Articles, Alerts & Perspectives

GOWV News

(by Jennifer Hicks)

The United States District Court for the Northern District of West Virginia recently held that a 2018 amendment to W. Va. Code § 22-6-8 (the “Flat Rate Statute”) “clearly does not apply retroactively.” Although the Supreme Court of Appeals of West Virginia has not yet addressed this issue, this federal court decision is indicative of how the highest court in West Virginia may answer the question raised by plaintiffs in royalty litigation across West Virginia: Does the 2018 amendment apply retroactively to alter the way royalties are paid for wells drilled on a flat rate lease before May 31, 2018?

In Corder v. Antero Resources Corporation, Civil Action No. 1:18-cv-30 (N.D. W.Va. May 12, 2021), the Court analyzed several issues related to the payment of oil and gas royalties pursuant to various royalty provisions. One of the leases at issue was what is commonly referred to as a “flat rate” lease, under which the lessee was required to pay “$100 per year for each and every gas well obtained on the premises[.]”

Flat rate leases are governed in West Virginia by W. Va. Code § 22-6-8, which was originally enacted in 1982 and first amended in 1994, to require that no permit for a flat rate well would be issued unless the lessee swore by affidavit that it would pay the lessor no less than one-eighth of the total amount paid to or received by or allowed to the lessee at the wellhead for the oil and gas so extracted, produced or marketed. In 2017, in Leggett v EQT Prod. Co., 800 S.E.2d 850, 862 (W.Va. 2017), the Supreme Court of Appeals of West Virginia interpreted this language as allowing a pro-rata deduction or allocation of all reasonable post-production expenses actually incurred by the lessee, and held that a lessee may utilize the “net-back” or “work-back” method to calculate royalties owed to a lessor pursuant to a lease governed by W. …

RMMLF Mineral and Energy Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern & Matthew C. Wood)

On September 4, 2021, the Pennsylvania Department of Environmental Protection (PADEP) published notice of its final technical guidance titled “Guidelines for Implementing Area of Review (AOR) Regulatory Requirement for Unconventional Wells,” No. 800-0810-001 (Sept. 4, 2021) (AOR Guidance). See 51 Pa. Bull. 5757 (Sept. 4, 2021). The AOR Guidance clarifies the AOR as “1,000 feet in all directions” from the plan view projections for horizontal and vertical unconventional wells. See 25 Pa. Code § 78a.52a(a). Vertical buffer distance for offset wells located within the AOR is 1,500 feet for all unconventional wells. See 25 Pa. Code § 78a.73(c). The final guidance document was effective upon date of publication, replacing PADEP’s 2016 guidance. Operators should reference the AOR Guidance regarding well placement and offset wells, for evaluating and monitoring nearby wells to prevent communication between wells, and for reporting and resolving incidents. The AOR Guidance also serves as an overview of PADEP’s well adoption permitting process.

Final issuance of the AOR Guidance followed a 60-day public comment period during which PADEP received approximately 55 comments from 10 commenters and made several changes to the draft version. Key changes to the AOR Guidance, as identified in the Pennsylvania Bulletin, include:

• clarifying the ability of operators to survey an area that extends beyond the prescriptive AOR regulatory language;
• removing language assigning responsibility for recently plugged offset wells to the operator who had completed the plugging;
• relocating language pertaining to briefing the hydraulic fracturing operations team about adjacent operator coordination;

…

RMMLF Energy Law Newsletter

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

On August 21, 2021, the Pennsylvania Department of Environmental Protection (PADEP) issued a draft revision of its technical guidance that explains PADEP’s considerations when evaluating liners and cap systems installed at coal refuse disposal areas pursuant to 25 Pa. Code chs. 86, 88, and 90. See PADEP, Draft TGD No. 563-2112-656, “Liners and Caps for Coal Refuse Disposal Areas” (Aug. 21, 2021) (Draft TGD). These systems of liners and protective caps, called “barrier layers,” are intended to prevent adverse impacts to groundwater and surface water and to prevent precipitation from coming into contact with coal refuse by preventing or reducing water migration through the refuse material. See 25 Pa. Code §§ 90.50(a)–(b), .101–.102, .122. As noted in the preamble for the rulemaking that established section 90.50(b), “[t]his statutory requirement was intended to ensure that precipitation contacting the coal refuse is kept to a minimum, thereby reducing the volume of water needing treatment after the site is closed.” 31 Pa. Bull. 3735, 3736 (July 14, 2001). PADEP noted that this draft technical guidance document, when finalized, would not mandate that existing structures be replaced or retrofitted.

