Articles, Alerts & Perspectives

FNREL Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

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

On January 31, 2022, Pennsylvania Governor Tom Wolf announced Pennsylvania was allocated a total of $104 million in Phase I funding to support the cleanup of orphaned and abandoned oil and natural gas wells throughout the state. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $104 Million from President Biden’s Bipartisan Infrastructure Law to Support Orphaned, Abandoned Well Cleanup in PA” (Jan. 31, 2022). The $104 million allocation is based on Pennsylvania’s notice of intent (NOI) to the U.S. Department of the Interior (DOI) indicating the commonwealth’s interest in applying for federal grant money for plugging orphaned wells and remediating orphaned well sites. See Press Release, DOI, “Biden Administration Announces $1.15 Billion for States to Create Jobs Cleaning Up Orphaned Oil and Gas Wells” (Jan. 31, 2022). The grants are part of $1.15 billion the federal government has allocated to states under the DOI with specific goals of reducing methane emissions and other pollution, and creating jobs. See Fact Sheet, White House, “Biden Administration Tackles Super-Polluting Methane Emissions” (Jan. 31, 2022); Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021). In the future, formula grants will allow the commonwealth to access more than $330 million in additional funding for the same purposes. See News Release, Senator Bob Casey, “Pennsylvania to Receive $104 Million to Clean Up Orphaned Oil and Gas Wells” (Jan. 31, 2022).

The Pennsylvania Oil and Gas Act defines an “abandoned well” as a well that (1) has not been used to produce, extract, or inject any gas, petroleum, or other liquid within the preceding 12 months; …

Pittsburgh Business Times

(Featured Babst Calland panelists Kevin Garber and Jim Curry)

Sparked by the newly released Allegheny Conference for Community Development’s long-term vision for achieving 70% reduction in carbon dioxide emission by 2050 and anticipating an upcoming Department of Energy funding opportunity announcement (FOA), local industry leaders gathered recently to discuss the benefits of a hydrogen economy.

The panelists included University of Pittsburgh Swanson School of Engineering Professor and Researcher, Gotz Veser; Babst Calland Shareholder and Environmental Attorney, Kevin Garber; Babst Calland Shareholder and Energy Attorney, Jim Curry; and Vice President, Corporate Strategy for Duquesne Light Company, Brian Guzek. The conversation was moderated by Chief Strategy and Research Officer for the Allegheny Conference on Community Development, Vera Krekanova.

Collaboration is key

These leaders all agreed that in order to build momentum toward a hydrogen economy in this region now, a collaboration of community resources, academia, energy and other industries, and public entities is key to producing a successful application proposal. More specifically, according to Krekanova, “if hydrogen and carbon capture utilization and storage (CCUS) could be well understood and thoughtfully negotiated, they can produce positive benefits for the environment, for the economy, and for the people.”

“One of the strengths … in the region here is, we have the industry base, we have the academic base, the research base,” Veser said.

Creating and strengthening opportunities for public and private partnerships and using those pooled resources and expertise will create additional opportunities in this region, he added.

“We can make hydrogen from natural gas, we can do carbon capture, we know how to do this. …

Legal Intelligencer

(By Robert Max Junker)

There is one in every town. The abandoned lot, corner or block. Maybe it once housed a building that was torn down long ago. Perhaps it served as the neighborhood sandlot for pick-up baseball games in the summer before the new all-season turf field was installed in the athletic complex. Might be one owner or several parcels with various owners. Likely it has delinquent taxes piling up. Possibly there was an approval in the past with much fanfare, but then the market collapsed, the groundbreaking was canceled and permits expired. People drive past all the time and wonder, “What are they ever going to build there?”

Although land is valuable because they are not making any more of it, a variety of factors can prevent otherwise viable property from being developed. In situations where there are local government hurdles to development, a would-be developer can have several options. A rezoning to change the zoning map and the type of permitted uses on the property is one option. But rezoning comes with risks both to the developer including a spot zoning challenge by neighbors and to the local government due to the possibility that the developer does a project that is now permitted in the new zoning district even though it was not what was proposed during the legislative rezoning process.

