March 11, 2020

DEP unveils initial draft of carbon dioxide trading rule to Air Quality Technical Advisory Committee

The PIOGA Press

(by Kevin Garber and Jean Mosites)

On February 13, the Department of Environmental Protection presented its preliminary draft proposed rulemaking to establish a carbon dioxide budget trading program to the Air Quality Technical Advisory Committee (AQTAC). The proposed trading program would apply to fossil fuel fired electricity generators of greater than 25 MW in Pennsylvania. The draft proposal reflects a first look at DEP’s vision for a cap-and-trade program as directed by Governor Tom Wolf’s October 3, 2019, Executive Order 2019-07.

The draft proposed rule, although still in development, parallels the model rule prescribed by the Regional Greenhouse Gas Initiative (RGGI). RGGI is a coalition of 10 states in the Northeast and Mid-Atlantic that participate in a regional CO2 cap-andtrade program for fossil fuel-fired electricity generating units that have a nameplate capacity of over 25 MWe.

Under the program, each member state has a budget of CO2 allowances, which it then allocates through setaside programs, offsets or periodic auctions. The number of allowances in each state’s CO2 budget that are allocated through auction varies widely among members. Each affected source (CO2 budget source) is required to hold sufficient CO2 allowances based on its CO2 emissions as determined from continuous monitoring. Each allowance is equal to one ton of CO2 emissions.

States’ CO2 budgets, and in turn available allowances, periodically reduce over time. This requires each CO2 budget source to either reduce CO2 emissions as measured by continuous monitoring, or obtain extra CO2 allowances to cover its emissions in excess of its allowance account. Under RGGI, auctions to obtain allowances generally occur quarterly, and may be open to qualified participants other than CO2 budget sources. The draft proposed rule explicitly mentions financial institutions and environmental groups as potential auction participants. …

March 4, 2020

Potential Impacts to Real Estate Development of Proposed Amendments to NEPA Regulations

Developing Pittsburgh

(by Matthew Moses, Mary Binker, Ben Clapp and Casey Snyder)

Proposed changes to regulations implementing the National Environmental Policy Act of 1969 (NEPA) have the potential to affect real estate development within the greater Pittsburgh region and nationwide. The proposed regulations, issued by the Council on Environmental Quality (the “CEQ”) in January 2020, would revise NEPA procedures by narrowing both the scope of actions that must be reviewed under NEPA as well as the extent of such review. With these changes, the time, cost and environmental analysis required to comply with NEPA could be significantly reduced, and development projects that previously faced delays could proceed more quickly through the review process, or potentially avoid it altogether.

Background and Purpose of NEPA

NEPA was enacted in 1970 with the goal of promoting accountability and transparency in federal decision-making by ensuring that the environmental impacts associated with federal actions were considered by the agencies undertaking those actions. Under NEPA, each federal agency is responsible for conducting a NEPA analysis on all agency actions that are deemed “major Federal actions” to determine if such actions impact the environment. “Major Federal actions” are currently defined in CEQ NEPA regulations as “actions with effects that may be major and which are potentially subject to federal control and responsibility” (emphases added). That may include both federal projects and projects undertaken by non-federal entities that receive federal funding or require federal permitting. Examples of major Federal actions include oil and natural gas pipeline construction projects, highway construction, and bridge replacement. The federal agency that takes a major Federal action (e.g., the issuance of a permit) is required to prepare an analysis of the project’s effects on the environment, which can take three forms: (i) a categorical exclusion (CE) for an action that has been previously determined to involve no significant environmental impacts; …

March 4, 2020

Babst Calland Attorney Jean M. Mosites Appointed to the EHB Rules Committee

Jean M. Mosites was recently appointed by Rep. Mike Turzai, the Speaker of the Pennsylvania House of Representatives to the Pennsylvania Environmental Hearing Board Rules Committee. Committee members serve two-year terms and may be reappointed for additional terms.

The Rules Committee reviews and makes recommendations regarding procedural rules for matters brought before the EHB. The Committee consists of nine attorneys who are in good standing before the Bar of the Supreme Court of Pennsylvania and who have practiced before the Board for a minimum of three years or who have comparable experience.

As a shareholder in Babst Calland’s Environmental and Energy and Natural Resources practice groups, Ms. Mosites has extensive experience representing clients in administrative appeals and environmental litigation in state and federal courts and before the Environmental Hearing Board in Pennsylvania, as well as counseling on environmental compliance and resolving liabilities under federal and state law.

