Law360
(by Cara Salvatore)
Babst Calland has hired a former National Highway Traffic Safety Administration lawyer who played a lead role in the agency’s work on the Takata air bag probe and other high-profile matters, the firm said Wednesday, the third former NHTSA staffer to join the firm’s transportation practice in recent years.
For the full article, click here.
The PIOGA Press
(by Kevin Garber and Jean Mosites)
The Pennsylvania Environmental Quality Board (EQB) will consider a petition for a cap-and-trade regulation at its April 16 meeting. The Clean Air Council, Widener Commonwealth Law School Environmental Law and Sustain-ability Center, and others submitted the petition on February 28, asking EQB to promulgate a regulation that would create a multi-sector cap-and-trade system to reduce greenhouse gas (GHG) emissions to achieve carbon neutrality in Pennsylvania by 2052.
The petitioners initially submitted the petition to EQB on November 27, 2018. Under EQB’s Petition Policy (25 Pa. Code Chapter 23), the Department of Environmental Protection is to notify EQB and the petitioner within 30 days of DEP’s receipt of the petition whether the petition meets the policy’s eligibility criteria. DEP advised the petitioners on December 26 that the petition met the criteria and would be submitted to EQB for consideration at the first meeting of 2019.
However, DEP did not notify EQB members until, apparently, early February. Upon learning of the petition, Representative Daryl Metcalfe, chairman of the House Environmental Resources and Energy Committee, requested DEP on February 19 to have the petitioners resubmit their petition. The petitioners resubmitted the petition on February 28 with minor changes and additional signatories. DEP notified petitioners and the EQB on March 1 that DEP would review the petition to ensure it still meets the eligibility criteria. DEP has now done that and EQB scheduled the matter for consideration at its April 16 meeting.
The petition
The petition includes a fully drafted regulation that establishes a cap on covered GHG emissions, based on a 2016 base year, and reduces GHG emissions to carbon neutrality by 2052. The regulation borrows heavily from California’s cap-and-trade regulation, which is a multi-sector program that includes Ontario and Quebec. …
The Legal Intelligencer
(by Lindsay Howard and Matthew Wood)
In a press conference on Feb. 14, 2019, the U.S. Environmental Protection Agency (EPA) announced its multifaceted “action plan” outlining steps the agency is taking to protect public health and the environment from per- and polyfluoroalkyl substances (PFAS). PFAS are a group of synthetic chemicals that have been in use since around the 1940s and have numerous commercial and consumer applications. They have been used in nonstick coatings for cookware and food containers, waterproofing for fabrics and textiles, the manufacture of plastics and resins, and the formulation of firefighting foams. Their widespread use and the discovery of PFAS chemicals in various environmental media across the United States has raised interest and concerns about their potential effects on human health and the environment.
PFAS in the Environment
PFAS chemicals have been found in, among other things, groundwater (which may be used for drinking water), surface water and sediments, as well as in wildlife and human blood. Human exposure may occur through ingestion of contaminated drinking water and consumption of animals and plants in which PFAS have bioaccumulated (or that have been exposed to PFAS in the course of preparing or cooking food for consumption). Studies have shown that exposure to PFAS chemicals may have negative health consequences, which has driven the EPA and other stakeholders to better understand the chemicals, the extent of their presence in the environment, their potential health effects and the best methods for containment and cleanup.
EPA’s Action Plan
To develop its action plan, the EPA requested comments, visited with leadership and citizens of PFAS-affected communities, and hosted a PFAS National Leadership Summit in Washington, D.C. …
Smart Business
(by Jayne Gest with Christian Farmakis)
It’s not always easy for business owners to find financing. Most business owners will, at some point, turn to conventional bank lending to help finance their business or fund growth, like acquisitions. There are, however, many different types of financing products available in the commercial lending market. But whatever type of financing you settle on, it’s critical to know exactly what you’re risking.
