Articles, Alerts & Perspectives

Pittsburgh, PA and Washington, DC

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)

On December 9, 2022, the Pennsylvania Department of Environmental Protection (PADEP) announced that it had issued an administrative order and two compliance orders related to a natural gas storage facility release event that occurred in Jackson Township, Cambria County, Pennsylvania, in November 2022. See Press Release, PADEP, “DEP Issues Three Orders to Equitrans in Wake of Rager Mountain Storage Reservoir Natural Gas Release” (Dec. 9, 2022) (at which the three orders are available). In the press release, PADEP said its investigations into the event are ongoing.

At the December 1, 2022, Oil and Gas Technical Advisory Board (TAB) meeting, Kurt Klapkowski, Acting Deputy Secretary for PADEP’s Office of Oil and Gas Management, referenced the release event and indicated that it will inform PADEP actions in 2023. After praising Pennsylvania’s current regulations, which were adopted in 1994, as “very good” in terms of the requirements they place on the gas storage industry, Klapkowski said that in response to the release event, stakeholders can probably expect “significant development of potential proposed rule-makings, potential proposed statutory changes, [and] potential proposed administrative and implementation changes.” TAB Meeting at 29:10, 30:50 (Dec. 1, 2022). To achieve these goals, Klapkowski said that he expected significant interaction between PADEP and operators, as well as coordination with TAB and the Crude Development Advisory Council (CDAC). Id. at 32:13. CDAC, which reports to TAB, will be involved in any proposed rulemakings, guidance, or other administrative changes because storage wells are defined as conventional wells governed by 25 Pa. …

Pittsburgh, PA and Washington, DC

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)

On November 3, 2022, then-Pennsylvania Governor Tom Wolf signed House Bill 2528 into law as Act 136 of 2022. The Act, effective January 3, 2023, amended Pennsylvania law to create the Orphan Oil and Gas Well Plugging Grant Program and bring the program into compliance with the requirements for the use of federal funding for well plugging. Among the significant amendments, the Act requires that no less than 20% of the funds allocated from the federal Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021), be made available for plugging conventional oil and gas wells (unless funds remain uncommitted six months prior to any deadline for recapture of the funds by the federal government, in which case they may be used for other purposes). 58 Pa. Cons. Stat. Ann. § 2811(a). The Act also increases the maximum grant amounts from $10,000 to $40,000 (or the actual cost, whichever is less) for wells up to 3,000 feet deep and from $20,000 to $70,000 (or the actual cost, whichever is less) for wells deeper than 3,000 feet. Id. § 2822(b).

The Act includes additional criteria an applicant must submit to the Pennsylvania Department of Environmental Protection (PADEP) to be considered a qualified well plugger (e.g., a demonstration that the applicant has access to the necessary equipment, materials, resources, and services required to plug wells). Id. § 2824(a). A qualified well plugger must also attest that (1) it will provide necessary documentation to allow PADEP to demonstrate it is complying with funding allocation requirements, and (2) each well plugged by the qualified well plugger will be plugged in accordance with applicable requirements.  …

Pittsburgh, PA and Washington, DC

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)

On November 3, 2022, then-Pennsylvania Governor Tom Wolf signed Senate Bill 806 into law as Act 153 of 2022. The Act, effective March 3, 2023, amends the Oil and Gas Lease Act to clarify the minimum amount of information that a conventional or unconventional oil and gas operator is required to provide to a royalty owner on a royalty payment check stub or in an attachment to other forms of payment. The Act requires that an operator/payor furnish the following items (the complete details of which are available in the Act’s text):

• identifying information for the lease, property, unit, or wells for which payment is being made;
• the month and year of oil, gas, or natural gas liquids production for which the payment is being made;
• the total volume of oil, gas, or natural gas liquids produced and sold per well;
• the price received per unit of oil, natural gas, or natural gas liquids sold;
• the aggregate amounts for each category of deductions for each well incurred that reduces the royalty owner’s payment, including all severance and other production taxes;
• net and gross value of the payor’s total sales from each well less any deductions;
• the royalty owner’s legal and contractual interest in the payor’s share, expressed as a decimal or fraction;
• the royalty owner’s share of the gross value of the payor’s total sales before any deductions;
• the royalty owner’s share of the sales value less the royalty owner’s share of taxes and any deductions;

…

Pittsburgh, PA and Washington, DC

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)

