Articles, Alerts & Perspectives

Smart Business

(by Sue Ostrowski featuring Mary Binker)

While the COVID-19 pandemic has had a significant negative impact on downtown Pittsburgh’s commercial leasing market, it has also created new opportunities for both tenants and landlords.

“While the pandemic changed a lot in the commercial real estate market in Pittsburgh, increasing vacancy rates and creating other challenges, it has also provided the chance for tenants and landlords to negotiate better terms,” says Mary Binker, a shareholder in the Real Estate, Corporate and Commercial, and Energy and Natural Resources groups of Babst Calland. “It has also allowed new tenants, who previously may not have been able to access the downtown commercial real estate market, to more seriously look into the downtown space.”

Smart Business spoke with Binker about how landlords and tenants can adjust to an evolving commercial real estate market.

How has the pandemic impacted downtown Pittsburgh commercial real estate?

Rates, lease terms and tenants’ concerns have changed, and vacancy rates have increased. Before the pandemic, the commercial real estate vacancy rate downtown was in the mid to low teens, but in January 2022, it was just over 20 percent, which is higher than in recent years. We are also seeing more tenants attempting to sublease all or part of their space.

Employers are grappling with how the pandemic is impacting office space, with many moving to remote work or, more recently, a hybrid model. What does that look like? Will the number of desks be limited? If everyone is in the office on the same days, how will that work? How do you accommodate a cleaning schedule and provide storage if different people use the same workspace on different days? …

The Wildcatter

(By Nikolas Tysiak)

Hello MLBC friends and family! As we survive the freezing cold of winter, there are only a few things to report to you. This time of year, with its proximity to the holidays, tends to be a judicial legislative “slow time.” As always, the Legislative and Regulatory Committee looks forward to hearing from anyone with an idea or suggestion of something to include in our newsletter updates.

OHIO

Hein Bros., LLC v. Reynolds, 2021-Ohio-4633 (7th Dist. Ct. App.). Owners of severed mineral interest brought an action to have a prior judgment divesting them of such severed minerals deemed void for failure of notice. In 2013, the surface owners of this property in Belmont County brought an action to have previously-severed minerals under their lands declared vested with the surface estate. Service of notice of the lawsuit was attempted by certified mail, with the surface owners’ attorney stating that various methods were attempted to locate the severed mineral owners. Certified mail having failed, notice was served by publication in accordance with Ohio law. In 2020, the same severed mineral owners sought the judgment overturned due to failure of notice, claiming that no reasonable person would not have been able to locate their addresses for service by certified mail if applying due diligence in 2013. Under Ohio law, there is a rebuttable presumption that the reasonable diligence exercised in issuing notice by mail has been followed, and to counterbalance the presumption evidence of a substantial nature must be presented. The severed mineral owners presented evidence from an identity investigator, working in 2021, to prove that they were locatable with reasonable diligence in 2013. The trial court was not swayed by this evidence, and the Court of Appeals followed the lead of the trial court and affirmed their judgment, denying the claims by the severed mineral owners in favor of the surface owners. …

GO-WV News

(By Katrina Bowers)

The West Virginia Supreme Court has accepted certified questions from the United States District Court for the Northern District of West Virginia concerning whether the seminal decision in Estate of Tawney v. Columbia Natural Resources, LLC, 219 W.Va. 266, 633 S.E.2d 22 (2006) (“Tawney”) regarding the deductibility of post-production expenses remains the law of West Virginia, and if so, the proper interpretation of Tawney.

In Charles Kellam, et al. v. SWN Production Company, LLC, et al., No. 5:20-CV-85, a case filed as a class action but not yet certified, the United States District Court for the Northern District of West Virginia, Judge John Preston Bailey, certified on his own motion whether Tawney remains the law of West Virginia, whether the lease in question allowed the deductions, and the proper application of Tawney. At the time of the District Court’s certification in Kellam, pending before the District Court was the defendants’ Motion for Judgment on the Pleadings which argued the Kellam’s lease complied with Tawney and the District Court was bound by the decision in Young v. Equinor USA Onshore Properties, Inc., 982 F.3d 201 (4th Cir. 2020). The Kellam’s lease states the lessee agrees to pay the lessor “as royalty for the oil, gas, and/or coalbed methane gas marketed and used off the premises and produced from each well drilled thereon, the sum of one-eighth (1/8) of the price paid to Lessee per thousand cubic feet of such oil, gas, and/or coalbed methane gas so marketed and used . . . less any charges for transportation, dehydration and compression paid by Lessee to deliver the oil, gas, and/or coalbed methane gas for sale.”

