Articles, Alerts & Perspectives

The American Oil & Gas Reporter

(By Del Torkelson)

Ensuring energy security and addressing climate change are not mutually exclusive goals, insists Senator Joe Manchin, D-W.V., and it is imperative for the United States to pursue both.

The chairman of the U.S. Senate Energy and Natural Resources Committee offered his perspective on the outlook for the country’s energy policy during a “Message to the Industry” video conversation included in The 2022 Babst Calland Report–Legal & Regulatory Perspectives for the U.S. Energy Industry, which the law firm released in late June. Joining Manchin in the report’s introductory webinar recording were Babst Calland energy attorneys Joe Reinhart, Moore Capito and Jim Curry.

The firm says its 12th annual energy analysis also contains perspectives from energy attorneys on critical issues facing the industry, including:

• Regulatory developments and enduring concern about climate change;
• Cybersecurity risks and the steps companies can take to minimize them;
• The U.S. Securities and Exchange Commission’s environment, social and governance-oriented disclosure requirements, as well as federal and state efforts to promote environmental justice;
• The role hydrogen and carbon capture and sequestration can play, as well as the factors influencing how quickly both technologies can expand;
• Recent and pending regulations related to permitting and operating pipelines; and
• The challenges renewable energy companies must overcome as they secure land and permits.

During the half-hour discussion with Manchin, the senator emphasized that laudable environmental ambitions must be rooted in reality. “You cannot just be aspirational and think ‘This is my wish; I wish it would work that way,’” Manchin advised. “It’s not the real world that we live in–and I have seen the real world. …

PIOGA Press

(By Kevin Garber, Varun Shekhar, Gina Falaschi and Marley Kimelman)

This article is an excerpt of The 2022 Babst Calland Report, which represents the legal perspective of Babst Calland’s energy attorneys addressing the most current business and regulatory issues facing the energy industry. To view the full report, go to reports.babstcalland.com/energy2022-2.

On June 30, the United States Supreme Court held, in West Virginia v. EPA, that the U.S. Environmental Protection Agency may not force existing coal-fired power plants to shift their electricity generation to cleaner sources under Section 111(d) of the Clean Air Act, thereby narrowing EPA’s authority to regulate greenhouse gas emissions from power plants.

West Virginia and a coalition of states, power companies and coal interests petitioned the Supreme Court to review the D.C. Circuit’s 2021 invalidation of the Trump administration’s 2019 Affordable Clean Energy rule, which had replaced the Obama administration’s 2015 Clean Power Plan. Under the Clean Power Plan, EPA calculated rate-based (amount of carbon dioxide emitted per megawatt hour generated) and mass-based (total amount of carbon dioxide emitted per year) targets for each state through application of three “building blocks” that were deemed to constitute the “best system of emission reduction…adequately demonstrated” (BSER) under Section 111(d) of the Clean Air Act: (1) improvements to heat rates (a measure of heat input to power output efficiency) achieved at individual power generation facilities; (2) shifting power generation to natural gas-fired or combined cycle facilities; and (3) increased power generation from renewable and zero-emitting sources. The latter two “building blocks” constituted the Clean Power Plan’s designed “generation shifting.” EPA projected that this BSER would drive down electricity derived from coal-fired sources from 38 percent of the nation’s overall generation in 2014 to 27 percent by 2030. …

Babst Calland congratulates Attorney Tim Miller as the recipient of this year’s Energy & Mineral Law Foundation John L. McClaugherty Award, which recognizes outstanding contributions to the Foundation and the field of energy and mineral law.  Each year, EMLF recognizes leaders who have shaped EMLF, and who are recognized as industry and community leaders.

To view the EMLF award presentation, click here.

Smart Business

(By Sue Ostrowski featuring Marc Felezzola)

If you are building new commercial construction, or making improvements to your existing facility, it is critical before starting to take steps to protect yourself from potential mechanics’ liens. Failing to do so could result in making double payments, or potentially forfeiting your property to foreclosure, says Marc Felezzola, a shareholder in Babst Calland’s Construction, Environmental and Litigation groups.

For example, if a prime contractor — someone who contracts directly with the owner — fails to pay a subcontractor — anyone who supplies labor or materials to the prime contractor or its direct subcontractor — the subcontractor can file a mechanics’ lien against the property on which the project was built. And if the subcontractor is not paid the lien amount, it can foreclose on the lien, force a sheriff sale of the property and take its payment from the proceeds of that sale.

This is true even if the owner has paid the contractor for the subcontractor’s work, meaning the owner could be subject to the double jeopardy of having to pay for subcontractor labor and materials twice.

“When you improve real property with construction, contractors and subcontractors confer a benefit that increases the property’s value,” Felezzola says. “The law allows for a lien against the property to secure payment for the benefit someone has contributed to increasing that value. As an owner, protecting yourself requires forethought before construction starts, to set the project up for transparency about potential lienholders and limit the scope of that potential to those with whom the owner directly contracts.”