Another option for a more targeted development where the local government will have assurances that it will get what was promised is a use variance. Although not as common as the ubiquitous dimensional variance that seek to alter building setbacks or heights beyond what is allowed in the zoning ordinance, a use variance in the right circumstances can be a viable path for both the local government and the developer. …

Babst Calland today published its 12th annual energy industry report: The 2022 Babst Calland Report – Legal & Regulatory Perspectives for the U.S. Energy Industry. Each of our nation’s energy sectors is impacted by local, state and federal policies, many of which are addressed in this inclusive report on legal and regulatory developments for the energy industry in the United States.

The Babst Calland Report represents the timely and insightful perspectives of the firm’s energy attorneys on some of the most critical issues facing the industry, including climate change, cybersecurity, ESG and environmental justice, hydrogen and carbon capture sequestration, pipelines, and renewables.

Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “The U.S. energy industry, and the U.S. economy as a whole, is reacting to shifting market forces and potential significant new changes in laws and regulations. Importantly, Russia’s invasion of Ukraine earlier this year and the resulting worldwide shortage of oil and gas has spotlighted the world’s continued reliance on fossil fuels and reinforced the value of America’s relative energy independence even as the nation and the world continue to seek alternative energy sources.”

Report Features Video Commentary from U.S. Senator Joe Manchin

This edition of The Babst Calland Report also features commentary from Senator Joe Manchin (D-WV), Chairman of the U.S. Senate Energy and Natural Resources Committee, who spoke with Babst Calland energy clients at a special briefing on May 26, 2022 called “A Perspective on U.S. Energy Policy with Senator Joe Manchin.” 

To request a copy of The 2022 Babst Calland Report, click here.

The Babst Calland Report is provided for informational purposes for our clients and friends and is not intended to constitute legal advice. 

The Wildcatter

(By Nikolas Tysiak)

PENNSYLVANIA

Commonwealth v. International Development Corporation, 2022 WL 628284 (Commw. Ct. Pa. 2022). This is a deed interpretation case with some Title Wash sprinkles mixed. In 1894, two individuals (Proctor and Hill) conveyed approximately 2,000 acres in Bradford County to Union Tanning Company, excepting and reserving all the coal, oil and gas. This was unseated lands, and the minerals remained assessed with the surface. After several intervening conveyances, the surface estate became vested in Central Pennsylvania Lumber Company (CPLC). CPLC’s surface assessment went delinquent and was sold to Calvin McCauley in 1908. The deed to McCauley effectively “washed” the title to the reserved minerals, which also effectively became vested in McCauley. McCauley subsequently transferred the newly-reunified estates under the 2000 acres back to CPLC in 1910. In 1920, CPLC conveyed the land to the Commonwealth, utilizing the following language:

[t]his conveyance is made subject to all the minerals, coal, oil, gas or petroleum found now or hereafter on, or under the surface on any or all of the lands described in each of the above mentioned parts or divisions [of the 1920 deed]; together with the right and privilege of ingress, egress and regress upon said lands for the purpose of prospecting for, or developing, working or removing the same, as fully as said minerals and mineral rights were excepted and reserved in deed dated October 27, 1894, from … Proctor [and Hill] to … Union …

International Development Corporation became the current successor to CPLC as to the minerals following the above 1920 deed, and the Commonwealth of Pennsylvania continues to own the surface estate to this deed. …

Legal Intelligencer

Alyssa Golfieri is a shareholder in the firm’s public sector and energy and natural resources groups. Her practice focuses primarily on municipal and land use law, with an emphasis on zoning, subdivision, land development and municipal ordinance enforcement.

Practice Profile:

Golfieri is a shareholder in the firm’s public sector and energy and natural resources groups. Her practice focuses primarily on municipal and land use law, with an emphasis on zoning, subdivision, land development and municipal ordinance enforcement.