PADEP’s current guidance serves as a guide for the use of liners for impoundments, stockpiles, and coal refuse disposal areas. See PADEP, TGD No. 563-2112-656, “Liners and Caps for Coal Refuse Disposal Areas” (July 17, 2021). PADEP’s draft revision of this technical guidance is significantly different from the current guidance in that the revised draft guidance incorporates protective caps and emphasizes PADEP’s preference for barrier layers constructed using synthetic material rather than clay. …

RMMLF Mineral and Energy Law Newsletter

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

On June 22, 2021, a few weeks after hearing oral arguments, the Supreme Court of Pennsylvania dismissed as having been improvidently granted appeals by environmental advocacy group Protect PT to overturn two Penn Township Zoning Hearing Board (Board) decisions to grant special exceptions for gas well development in the township. Protect PT v. Penn Twp. Zoning Hearing Bd., 252 A.3d 600 (Pa. 2021) (mem.).

The companion cases originated from the Board’s 2018 decisions to approve special exception applications by Olympus Energy LLC (Olympus) to develop oil and gas operations at two well pads in Penn Township, Westmoreland County, Pennsylvania. In the hearings, Protect PT asserted that the cumulative impacts of the gas well development near residential neighborhoods could increase the probability of negative environmental, safety, and health impacts in the community. The Board ultimately approved Olympus’s applications, concluding the proposed development satisfied the requirements of the township’s zoning ordinance (subject to certain conditions) and that Protect PT failed to present sufficient, credible evidence to rebut the Board’s conclusion.

Protect PT first appealed the Board’s decisions to the Westmoreland County Court of Common Pleas, which denied the appeals and affirmed the Board’s decisions without taking additional evidence. Protect PT subsequently appealed to the Commonwealth Court of Pennsylvania. Before the commonwealth court, Protect PT argued that the Board capriciously disregarded the evidence presented to it in granting Olympus’s applications. See Protect PT v. Penn Twp. Zoning Hearing Bd., 238 A.3d 530 (Table), 2020 WL 3640001 (Pa. …

RMMLF Mineral and Energy Law Newsletter

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

Continuing from previous issues of this Newsletter, this report provides recent updates on the Pennsylvania Environmental Quality Board’s (EQB) proposed CO2 Budget Trading Program rulemaking, which would link Pennsylvania’s program to and implement the Regional Greenhouse Gas Initiative (RGGI) within the commonwealth beginning in 2022. See Vol. XXXVIII, No. 2 (2021), Vol. XXXVIII, No. 1 (2021), Vol. XXXVII, No. 4 (2020), Vol. XXXVII, No. 3 (2020), Vol. XXXVII, No. 2 (2020), Vol. XXXVII, No. 1 (2020), Vol. XXXVI, No. 4 (2019) of this Newsletter. RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from the power sector. The proposed regulation would limit CO2 emissions from Pennsylvania’s fossil fuel-fired electric generating units with a nameplate capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid. The proposed initial emissions cap for Pennsylvania in 2022 is 78 million tons of CO2, which would decline annually.

The public comment period for the proposed rule ran from November 7, 2020, until January 14, 2021. The Independent Regulatory Review Commission (IRRC) released its comments on February 16, 2021. See Comments of the Independent Regulatory Review Commission, Environmental Quality Board Regulation #7-559 (IRRC #3274, CO2 Budget Trading Program (Feb. 16, 2021). The IRRC recommended that EQB (1) explain the choice to institute the program through regulation rather than legislation; (2) provide analysis of its statutory authority to enact the proposal; (3) consider recommendations from commentators on public health, safety, and welfare, economic or fiscal impact, and adequacy of data; …

The Legal Intelligencer

(by Blaine Lucas and Anna Jewart)