Smart Business spoke with Felezzola about three ways to protect yourself before beginning a construction project. …

GO-WV

(By Robert Stonestreet)

What does the West Virginia oil and gas industry have in common with freshwater mussels, how the federal government chooses to define the term “habitat,” and drilling activity on federal lands in the west?  Quite a bit, actually.  As explained below, recent developments on each of these topics intersect with the regulatory programs that govern oil and gas operations in West Virginia.

WVDNR Mussel Guidance

On June 23, 2022, the West Virginia Division of Natural Resources (WVDNR) published final guidance reflecting the agency’s recommendations for other state and federal government agencies to consider when issuing environmental permits authorizing activities that may impact freshwater mussels.  Why does this matter to the West Virginia oil and gas industry?  Because the guidance hopefully resolves a long running effort to address what some viewed as improper efforts by the WVDNR to directly regulate oil and gas operations.

In addition to various permits required by the West Virginia Department of Environmental Protection (WVDEP) and the United States Army Corps of Engineers (Corps) for activities that impact certain streams, operators are required to obtain a “right of entry” permit from the WVDNR before any disturbance may take place in or under certain size streams.  This permit stems from the State of West Virginia’s claim to own the stream bed of certain waterways.  Activities requiring a “right of entry” permit include installation of equipment to withdraw water for use in well completion or other activities.

Several years ago, WVDNR began attempting to impose conditions in “right of entry” permits that would regulate the design of certain stream crossings and impose restrictions on when and how much water could be withdrawn from a stream.  …

Melissa M. Rounds recently joined Babst Calland as senior counsel in the Energy and Natural Resources Group. Mrs. Rounds has represented clients in the oil and gas industry for more than 15 years and has assisted producers in a variety of transactional matters, including real estate closings, preparation of documents for leasing purposes and examining and certifying title. Her work includes resolving complex title defects, coordinating urgent title projects, working in-house with major energy producers to provide comprehensive lease analysis and assistance with mineral purchases, and providing legal analysis for changes in statutory and case law.

Mrs. Rounds’ work on behalf of the oil and gas community is primarily focused in Morgantown, West Virginia. Her representation in the Morgantown area includes working with operators to reach drilling commitments, and interactions with county officials in major producing counties in northcentral West Virginia.

Prior to joining Babst Calland, Mrs. Rounds was the owner and attorney for Melissa Rounds Law. She is a 2006 graduate of West Virginia University College of Law.

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)

On March 4, 2022, Pennsylvania Governor Tom Wolf announced that the commonwealth is eligible for almost $26.5 million in Abandoned Mine Reclamation Fund program annual grants. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $26.5 Million Federal Funding to Help Reclaim Abandoned Mine Lands” (Mar. 4, 2022). This is in addition to the almost $250 million authorized for annual distribution to Pennsylvania over 15 years from the federal Abandoned Mine Land (AML) Trust Fund. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $244.9 Million Bipartisan Infrastructure Law Investment to Cleanup Pennsylvania’s Abandoned Mine Lands” (Feb. 7, 2022). The AML program was established pursuant to title IV of the Surface Mining Control and Reclamation Act of 1977, Pub. L. No. 95-87, 91 Stat. 445, and the $250 million annual distribution for Pennsylvania stems from President Joe Biden’s November 2021 bipartisan Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021).

In Governor Wolf’s March 4 announcement, he noted that AML funding supports jobs in coal communities and could lead to the reduction of methane emissions throughout the commonwealth. Pennsylvania expects to receive almost $4 billion over the next 15 years to address contamination and pollution caused by coal mining and the estimated 5,000 abandoned mines throughout the commonwealth. In 2019, the Pennsylvania Department of Environmental Protection (PADEP) reported that the commonwealth had over 287,000 acres of land in need of reclamation, with the estimated cost of reclamation expected to exceed $5 billion.  …

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)

On March 12, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a revised draft of its Environmental Justice Policy (Draft EJ Policy) for public comment. See 52 Pa. Bull. 1537 (Mar. 12, 2022); PADEP, Draft EJ Policy (Mar. 12, 2022). Publication of the Draft EJ Policy comes approximately four years after PADEP published a revised version of its then-current EJ Policy focused on enhancing public participation during permit reviews in identified environmental justice (EJ) areas. PADEP withdrew that revision after public comments indicated that the proposed revisions were beyond the scope of PADEP’s stated focus. See 50 Pa. Bull. 5920 (Oct. 24, 2020). With the withdrawal, PADEP indicated that it intended to develop and integrate a broader EJ policy into its policies and practices. Id. The Draft EJ Policy incorporates, refines, and expands on the withdrawn 2018 revisions, relying on many of the developments that have occurred in the intervening years, and proposes to make significant changes to the current EJ Policy. See PADEP, Environmental Justice Public Participation Policy (Apr. 24, 2004). Below are some of the most significant changes.

