February 13, 2019

Supreme Court of Appeals of West Virginia Scheduled to Decide Potential Landmark Oil and Gas Case

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. …

February 7, 2019

Examining the Shutdown’s Impact on the EEOC and Charges of Discrimination

The Legal Intelligencer

(by Stephen Antonelli)

By the time you are reading this, the federal government will have re-opened, at least temporarily. On Friday, Jan. 25, the president and Congress agreed to end a 35-day partial shutdown of the U.S. government—the longest in history—by passing a continuing resolution that will fund the government through Feb. 15.

Throughout the shutdown, there were numerous news stories concerning the deadlines by which federal courts were expecting to run out of money. As a result, employment litigators and other federal court practitioners questioned whether the shutdown would interfere with their clients’ filing deadlines and how it might affect their practices, generally. Early on, courts were expected to run out of operating funds by Jan. 18. That deadline was later extended to Jan. 25 and then to Feb. 1. Luckily, courts were able to maintain mostly normal operations until the shutdown ended.

Likewise, the shutdown did not affect the National Labor Relations Board (NLRB) or the U.S. Department of Labor (DOL). The same cannot be said for the Equal Employment Opportunity Commission (EEOC), which closed on Dec. 22 and did not reopen until Jan. 28. For the 37 days in between those dates, the EEOC did not process new charges of discrimination and it did not investigate pending charges.

According to the EEOC’s website, during the shutdown, most services were unavailable. Its toll-free phone numbers were unstaffed, its digital portals were inaccessible, and intake interviews were cancelled (unless a charging party was in danger of missing a filing deadline). In other words, unless a deadline was nearing, if parties to a charge of discrimination had questions about the status of a charge, those questions were likely unanswered during the shutdown. …

January 25, 2019

Find the middle ground: The corporate opportunity doctrine when your investors are competitors

Smart Business

(by Jayne Gest with Christian Farmakis and Sara Antol)

Consider this scenario: A startup in the artificial intelligence (AI) space develops a unique algorithm. A larger AI firm is interested in this algorithm but isn’t sure it’ll work. The larger company doesn’t want to buy the startup, but it wants a foot in the door on the new technology and is willing to invest. The startup needs funds but is concerned about the competitive issues created by giving the larger company a board seat and waiving the corporate opportunity doctrine.

“A smaller company is under pressure — in this scenario or others like it — to waive the corporate opportunity doctrine,” says Sara M. Antol, shareholder at Babst Calland. “Before you do that, stop and think about what this will mean. You need to determine whether there’s room to compromise with tailored language that serves the purposes of both the company and the investor.”

Smart Business spoke with Antol and Christian A. Farmakis, shareholder and chairman of the board at Babst Calland, about the corporate opportunity doctrine.

What is the corporate opportunity doctrine?

The corporate opportunity doctrine is part of the duty of loyalty imposed upon corporate fiduciaries. It’s not uncommon for a business owner or entity to invest in another company. If the investment is significant, the investor may demand a board seat to help influence the policies and operations of the company. If this person finds out about an opportunity as a board member, the corporate opportunity doctrine stops that director or officer from personally benefiting from an opportunity that would belong to the corporation, if it meets a four-pronged test:

  • If the corporation is financially able to exploit the opportunity.

    • …

January 11, 2019

Newly proposed definition of ‘waters of the United States’ could ease federal compliance burdens for oil and gas sector

The PIOGA Press

(by Lisa M. Bruderly and Gary E. Steinbauer)

On December 11, the U.S. Environmental Protection Agency and Army Corps of Engineers released a much-anticipated proposed rule that would redefine “waters of the United States” (WOTUS) under the Clean Water Act (CWA).1 As compared to the WOTUS definition in the Obama administration’s 2015 “Clean Water Rule” (CWR) (currently applicable in Pennsylvania), the proposed rule would significantly reduce the federal government’s jurisdiction over surface water, including wetlands, nationwide. Should the proposed rule be finalized as writ ten, the oil and gas sector could see significant changes in CWA permitting/compliance obligations associated with well sites and pipeline construction.

