July 8, 2020

Energy Bar Association Welcomes Babst Calland Professional Members

Babst Calland is a member of the Energy Bar Association (EBA), an international, non-profit association established in 1946 to advance the professional excellence of those engaged in energy law, regulation and policy through professional education, exploring diverse viewpoints and building connections.

The EBA is a dynamic organization of attorney, energy professionals, students and academia interested in all facets of the practice of energy law. EBA’s mission to promote professional excellence and ethical integrity of its member in the practice, administration, and development of energy laws, regulations, and policies.

July 2, 2020

Enforceability of Oral Change Orders Despite ‘No Oral Modification’ Clauses

The Legal Intelligencer

(by James Miller and Benjamin Wright)

The recent decision in STI Oilfield Services v. The Williams Companies, Inc. f/k/a Access Midstream Partners, No. 2018-1003 C.P. (Pa. Com. Pl., Susquehanna County, March 16, 2020 Opinion), highlights the challenges those in the construction industry face when contractors or subcontractors seek additional compensation based upon an alleged oral change order or modification, even when the underlying contract contains a clear “no oral modification” (NOM) clause.

Most construction contracts contain one or more NOM clauses, including a requirement that valid change orders be in writing. Generally, these clauses provide that a contract cannot be modified absent a writing executed by the parties. This is intended to avoid having the carefully drafted written agreement of the parties set aside based on alleged oral conversations that are often supported only by memory or by piecing together evidence of conduct of the parties. Oral modifications naturally breed disagreements, misunderstandings and protracted litigation—everything a well-written contract seeks to avoid. However, Pennsylvania courts have not strictly enforced NOM clauses, especially with respect to construction contracts and alleged oral change orders for extra work.

In Universal Builders v. Moon Motor Lodge, 244 A.2d 10, 15 (Pa. 1968) the Pennsylvania Supreme Court held that, outside of a contract subject to the statute of frauds, a written “contract can be modified orally although it provides that it can be modified only in writing.” “Construction contracts typically provide that the builder will not be paid for extra work unless it is done pursuant to a written change order, yet courts frequently hold that owners must pay for extra work done at their oral direction.” “The effectiveness of a nonwritten modification in spite of a contract condition that the modifications must be written depends upon whether enforcement of the condition is or is not barred by equitable considerations, not upon the technicality of whether the condition was or was not expressly and separately waived before the non-written modification.”

Courts have significant discretion in determining whether to allow oral modification claims to survive dispositive motions and move to trial. …

June 23, 2020

The 2020 Babst Calland Report Highlights Legal and Regulatory Challenges for the U.S. Oil and Gas Industry

Oversupply and pandemic bring on need to adapt to a changing market

Babst Calland today published its 10th annual energy industry report: The 2020 Babst Calland Report – The U.S. Oil & Gas Industry: Federal, State, Local Challenges & Opportunities; Legal and Regulatory Perspective for Producers and Midstream Operators. 

In this Report more than 50 energy attorneys provide perspective on the current state of the U.S. natural gas and oil production industry and its growth to historic highs due to more than a decade of advances in on-shore horizontal drilling and high-volume hydraulic fracturing. It asserts that despite current challenges, a maturing shale industry is poised for future growth as natural gas and oil producers have driven down the costs of production. Transportation options for moving these natural resources from growing areas of production to customers continue to be built, even with new hurdles from regulators and other stakeholders.

Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. natural gas and oil industry has experienced tremendous growth and change since we first published this Report in 2011. Fast forward to an unprecedented 2020 with a pandemic, a corresponding economic slow-down and oversupply of natural gas and crude oil. With increased public and government pressure, sustained low prices, and less-reliable financing options, resiliency will continue to be the driving force of a dynamic energy market that continues to evolve.”

Report highlights

The Babst Calland Report is an annual review of the issues and trends at the federal, state and local level in the oil and gas industry over the past year. The 102-page Report covers a range of topics from the industry’s business outlook, regulatory enforcement and rulemaking to developments in pipeline safety and litigation trends. …

June 22, 2020

How to mitigate legal liability while reopening your business

Smart Business

(by Adam Burroughs with Molly Meacham)

As states begin to relax restrictions on social gatherings, businesses are trying to reopen in a manner that is safe for their employees, vendors, customers and clients. They’re also trying insulate themselves from the legal exposures they face as they work out a plan to get their business up and running.

“I’m getting a lot of questions from employers who want to do right on all of those fronts,” says Molly Meacham, a shareholder at Babst Calland. “They are really working hard, thinking through the issues, listening to state, local and federal government advice, all while trying to keep their businesses running.”

