July 11, 2019

Major title issues in Pennsylvania, West Virginia and Ohio: Allocation wells royalty disputes, frac hits and water rights

The PIOGA Press

(The 2019 Babst Calland Report)

This article is an excerpt of The 2019 Babst Calland Report, which represents the collective legal perspective of Babst Calland’s energy, environmental and pipeline safety attorneys addressing the most current business and regulatory issues facing the oil and natural gas industry. A full copy of the report is available by writing info@babstcalland.com.

 Pennsylvania

 Emerging trend of allocation wells and cross unit drilling in the Appalachian Basin

 Allocation wells and cross unit drilling have the potential to create more economic wells using longer laterals, while overcoming unit size limitations commonly found in oil and gas leases. An allocation well is a lateral wellbore that crosses multiple lease boundaries of tracts that have not been pooled or unitized. Similarly, cross unit drilling involves laterals that traverse multiple units.

The use of allocation wells and cross unit drilling in Texas and Oklahoma has evolved out of legislation, administrative rulings and case law. Allocation drilling and cross unit drilling are not yet widely used in the Appalachian Basin, but as drilling technology evolves it is likely that operators will look to the feasibility of employing that technology across the basin.

The biggest risk with allocation wells in the Appalachian Basin is the lack of specific authority under most standard Appalachian Basin leases granting the operator the authority to drill allocation wells. Consequently, possible claims might be asserted challenging an operator’s transportation of non-native gas across leased lands or the commingling of native and non-native gas produced from separate units or leases. Another issue associated with the potential use of allocation wells is determining the appropriate method of allocating production royalties between the different lessors. …

July 3, 2019

Crossroads helps students reach their full potential

Pittsburgh Catholic

(by Paula A. Smith)

Dwayne Coleman, 24, speaking to a group of graduates at a college signing ceremony in May, said that if someone had told him as a teenager that he would travel to China and teach English he would have never believed them.

But with help from the Crossroads Foundation, his mother and the staff at Cardinal Wright Regional School, he came to believe in his academic abilities and potential for success.

Coleman, who was raised by a single mother with two younger children on Pittsburgh’s North Side, graduated from Central Catholic High School in 2012, thanks to assistance from Crossroads.

For the past nine months he worked with the Rand Corp. on the Phresh Project for Pittsburgh Hill/Homewood Research on Neighborhood Change and Health.

“Crossroads really fosters a sense of community,” Coleman said. “It’s easy for students like us to feel out of place because of having a lower socioeconomic background or for being disadvantaged students. But Crossroads provided financial support and tried to make sure the emphasis was on the whole person.”

The Crossroads Foundation is an organization like no other in Pittsburgh. It is a college preparatory program that began with 11 students in 1988 and recently celebrated its 30th academic year with 580 alumni.

Crossroads provides an integral approach committed to helping promising students of all ethnicities with a limited income to obtain a quality Catholic high school education and receive academic support to attend college. Students do not need to be Catholic.

Esther Mellinger Stief, executive director of Crossroads, said, “I make sure Crossroads keeps its commitment to every scholar of providing financial support, but more than that, the opportunities these young people need to fulfill their potential. …

June 28, 2019

Resideo Acquires LifeWhere, Expanding Remote Monitoring And Predictive Maintenance Capabilities

Babst Calland congratulates our friends at LifeWhere on their successful exit. We are proud to have represented you from formation through exit. Resideo and the LifeWhere team are well-positioned to continue the growth opportunities afforded by the LifeWhere technology.
Chris Farmakis, Sara Antol and Michael Fink from Babst Calland’s Emerging Technologies Group represented LifeWhere in the sale.
For more information, click here.

June 21, 2019

Early-stage companies: Get your patent attorney involved early

Smart Business

(by Jayne Gest with Carl Ronald)

Intellectual property (IP) drives value, especially in industries like robotics or medical devices. However, engineers would rather be developing new products. They dislike spending time on invention disclosures. Carl Ronald, shareholder at Babst Calland, believes patent attorneys can help fill this gap in younger companies that have started taking on outside investors.