February 26, 2020

Julie R. Domike – Environmental Attorney

Emerging Technologies Profile 

Is there one thing you recall that influenced your career path? Yes, I started thinking about hands-free vehicles when I was just a kid. On a vacation back to the U.S., as my father accelerated the family station wagon onto the highway, I imagined something like a subway’s third-rail. Vehicles would connect to it and travel forward in a safe and graceful caravan. Drivers would be able to use their time how they pleased—maybe playing a game of cards with their daughters. When it was time to return to active driving, the vehicle would disconnect, and the driver would resume the controls.  Even back then, the idea made so much sense to me.

What may surprise people about your background? As an attorney at the EPA, I was involved in rulemaking and enforcement for the first part of my career. In private practice, I represent companies that have been the focus of EPA’s regulations. Some of my friends tell me that my best skill is as an intermediary who can play on both sides of the regulatory fence.

What brought you to the nation’s capital? As the daughter of an American working abroad, I was raised all over Latin America.  While growing up in countries still squarely under the thumb of charismatic caudillos, the idea of a country governed by law instead of one man’s whims seemed like a paradise. I’ve always been impressed by the predictability that stare decisis and precedent lend to our system. My law degree is from Georgetown, and from there I joined the EPA where the focus was on implementing the 1990 amendments to the Clean Air Act.

How do you ease your daily commute into/out of the District? …

February 24, 2020

The value of M&A and why you can’t afford to ignore it

Smart Business 

(by Jayne Gest with Chris Farmakis)

Vivak Gupta has hands-on experience with M&A — including his share of battle scars — after 36 years in the IT industry. Most recently, he was the president and CEO behind Mastech Digital’s $55 million deal for InfoTrellis in 2017.

No two acquisitions are the same, but he says he tries not to make the same mistakes twice.

“It’s a pretty complex process, and there is no shortcut but to actually learn from experience,” Gupta says. “It’s baptism by fire — you have to burn your fingers and then you really get to know what works and what doesn’t work.”

But even when Gupta isn’t actively looking to buy or sell a business, he keeps an eye on the dealmaking market — who is buying and selling companies and raising capital — because it’s a good indicator of what’s happening in the industry.

“Why is my competitor acquiring a company in, just as an example, the cloud space?” he says. “How is it connecting with their current strategy? Then, you watch how they complete the acquisition and how the market rewards them or penalizes them for that acquisition.”

Gupta isn’t alone in his feelings about the value of M&A. Many executives, investors and advisers see how mergers, acquisitions and dealmaking play a critical role in business today — both directly and indirectly. And those who ignore it run the risk of falling behind as their competitors scoop up a new technology, diversify into new geographies, raise growth capital and implement long-term exit plans that help them operate better.

You owe it to yourself to build your M&A knowledge and network, but don’t take our word for it. …

February 24, 2020

The rise of representations and warranty insurance

Smart Business 

(by Jayne Gest with Kevin Wills)

Representations and warranties insurance, which has become more affordable for merger and acquisition transactions, is growing much more prevalent in recent years as the market for such insurance has grown more competitive.

“If you haven’t paid attention or you’re not a regular acquirer of businesses or assets, your opinion of reps and warranties insurance might be dated,” says Kevin T. Wills, shareholder and chair of the corporate and commercial group at Babst Calland.

Smart Business spoke with Wills about how representations and warranties insurance works and what to consider with this risk mitigator.

What are the benefits of utilizing reps and warranties coverage?

These policies can be advantageous for both buyers and sellers.

For a seller, it can reduce or eliminate any need to holdback or escrow a portion of the purchase price with respect to post-closing indemnification claims for breaches of representations and warranties. This provides a seller with a cleaner exit with less contingent liabilities and more certainty as to the sale proceeds. Additionally, if a seller is going to have an ongoing relationship with the buyer, it also avoids the potential awkwardness a lawsuit may cause.

On the buyer side, it can make your bid more attractive if the seller knows that it will not be responsible for post-closing claims for breaches of representations and warranties. It helps with the negotiation of the purchase agreement because a seller is less concerned with their post-closing exposure for breaches of representations and warranties, which saves time and reduces legal fees. Also, in some instances, the coverage limit and duration that the buyer acquires — the amount of the insurance policy and the term thereof— may exceed what the seller would be willing to give in a negotiated indemnification context. …

February 18, 2020

Treasury Issues Committee on Foreign Investment in the United States Review Rules

Emerging Technologies Alert

(by Justine Kasznica and Boyd Stephenson)

Technology companies seeking foreign investment should be aware of recently effective changes to the Committee on Foreign Investment in the United States (CFIUS) notification process for investments by foreign entities.  While these changes generally mirror CFIUS’ recently terminated pilot project, differences between the programs could determine whether a US business needs to file with CFIUS for pre-foreign investment review.  The following client alert explains the program changes in greater depth.

