other hand, commenters from other states, local governments and environmental groups urge EPA to impose even more stringent requirements, beyond those included in the methane proposal. Several key themes and legal issues emerge from these comments and it seems worthwhile to highlight some of the potentially pivotal legal issues raised by commenters, including those related to EPA’s proposed community-based monitoring program.

Legal Issues

The numerous legal issues commenters raise about the methane proposal range from foundational questions about whether the CAA allows EPA to regulate methane emissions from the oil and gas in this manner to legal concerns about the way EPA proposes to regulate specific sources. …

Legal Intelligencer

(By Anna S. Jewart and Blaine Lucas)

In 2013, the Pennsylvania Supreme Court rendered its ground-breaking decision in Robinson Township v. Commonwealth, (Robinson II), in which a three-justice plurality relied on  the Pennsylvania Environmental Rights Amendment, Article I, Section 27 of the Pennsylvania Constitution (ERA) to invalidate certain provisions of Act 13 (the General Assembly’s 2012 comprehensive update to the former Oil and Gas Act) limiting the authority of local governments to regulate oil and gas development. This decision triggered a wave of challenges from objectors who argued local ordinances are substantively invalid where they fail to place sufficient restrictions on oil and gas uses or allow them in allegedly incompatible zoning districts. To date, these types of claims have been consistently rejected by local zoning hearing boards, the Common Pleas Courts and the Commonwealth Court. Extensive case law following Robinson II makes it clear that where oil and gas development occurs is squarely within the purview of local zoning authority, while how it occurs is a state regulatory matter. The Supreme Court’s decisions in Gorsline v. Fairfield Township, 186 A.3d 375 (Pa. 2018), and Robinson IV, 147 A.3d 536 (Pa. 2016), and several Commonwealth Court decisions including Frederick v. Allegheny Township Zoning Hearing Board, 196 A. 3d 677 (Pa. Cmwlth. Ct. 2018), Delaware Riverkeeper Network v. Middlesex Township Zoning Hearing Board, No. 2609 C.D. 2015 (Pa. Cmwlth. 2019) and Protect PT v. Penn Township, No. 1632 C.D. 2018 (Pa. Cmwlth. Nov. 14, 2019), appear to have laid to rest any lingering doubts concerning a municipality’s authority to allow oil and gas uses within its boundaries.  …

Babst Calland is pleased to announce that Bruce F. Rudoy has been elected a Fellow of the American Bar Foundation (ABF). Membership is limited to just one percent of lawyers licensed to practice in each jurisdiction. Members are nominated by their peers and selected by the ABF Board.

The ABF Fellows is a global honorary society that recognizes attorneys, judges, law faculty and legal scholars whose public and private careers have demonstrated outstanding dedication to the highest principles of the legal profession and to the welfare of their communities. ABF Fellows hail from nearly 40 countries and hold a wide variety of influential roles.

Mr. Rudoy is a shareholder and co-chair of Babst Calland’s Energy and Natural Resources and Renewables groups and Land and Energy Title Department. Mr. Rudoy concentrates his practice in the areas of Oil and Gas, Renewable Energy, and the associated business transactions, corporate and real estate law. He counsels various clients on title, transaction and regulatory matters. Those matters are diverse and include title issues and opinions, purchase and sale of assets and equity, due diligence examination and analysis. Transactional matters related to energy contract matters include Joint Ventures, Farm-Outs and Farm-Ins, Power Purchase Agreements, Equipment Supply Agreements, EPC Contracts, Offtake Agreements, leases and licensing, secured lending, and litigation related to all of the foregoing. Mr. Rudoy is also a member of the Firm’s board of directors.

Mr. Rudoy is admitted to practice in Pennsylvania, Alaska, Kentucky, New Mexico, North Dakota, Ohio, Oklahoma, Texas, West Virginia and Wyoming. He is also a member of the bar associations in each of those states. He graduated from Pennsylvania State University in 1987 with a B.S. in Finance. He attended the London Metropolitan University (formerly City of London Polytechnic) in London, England in 1986 where he studied law and economics. …

PIOGA Press

(By Kevin Garber and Gina Falaschi)

On April 4, 2022, the Pennsylvania Senate failed by one vote to reach the two-thirds majority vote needed to override Governor Tom Wolf’s January 10th veto of Senate Concurrent Regulatory Review Resolution 1, which was intended to block the Pennsylvania Department of Environmental Protection’s regulation to join the Regional Greenhouse Gas Initiative (RGGI). However, the following evening, April 5, the Commonwealth Court issued a stay preventing the Legislative Reference Bureau from publishing the regulation as a final, immediately-effective rule in the Pennsylvania Bulletin and scheduling a hearing for May 4, 2022 on litigation that DEP initiated in February to force publication of the final regulation.

RGGI is the country’s first regional, market-based cap-and-trade program, designed to reduce carbon dioxide emissions from fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10 percent of their annual gross generation to the electric grid. Regulated sources must hold allowances equal to their CO2 emissions over a three-year compliance period. Each allowance is equal to one short ton of CO2. Regulated sources may purchase state-issued allowances at quarterly auctions or through secondary markets and can use allowances issued by any RGGI state to comply. Regulated sources may also use offsets awarded for certain environmental projects to meet a maximum of 3.3 percent of their allowances.

If the rule is published in the Pennsylvania Bulletin before July 1, 2022, the partial year emissions cap for Pennsylvania would be 40.7 million tons of CO2 for the remainder of 2022. The total annual emissions cap would gradually decline to 58 million in 2030. Affected units would need to start monitoring emissions on July 1, 2022 to be able to purchase allowances for CO2 emitted on or after that date. …

PIOGA Press

(By Justine Kasznica and Ember Holmes)

On March 21, 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 (www.whitehouse.gov/briefing-room/statements-releas- es/2022/03/21/fact-sheet-act-now-to-protect-against- potential-cyberattacks), 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. In November, 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, 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” (www.cisa.gov/uscert/ncas/alerts/aa22-011a) 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 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.

What is Shields Up?

Shields Up is a cybersecurity campaign formed out of the combined efforts of CISA and the FBI to help organizations prepare for, respond to and mitigate the impact of cyberattacks by Russia. …

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). …