“Sometimes, I will get a call from an engineering manager who just approved an employee request to present a poster at a conference. They’re wondering, ‘Is this is something that could affect patentability? Can you look at it? The conference is in five days,’” Ronald says.

It’s better to be proactive and strategic, where an attorney works with your engineering team — reducing the barriers to getting disclosures on paper, identifying what you should patent and what you should keep secret.

Smart Business spoke with Ronald about developing relationships between engineers and attorneys to build up an IP portfolio.

Why is it important to involve a patent attorney early in the development pathway?

It is critical to set the tone early. Executives that position the business as an innovative company need to make sure their employees are educated about IP, and that the organization is utilizing patents, trade secrets and other forms of IP to protect that value.

Let’s say, a Ph.D. student working with a company wants to publish an article. Some magazines have confidentiality around peer reviewers and some do not. So, a submittal to peer review could be a disclosure that could destroy novelty, thus destroying patentability. While in the U.S., you can disclose something and still file a patent within a year, overseas that is not the case. …

June 20, 2019

A Second Slice: Practical Considerations for Short-Term Rentals

The Legal Intelligencer 

(by Krista-Ann Staley and Jenn Malik)

On April 26, the Pennsylvania Supreme Court announced its opinion in Slice of Life v. Hamilton Township Zoning Hearing Board, No. 7 MAP 2018 (Pa. 2019), addressing the permissibility of short-term vacation rentals in residential zoning districts. Specifically, the Supreme Court addressed “whether a zoning ordinance that defines ‘family’ as requiring ‘a single housekeeping unit’ permits the purely transient use of property located in a residential zoning district.”

The Slice of Life litigation arose from a notice of zoning violation issued to the owner of a short-term rental property, a limited liability company whose only member resided in Brooklyn, New York. The owner operated several other properties as short-term vacation rentals. The property in question in Slice of Life operated solely as a short-term vacation rental and was located in Hamilton Township’s single-family residential zoning district. The zoning district only permitted “single family detached dwellings and accessory uses and essential services.” The applicable provisions of the township’s zoning ordinance are as follows:

  • “Dwelling” is defined as a building on a lot intended for and occupied exclusively as a residence for one family and specifically excludes hotels, motels, rooming houses or other tourist homes.
  • “Family” is defined as a “single housekeeping unit.”
  • “Single family housekeeping unit,” “rooming house” and “tourist home” are undefined by the zoning ordinance.

The subject property is a six-bedroom house that sleeps up to 17 people. One individual is responsible for signing the lease; however, no one associated with the property rental made any effort to ascertain the relationship between the individuals occupying the property. The rental company responsible for handling reservations collects no information concerning additional guests. …

June 18, 2019

Pennsylvania Public Utilities Commission Asks for Public Comments on Amending Hazardous Liquid Pipeline Safety Regulations

Pipeline Safety Alert 

(by James Curry, Keith Coyle and Brianne Kurdock)

On June 13, 2019, the Pennsylvania Public Utilities Commission (PAPUC) voted 5-0 to issue an Advance Notice of Proposed Rulemaking (ANOPR) soliciting public comment on whether to amend the pipeline safety requirements for public utilities that transport hazardous liquids.  PAPUC is seeking input on the following topics within 60 days of the date the ANOPR is published, or by no later than August 28, 2019:

  • Construction: Bare steel and vintage pipe, material and specification requirements for new and used pipe, depth of cover, underground clearance, valve location and spacing, and prior notification for construction activities.
  • Operations and Maintenance: Pressure test requirements and frequency, line markers, right-of-way inspections, leak detection, odorant, emergency response, and public awareness.
  • Corrosion Control: External and internal corrosion control measures, adequacy of cathodic protection, in-line inspections, and hydrostatic testing and pigging for assessing corrosion or cathodic protection.
  • Other topics:
    • Conversion of Service
    • Emergency Flow Restricting Devices
    • Operator Qualification
    • Accident Notification
    • Transparency and Protection for Security Information
    • Horizontal Directional Drilling
    • Geophysical Testing and Baselining
    • Protecting Public and Private Water Wells and Supplies
    • Eminent Domain