Incorporation of Executive Order and Expansion of OEJ’s Role

The Draft EJ Policy incorporates Governor Tom Wolf’s October 28, 2021, executive order on EJ by citing it as an authority and addressing the requirements of the order. See Executive Order 2021-07, “Environmental Justice” (Oct. 28, 2021); Draft EJ Policy at i; see also Vol. …

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)

On February 19, 2022, the Pennsylvania Department of Environmental Protection (PADEP) announced the bond rate guidelines for the calculation of land reclamation bonds for coal and noncoal mining operations in Pennsylvania. The coal bond rates were effective April 1, 2022, and the noncoal bond rates were effective February 19, 2022.

PADEP will use the coal bond rate guidelines to calculate land reclamation bonds for coal mining operations including surface mines, coal refuse disposal sites, coal refuse reprocessing sites, coal processing facilities, and the surface facilities of underground mining operations. These guidelines do not apply to bonds ensuring replacement of water supplies under section 3.1(c) of the Surface Mining Conservation and Reclamation Act, 52 Pa. Stat. § 1396.3a(c), or to bonds ensuring compliance with the requirements of the Bituminous Mine Subsidence and Land Conservation Act, id. §§ 1406.1—.21.

PADEP will use the noncoal bond rate guidelines to calculate land reclamation bonds for noncoal mining operations including surface mines and facilities and the surface facilities of underground mining operations. Activities including special revegetation plans, wetland mitigation, and stream channel restoration will be estimated on a case-by-case basis. Pursuant to 25 Pa. Code § 86.149 (coal) and 25 Pa. Code § 77.202 (non-coal), the bond schedule must reflect the requirement that the bond equal the estimated cost to PADEP “if it had to complete the reclamation, restoration and abatement work” required under the applicable acts, regulations, and permits. Both the coal and noncoal bond rate schedules and announcements are available on PADEP’s website at https://www.dep.pa.gov/Business/Land/Mining/BureauofMiningPrograms/Bonding/Pages/BondRates.aspx. …

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Mining

(By Joseph K. Reinhart, Sean M. McGovern, Gina N. Falaschi and Christina Puhnaty)

After a lengthy rulemaking process, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule was published in the Pennsylvania Bulletin. See 52 Pa. Bull. 2471 (Apr. 23, 2022). As previously reported in Vol. XXXVI, No. 4 (2019) of this Newsletter, on October 3, 2019, Governor Tom Wolf signed Executive Order No. 2019-07, “Commonwealth Leadership in Addressing Climate Change Through Electric Sector Emissions Reductions,” directing PADEP to initiate a rulemaking to join the Regional Greenhouse Gas Initiative (RGGI). 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. The CO2 Budget Trading Program links Pennsylvania’s program to RGGI.

Following approval of the rule by the Environmental Quality Board (EQB) in July 2021 and approval by the Pennsylvania Independent Regulatory Review Commission in September 2021, the final form rulemaking was submitted to the Pennsylvania House and Senate Environmental Resources and Energy standing committees. Both houses of the legislature passed Senate Concurrent Regulatory Review Resolution 1 (S.C.R.R.R.1), which disapproved of the rulemaking, and Governor Wolf vetoed the resolution on January 10, 2022. See Vol. 39, No. 1 (2022) of this Newsletter. The Governor’s veto sent the resolution back to the legislature, where each chamber had 30 calendar days or 10 legislative days, whichever was longer, to attempt a veto override. …

FNREL Water Law Newsletter

(By Lisa M. Bruderly & Mackenzie Moyer)

On March 19, 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a draft technical guidance document entitled “Trenchless Technology Guidance,” PADEP Doc. No. 310-2100-003 (Mar. 19, 2022). See 52 Pa. Bull. 1693 (Mar. 19, 2022). The purpose of this draft guidance document is to outline the steps and options to consider, and implement as appropriate, when proposing to use a trenchless technology installation method on any portion of a project. PADEP intends for this draft guidance to help “avoid, minimize, or eliminate environmental impacts” associated with trenchless technology installation. Trenchless Technology Guidance at 2. The public comment period on the draft guidance closed on May 18, 2022.

The draft guidance developed out of a stakeholder workgroup required as part of a settlement with the Clean Air Council, the Delaware Riverkeeper Network, and the Mountain Watershed Association regarding the PADEP-issued permits for the Mariner East II pipeline project. Two workgroups were formed out of that settlement to create guidance related to two topics: (1) alternatives analysis and (2) trenchless technology. The draft “Alternatives Analysis Technical Guidance Document” was published for public comment in October 2021. PADEP is currently working to revise the guidance in response to comments. The draft Trenchless Technology Guidance is the second draft guidance to come from these workgroups.