Smart Business spoke with Meacham about addressing the legal risks that come with operating during the pandemic.

What legal concerns do companies have as they reopen?

The most significant concern is that a company will have an outbreak at their workplace. If that happens, it means considering the company benefits employees should be entitled to, such as sick leave or short-term disability, if they are eligible for leave under the Family and Medical Leave Act (FMLA), if they are covered by Families First Coronavirus Response Act (FFCRA) and eligible for those leaves, or if they’re entitled to any accommodation under the Americans with Disabilities Act.

Another risk is that contracting the illness could lead to a lawsuit or workers’ compensation claim. In a classic workers’ compensation scenario, the employee would need to prove they contracted the virus at the workplace. Some states are reducing employees’ burden of proof, or covering COVID-19 illness for certain groups of employees. For those states that are not making changes, whether or not COVID-19 is covered by workers’ compensation is likely to be a hotly litigated issue. …

June 17, 2020

Ninth Circuit denies emergency motion for partial stay of Montana district court’s NWP 12 vacatur

The PIOGA Press

(by Lisa Bruderly and Ben Clapp)

On May 28, the Ninth Circuit denied the U.S. Army Corps of Engineers’ request for an emergency stay pending appeal of a Montana district court’s vacatur of Nationwide Permit (NWP) 12 in Northern Plains Resource Council, et al. v. Army Corps of Engineers, a challenge to the Keystone XL Pipeline. As a result of the denial, NWP 12 remains unavailable for the construction of new oil and gas pipelines. The ruling means continued permitting delays are likely for pipeline developers seeking federal authorization for stream and wetland crossings and any resulting discharge of dredged or fill material into waters of the United States under Section 404 of the Clean Water Act (CWA).

A Montana district court’s April vacatur of NWP 12 was based on the judge’s determination that the Corps failed to comply with the Endangered Species Act (ESA) when NWP 12 was last issued in 2017. The decision was interpreted as a broad vacatur of NWP 12, extending beyond permitting of the Keystone XL Pipeline. In a significant positive development for permittees proposing work on existing pipelines, on May 11 the district court narrowed the scope of its original vacatur “to the construction of new oil and gas pipelines” with NWP 12 remaining “in place during remand insofar as it authorizes non-pipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects.”

For pipeline developers, however, the stay sought by the Corps represented the final possibility of continuing to conduct work under NWP 12 during the long appellate process. The Ninth Circuit denied the Corps’ request on grounds that the Corps had not demonstrated a likelihood of success on the merits or probability of irreparable harm if the stay was not granted. …

June 17, 2020

EQB publishes proposed rulemaking for control of VOC emissions from existing oil and natural gas sources

The PIOGA Press

(by Mike Winek, Gary Steinbauer and Gina Falaschi)

Pennsylvania’s Environmental Quality Board (EQB) published a proposed rulemaking in the May 23 Pennsylvania Bulletin entitled “Control of VOC Emissions from Oil and Natural Gas Sources.” 50 Pa.B. 2633 (www.pacodeandbulletin.gov/ Display/pabull?file=/ secure/pabulletin/data/ vol50/50- 21/684.html). This proposed rulemaking would have Pennsylvania adopt reasonably available control technology (RACT) requirements and RACT emission limitations for existing oil and natural gas sources of volatile organic compound (VOC) emissions.

As proposed, the rule would apply to owners and operators of any of the following oil and natural gas sources of VOC emissions that were in existence on or before the effective date of this rulemaking: storage vessels (in all segments except natural gas distribution), natural gas-driven pneumatic controllers, natural gas-driven diaphragm pumps, centrifugal compressors and reciprocating compressors, and fugitive emission components.

This proposal is based on EPA’s October 2016 Control Techniques Guidelines (CTG) for the Oil and Gas Industry, which provide RACT requirements for VOC emissions from existing oil and gas sources. Pursuant to the federal Clean Air Act, EPA established National Ambient Air Quality Standards (NAAQS) for six “criteria pollutants,” which includes ground-level ozone. Ground level ozone is created in a photochemical reaction of oxides of nitrogen (another criteria pollutant) and VOCs in the presence of sunlight.

The federal statute requires any (i) existing major source of VOC emissions (generally more than 50 tons per year of VOC depending on location) in an ozone nonattainment area and (ii) any other source (i.e., minor sources) for which EPA has issued a CTG to implement RACT to control emissions, consistent with the issued CTG. Pennsylvania is in the northeast ozone transport region, which makes the Commonwealth nonattainment for ozone, and thus triggers RACT under federal law. …

June 17, 2020

Commonwealth Court Sees Spot Zoning, Overturns Industrial Rezoning

The Legal Intelligencer

(by Anna Skipper and Krista Staley)

For over 100 years, local governments have used zoning regulations, enabled by the police powers delegated from the states, to implement plans for the development of their communities. For just as long, objectors have challenged zoning regulations as exceeding this authority. The Commonwealth Court recently upheld such a challenge in Allen Distribution v. West Pennsboro Township Zoning Hearing Board, No 524 C.D. 2019 (Pa. Commw. Ct. May 11, 2020), finding that West Pennsboro’s decision to change the zoning of two parcels constituted illegal spot zoning.