On January 17, 2020, the Treasury Department’s Office of Investment Security (Treasury) released two final rules requiring some foreign entities acquiring an interest in a US business with a national security nexus (Transaction Rule)[1] or real estate near air or sea ports or near US military installations (Real Estate Rule or, collectively, Rules)[2] to be approved by the Committee on Foreign Investment in the United States (CFIUS) before the transaction can be completed.  The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) required Treasury to expand the Transaction Rule—which previously required CFIUS review over only foreign investments that could result in foreign control of a US business—to include non-passive but non-controlling investments and to adopt the Real Estate Rule.[3]

The Treasury implemented a version of the Transaction Rule under a 2018 interim final rule and through a pilot program requiring mandatory declarations of certain transactions involving investments by foreign entities in US businesses beginning November 10, 2018.[4]  On September 24, 2019, the Treasury issued notices of proposed rulemaking for the Transaction Rule[5] and the Real Estate Rule.[6]  The Transaction Rule replaced the pilot program beginning February 13, 2020.  …

February 18, 2020

Pennsylvania DEP Unveils Initial Draft of Carbon Dioxide Trading Rule to Air Quality Technical Advisory Committee

Environmental Alert

(by Kevin Garber, Jean Mosites and Varun Shekhar)

On February 13, 2020, the Pennsylvania Department of Environmental Protection presented its preliminary draft proposed rulemaking to establish a carbon dioxide budget trading program to the Air Quality Technical Advisory Committee (AQTAC).  The proposed trading program would apply to fossil fuel-fired electricity generators of greater than 25 MW in Pennsylvania.  The draft proposal reflects a first look at Pennsylvania DEP’s vision for a cap-and-trade program as directed by Governor Tom Wolf’s October 3, 2019 Executive Order 2019-07.

The draft proposed rule, although still in development, parallels the model rule prescribed by the Regional Greenhouse Gas Initiative (RGGI).  RGGI is a coalition of 10 states in the Northeast and Mid-Atlantic that participate in a regional CO2 cap-and-trade program for fossil fuel-fired electricity generating units that have a nameplate capacity of over 25 MWe.  Under the program, each member state has a budget of CO2 allowances, which it then allocates through set-aside programs, offsets, or periodic auctions.  The number of allowances in each state’s CO2 budget that are allocated through auction varies widely among members. Each affected source (“CO2 budget sources”) is required to hold sufficient CO2 allowances based on its CO2 emissions as determined from continuous monitoring.  Each allowance is equal to one ton of CO2 emissions.

States’ CO2 budgets, and in turn, available allowances, periodically reduce over time.  This requires each CO2 budget source to either reduce CO2 emissions as measured by continuous monitoring, or obtain extra CO2 allowances to cover its emissions in excess of its allowance account.  Under RGGI, auctions to obtain allowances generally occur quarterly, and may be open to qualified participants other than CO2 budget sources.  …

February 14, 2020

PHMSA Issues Final Rule for Underground Natural Gas Storage Facilities

Pipeline Safety Alert 

(by James Curry, Keith Coyle and Brianne Kurdock)

On February 12, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA or Agency) released a final rule establishing new safety standards and reporting requirements for underground natural gas storage (UNGS) facilities (the Final Rule).  The Final Rule modifies regulations that PHMSA previously established in an interim final rule (IFR) to address a congressional mandate in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act).

The Final Rule follows the approach taken in the IFR by incorporating the provisions in two industry safety standards for UNGS facilities by reference but eliminates the requirement to treat the permissive elements of those standards as mandatory.  The Final Rule also makes other changes to the IFR, many of which respond to issues raised in public comments, a petition for reconsideration filed by several industry trade organizations, and a petition for judicial review filed by the State of Texas in the U.S. Court of Appeals for the 5th Circuit.  Additional information about the Final Rule, which takes effect on March 13, 2020, is provided below.