“Business owners often focus more on ‘getting the loan’ than on the specific terms and covenants of the loan, which in many instances can hinder the ongoing operations of the business,” says Christian A. Farmakis, shareholder and chairman of the board at Babst Calland.
Smart Business spoke with Farmakis about the lending environment and legal risks to keep an eye on.
What are loan options for small and mid-sized business owners?
Since the Great Recession, traditional bank lending has competed with other forms of lending. For instance, business owners are increasingly turning to private equity funding and family office lending rather than traditional, asset-based lending. These options may require sacrificing significant ownership and control over the business.
Other loan types include U.S. Small Business Administration loans backed by the federal government but underwritten by banks, small business loans for real estate financing and equipment loans.
Credit unions and regional and community banks sometimes offer different and more flexible terms and do smaller loans because they service the loan in their portfolio, where a larger bank might have stricter underwriting requirements.
What legal issues could crop up in the term sheet and loan documents?
Loans can include affirmative and negative covenants, but it’s usually the negative ones that trip people up. …
Institute for Energy Law Oil & Gas E-Report
(by Adam Speer)
Anyone dealing with land and title issues in West Virginia quickly learns the importance of real property assessments. The relative ease in which an interest in land, including mineral rights, can be lost in a tax sale means that landmen and title practitioners who fail to examine a property’s tax assessment history do so at their peril. Those histories are found in the volumes of “landbooks” maintained by each county assessor’s office. A relatively common and beguiling problem arises when the title examiner discovers that a property has been double assessed. Such duplicate assessments are rarely obvious, as assessed interests are often described by brief and vague notations and sometimes assessed in the name of a long-gone predecessor in title.
Recently, in Haynes v. Antero Resources Corporation, Hill v. Lone Pine Operating Company and L&D Investments Inc. v. Mike Ross, Inc., the Supreme Court of Appeals of West Virginia considered the validity of several tax deeds that stemmed from the duplicate assessment of certain oil and gas interests created by the Harrison County Assessor’s Office. In each of the cases, the court reaffirmed its long-standing precedent that holds that in the case of two assessments of the same land under the same claim of title, the state can only require one payment of taxes under either assessment. The cases highlight the potential consequences of duplicate tax assessments of severed mineral interests in West Virginia and the need to have interests properly assessed. The Haynes, Lone Pine and L&D Investment decisions should be maintained in any title practitioner’s toolkit for analyzing interests conveyed by a tax sale and determining the likelihood of a successful challenge to set aside a tax deed. …
The Legal Intelligencer
(by John McCreary)
The February 2017, issue of Pennsylvania Law Weekly published this author’s comments on the employment law issues created by the then-recently enacted Medical Marijuana Act (MMA). I identified some of the practical and legal problems presented by the continued illegality of marijuana under federal law, the conflict between statutory employment protections for medical marijuana patients and common employer policies prohibiting illegal drug use. I predicted that the “imprecision of the MMA’s statutory language” would “inject needless uncertainty into the employer-employee relationship” that “likely would not be resolved absent litigation.” Although to date there have been no cases reported under Pennsylvania’s MMA, several courts in other jurisdictions have considered employment issues arising under similar medical marijuana statutes. The uncertainty is lessening; the smoke is beginning to clear.
The 2017 article conjectured that the federal Drug Free Workplace Act (DFWA), which requires recipients of federal funds to maintain a drug-free workplace as described, see 41 U.S.C. Section 8102, might serve as a defense to a claim brought by a medical marijuana patient. Noffsinger v. SSC Niantic, 338 F.Supp.3d 78 (D.Ct. 2018), a case arising under Connecticut’s Palliative Use of Marijuana Act (PUMA), Conn. Gen. Stat. Sec. 21a-408 et seq.says otherwise. There, medical marijuana patient Noffsinger accepted a position as activities manager at the defendant’s health and rehabilitation facility. The plaintiff informed her prospective employer about her medical marijuana prescription. PUMA Section 21a-408p(b)(3) provides that “no employer may refuse to hire a person or may discharge, penalize or threaten an employee solely on the basis of such person’s or employee’s status as a qualifying patient” under PUMA. When Noffsinger’s pre-employment drug screen returned positive for marijuana the job offer was rescinded. …
Employment Alert
(by John McCreary and Stephen Antonelli) …
The PIOGA Press
(by Lisa M. Bruderly and Gary E. Steinbauer)
On February 14, the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers opened a 60-day public comment period on the proposed rule to revise the definition of “waters of the United States” (WOTUS) under the Clean Water Act (CWA) by publishing the proposed rule in the Federal Register. The comment period is scheduled to end April 15, although this date may be extended. The publication comes more than two months after the agencies released the proposed revised definition of WOTUS to the public on December 11.