Zoning ordinances generally enjoy a presumption of constitutional validity. However, an ordinance will be held to be unconstitutional if it is unreasonable, arbitrary or not substantially related to the police power interest it purports to serve. Thus, zoning enabling acts, such as the Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq. (the MPC), require all zoning measures to be substantially related to the protection and preservation of the public health, safety, morality and welfare interests of its community.

Zoning regulations consist of a zoning map and zoning text. Those documents work in tandem; the map divides the municipality, or municipalities in cases of joint zoning, into “districts” while the text provides regulations for each district, imposes requirements for specific uses and outlines various procedures. Under the MPC, either the municipality or a landowner (including a leaseholder or potential buyer) can propose text and map amendments. The amendment process allows municipalities to improve their ordinances by, for example, adapting them to accommodate new and evolving uses. However, when used in a piecemeal fashion to achieve inconsistent goals, amendments may no longer have a reasonable relationship to the police power they must promote. …

June 17, 2020

Appalachian Trail Not a Barrier to Atlantic Coast Pipeline

Energy Alert

(by Robert Stonestreet and Jim Curry)

The United States Forest Service may grant permission for a natural gas pipeline to go underneath the Appalachian Trail, so says the United States Supreme Court in an opinion released on June 15, 2020.  Seven of the nine justices voted to reverse a decision by the Fourth Circuit Court of Appeals that had concluded the Forest Service lacked authority to do so for the Atlantic Coast Pipeline (ACP).  Only Justice Sonia Sotomayor and Justice Elena Kagan dissented from the decision.

The ACP is a proposed 604-mile pipeline stretching from West Virginia to North Carolina.  Approximately 16 miles of the pipeline route goes through the George Washington National Forest, which requires approval from the Forest Service.  The Appalachian Trail, a 2,200-mile federally designated footpath from Mount Katahdin in Maine to Springer Mountain in Georgia, also passes through the George Washington National Forest with permission from the Forest Service.  The National Park Service administers the Appalachian Trail through various arrangements with the Forest Service.  At issue in this case is a 0.1-mile segment of the pipeline that would pass under the Appalachian Trail at a depth of approximately 600 feet.  Both the entry and exit locations for this segment of the pipeline would be on private land, would not be visible from the Appalachian Trail, and would not disturb the surface of the trail.

In 2018, the ACP developers obtained the necessary authorizations from the Forest Service to place the pipeline through the National Forest and under the Appalachian Trail.  Several organizations challenged these authorizations by arguing that the Forest Service lacked authority to authorize a pipeline to cross under the trail.  The Fourth Circuit agreed and vacated the authorizations issued by the Forest Service. …

June 12, 2020

Client Spotlight: Congratulations, Astrobotic!

Pittsburgh, PA

EmTech Law Blog

(by Justine Kasznica)

Today, we are thrilled to celebrate with Astrobotic Technology, Inc., a Pittsburgh-based space robotics and lunar transportation and logistics company, on receiving a $199.5 NASA award to send the NASA Volatiles Investigating Polar Exploration Rover (VIPER) to the lunar surface in 2023 to search for water-ice. Not only is this a historically significant mission, as it is the first “resource-mapping” mission of its kind, this is an amazing achievement for a company that that has worked tirelessly for 13 years to prove a new commercial space market. For more information, click here.

Our Emerging Technologies attorneys are fortunate to work with incredible innovators, entrepreneurs and visionaries pushing the frontiers of technology and industry. We love to showcase our clients, especially when they hit notable milestones that may be of interest to our entire Babst Calland EmTech family.

Our newly launched EmTech Blog will enable us to do more of these Client Spotlights, so stay tuned! If you would like your company to be featured, please send accomplishments or highlights to jkasznica@babstcalland.com.

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June 11, 2020

Pa. Proposes Changes for Permitting Projects With Stream, Wetland Impacts

The Legal Intelligencer

(by Lisa Bruderly and Daniel Hido)

The Pennsylvania Department of Environmental Protection (PADEP) is proposing significant revisions to its regulations and guidance regarding the permitting of obstructions and encroachments of waters of the commonwealth under 25 Pa. Code Chapter 105. The regulatory revisions, if promulgated, are expected to significantly change the Chapter 105 permitting process by increasing the level of required effort to complete an individual (joint) permit application and potentially increasing the time for the PADEP to review such applications.