She represents the firm’s municipal clients on a wide array of local government issues, including the preparation of zoning and land development ordinances pursuant to the Pennsylvania Municipalities Planning Code, the processing of land development applications, responses to record requests submitted under the Pennsylvania Right-to-Know Law, navigation of public bidding matters, abatement of property maintenance issues, defense of notices of violations before zoning hearing boards and magisterial district judges, and compliance with both the Pennsylvania Sunshine Act and the Pennsylvania Public Official and Employee Ethics Act.

Leadership Activity:

Golfieri is an active leader within the firm, having served on the associates, summer associates, recruiting, technology and carpetmaster’s committees. She also serves as a mentor to future generations of attorneys outside the firm.

Pro Bono and Civic Work:

She frequently volunteers as an alumni judge for Duquesne University School of Law 1L appellate oral arguments, a juror for Allegheny County High School Mock Trial Competition, a panelist for Allegheny County Bar Association’s young lawyer’s division roundtable discussion titled “Preparing for the Bar Examination,” and a coordinator for Allegheny County Bar Association’s young lawyer division holiday toy drive.

Experience:

Current employer, May 2011-present, summer associate, 2011, associate, September 2012-December 2020, shareholder, Jan. …

PIOGA Press

(By Sean McGovern)

The Pennsylvania Department of Environmental Protection on March 12 shared an updated draft of its Environmental Justice (EJ) Policy for public comment. Among the many changes, the draft EJ Policy expands the role of the Office of Environmental Justice (OEJ), creates new requirements for unconventional oil and gas, and creates new enforcement priorities for the department. Comments were accepted through May 11.

Pennsylvania’s Environmental Justice Policy

The OEJ oversees environmental justice initiatives and policies in the state. The primary goal of the OEJ is to increase communities’ environmental awareness and involvement in DEP’s permitting process. In 2004, the department created the Environmental Justice Public Participation Policy to provide citizens in environmental justice communities enhanced public participation opportunities during certain permit application processes. The EJ Policy is a critical part of DEP’s environmental justice initiatives, providing guidelines for the agency’s approach to public engagement for permit application reviews in environmental justice areas as defined under the current EJ Policy.

In 2018, DEP circulated a draft revision to the current EJ Policy for public comment. Ultimately, the department withdrew the proposed draft revisions after public comments were received, and the current 2004 version of the EJ Policy remained in effect. DEP continued to evaluate revisions to the EJ Policy and in 2021 proposed to update the policy by incorporating, refining and expanding upon the withdrawn 2018 revisions. On March 12, DEP released the draft EJ Policy for a 60-day public comment period with several public meetings and informational webinars.

Significant revisions and additions to the draft EJ Policy 

The draft EJ Policy proposes to make significant changes to the current policy. …

Legal Intelligencer

(By Varun Shekhar)

On April 6, the U.S. Environmental Protection Agency (EPA) published in the Federal Register a proposed rule that, if finalized, would establish a federal implementation plan (FIP) to address regional ozone transport under the Clean Air Act (CAA). The proposed rule is noteworthy based on the numerous adjustments it makes to existing nitrogen oxides (NOx) emissions budgets for a number of states, including Pennsylvania, as well as marking the first time that the EPA has used the regional ozone transport provision under the CAA to regulate sources other than electricity generating units (EGUs).

Background

Section 109 of the CAA directs the EPA to establish federal National Ambient Air Quality Standards (NAAQS) for certain pollutants deemed appropriate by the EPA. One of these pollutants is ozone, which is formed in part by photochemical reactions involving NOx and volatile organic compounds (VOCs). The most recent NAAQS for ozone was promulgated by the EPA in 2015, which establishes an eight-hour 70 parts per billion ambient standard. Section 110 of the CAA also directs states to submit to the EPA “state implementation plans” (SIPs), to detail how emissions from facilities in each state will attain the NAAQS. SIPs are also required to demonstrate that emissions from facilities in the state will not “contribute significantly” to nonattainment or interfere with continued attainment of the NAAQS by other states (often referred as the CAA’s “Good Neighbor” provision). If a state fails to submit a satisfactory SIP to achieve these requirements, the EPA is required under the CAA to develop and implement a FIP for that state.