Revised Approach to Non-Mandatory Provisions of API RP 1170 and API RP 1171

The Final Rule eliminates what was arguably the most controversial aspect of the IFR, i.e. the requirement to treat the permissive elements of two industry standards as mandatory.  In the 2016 IFR, PHMSA incorporated API Recommended Practice 1170 Design and Operation of Solution-mined Salt Caverns Used for Natural Gas Storage (RP 1170) and Recommended Practice 1171 Functional Integrity of Natural Gas Storage in Depleted Hydrocarbon Reservoirs and Aquifer Reservoirs (RP 1171 or RPs, collectively) by reference.  …

February 13, 2020

Court Provides Clarity on the Applicable Scope of Review in Land Use Appeals

The Legal Intelligencer

(by Alyssa Golfieri)

Zoning hearing boards have exclusive jurisdiction to hear and render final adjudications on nine discrete matters, ranging from substantive challenges to the validity of land use ordinances, to appeals from determinations of a zoning officer, to applications for variances and special exceptions from the terms of zoning and floodplain ordinances. See Section 909.1(a) of the MPC, 53 P.S. Section 10909.1(a). If a party to a land use matter is unhappy with a zoning hearing board’s final adjudication, he has 30 days to appeal the decision to the trial court. See Section 1002-A of the MPC, 53 P.S. Section 11002-A.

When rendering final adjudications, zoning hearing boards sit as fact finders. This means zoning hearing boards are the sole judge of the credibility of witnesses and the weight afforded evidence. See Tri-County Landfill v. Pine Township Zoning Hearing Board, 83 A.3d 488, 518 (Pa. Commw. Ct. 2014). As such, when a zoning hearing board’s decision is appealed to the trial court, the trial court should not, with one exception addressed below, engage in fact-finding or disturb the board’s credibility determinations. See Section 1005-A of the MPC, 53 P.S. Section 11005-A; see also Manayunk Neighborhood Council, 815 A.2d at 652 (Pa. Commw. Ct. 2002). Rather, the trial court must uphold a zoning hearing board’s determination so long as the board did not commit a manifest abuse of discretion—an abuse of discretion occurs only when a zoning hearing board’s findings are not supported by substantial evidence, which Pennsylvania courts have defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See Berman v. Manchester Township Zoning Hearing Board, 540 A.2d 8, 9 (Pa. …

February 12, 2020

Christian Farmakis Featured Speaker at Dealmakers Conference

Law firm Babst Calland will participate at the 2020 Smart Business Dealmakers Conference in Pittsburgh, Pa. on March 5 at Wyndham Grand Pittsburgh Downtown.

The conference will feature middle-market CEOs, top private equity and venture capital firms, major lenders and leading service providers participating in sessions that cover the breadth of the merger and acquisition landscape addressing such topics as buying a business, selling a business, financing a deal, liquidity events, merging operations, alternative investing and more.

Attorney Christian A. Farmakis will join a group of recognized entrepreneurs and business experts in discussing Transaction Audits: How to prepare your company for any type of deal.

For more information about the Dealmakers conference, or to register to attend, visit: https://www.smartbusinessdealmakers.com/pittsburgh//event/

February 11, 2020

PHMSA Proposes New Valve Installation and Minimum Rupture Detection Standards for Gas and Hazardous Liquid Pipelines

Pipeline Safety Alert 

(by James Curry, Keith Coyle and Brianne Kurdock)

On February 6, 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice of proposed rulemaking (NPRM) in the Federal Register containing new valve installation and minimum rupture detection standards for gas and hazardous liquid pipelines.  The NPRM would require the installation of automatic shutoff valves (ASV), remote-control valves (RCV), or equivalent technology, on certain gas transmission and hazardous liquid pipelines.  The NPRM also contains proposed requirements for rupture detection and mitigation, including provisions for improving emergency response and conducting failure investigations and analyses.  Public comments must be filed in response to the NPRM on or before April 6, 2020.  Additional background information and a brief summary of PHMSA’s proposals are provided below.

Why Did PHMSA Issue the NPRM?

In 2010, a pair of significant pipeline incidents occurred in Marshall, Michigan, and San Bruno, California.  The resulting NTSB investigations led to the issuance of safety recommendations relating to the use of ASVs and RCVs and other measures to improve rupture detection and response.  Also, in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (2011 Act), Congress added mandates to the Pipeline Safety Act directing PHMSA to conduct studies and, if appropriate, establish regulations to address the concerns identified in NTSB’s safety recommendations.  In the years following the 2011 Act, PHMSA commissioned the studies required by the congressional mandates and received separate recommendations from GAO on the need to improve pipeline incident response.  PHMSA also issued two ANPRMs after the 2010 pipeline incidents asking for public comment on the need to amend the pipeline safety regulations for valve installation and rupture detection.  …

February 10, 2020

Revised DEP policy would expand the scope of projects requiring PHMC review

The PIOGA Press

(by Jean Mosites, Hannah Baldwin and Casey Snyder)

On December 28, the Pennsylvania Department of Environmental Protection published notice of a substantive revision to the Policy for Pennsylvania Historical and Museum Commission (PHMC) and DEP Coordination During Permit Application Review and Evaluation of Historic Resources (012-0700-001). The draft policy, if finalized, would replace Implementation of the Pennsylvania State History Code: Policy and Procedures for Applicants for DEP Permits and Plan Approvals, finalized in 2002 and amended in 2006, and establishes the framework DEP would implement for its plan approvals and permit application reviews to comply with Pennsylvania’s History Code, 37 Pa. C.S. §§ 101 et seq.