Trenchless technology is defined in the draft guidance as “[a] type of subsurface construction work that requires few trenches or no trenches which includes any trenchless construction methodology, including, without limitation: horizontal directional drilling, guided auger bore, cradle bore, conventional auger bore, jack bore, hammer bore, guided bores, and proprietary trenchless technology . . …

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)

On March 15, 2022, the Environmental Quality Board approved final regulations establishing reasonably available control technology (RACT) requirements for volatile organic compounds (VOCs) and other pollutants from existing oil and natural gas production facilities, compressor stations, processing plants, and transmission stations. The regulation will be submitted to the U.S. Environmental Protection Agency (EPA) for approval as part of the commonwealth’s state implementation plan under the Clean Air Act. As reported in more detail in Vol. 39, No. 1 (2022) and Vol. XXXVII, No. 3 (2020) of this Newsletter, under the new regulation, oil and natural gas operators with facilities that exceed VOC emission thresholds would be required to do more frequent leak detection and repair monitoring on certain equipment at their facilities.

The rulemaking had advanced to the Pennsylvania House and Senate Environmental Resources and Energy Committees and the Independent Regulatory Review Commission (IRRC) for consideration. After the House Environmental Resources and Energy Committee issued a disapproval letter for the rulemaking on April 26, 2022, however, the Pennsylvania Department of Environmental Protection (PADEP) withdrew the rule from consideration by the IRRC to reevaluate the rulemaking. The Committee’s disapproval letter alleges that PADEP failed to comply with Act 52 of 2016, which requires that any rulemaking concerning conventional oil and gas wells be undertaken separately and independently from those concerning unconventional oil and gas wells or other subjects. PADEP has stated that it needs to finalize the rule by June 16, 2022, to avoid sanctions by the EPA under the Clean Air Act. …

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)

On February 23, 2022, the Murrysville Watch Committee (MWC) petitioned the Supreme Court of Pennsylvania to allow an appeal of its unsuccessful challenge of the Municipality of Murrysville’s Oil and Gas Ordinance (Ordinance), which authorized oil and gas wells as a conditional use in Murrysville’s Oil and Gas Recovery Overlay District (Overlay District), including parts of the rural residential zoning district. As adopted, the Ordinance’s geographic and other limitations (e.g., required setbacks from well pads) restricted unconventional oil and gas development to only 5% of Murrysville’s land mass. MWC originally filed a validity challenge to the Ordinance in October 2018 before the Murrysville Zoning Hearing Board (Board), claiming, among other things, violations of due process, equal protection, and the Environmental Rights Amendment (ERA) to the Pennsylvania Constitution, Pa. Const. art. I, § 27. Broadly, MWC contended that unconventional oil and gas drilling is an industrial activity incompatible with residential zoning districts. The Board held multiple hearings, denied MWC’s challenge, and issued 167 findings of fact related to its decision. Without presenting any additional evidence, MWC appealed the Board’s decision to the Westmoreland County Court of Common Pleas, which affirmed the Board’s decision, noting that the record showed that MWC provided no evidence to differentiate the Ordinance from other, similar ordinances upheld on appeal, the precedential application of which foreclosed MWC’s challenges. MWC subsequently appealed that decision to the Commonwealth Court of Pennsylvania.

On January 24, 2022, the commonwealth court affirmed the trial court’s and Board’s decisions. …

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)

The Pennsylvania Department of Environmental Protection (PADEP) is proceeding with two updates amending 25 Pa. Code ch. 78 (conventional oil and gas well regulations). See DEP Regulatory Update (Apr. 23, 2022). The final chapter 78 rulemaking approved by the Environmental Quality Board (EQB) and Independent Regulatory Review Commission (IRRC) in 2016 was used as the basis for the proposed updates. See Meeting Minutes, Oil & Gas Technical Advisory Board (TAB) (Sept. 17, 2020).

The first draft update, “Environmental Protection Performance Standards for Conventional Oil and Gas Operators” (#7-539), proposes updates to well reporting requirements and protection and replacement of public or private water supply regulations to reflect Act 13 of 2012, bonding requirements to reflect Act 57 of 1997, and updates to assessment and inactive status designation regulations to reflect current PADEP practice. Other surface and non-surface activity updates address permit issuance, underground injection well permitting, impoundments and borrow pits, erosion and sedimentation and site restoration requirements, and mechanical integrity testing and reporting. See TAB Meeting (Jan. 14, 2022); Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021). This update was most recently presented to the Pennsylvania Grade Crude Development Advisory Council (CDAC) on December 16, 2021, and TAB on May 5, 2021.

The second update, “Waste Management and Related Issues at Conventional Oil and Gas Well Sites” (#7-540), addresses proper handling, storage, processing, and disposal of drill cuttings and waste water generated by conventional oil and gas operations. …