The Kellam lease is very similar to the lease considered in Young, where the 4th Circuit Court of Appeals reversed Judge Bailey and held the lease clearly and unambiguously allowed the deduction of post-production expenses. …

Christina Manfredi McKinley recently joined Babst Calland as a shareholder in the Litigation, Energy and Natural Resources, and Environmental groups.

Ms. McKinley provides business-oriented solutions to her clients and routinely serves as a general advisor, counseling clients on day-to-day legal and business matters on any number of issues. Her business-focused, proactive approach to problem-solving allows her to provide solutions to clients in a variety of industries, including manufacturing, retail, energy, chemicals, and environmental.

As a litigator who focuses on complex commercial matters, Ms. McKinley’s trial practice encompasses all phases of litigation, from early alternative dispute resolution through post-trial motions. She has concentrated experience in complex purchase agreement and commercial contracts disputes, protection of competitive interests (e.g., Lanham Act, unfair competition, tortious interference, trade secret protection, restrictive covenants), technology disputes (e.g., software services and license agreements), and director and officer defense.

An experienced appellate litigator, Ms. McKinley has practiced before the United States Supreme Court at every stage of the process, including the briefing and preparation of two merits cases that were argued before the Court. She also has briefed and prepared cases for argument before the United States Courts of Appeals for the Second, Third, Sixth, and D.C. Circuits, and she has argued numerous cases before the Pennsylvania intermediate appellate court.

Prior to joining Babst Calland, Ms. McKinley was a shareholder with Dentons Cohen & Grigsby. She is a graduate of The Catholic University of America, Columbus School of Law.

The Legal Intelligencer

(by John McCreary)

Within days of the publication in the August 16, 2021 Legal Intelligencer of the last installment of this occasional series on Pennsylvania’s Medical Marijuana Act (MMA), the Superior Court affirmed Judge William J. Nealon’s decision – discussed in that article — that the  MMA does provide for a private right of action by medical marijuana patients claiming discrimination in employment. Palmiter v. Commonwealth Health Systems, 260 A.3d 967 (Pa.Super. 2021). Rejecting the contention that exclusive jurisdiction over enforcement of the MMA lies with the Department of Health, the Court stated that “[a]lthough the General Assembly did not expressly create a private right of action on behalf of an employee whose employer discriminates against her for medical marijuana use, it proclaimed a public policy prohibiting such discrimination. See 35 P.S. § 10231.2103.” 260 A.3d at 973. Beyond acknowledging the existence of the claim, however, the Court did not provide any specific guidance to either patients or employers concerning their rights and obligations under the statute. It acknowledged generally that:

[T]he same section of the statute [that creates employment protections for patients] also explicitly sets forth the rights of employers, i.e., that an employer is not required to provide an accommodation for certified users and may discipline employees who are under the influence of medical marijuana in the workplace. See § 2103(b)(2). Thus, in the employment context, § 2103(b) of the MMA not only delineates the rights afforded employees who are certified users, but also sets forth the rights of employers to discipline employees who are in violation of the terms of certified use.

260 A.3d at 975. The Court also noted that the MMA does not provide a specific remedy, id. …

Pittsburgh Business Times

(By Gary Steinbauer)

Babst Calland Shareholder Gary Steinbauer unpacks a series of proposed new EPA regulations that would further restrict methane gas emissions within the region’s oil and gas industry.

The region’s oil and gas industry is about to face yet another round of restrictive new federal and state regulations aimed at reducing the industry’s impact on the world’s climate. This time, the U.S. Environmental Protection Agency (EPA) has proposed a new set of rules under the Clean Air Act that would greatly restrict the emission of methane gas — known more commonly as greenhouse gas — into the air at gas wells, transmission stations and processing plants.

Likewise, the industry will soon have to contend with similar new regulations from the likes of the U.S. Pipeline and Hazardous Materials Safety Administration, the multi-state Regional Greenhouse Gas Initiative (RGGI), and the Pennsylvania Department of Environmental Protection, among others.

So what does this mean for the region’s already-heavily regulated oil and gas industry, which remains a target of the Biden administration and its climate-change initiatives?