Comments provided on the proposed new WOTUS definition must be considered by the two agencies prior to promulgation of the new definition. Oil and gas companies as well as other regulated parties are encouraged to provide their input during the public comment process.
Less WOTUS would reduce federal permitting and compliance requirements
The agencies proposed the revised WOTUS definition to provide more predictability and certainty in identifying federally regulated waters.[2] Overall, the proposed WOTUS definition is generally regarded as being less stringent than previously proposed definitions. For the oil and gas industry, the new proposed definition of WOTUS could reduce the federal CWA permitting and compliance obligations associated with the construction and maintenance of well sites and pipelines. Under the proposed new definition of WOTUS, only those waters or features with a “continuous surface connection” to an otherwise traditionally navigable water (i.e., river, lake, or other waterbody that supports or has supported navigation) would be subject to federal jurisdiction. The proposed definition of “tributary” would be limited to streams with perennial or intermittent flow during a “typical year,” and would exclude ephemeral streams and features that flow only in direct response to precipitation. …
PA Law Weekly
(by Jean M. Mosites and Varun Shekhar)
On Feb. 28, Clean Air Council and Widener Commonwealth Law School Environmental Law and Sustainability Center, among others, resubmitted a petition to the Pennsylvania Environmental Quality Board, asking it to promulgate a regulation that would create a multi-sector cap-and-trade system in Pennsylvania to reduce greenhouse gas (GHG) emissions to achieve carbon neutrality by 2052.
The Petition
The petition includes a fully drafted regulation that establishes a cap on all reported GHG emissions, based on a 2016 base year. The cap would decline by 3 percent each year.
The petitioners acknowledge: “The proposed regulation will have an impact on all sectors of Pennsylvania’s economy, although the impact will vary among businesses and individuals, with some benefiting and some suffering adverse impacts.”
Capping GHG emissions means that the covered entities meeting certain thresholds—including producers of cement, glass, steel, lead and paper, any facility producing or importing electricity, and fossil fuel producers—all must obtain allowances, by auction or allocation, for each metric ton of reportable GHG emissions per year attributable to their operations in Pennsylvania. According to the EPA’s envirofacts database, close to 400 facilities in Pennsylvania report GHG emissions to the EPA.
The petition proposes that emissions from covered sources would be capped, with the cap declining each year by an amount equal to 3 percent of 2016 emissions. If the regulation becomes effective for 2020, the cap would be equal to 91 percent of 2016 emissions. Limited by the ever-declining cap and availability of allowances, each covered entity must reduce its GHG emissions over time to achieve carbon neutrality by 2052. Allowances under the proposed trading system would be priced at a minimum of $10 each in 2020, with the price increasing by 10 percent plus the rate of inflation each year. …
Smart Business
(by Jayne Gest with Christian Farmakis and Justine Kasznica)
Convertible debt is a common investment vehicle by which early-stage companies raise capital, where an investor grants to a company a short-term, often interest-bearing loan that converts into equity of the company at a future date. The convertible debt investors agree to push the question of what the company is worth — the valuation — down the road until the company’s next priced funding round. In return, the investors receive certain advantageous terms at the time that the debt converts to equity.