This past May, a curio story made international news when a Belgian farmer moved a stone monument on his property by approximately 7.2 feet.  While this typically would have remained unknown, except to the farmer and perhaps to his neighbor, the farmer did not consider that the stone had been placed in 1819 to mark his home country’s border with France, and moving it resulted in an approximate 3,000 square foot loss of territory for the French.  Luckily, the change in location was quickly caught and resolved without international incident.  The quick discovery and resulting amicable resolution between the two nations was made possible in large part because the local Belgian municipality, Erquelinnes, had geo-localized the stones in 2019 for its 200th anniversary and knew exactly where it should have been.  A few days after the story went viral, the Pennsylvania Commonwealth Court addressed what happens when municipalities here misplace their historic markers and later disagree over the location of their common boundaries.  In Woodward Twp. Mun. Corp. of Clinton County, Pa. v. Dunnstable Twp. Mun. Corp. of Clinton County, Pa., Nos. 704 C.D. 2020, 733 C.D. 2020 (Pa. Cmwlth. May 12, 2021), disagreement over boundary stones and surveys dating back to 1844 resulted in a modern-day battle of the experts to determine exactly where the shared boundary of the two townships actually lies.

Although it was avoided by the farmer in Erquelinnes, wars and lawsuits are often fought over the location of boundaries, whether they are private, municipal, or international.  Consequently, Pennsylvania law provides certain protections for the agreed upon location of municipal boundaries, and establishes procedures for both how to change them willingly, and how to resolve disputes surrounding their location.  …

Pittsburgh, PA

Renewables Law Blog

(By Bruce Rudoy)

It’s no secret that coal plants have had trouble competing with cheaper renewables and natural gas in recent years. Unexpectedly low prices from PJM’s latest capacity auction spurred a fresh wave of retirement announcements this month. But Talen Energy has decided that rather than retire coal plants and walk away, it would convert those sites to be used for other renewable energy-related projects. While Talen promised in November 2020 to shut down roughly 5 gigawatts of coal capacity in the 2020s, the company wanted more of a comprehensive strategy for this transition.  “This is the first of hopefully many unit transitions from coal to lower-carbon sources and battery,” said Cole Muller, who oversees Talen’s fossil-powered fleet in the territory of regional transmission organization PJM. “It’s really about decarbonizing, …investing in the communities and continuing to provide opportunities for our people.” After that project, Talen plans to build a 1-gigawatt battery fleet in the next three to five years on its existing properties, using individual batteries as large as 300 megawatts. “If you just retire it, you have a significant loss to both jobs and the tax base, and the communities at large,” Muller said. Talen tapped battery developer Key Capture Energy to build a 20-megawatt system as a demonstration of the concept. That smaller size allows for a streamlined approval process, Muller noted. But the battery will act just like any other commercial power plant, bidding into PJM’s markets for capacity, ancillary services and energy arbitrage. Assuming that goes well, Talen can add up to another 115 megawatts of battery storage to fully utilize the coal plant’s grid connection capacity. …

The Legal Intelligencer

(by Molly Meacham)

Even in ordinary times, keeping up with an ever-changing employment law landscape is a compliance challenge for businesses.  The extraordinary circumstances of the COVID-19 pandemic sparked unprecedented compliance challenges for employers, including workplace safety issues, additional temporary leave requirements, and interpreting existing obligations through the lens of COVID-19.

Compliance obligations for employers are continuing to evolve in 2021.  Presidential administration change and a change in the majority party in the U.S. Senate each typically cause new and revised legislation and regulations.  Combined with the ongoing pandemic, the result is continued significant alteration to the legal and regulatory framework that will impact employers in 2021 and beyond.  These developing issues include worker classification under the Fair Labor Standards Act (FLSA), a temporary expansion of the Consolidated Omnibus Budget Reconciliation Act (COBRA) under the American Rescue Plan Act of 2021 (ARPA), and COVID-19 workplace safety issues relating to fully vaccinated employees.

FLSA Independent Contractor Rule Withdrawn

One of the most important baseline employment-related determinations a business can make is whether a worker is properly classified as an employee or an independent contractor under the FLSA.  Worker misclassification is a frequently-litigated issue that represents significant legal exposure for businesses, as damages for misclassification can include retroactive application of minimum wage and overtime requirements, the value of employee benefits that were not provided, any legally-mandated sick time, or self-employment tax paid by the worker.

In the last weeks of the Trump administration in early 2021 the Department of Labor (DOL) issued a Final Rule seeking to clarify the independent contractor test and make it easier to identify workers covered by the FLSA.  The traditional independent contractor test contains six non-exclusive factors which the DOL’s Wage and Hour Division and the federal courts evaluate on a case-by-case basis to determine whether a worker is, as a matter of economic reality, dependent on the employer for work or in business for themselves, with no single factor considered dispositive.  …