The History Code and its application to oil and gas operations

Under Section 507 of the History Code, Common-wealth agencies must notify PHMC before undertaking any Commonwealth or Commonwealth-assisted permitted or contracted project that affects or may affect archaeological sites and provide PHMC with information concerning the project or activity. DEP requires applicants to submit the State Historic Preservation Office (SHPO) Project Review Form to PHMC if their project potentially affects an archaeological site. After receiving the form from the applicant, PHMC must then determine whether the project may adversely affect an archaeological site.

Oil and gas operations potentially fall within the History Code’s consultation and survey requirements as “Commonwealth-assisted permitted projects.” Activities that require state permits, such as construction of well pads, pipelines, compressor stations and underground injection control wells, could have the potential to affect historic resources that come within the purview of the PHMC coordination requirements in the History Code.

Neither the History Code nor the draft policy mandates outcomes for known or discovered historic resources identified during the review process or during a survey or field investigation. …

February 7, 2020

New WOTUS definition finalized, new challenges expected

The PIOGA Press

(by Lisa Bruderly and Kevin Garber)

On January 23, the U. S. Environmental Protection Agency and the U. S. Army Corps of Engineers pre-published the final Navigable Waters Protection (NWP) Rule, which (yet again) redefines the scope of waters regulated under the Clean Water Act (CWA). In particular, the final NWP Rule revises the definition of “waters of the United States” (WOTUS) in 12 federal regulations and will become effective 60 days after publication in the Federal Register.

Once effective, the NWP Rule will almost certainly be challenged in the courts by NGOs and other interested parties. These challenges could result in the courts staying the NWP Rule in some, or all, states while the lawsuits are litigated.

The NWP Rule is the final step in fulfilling the Trump administration’s promise to repeal and replace the Obama administration’s 2015 Clean Water Rule (CWR), which many believe improperly expanded the scope of waters regulated under the CWA. Effective December 23, 2019, EPA and the Corps repealed the CWR and restored the WOTUS definition that existed before 2015. Prior to the repeal, the pre2015 rule’s WOTUS definition applied in approximately half of the states, while the CWR’s WOTUS definition applied in the remainder (including Pennsylvania), resulting in certain states having more federally regulated waters than other states.

The stated intent of the NWP Rule is to provide “clarity, predictability and consistency” regarding CWA jurisdiction. Consistent with President Trump’s February 28, 2017, Executive Order, the NWP Rule heavily reflects and relies upon Supreme Court Justice Antonin Scalia’s interpretation of the pre-2015 rule’s definition of WOTUS, as expressed in his plurality opinion in the seminal case, Rapanos v. …

February 6, 2020

DOL Issues First Meaningful Revision to Joint Employer Rule in Decades

The Legal Intelligencer

(by Stephen Antonelli and Andrew DeGory)

On Jan. 16, the U.S. Department of Labor (DOL) released a final rule updating its interpretation of “joint employer” under the Fair Labor Standards Act (FLSA). The update represents the first “meaningful revision” of its interpretation, codified at 29 CFR Part 791, since the FLSA’s inception in 1958. The final rule takes effect on March 16 and carries meaningful significance for companies that rely on temporary staffing and subcontractors and franchise owners. It could also allow companies to exert more influence over temporary workers without being considered a “joint employer.” While not binding on the federal courts, the final rule will serve as the DOL’s official interpretation moving forward and guide its enforcement of this issue under the FLSA.

The FLSA has always recognized that an employee can have two or more employers who are jointly and severally liable for the wages of its workers. The act requires covered employers to pay their employees at least the federal minimum wage for every hour worked and overtime for every hour worked over 40 in a workweek. The FLSA defines the term “employer” to “include any person acting directly or indirectly in the interest of an employer in relation to an employee.”

Part 791 recognizes two scenarios where an employee may have joint employers. In the first scenario, and most commonly, an employee performs work for an employer while another person or entity “simultaneously benefits” from that work. Thus, the employee only works one “set” of hours in a given week. In the second scenario, “one employer employs an employee for one set of hours in a workweek, and another employer employs the same
employee for a separate set of hours in a workweek.”

The DOL’s final rule primarily addresses the first scenario and adopts a four-factor balancing test derived from the U.S. …

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