Smart Business spoke with Christian A. Farmakis, shareholder and chairman of the board, and Justine M. Kasznica, shareholder, at Babst Calland, about this investment vehicle.
What are the benefits for these investors?
As with any loan, the convertible debt note accrues interest until a defined maturity date. Unlike a standard promissory note, the convertible note often includes a conversion discount, valuation cap and other terms designed to mitigate the investor’s risk.
With the conversion discount, these investors receive a discount on the price per share at which their note converts to equity at a future priced round. Although discounts vary, it’s commonly set around 20 percent. Thus, if the price per share is set at $1, an investor’s convertible debt note would convert at a price of 80 cents per share.
With a valuation cap, (a) a maximum value of the company is established, solely for the purpose of calculating conversion of debt to equity; and (b) the investor’s price per share will be capped at the agreed upon number.
How can convertible debt negatively impact the startup? …
The Legal Intelligencer
(by Krista-Ann M. Staley and Jenn L. Malik)
In 2016, Pennsylvania joined several other states in enacting legislation legalizing the use or possession of medical marijuana within its borders. Inherent in adopting this legislation is the regulation of the various retailers and manufacturers charged with supplying legal green to licensed users of medical marijuana. Now that the commonwealth has legislated the “how” of medical marijuana use, local governing bodies are taxed with legislating the “where.” The following addresses state and local regulation concerning the zoning of the medical marijuana industry.
State Regulation of Medical Marijuana Organizations
The Medical Marijuana Act (the act), 35 P.S. Section 10231.101 et seq., authorizes the Pennsylvania Department of Health (the department) to issue permits to “medical marijuana organizations” (MMOs), bifurcated by the act into two categories—namely dispensaries and grower/processors. As the terms suggest, dispensaries are authorized by the department to dispense medical marijuana and grower/processors are permitted by the department to grow and process medical marijuana. The act required the department to divide the commonwealth into regions and to regulate the number of permits issued per region. As a result, the department essentially regulates the amount of medical marijuana grown, manufactured and sold in each region. (The act required the department to establish at least three regions and the department actually established six regions). The department is initially only permitted to issue 25 permits to growers/processors and 50 permits to dispensaries statewide. In addition to the limited number of permits available, stringent state-mandated application requirements and hefty fees (i.e, an initial application fee of $10,000 for grower/processors and $5,000 for dispensaries; a first-year permitting fee of $200,000 for grower/processors and $30,000 for dispensaries; and additional renewal permitting fees) further limit MMO locations in the commonwealth. …
Environmental Alert
(by Lindsay P. Howard, Alana E. Fortna and Matthew C. Wood)
On February 14, 2019, the U.S. Environmental Protection Agency (EPA) released its Action Plan for regulating and addressing risks concerning per- and polyfluoroalkyl substances (PFAS), comprising a group of synthetic chemicals with widespread consumer, commercial, and industrial applications. PFAS refers to a large collection of man-made chemicals that includes PFOA and PFOS (both specifically targeted in the Action Plan), as well as PFBS, perfluorononanoic acid (PFNA), and others referred to as GenX chemicals, and thousands of other compounds. Although there have been only limited widespread studies, evidence suggests that exposure to some PFAS chemicals can lead to adverse health effects. PFAS have been widely-used since as early as the 1940s, but public and governmental interest has grown, especially in the last decade, as concerns regarding the potential effects of exposure to PFAS have increased.
Although the Action Plan generally tends to focus on drinking water, EPA notes that exposure may occur through, among other things, consumption of plants and meat in which PFAS have bioaccumulated, consumption of food exposed to PFAS, exposure to commercial and consumer products such as non-stick cookware, stain-resistant carpet and clothing, and pizza boxes. According to EPA, the ubiquitous nature of PFAS means that most people have been exposed to PFAS chemicals. In the environment, PFAS have been found in dozens of states, as well as on military bases and tribal land.