The EPA’s approach to implementing the CAA’s Good Neighbor provision began in 2011 with enactment of the Cross-State Air Pollution Rule (CSAPR) (76 Fed. …

Smart Business

(By Sue Ostrowski featuring Ben Clapp)

When conducting corporate or real estate transactions, prospective buyers need to be aware of the environmental risks of the proposed acquisition, or they could find themselves on the hook for millions of dollars in remediation and compliance liabilities.

“Buyers need to work closely with an experienced environmental transactional attorney, sometimes in tandem with an environmental consultant, to ensure they are not acquiring environmental liabilities they didn’t intend to acquire,” says Ben Clapp, shareholder in the Environmental, Corporate and Commercial, and Energy and Natural Resources groups at Babst Calland. “Sellers also need to ensure they do not remain saddled with liabilities they didn’t intend to retain after a sale.”

Smart Business spoke with Clapp about the environmental diligence process in a sale and how to address environmental risks in contractual provisions.

What should potential buyers be aware of regarding environmental risk?

Purchasing a property without proper safeguards could put a buyer at risk of substantial liability should environmental contamination or compliance issues be discovered after purchase. Property owners are generally responsible for contamination, regardless of whether they caused it, including contamination that existed prior to taking ownership. Acquiring a business with undiscovered compliance issues can result in significant capital outlays for corrective actions and raises the possibility of becoming subject to enforcement actions and fines.

Environmental diligence is key to assessing the scope of environmental risk associated with a given transaction. However, the extent of diligence a buyer is permitted to perform can differ based on transaction structure and relative leverage of the parties.

How can buyers identify potential environmental issues? …

Legal Intelligencer

(By Alexandra Farone and Jessica Altobelli)

Regardless of the outcome of the Dobbs case, key employment discrimination standards on the topics of pregnancy and abortion will remain unchanged absent significant legislative amendment to Title VII.

By now, most of us have heard of the infamous U.S. Supreme Court draft opinion leak in the case of Dobbs v. Jackson Women’s Health Organization. The Supreme Court is expected to officially issue its opinion in early July, and if the leaked opinion is an accurate foreshadowing, the court will overturn Roe v. Wade and Planned Parenthood v. Casey to abolish the previously held constitutional right to pre-viability abortions. The leaked opinion, and the larger topic of abortion generally, are often considered third-rail topics in many workplaces, given the strongly held opinions on both sides of the issue. For the same reasons, current U.S. Court of Appeals for the Third Circuit law concerning pregnancy- and abortion-related discrimination, also tends to be an avoided topic. However, attorneys are likely to see a marked uptick in questions from employer-clients concerning their current legal obligations toward pregnant employees or employees who have sought or obtained an abortion. Regardless of the outcome of the Dobbs case, key employment discrimination standards on the topics of pregnancy and abortion will remain unchanged absent significant legislative amendment to Title VII.

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of sex. The Pregnancy Discrimination Act of 1978 (PDA) amended Title VII to prohibit sex discrimination on the basis of pregnancy. Specifically, the PDA extended the definition of “on the basis of sex” to include—but is not limited to—pregnancy, childbirth or related medical conditions. …

PIOGA Press

(By Blaine Lucas and Anna Jewart)

What is a “substantive validity challenge?”

Under Pennsylvania law, the question of where certain uses are permitted to occur is fundamentally a local issue. By delegation of the police power through the Municipalities Planning Code, 53 P.S. §§10101 et seq., local governments are vested with the power to adopt zoning ordinances and zoning maps outlining what uses are allowed in what areas within their boundaries. Zoning ordinances are presumed to be valid, and the decision as to where specific uses are permitted is largely within the discretion of the local governing body.