“It’s going to be a busy year,” said Gary Steinbauer, a shareholder with Pittsburgh law firm Babst Calland and member of the firm’s environmental practice. “Let’s just say that, in 2022, when it comes to these federal Clean Air Act requirements particularly, we all should just buckle up and be prepared to invest the resources and time to really understand what this is going to mean for the future of air regulations that will impact the industry.”

In other words, the oil and gas industry should take action now about the proposed regulations for consideration.

“Companies,” he added, “should be reviewing, evaluating and considering how the proposal may impact their operations and also strongly consider participating in the rule-making process and submitting comments to the EPA.”

Steinbauer shared this summary of the current regulatory situation with the Pittsburgh Business Times recently as part of the law firm’s ongoing “Business Insights” video series, produced in partnership with the Pittsburgh Business Times. …

The PIOGA Press

(By Jim Curry and Chris Kuhman)

On November 15, 2021, President Biden signed the bipartisan $1.2 trillion Infrastructure Investment and Jobs Act (H.R. 3684). This Alert reviews the key provisions related to hydrogen and carbon capture, utilization, and storage (CCUS).

Hydrogen

Regional Clean Hydrogen Hubs (Sec. 40314): In perhaps the most impactful provision, the Bill authorizes an $8 billion program to support the development of at least four regional clean hydrogen hubs to network hydrogen producers, storage, offtakers and transport infrastructure. DOE must solicit proposals for regional clean hydrogen hubs by May 15, 2022, and select the four hubs by May 15, 2023. DOE will solicit at least one hub proposal for each of the following hydrogen production technologies: fossil fuels, renewables or nuclear. And, DOE will solicit at least one hub to provide hydrogen to each of the following sectors: power generation, industrial, residential and commercial heating, and transportation.

Clean hydrogen definition and production qualifications (Secs. 40312 & 40315): Defines “clean hydrogen” and “hydrogen” in a technology neutral way, and requires DOE and EPA to develop an initial carbon standard for projects to qualify as clean hydrogen production, eligible for the variety of incentives throughout the Bill. Clean hydrogen means “hydrogen produced with a carbon intensity equal to or less than 2 kilograms of carbon dioxide (CO2)-equivalent produced at the site of production per kilogram of hydrogen produced.” The standard must consider technological and economic feasibility and allow production from fossil fuels with CCUS, hydrogen carrier fuels, renewables, nuclear and other methods that DOE determines are appropriate.

Research and development program and national clean hydrogen strategy and roadmap (Secs. …

Babst Calland recently named Katrina N. Bowers a shareholder in the Firm.

Katrina Bowers is a member of the Corporate and Commercial, Litigation, and Energy and Natural Resources groups. Ms. Bowers currently serves as General Counsel to the West Virginia International Yeager Airport, and as general counsel and advisor to airports in West Virginia, on day-to-day legal and business matters, such as compliance with West Virginia and federal law, employment and litigation matters, corporate governance, and contract negotiations.

Ms. Bowers’ practice also includes representing oil and gas companies in litigation concerning a variety of matters including trespass, negligence, property damage, royalty payments, toxic torts, title disputes, breach of contract, preliminary and permanent injunctions, and fraud as well as advising them regarding proposed, pending, and enacted safety, health, and environmental regulations. Ms. Bowers has also represented coal operators in cases alleging adverse treatment, deliberate intent, and wrongful termination. Further, she has represented clients against civil penalties and violations issued by the Mine Safety and Health Administration and the Occupational Safety and Health Administration.

Ms. Bowers is a 2013 graduate of West Virginia University College of Law.

GO-WV News

(Keith Coyle, Ashleigh Krick and Chris Kuhman)

On November 15, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a final rule for onshore gas gathering lines. The final rule, which represents the culmination of a decade-long rulemaking process, amends 49 C.F.R. Parts 191 and 192 by establishing new safety standards and reporting requirements for previously unregulated onshore gas gathering lines. Building on PHMSA’s existing two-tiered, risk-based regime for regulated on-shore gas gathering lines (Type A and Type B), the final rule creates:

• A new category of onshore gas gathering lines that are only subject to incident and annual reporting requirements (Type R); and
• Another new category of regulated onshore gas gathering lines in rural, Class 1 locations that are subject to certain Part 191 reporting and registration requirements and Part 192 safety standards (Type C).

The final rule largely retains PHMSA’s existing definitions for onshore gas gathering lines but imposes a 10-mile limitation on the use of the incidental gathering provision. The final rule also creates a process for authorizing the use of composite materials in Type C lines and prescribes compliance deadlines for Type R and Type C lines. Additional information about these requirements is provided below.