On November 18, 2022, the Pennsylvania Environmental Quality Board (EQB) notified Pennsylvania’s Independent Regulatory Review Commission (IRRC) that it was formally withdrawing its widely-opposed proposed rulemaking to change the water quality criterion for manganese in the commonwealth. See Letter from Laura Griffin, Regulatory Coordinator, EQB, to David Summer, Exec. Dir., IRRC (Nov. 18, 2022); see also Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). The manganese rule would have added a numeric water quality criterion for manganese of 0.3 mg/L to Table 5 at 25 Pa. Code § 93.8c and deleted the existing water quality criterion of 1.0 mg/L from 25 Pa. Code § 93.7. See Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). In its rule proposal, the EQB and the Pennsylvania Department of Environmental Protection identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth,” but specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expected that mining operators would need to perform additional treatment to meet this criterion. Id. at 3.

The EQB’s withdrawal of the rule follows the November 2022 disapproval of the rulemaking by the IRRC and the Pennsylvania House and Senate Environmental Resources and Energy standing committees. See Vol. 39, No. 4 (2022) of this Newsletter. …

Pittsburgh, PA and Washington, DC

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)

As previously reported in Vol. 39, No. 2 (2022) of this Newsletter, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule, or RGGI Rule, which links the commonwealth’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), was published in the Pennsylvania Bulletin in April 2022. See 52 Pa. Bull. 2471 (Apr. 23, 2022). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.

A number of legal challenges were filed in response to the publication of the final rule. On April 25, 2022, owners of coal-fired power plants and other stakeholders filed a petition for review and an application for special relief in the form of a temporary injunction. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been filed and the court heard 30 minutes of oral argument in the case on November 16, 2022. The parties await the court’s ruling.

Additionally, on July 13, 2022, natural gas companies Calpine Corp., Tenaska Westmoreland Management LLC, and Fairless Energy LLC filed a third legal challenge to the rule with arguments similar to those brought in the other two cases. See Calpine Corp. v. PADEP, No. 357 MD 2022 (Pa. …

Pittsburgh, PA

Pretrial Practice & Discovery

American Bar Association Litigation Section

(By Jessica Barnes)

The application and scope of the attorney-client privilege for communications containing both legal and nonlegal advice is a critical consideration to protect the privilege.

A “bedrock doctrine of the legal profession,” “hallmark of Anglo-American jurisprudence,” and “cornerstone of the American legal system”—these are just a few ways that the attorney-client privilege was described in briefing in a matter before the Supreme Court of the United States (SCOTUS) that has attracted attention from legal scholars across the country.

This closely watched SCOTUS case is In Re Grand Jury, No. 21-1397, which involves a dispute over the withholding of documents in the form of communications containing both legal and non-legal advice (dual-purpose communications) in response to grand-jury subpoenas on the basis of privilege. Specifically, the petitioner-law firm provided legal advice to a client regarding the tax consequences of the client’s anticipated expatriation (i.e., renouncing citizenship). Thus, some of the communications from the law firm to the client were made for the dual purpose of providing legal advice about tax consequences and to facilitate preparation of the client’s tax returns.

For example, some of the documents that the law firm withheld on a privileged basis included communications related to unsettled statutory requirements, strategies for filing amended income-tax returns for purposes of expatriation, and the drafting of a submission to the IRS advocating for the abatement of a penalty assessment. The law firm withheld these dual-purpose communications on the ground that while relating to the client’s tax returns, they were sufficiently motivated by the additional purpose of obtaining or providing legal advice regarding the client’s taxes. …

Pittsburgh, PA

Pittsburgh Trib

(By Stephanie Ritenbaugh)

An Oakland business incubator closed its initial investment — over $300,000 — in one of its first cohort of companies through its ‘angel investment’ program.

Idea Foundry’s program, IF Ventures, said the company that received the infusion was one of five presented to a group of investors in September.

Idea Foundry and its partner, law firm Babst Calland, declined to name the company because of confidentiality agreements. However, President and CEO Mike Matesic was able to say that it’s a company that develops software to help retailers and distributors.

The company is generating revenue, Matesic said.

“Part of our investment will be used for the company to expand into additional geographic models,” said Chris Farmakis, shareholder and board chairman of Pittsburgh-based Babst Calland.

Additional investments are still being considered for the group, Matesic said.

IF Ventures is an investment group managed by Idea Foundry Inc., a non-profit economic development organization. The goal of the program is to attract investors and funding for companies to boost economic development through entrepreneurship and business growth.

“The investor interest and attraction of new investors exceeded our expectations at this early stage,” Matesic said.

“One of the most promising actions that occurred was that our initial group of investors encouraged their peers to join and ultimately became part of this initial investment,” he said.