The PADEP has presented the regulations and guidance to several of its advisory committees, including, most recently, the Water Resources Advisory Committee (WRAC) on May 28. Later this year, the proposed revisions are expected to be presented to the Environmental Quality Board, with a public comment period to follow. The PADEP’s “draft final” technical guidance document (TGD) on alternatives analysis requirements is expected to be finalized and published in coordination with the proposed regulatory revisions.

Proposed Regulatory Changes to Chapter 105

Proposed revisions to Chapter 105 include the following:

Permit Waivers—Addition of six new permit waivers to 25 Pa. Code Section 105.12, including new waivers for temporary environmental investigation activities and for temporary mats and pads used to minimize erosion and sedimentation at wetland crossings.

Alternatives Analysis—Addition of criteria to the alternatives analysis requirements at 25 Pa. Code Section 105.13(e)(viii), including identification of the effects of “reasonably foreseeable future development” within the wetland or watercourse upstream and immediately downstream of the proposed project and demonstration that project alternatives impacting other regulated waters would meet the requirements of 25 Pa. Code Section 105.16, regarding environmental, social and economic balancing. …

June 10, 2020

Regulatory Challenges to Fully Utilizing Existing Technology

Emerging Technologies in a Time of Pandemic

(by Ben Clapp, Julie Domike, Gina Falaschi, Justine Kasznica and Boyd Stephenson)

On May 1st, Amazon Prime premiered Upload, the story of a software engineer whose consciousness is transferred to the cloud after his fully autonomous vehicle (AV) rear-ends another car. The accident takes place in 2033. By then, the show imagines, vehicles that drive themselves will be the default. We won’t spoil the ending. But, in the fictional 2033—only 13 years from now—the public is astounded when the vehicle is involved in a wreck. It is an entertaining take on the future. In reality, however, we’ve got a lot of regulations to update if autonomous vehicles (AVs) are going to play the role imagined in Upload.

That’s too bad, given the current state of affairs. As industry commentators have noted, in this time of pandemic AVs could have provided much needed assistance with long-haul shipments, non-contact deliveries of food and other goods, and contact-free transportation of the sick or elderly to and from medical appointments. Some have predicted that the benefits AVs provide during public health crises will help propel them to wider acceptance and regulatory approval. And while there is still much work to be done on that front, there is a solid foundation to build on.

Click here for the PDF. 

June 10, 2020

PHMSA Proposes Regulatory Reforms for Natural Gas Pipelines

Pipeline Safety Alert

(by Keith Coyle and Ashleigh Krick)

On June 9, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Notice of Proposed Rulemaking (NPRM) proposing amendments to the gas pipeline safety regulations at 49 C.F.R. Parts 191 and 192.  PHMSA explained that the purpose of the NPRM is to ease regulatory burdens identified through internal agency review, petitions for rulemaking, and public comments.  The Agency estimates that the proposed amendments will result in approximately $129 to $132 million in annualized cost savings, with the largest cost savings due to amendments related to farm taps and atmospheric corrosion inspections.  Comments are due August 10, 2020.

The NPRM covers the following topics:

Proposed Exemptions from the Distribution Integrity Management Program Requirements

  • PHMSA is proposing to codify the policy announced in its March 2019 Exercise of Enforcement Discretion by allowing operators of farm taps to maintain pressure regulating devices on farm taps under either the distribution integrity management program (DIMP) requirements or 49 C.F.R. § 192.740.  While not defined in the proposed Part 192 amendments in the NPRM, the preamble describes a farm tap as “individual gas service line directly connected to a gas transmission, production, or gathering pipeline.”  PHMSA estimates that, based on information submitted by distribution operators, the proposal to allow operators to manage farm taps under DIMP or § 192.740 will result in nearly $42 million in annualized cost savings.
  • PHMSA is also proposing to exempt farm taps originating from unregulated production and gathering pipelines from the DIMP requirements, the overpressure protection inspection requirements in § 192.740, and the annual reporting requirements in Part 191. 

    • …

June 5, 2020

USEPA Significantly Revises Section 401 Water Quality Certification Process

Environmental Alert

(by Lisa Bruderly and Daniel Hido)

The United States Environmental Protection Agency (USEPA) has pre-published a final rule that streamlines the water quality certification requirements under Section 401 of the Clean Water Act (CWA), 33 U.S.C. § 1341 (the 401 Rule).  Section 401 requires any applicant for a federal license or permit which will, or may, result in a discharge to waters of the United States (WOTUS) to obtain a certification that the discharge will comply with applicable water quality requirements from the applicable state, authorized tribe or interstate agency (Certifying Authority).