A party challenging the substance of a zoning ordinance bears a heavy burden of proving the provisions are “arbitrary, and unreasonable, and have no substantial relationship to promoting its public health, safety, and welfare.” When reviewing these types of challenges, courts are required to balance the public interest to be served with the confiscatory or exclusionary impact of the ordinance on individual property rights. Although property owners frequently challenge the substantive validity of ordinances they feel are too confiscatory, objectors have also challenged ordinances for being too permissive of a certain use―alleging that they fail to have the required connection to public health, safety or welfare.

Act 13, Robinson II and challenges under the ERA

In 2012, the Pennsylvania General Assembly enacted Act 13, a comprehensive update to the former Oil and Gas Act. Shortly thereafter, the Pennsylvania Supreme Court was tasked with considering the impact of the Article I, Section 27 of the Pennsylvania Constitution, known as the Environmental Rights Amendment (ERA) on Act 13, in which a plurality of the court ultimately invalidated certain provisions of Act 13 limiting the authority of local governments to regulate oil and gas development. …

Smart Business Dealmakers

(By Adam Burroughs featuring Kevin Wills)

Around 2019, Edward Saxon, CEO of Conco Systems, and his four siblings were running the business as equal partners when they recognized it was nearing time for a change.

“All of a sudden we woke up one day and realized we are all in our 60s and the runway was getting short,” Saxon says. “And first I said, ‘I’ll be happy to go. I’ve been running it. You guys can have a shot.’ They got together and said, ‘We don’t want the shot.’ Two of them wanted to go and do their own thing.’”

Having heard stories of deals run without professional help that fell apart, Saxon decided to enlist the help of an investment banker. That was a big help, he says, because not only do they bring buyers to the table but they do a lot of work getting the business prepared, putting a CIM (confidential information memorandum) together, helping owners understand where the real value is in their business and adding value beyond what the owners recognize.

Kevin Wills, an attorney with Babst, Calland, Clements and Zomnir, says when someone is looking to sell a business, one of the first things they should do is look into the potential impediments to doing a deal. That could include a shaky organizational structure, a complicated cap table, issues with unanimous consent, any convertible notes that need to be dealt with, or any rights of refusal.

“A fundamental transaction, like the sale of the business, usually triggers rights in people that aren’t operating day-to-day, and you don’t always think of those people,” Wills says. “So, if you got a family-run business with three family members mainly running it but the next generation of grandkids have trusts that are already in there and they have to consent to everything, you want to make sure you don’t have rogue holdouts that could hijack your deal or leverage better terms for themselves. …

Smart Business

(By Sue Ostrowski featuring Justine Kasznica and Ember Holmes)

Every business, no matter how big or small, faces the risk of a cyberattack.

“If you are on the internet or have networked assets — and almost every business does — you are at risk,” says Justine Kasznica, a shareholder in Babst Calland’s Emerging Technologies, Corporate and Commercial, Mobility, Transport and Safety, and Energy and Natural Resources groups. “The current geo-political climate and the Russia-Ukraine war underscore the paramount importance of cybersecurity to our national security, as Russia has threatened to counter any action the U.S. may make in support of Ukraine with cyberattacks.”

Adds Ember Holmes, an associate in the Corporate and Commercial and Emerging Technologies groups of Babst Calland, “It is prudent that all business owners assess their current situation regarding cybersecurity threats, address areas that are lacking and shore up policies.”

Smart Business spoke with Kasznica and Holmes about the Biden administration’s response to the threat, and how business owners can minimize risk and stay compliant with regulatory requirements.

Who should be concerned about cyber threats?

Threats to cybersecurity impact every business, and ignoring these is irresponsible and dangerous. Small business owners may not think they are at risk, but they are often perceived as not having the resources larger businesses have, making them targets of malevolent attacks. This is especially true for businesses storing or processing personal or sensitive information.

There are also regulatory issues. Small businesses may be prevented from working in certain industries or with certain customers if their systems don’t meet compliance requirements.

How can a business reduce the risk of cyberattacks? …