Type R Lines:  The final rule creates a new category of reporting-only regulated gathering lines. These gathering lines, known as Type R lines, include any onshore gas gathering lines in Class 1 or Class 2 locations that do not meet the definition of a Type A, Type B, or Type C line.  Operators of Type R lines must comply with the certain incident and annual reporting requirements in Part 191. …

Babst Calland recently named Mary H. Binker, Michael E. Fink, Jennifer L. Malik and Cary M. Snyder shareholders in the Firm.

Mary Binker is a member of the Corporate and Commercial, Energy and Natural Resources, and Real Estate groups. Her practice focuses primarily on corporate and transactional matters, including negotiation of commercial contracts and real estate transactions. Ms. Binker advises businesses of various sizes and complexity, in a broad range of industries including chemical, energy and real estate development, in their corporate contracting needs. She counsels clients on their day-to-day contracting needs such as procurement and service agreements. Ms. Binker also has experience assisting real estate clients in acquisitions, leasing, and management agreements. She is a 2010 graduate of the University of Pittsburgh School of Law.

Michael Fink is a member of the Corporate and Commercial and Emerging Technologies groups. Mr. Fink focuses his practice on assisting high-tech start-up ventures with both fundraising and general corporate or governance matters. He also counsels clients with technology transactions and licensing, and he works on both the buy-side and the sell-side in mergers and acquisitions in the technology, real estate, energy, and healthcare sectors. Entity selection and formation, preparation and programming of capitalization tables and distribution models, and corporate governance counseling are additional services Mr. Fink routinely provides clients. He is a 2011 graduate of the University of Pittsburgh School of Law.

Jenn Malik is a member of the Public Sector and Energy and Natural Resources groups. Ms. Malik’s practice focuses primarily on municipal and land use law, with an emphasis on zoning, subdivision and land development, and municipal ordinance construction and enforcement. She represents the Firm’s municipal clients on a wide array of local government issues, including developing and implementing zoning and land development ordinances, reviewing and overseeing the processing of Pennsylvania Municipalities Planning Code applications, such as applications for conditional uses and special exceptions, analyzing and responding to Pennsylvania Right-to-Know Law record requests, navigating public bidding procedures, assisting to identify and enforce property maintenance and zoning violations, and counseling clients to ensure compliance with both the Pennsylvania Sunshine Act and the Pennsylvania Public Official and Employee Ethics Act. …

Babst Calland today announced the lateral move of Harley Stone, who recently joined the Firm’s Pittsburgh office.

A shareholder in Babst Calland’s Public Sector and Energy and Natural Resources groups, Attorney Stone provides senior-level counsel in municipal, land use, environmental and energy law. He represents municipal governments, authorities and private developers in municipal permitting, planning, land use, and zoning. A seasoned trial lawyer, he also has many years of experience as a litigator in the areas of municipal law, employment law, and tax assessment appeals.

Commenting about Harlan’s lateral move to the Firm, Babst Calland Managing Shareholder Donald C. Bluedorn II said, “We are very pleased to welcome Harlan to our Firm. He is a natural fit for us as he shares our values, experience and philosophy in serving clients. Harlan is a highly-regarded attorney and supports our strategy to expand Babst Calland’s legal counseling team and capabilities to serve the needs of existing and new clients in the region.”

With significant experience in municipal, land use and zoning law, Mr. Stone will be joining forces with Babst Calland’s well-established and respected Public Sector team.

“Much deliberation went into my decision to join Babst Calland after practicing with various law firms over my 40+ year career,” said Mr. Stone. “Ultimately, I became convinced that Babst Calland represented the perfect fit for me and my practice.”

Mr. Stone is admitted to practice in Pennsylvania and before the Supreme Court of Pennsylvania, Supreme Court of the United States, United States Court of Appeals for the Third Circuit, and United States District Court for the Western District of Pennsylvania. He is a member of the Allegheny County Bar Association, Allegheny County & Western Pennsylvania Association of Township Commissioners (AC&WPTAC), Association of Municipal and School Solicitors, and the Local Government Academy. …

Smart Business

(by Sue Ostrowski featuring Molly Meacham)

Running a business presents a multitude of challenges, but the pandemic has added another layer of complexity as leaders struggle to stay compliant with ever-evolving laws and regulations regarding COVID-19.