The rulemaking, found at 40 CFR Part 121, is in response to President Donald Trump’s April 10, 2019 Executive Order 13868, which identified Section 401 as “one source of confusion and uncertainty hindering the development of energy infrastructure” and directed USEPA to update its regulations and guidance.  USEPA characterizes the 401 Rule as the agency’s first “holistic” analysis of Section 401 since the 1972 Federal Water Pollution Control Act amendments (i.e., the CWA).

The 401 Rule is expected to benefit applicants for federal permits or licenses which will, or may, result in a discharge from a point source to WOTUS, including applicants seeking National Pollutant Discharge Elimination System (NPDES) and Section 404 permits, as well as hydropower and pipeline licenses issued by the Federal Energy Regulatory Commission (FERC) by (1) narrowing and streamlining the certification process, (2) limiting the scope of Certifying Authority review/response, and (3) capping the amount of time that Certifying Authorities can review a certification.  The Rule comes in response to state attempts to delay natural gas pipelines and other energy-related facilities through extended Section 401 certification processes, requiring applicants to address a number of considerations unrelated to water quality, including climate change. …

June 4, 2020

What to Expect When You’re Expecting OSHA to Visit Your Reopened Workplace

The Legal Intelligencer

(by Brian Lipkin)

The Occupational Safety and Health Administration (OSHA) is the federal agency that enforces workplace safety and health rules. On May 19, OSHA issued two enforcement memos outlining its plans to inspect workplaces during the COVID-19 pandemic. These memos took effect on May 26.

As workplaces reopen, here is what employers can expect:

  • High Exposure Workplace Inspections

When employees go back to work, OSHA anticipates an influx of COVID-19-related complaints. As a result, OSHA will prioritize inspections of workplaces with “high” and “very high” risks of COVID-19 exposure, including medical facilities, nursing homes and clinical laboratories.

OSHA is less likely to visit workplaces with medium- and low-risk levels, meaning that employees have less frequent and less close contact with the public. So, retail stores and offices are unlikely to have an OSHA compliance officer pay a visit. If OSHA receives a complaint about a medium- or low-risk workplace, it will typically send a letter, ask the employer to respond in writing and close the inspection without any in-person contact.

  • Allowances for Unavailable Equipment

OSHA requires all businesses to provide workers with personal protective equipment. Depending on the type of workplace, equipment to protect against COVID-19 can include masks, gloves and hand sanitizer.

Having shopped at Target recently, OSHA compliance officers understand many businesses can’t purchase these items because they are in limited supply. OSHA will use its discretion in citing employers that have acted in good faith, so employers should document their attempts to purchase any equipment that is unavailable.

If a business can’t purchase the right protective equipment, it should consider changing workplace rules to limit exposure risks. …

June 2, 2020

Pennsylvania Supreme Court Preserves Rule of Capture

RMMLF Mineral Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern and Casey Snyder)

On January 22, 2020, the Pennsylvania Supreme Court affirmed that the rule of capture, a 150-year-old legal doctrine that applies when a well drains oil and gas from a reservoir that crosses multiple properties, can be applied to hydraulic fracturing of unconventional wells. See Briggs v. Sw. Energy Prod. Co., 224 A.3d 334 (Pa. 2020). The decision reverses the April 2, 2018, ruling by the Pennsylvania Superior Court that the rule of capture did not apply to hydraulic fracturing. Briggs v. Sw. Energy Prod. Co., 184 A.3d 153 (Pa. Super. 2018); see Vol. XXXV, No. 2 (2018) of this Newsletter.

In Briggs, the plaintiffs owned property adjacent to land owned by Southwestern Energy Production Co. (Southwestern). Southwestern used hydraulic fracturing for natural gas extraction from the Marcellus Shale formation, and wells were drilled on and fluids injected only beneath its land. Briggs, 224 A.3d at 339, 343.

The court ruled that the rule of capture was applicable to hydraulic fracturing as it is to any other means of artificially stimulating the flow of oil and gas. Id. at 352. It emphasized that the application of the rule of capture did not rest on the distinction between using natural flow and hydraulic fracturing. However, the court did not answer the question of whether horizontal hydraulic fracturing could constitute a trespass by physical intrusion of properties adjacent to a well site. Id. at 350–51. The court remanded the case to the superior court to determine whether or not the plaintiffs’ claims could move forward in light of what it said were pleading deficiencies in the complaint for failing to allege a physical intrusion. …

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