EPA developed the Action Plan in response to more than 120,000 comments in the public docket and feedback from federal, state, and local stakeholders who attended the Agency’s two-day National Leadership Summit on PFAS in Washington, D.C. EPA also gathered input by visiting and engaging with members of PFAS-affected communities in several states. …
Environmental Alert
(by Lisa M. Bruderly and Gary E. Steinbauer)
On February 14, 2019, the U.S. Environmental Protection Agency and Army Corps of Engineers’ proposed rule to revise the definition of “waters of the United States” (WOTUS) under the Clean Water Act (CWA) was published in the Federal Register. The publication begins a 60-day public comment period, which ends on April 15, 2019, and comes more than two months after the Agencies released the proposed revised definition of WOTUS to the public on December 11, 2018. A detailed description of the proposed revised definition of WOTUS was covered in our previous Environmental Alert.
The Agencies are seeking comments on all aspects of their proposal, including the six categories of waters that would categorically be considered to be WOTUS, the 11 categories of waters or features that would not be considered to be WOTUS, and the newly proposed definitions of the terminology referenced in the proposal, such as “tributary” and “adjacent wetland.” In addition, the Agencies have specifically requested comments on the following issues:
The PIOGA Press
(by Jean M. Mosites and Casey J. Snyder)
On January 8, Governor Tom Wolf issued the first executive order (EO) of 2019 entitled: Commonwealth Leadership in Addressing Climate Change and Promoting Energy Conservation and Sustainable Governance. The six-page EO is the current administration’s most recent action to address climate effects from greenhouse gas (GHG) emissions.
The EO consists of the following four components, with the majority of the order applying only to Pennsylvania executive agencies:
Statewide climate reduction goals
The EO includes an important, statewide goal within an order that otherwise applies only to state agencies. The EO commits Pennsylvania to a goal to achieve a 26 percent reduction of GHG from 2005 by 2025 and an 80 percent reduction by 2050. The directive places Pennsylvania in a league with 20 other states with specific GHG reduction targets. Pennsylvania’s goal is more stringent in the short term compared to states like Michigan and less stringent in the long term than goals set by California and New York. Of the states with GHG reduction targets, Pennsylvania is the leading net energy producer and the leading natural gas producer, according to the U. S. Energy Information Agency.
The EO comes during a time when the Trump administration has been critical of climate change initiatives. President Trump announced in 2017 that the U.S. would withdraw from the Paris Accord, and the EPA under his administration is considering rolling back regulation of methane emissions from onshore natural gas production. …
The DTCWV Defender
(by Jennifer Hicks)
The Supreme Court of Appeals of West Virginia will hear argument and issue a decision this year in EQT Production Company v. Crowder, et al., Appeal No. 17-0968, a case that could have far-reaching implications for oil and gas operators here.
In 2015, surface owners Beth Crowder and David Wentz filed suit alleging trespass and other claims arising when EQT Production entered the plaintiffs’ surface tract and drilled nine horizontal gas wells that extended into neighboring tracts. The parties’ predecessors had entered into an oil and gas lease in 1901 that was amended in 2011, after the surface and mineral estates were severed, to allow the pooling and unitization of the tract with the oil and gas from neighboring tracts. Plaintiffs argued that neither the lease nor the amendment gave EQT Production the right to use their surface to access and produce gas from neighboring tracts.
They claimed that despite having a valid oil and gas lease that allowed pooling, the producer did not have express permission to utilize the plaintiffs’ surface property to produce natural gas from neighboring mineral tracts. While the plaintiffs acknowledged that the mineral lessee is entitled to “reasonable use” of the surface to extract oil and gas, they argued that such “reasonable use” was limited to extraction from the subject tract only, not neighboring tracts.
Circuit Court Judge Timothy Sweeney agreed. In his summary judgment Order, Judge Sweeney found that because the mineral owners no longer owned the right to use the surface lands for exploration and production from neighboring tracts, they could not have given those rights to EQT Production in the lease amendment. Judge Sweeney found that only the surface owners or their predecessors could have expanded EQT Production’s rights to use the surface. …