In issuing the ANOPR, PAPUC is taking an approach that is similar to the Pipeline and Hazardous Materials Safety Administration (PHMSA), which issued an Advance Notice of Proposed Rulemaking (ANPRM) in 2010 asking for public comment on whether to amend the federal safety standards for hazardous liquid pipelines. After reviewing the comments submitted in response to the ANPRM, PHMSA issued a Notice of Proposed Rulemaking (NPRM) in 2015 containing new safety standards addressing a number of topics.  …

June 18, 2019

Report Highlights Federal, State and Local Challenges and Opportunities for the U.S. Oil and Gas Industry

Natural gas production continues to increase in each of the nation’s seven largest shale basins

Babst Calland today released its annual energy industry report: The 2019 Babst Calland Report – The U.S. Oil and Gas Industry: Federal, State and Local Challenges & Opportunities; Legal and Regulatory Perspective for Producers and Midstream Operators. 

In this Report, Babst Calland energy attorneys provide perspective on issues, challenges, opportunities and recent developments in the oil and gas industry that are relevant to producers and midstream operators.

According to the International Energy Agency, “the second wave of the U.S. shale revolution is coming” and the United States will account for a 70 percent increase in global oil production and a 75 percent expansion in LNG trade in the next five years.

On a year-over-year basis, natural gas production continues to increase in each of the seven largest shale basins in the United States. Most notably, oil and natural gas production is being driven by three of the largest producing basins including Appalachia in Pennsylvania, West Virginia and Ohio, the Permian Basin in Texas and New Mexico, and the Haynesville Basin in southwestern Arkansas, northwest Louisiana, and east Texas.

Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “Domestic shale producers and operators continue to face myriad legal and regulatory challenges by regulatory agencies, the courts, activists, and the market. This annual review is a snapshot of the issues and trends on the federal, state and local level in the oil and gas industry over the past year.”

The 92-page Babst Calland Report covers a range of topics from the industry’s business outlook, regulatory enforcement and rulemaking to developments in pipeline safety and litigation trends. …

June 14, 2019

The West Virginia Supreme Court Confirms the Right of Mineral Owners to “Reasonably Use” the Surface to Extract Minerals – for Now

Energy Alert

(by Timothy Miller and Mychal Schulz)

The West Virginia Supreme Court issued an opinion in Andrews v. Antero Resources Corp. and Hall Drilling, LLC, No. 17-0126 (W. Va. June 10, 2019), an eagerly-awaited decision arising out of the In re: Marcellus Shale Litigation, in which hundreds of lawsuits have been filed against E&P and midstream oil and gas companies alleging that activities related to the production, compression, and transportation of natural gas represented a private nuisance.

The Property Owners in Andrews, which represented the first trial group in In re: Marcellus Shale Litigation, alleged that the fracking operations of Antero and Hall Drilling “in relation to their development of the Marcellus shale have caused Property Owners to lose the use and enjoyment of their properties due to the annoyance, inconvenience, and discomfort caused by excessive heavy equipment and truck traffic, diesel fumes and other emissions from the trucks, gas fumes and odors, vibrations, noise, lights, and dust.”  They filed a complaint alleging claims for “private temporary continuing abatable nuisance and negligence” against Antero and Hall Drilling arising from their “natural gas exploration, extraction, transportation and associated activities in close proximity to [Property Owners’] properties.”

Eventually, the Property Owners voluntarily dismissed all claims for (1) property damages, (2) physical or medical injury, and (3) negligence.  By the time the Mass Litigation Panel (MLP) addressed the motions for summary judgment filed by Antero and Hall Drilling only the Property Owners’ private nuisance claims remained.