“The biggest issues now facing employers are COVID-related — and not just operations and physical safety but complying with a host of local, state and federal laws and regulations,” says Molly Meacham, co-chair, Litigation Group, at Babst Calland. “Strategic planning is more important than ever, and you need to have a good grasp on the issues that may impact your business and be prepared to deal with them.”

Smart Business spoke with Meacham about issues impacting employers and the steps they can take to ensure compliance.

How can employers ensure compliance with local, state and federal regulations?

It can be a significant burden to monitor COVID-related local, state and federal government actions and court decisions. Employers have always had significant regulatory burdens, but they previously had more lead time to plan for compliance and implementation. COVID requires businesses to adapt, act quickly and be flexible. Unfortunately, COVID-related compliance can be expensive, with new laws requiring employers to provide items like additional paid leave, job-protected unpaid leave and regular COVID testing.

Understanding the current legal challenges and evaluating how they impact your business is key. And it’s not just local activity. COVID issues are developing quickly on the national stage. For example, a federal court in Georgia issued a stay effective across the country regarding the executive order requiring federal contractor employees to be vaccinated. Another court stayed the OSHA vaccinate-or-test requirement for companies with more than 100 employees, and yet another stayed the federal requirement for certain health care workers to be vaccinated. …

The Legal Intelligencer

(By Anna Jewart and Blaine Lucas)

Under the U.S. and Pennsylvania Constitutions, private property may not be taken for public use without payment of just compensation to the owners, see U.S. Const. amend. V; Pa. Const., art. I Section 10. This conversion of private property for a public purpose is interchangeably known as a “condemnation” or a “taking.” In Pennsylvania, the Eminent Domain Code, 26 Pa.C.S. Section 101 et seq., provides “a complete and exclusive procedure and law to govern all condemnations.” This includes de jure condemnations initiated by condemning bodies in compliance with statutory requirements, as well as de facto condemnations, initiated by property owners when entities cloaked with eminent domain powers substantially deprive them of the beneficial use and enjoyment of their properties without initiating and following the procedures set forth under the Eminent Domain Code.

Under the Eminent Domain Code, a property owner asserting that a de facto taking of property has occurred is authorized to bring an “inverse condemnation” action against the condemnor in order to receive adequate compensation for the loss. Generally, courts considering an allegation that a de facto taking occurred place a heavy burden on the property owner to show that:

• The condemnor had the power to condemn the land under eminent domain procedures;
• The property owner was substantially deprived of the use and enjoyment of the property through exceptional circumstances; and
• The damages sustained were an immediate, necessary, and unavoidable consequence of the condemnor’s exercise of its eminent domain power.

Therefore, courts have required evidence that the taking resulted from the actions of an entity “clothed with the power of eminent domain.” Both public, and “quasi-public” entities, such as corporations or public utilities to whom special governmental powers have been delegated, may hold such a power. …

The Wildcatter

(By Nikolas Tysiak)

Hello MLBC friends, family and colleagues! This time around, you get a DOUBLE dose of statutes, regulations and cases because your friendly, neighborhood Legislative and Regulatory Committee Chair was too busy to get an article finalized for the last issue of the Wildcatter. Luckily for us, there has not been a lot of activity to report on, so hopefully this article will fill in the gap in your life with fascinating legal and legislative developments.

PENNSYLVANIA
In Pennsylvania Environmental Defense Foundation v. Commonwealth (255 A.3d 289 (Pa. 2021)), the Pennsylvania Supreme Court was asked to determine if allocations of bonuses, yearly rentals and interest penalties for late payments under oil and gas leases on state forest and game lands were improperly allocated to the Commonwealth General Fund under the Environmental Rights Amendment (“ERA”) to the Pennsylvania Constitution (Art. I, Sec. 27). In a prior decision, the Supreme Court had determined that the ERA created a public trust subject to private trust principles, and that royalty revenue streams generated by the sale of gas extracted from Commonwealth lands represented the sale of trust assets that had to be returned to trust fund principal.

In that prior decision, it was determined that not enough information existed in the record to determine whether the bonuses, rentals and interest penalties were also improperly allocated. The issue regarding the non-royalty payments had been remanded to the Commonwealth Court, which decided these non-royalty revenue streams did not constitute the sale of trust assets and were instead “income” and were not required to be returned to the trust fund principal. The Supreme Court relied on contract principles to determine that the non-royalty payments were not compensation for trust assets (oil and gas in the ground), and therefore did not have to be returned to the trust fund principal in kind. …