To view the full article, click here.

Pittsburgh, PA

PIOGA Press

(By Lisa Bruderly)

Projects involving oil or natural gas development or pipeline construction require U.S. Army Corps of Engineers (Corps) permitting for impacts from crossing, or otherwise disturbing, federally regulated streams and wetlands. The extent of required federal permitting is dependent on the definition of “waters of the United States” (WOTUS), which determines federal jurisdiction under the Clean Water Act (CWA).  Typically, the more impacts to federally regulated streams and wetlands, the more likely the permitting will cause project delays and increase expenses.

As one of their last actions for 2022, U. S. EPA and the Corps (the Agencies) released a prepublication notice of a new definition of WOTUS on December 30, 2022. The new definition will become final 60 days after publication in the Federal Register.

Although the Agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the Agencies have already been informally utilizing to determine WOTUS, which entails relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (e.g., Rapanos v. United States, 547 U.S. 715 (2006)). The Agencies reverted back to this definition in August of 2021, when the U.S. District Court for the District of Arizona vacated the definition of WOTUS promulgated by President Trump’s administration, referred to as the Navigable Waters Protection Rule (NWPR).

The Agencies’ current approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Antonin Scalia issued the plurality opinion, holding that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (i.e., adjacent wetlands). …

Pittsburgh, PA

Pittsburgh Business Times- Pittsburgh INNO

(By Nate Doughty)

A new Pittsburgh-based investment program backed by local angel investors has marked the close of its first capital infusion into a startup company.

IF Ventures, a joint program from Pittsburgh-based nonprofit economic development organization Idea Foundry made in partnership with Pittsburgh-based law firm Babst Calland, announced it invested over $300,000 into one of the program’s inaugural cohort of companies.

Chris Farmakis, a shareholder and board chair at Babst Calland, declined to disclose the name of the startup that received the investment citing confidentiality agreements made between the parties but noted that this is just the first of several deals the program is looking to make in the coming months.

Farmakis said the program isn’t to be likened to a fund like those raised by venture capital firms. Instead, IF Ventures serves as the vetter of hundreds of companies looking to take on investment and only selects a few firms to be presented to its cadre of angel investors who are open to deploying capital in budding enterprises.

There is no requirement that individuals in this program invest in every company, Farmakis said, though periodic investments must be made if investors wish to remain participants in the program.

“This is more about taking successful entrepreneurs, successful business people and people that have the ability to invest in these companies, aggregate them together and give them access in a painless way to make discernible investment decisions,” Farmakis said. “And that’s what we’re doing with this program.”

IF Ventures is expecting to close on its second investment soon and a second cohort of companies will be brought before the investors in its program next month.

Pittsburgh, PA

Breaking Ground

(By Max Junker and Anna Hosack)

Since the 1999 enactment of the Pennsylvania Construction Code Act (“PCCA”), Pennsylvania has sought to establish uniformity for construction standards throughout the Commonwealth.  In pursuit of uniformity the PCCA embraced the adoption of standards drafted by the International Code Council (“ICC”), a private non-profit entity, and directed the Department of Labor & Industry (“Department”) to promulgate certain ICC standards under the Uniform Construction Code (“UCC”).  The directive to adopt standards originating from a non-governmental entity such as the ICC implicates a legal concept known as the non-delegation doctrine.  The Commonwealth Court recently invoked the non-delegation doctrine to enjoin the enforcement of the 2021 accessibility regulations promulgated by the Department in Pennsylvania Builders Association v. Department of Labor & Industry, No. 479 M.D. 2021, 2022 WL 14668728 (Pa. Cmwlth. Oct. 26, 2022).

The non-delegation doctrine is embodied in Article II, Section 1 of the Pennsylvania Constitution where it states: “The legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives.”  Together with Article III, Section 1 of the Pennsylvania Constitution addressing the passage of laws, the non-delegation doctrine constrains the General Assembly so that it cannot delegate its lawmaking power to any other branch of government, another body, or some other authority.  Christ the King Manor v. Dep’t of Pub. Welfare, 911 A.2d 624 (Pa. Cmwlth. 2006), aff’d 951 A.2d 255 (Pa. 2008).

The Commonwealth Court’s recent decision in Pennsylvania Builders Association is the culmination of litigation filed by the Pennsylvania Builders Association (“PBA”) against the Department alleging that the ICC accessibility provisions adopted pursuant to Section 304(a)(3) of the PCCA (“Accessibility Regulations”) constituted an unconstitutional delegation of legislative authority. …