While the MLP granted Antero’s and Hall Drilling’s motion for summary judgment, it “declined to apply principles of nuisance law, and instead ruled on the summary judgment motions based upon Antero’s contractual and property rights.”  Specially, the MLP’s Order stated that “[b]ecause the Court resolves summary judgment based upon Antero’s contractual and property rights, it does not address the issues to which common law private nuisance principles would be applied.  …

June 11, 2019

State Supreme Court declines case rejecting challenge to zoning ordinance allowing drilling in all districts

The PIOGA Press

(by Blaine Lucas, Robert Max Junker and Jennifer Malik)

On May 14, the Pennsylvania Supreme Court entered an order denying the petition for allowance of appeal in Frederick v. Allegheny Township Zoning Hearing Board, et al., No. 449 WAL 2018 (Pa. 2019). The order concludes a battle of more than four years over the validity of the Allegheny Township, Westmoreland County, zoning ordinance. Previously in Frederick, the Commonwealth Court in a 5-2 en banc decision, rejected the contention that an unconventional natural gas well pad can be permitted only in an industrial zoning district, concluding that Pennsylvania law empowers municipalities to determine the location of oil and gas development and whether the same is compatible with other land uses within their boundaries. Frederick v. Allegheny Twp. Zoning Hr’g Bd., 196 A.3d 677 (Pa. Cmwlth. 2018).

Frederick is one of at least eight cases involving challenges to the validity of local zoning ordinances in Pennsylvania which authorize oil and gas development. Generally speaking, the challengers in these cases claim, based on the Pennsylvania Supreme Court’s decisions in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa.2013) and Pennsylvania Environmental Defense Foundation v. Commonwealth, 161 A.3d 911 (Pa. 2017) that the zoning ordinances violate substantive due process and Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (ERA), because they permit an allegedly industrial use in non-industrial zoning districts.

In Frederick, the Allegheny Township zoning ordinance authorized oil and gas operations as a permitted use by right in all zoning districts.1 After the township issued a zoning permit to an operator for an unconventional well pad, three residents filed an appeal with the zoning hearing board challenging both the permit and the validity of the zoning ordinance. …

June 6, 2019

One of Pittsburgh’s biggest law firms enters Houston

Pittsburgh Business Times and Houston Business Times 
(by Patty Tascarella)
Babst Calland has opened its first Texas office via a merger with attorneys of The Chambers Law Firm, a firm based in Houston.
Les Chambers serves as managing shareholder of Babst Calland’s Houston office, which is located in The Woodlands.
Les Chambers, Ryan Chambers and Coleman Anglin have joined Babst Calland as shareholders, and Nataliya Tipton came aboard as an associate, according to a June 5 press release. They specialize in legal and regulatory matters related to oil and gas, property and transactional law as well as oil and gas title examination and analysis process for exploration and production companies in Texas, New Mexico, Oklahoma and the Appalachian Basin.
For the full Pittsburgh article, click here.
For the full Houston article, click here.

June 6, 2019

EPA’s Draft Study of Produced Water Management in the Oil and Gas Industry

The Legal Intelligencer

(by: Kevin Garber and Casey Snyder)

Background: Oil and Gas Produced Water Management 

Drilling and operating oil and gas wells, especially unconventional wells, generates a significant amount of flowback and produced water that must be managed properly under federal and state environmental laws (for this article, “produced water” will refer to all oil and gas extraction water). There are multiple produced water management strategies—and trends in the industry vary. The EPA’s newly released draft study, “Study of Oil and Gas Extraction Wastewater Management Under the Clean Water Act,” EPA‐821‐R19‐001 (May 2019), collected stakeholder input on produced water management options nationwide as part of its effort to determine whether future actions are appropriate to permit additional options to manage produced water.

Reviewing current management practices nationally, the EPA determined that injecting produced water into underground injection control (UIC) wells is the most common disposal option. Injection may be for disposal (Class II-D wells) or for enhanced oil recovery (Class II-R wells). The EPA and states with delegated authority implement these programs pursuant to the Safe Drinking Water Act. Pennsylvania has not applied for and does not have primacy to implement the federal UIC program in the commonwealth. Other management options include using produced water to hydraulically fracture new wells; using evaporation ponds or seepage pits in some states to contain produced water and subsequently collect precipitated solids for disposal or sale; using produced water from conventional operations for dust suppression and deicing; treating produced water onsite in mobile treatment units or treating it off site at centralized water treatment facilities (CWTs); disposing produced water from conventional operations at publicly owned treatment works (POTWs); and, in states west of the 98th meridian, discharging to surface water where suitable for agriculture or wildlife. …

June 6, 2019

West Virginia Supreme Court Opinion Limits Use of Surface Tract for Production of Gas from Neighboring/Unitized Tracts

Energy Alert

(by Timothy Miller and Paul Atencio)

On June 5, 2019, the West Virginia Supreme Court issued its opinion in EQT Production Company v. Crowder affirming a decision of the circuit court of Doddridge County, holding that a surface tract cannot be used to produce minerals from neighboring lands in the absence of an agreement with a surface owner, even if the mineral owners/lessees agreed to pooling and unitization.

At the time that the century-old lease was executed, the lessor owned both the surface and minerals in fee.  The minerals were later severed from the surface as subdivided tracts were conveyed as “surface only.”  The plaintiff surface owners challenged use of their lands to drill horizontal wells extending beyond the limits of their property to produce and transport oil and gas to/from adjacent tracts.

The Circuit Court of Doddridge County agreed with the plaintiffs and entered an order granting partial summary judgment, finding EQT trespassed to the extent it used the plaintiffs’ surface lands to conduct operations under neighboring mineral estates.

The Court held that the long recognized implied right of a lessee to use so much of the surface as “reasonably necessary” to produce the minerals, was limited to use for production under the surface tract only; not neighboring lands, even if the mineral lessees had signed lease modifications allowing pooling and unitization.  The appeal resulted from a trial court order finding that production companies do not have the right to produce pooled production through a surface drill tract without an express reservation in a severance deed or surface owner consent.

In its opinion the Court noted it did not decide the case on the “excessive use” claim, but limited it holding to trespass and property law claims.  …

June 5, 2019

Babst Calland Opens Houston Office, Merges with Attorneys from the Chambers Law Firm, PLLC

Les Chambers, Ryan Chambers, Coleman Anglin and Nataliya Tipton Join the Firm’s Energy and Natural Resources Practice

Babst Calland today announced the opening of a new office in Houston, Texas, and merger with attorneys of The Chambers Law Firm, a prominent Houston law firm.

Les R. Chambers, Ryan A. Chambers, and Coleman G. Anglin join the Firm as shareholders, and Nataliya K. Tipton as associate.

These Houston-based attorneys represent clients on a variety of legal and regulatory matters, particularly in the areas of oil and gas, property, and transactional law and all aspects of oil and gas title examination and analysis process for exploration and production companies in the Mid-Continent (including Texas, New Mexico and Oklahoma) and Appalachian Basin.

Commenting on these developments, Donald C. Bluedorn II, managing shareholder of Babst Calland, said, “These highly-regarded oil and gas attorneys are a natural fit in advancing our Firm’s vision to continue to expand our geographic footprint to serve clients’ needs in the development of the Permian Basin and other major and emerging shale plays in the country.”

“Our nationally-recognized multidisciplinary team of experienced energy attorneys, along with the resources of our new Houston office, offer our clients exceptional regional and national legal representation to help navigate challenges and opportunities to succeed in the oil and gas industry.”

“We are very excited to be joining Babst Calland,” said Les Chambers.  “The vast experience of our respective firms in the energy and natural resource sector, along with the diversity of practice areas and significant support staff at Babst Calland, will create a synergy that will greatly enhance the services we can provide to both our individual and mutual clients across the country.”

Les Chambers, the managing shareholder of Babst Calland’s Houston office, concentrates his practice in the areas of oil, gas and mineral title examination and opinions, oil and gas transactions, property law, as well as assisting clients on a wide range of energy matters including negotiating and drafting oil and gas contracts, leases, due diligence examination and analysis, pipeline acquisitions and surface use and seismic agreements. …

June 4, 2019

DOT Sends Pipeline Safety Bill to Congress

Pipeline Safety Alert

(by James Curry, Keith Coyle and Brianne Kurdock)

On June 3, 2019, the U.S. Department of Transportation (DOT) sent a legislative proposal to Congress for reauthorization of the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) pipeline safety program.  If enacted and signed into law, the legislation would reauthorize PHMSA’s pipeline safety program for an additional four years, or through 2023.

As in previous reauthorizations, the bill includes provisions that respond to recent events—in this case, the September 13, 2018, natural gas distribution incident in Merrimack Valley, Massachusetts.  Consistent with the Trump Administration’s broader policy agenda, the bill also includes provisions to promote innovation by supporting new technologies and enhancing pipeline safety and reliability.

The legislation addresses other areas of concern to the pipeline industry, such as requiring more timely review of technical standards and imposing additional criminal sanctions for pipeline vandalism.  Finally, the bill includes rulemaking mandates that focus on items of importance to PHMSA—namely, expanding the operator qualification (OQ) program to pipeline construction and establishing regulations for inactive pipelines.

How does the DOT Pipeline Safety Bill Respond to the Merrimack Valley Natural Gas Distribution Incident?

  • Secondary or Back-Up Overpressure Protection: Requires gas distribution pipeline operators to provide a secondary or back-up means of overpressure protection, which is capable of shutting the flow of gas or relieving gas to the atmosphere, for regulator stations serving low pressure distribution systems that use the primary and monitor regulator design.
  • Management of Change:  Permits PHMSA to require all pipeline operators
    to prepare and implement pipeline tie-in procedures that address management of change and active monitoring of pressures and control of gas and liquid sources.

    • …

May 30, 2019

Guidance: Shift Toward Classifying Workers as Independent Contractors

The Legal Intelligencer

(by Carla Voigt and Molly Meacham)

Recent guidance from two federal agencies indicates a push by the current administration toward classifying gig economy workers as independent contractors under federal workplace laws. Last month, the Department of Labor’s Wage and Hour Division (WHD) and the National Labor Relations Board (NLRB) each authored guidance declaring certain workers in the gig economy independent contractors, rather than employees.

In an opinion letter issued on April 29, the WHD analyzed whether workers for an unnamed “virtual marketplace company” (VMC) are employees or independent contractors under the Fair Labor Standards Act (FLSA). In refining the definition of independent contractor, the WHD focused on the economic reality test, which considers the totality of the circumstances to determine the degree of economic dependence the worker has on his employer. The WHD opinion letter describes workers’ “economic dependence” on businesses as “the touchstone of employee versus independent contractor status” and evaluated the nature of the relationship using the existing six-factor test previously developed by the U.S. Supreme Court in Rutherford Food v. McComb, 331 U.S. 722, 729 (1947).

Shortly after the WHD issued its opinion letter, in May the NLRB published its own advice memorandum dated April 16, in which it declared a group of Uber drivers to be independent contractors under the National Labor Relations Act (NLRA). Applying the board’s SuperShuttle classification test, the NLRB determined that the drivers have “significant opportunities for economic gain and, ultimately, entrepreneurial independence.” Accordingly, the NLRB opined that the drivers were properly classified as independent contractors and therefore not eligible to unionize under the NLRA. These publications indicate a significant trend by the current administration in favor of classifying workers as independent contractors. …

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