Revised definition limits federal government’s CWA jurisdiction

The proposed rule’s WOTUS definition is intended to provide predictability and consistency in identifying federally regulated surface waters. The agencies state the proposed WOTUS definition is “straightforward” and cost-effective while still being protective of the nation’s navigable waters and respectful of state and tribal authority over their land and water resources.

The proposal focuses on surface waters that are “physically and meaningfully connected to traditional navigable waters,” and relies largely on the “relatively permanent water” jurisdictional test established in the late Justice Antonin Scalia’s plurality opinion in United States v. Rapanos, 547 U.S. 715 (2006). The proposed rule includes the following six categories of waters that are WOTUS and also includes 11 categories of waters or features that are not WOTUS:

WOTUS includes

  1. Traditional navigable waters, including territorial seas (TNWs)
  2. Tributaries that contribute perennial or intermittent flow to TNWs
  3. Ditches that (a) are TNWs, (b) are constructed in a tributary, (c) relocate or alter a tributary such that they are a tributary, or (d) are constructed in an adjacent wetland so long as they meet the definition of tributary
  4. Lakes and ponds that (a) are TNWs, (b) contribute perennial or intermittent flow to a TNW in a typical year directly or indirectly through a jurisdictional water, or (c) are flooded by jurisdictional waters in a typical year
  5. Impoundments of otherwise jurisdictional waters
  6. Wetlands adjacent to jurisdictional waters

 WOTUS does NOT include

  1. Any feature not identified in the proposal as jurisdictional
  2. Groundwater
  3. Ephemeral features and diffuse stormwater run-off
  4. Ditches that are not defined as WOTUS
  5. Prior converted cropland
  6. Artificially irrigated areas that would revert to upland if irrigation stopped
  7. Artificial lakes/ponds constructed in upland that are not defined as WOTUS
  8. Water-filled depressions and pits created in upland incidental to mining or construction activity, and pits excavated in upland to obtain fill, sand or gravel
  9. Stormwater control features created in upland to convey, treat, infiltrate or store stormwater run-off
  10. Wastewater recycling structures constructed in upland
  11. Waste treatment systems

The proposed rule’s definition of WOTUS is significantly different from the definition of WOTUS under the CWR, and, as such, would significantly reduce the extent of federally regulated waters. …

January 11, 2019

Work It Out—Conflict Resolution for Business Owners

The Legal Intelligencer

(by Kevin K. Douglass)

Many closely-held business owners successfully ignore disagreements with co-owners for years or even decades. Understandably, there is always a more pressing and important business matter that merits immediate attention. Also, particularly in family-owned businesses, contentious issues may be “overlooked” to preserve family harmony. Unfortunately, issues that fester for years can suddenly and dramatically spiral out of control and result in expensive, harmful and sometimes embarrassing litigation. Even after litigation is threatened or commenced, or a controversy between owners otherwise escalates, business owners should remain open to the possibility of resolution through means other than litigation. These options, including mediation, are available for co-owners to address contentious issues quietly, economically and with dignity.

Recognizing There Is a Problem

A common refrain among business owners is that they were “blind-sided” when a co-owner turned aggressive, hired an attorney and began making demands that soon led to litigation. It can sometimes be difficult to pinpoint the underlying reasons for the disagreement and the triggering event that causes the controversy to bubble to the surface. This is especially true when owner animosity or even anger makes it more difficult to fully understand and resolve the underlying problem.

From a legal standpoint, even before a conflict arises, it is important to analyze the rights of each owner, including the terms of applicable agreements and documents (e.g., shareholder, partnership or operating agreements, employment agreements, buy/sell agreements, by-laws, minutes, confidentiality and noncompete provisions), as well as the statutory and common law rights each may have. It is not unusual for disgruntled owners to raise a myriad of complaints and claim damages for alleged injuries suffered directly by the owner or derivatively to the business itself. …

January 10, 2019

EPA and Army Corps Again Propose to Redefine ‘Waters of the United States’

The Legal Intelligencer

(by Lisa M. Bruderly)

On Dec. 11, the U.S. Environmental Protection Agency and Army Corps of Engineers (collectively, the agencies) released a long-awaited proposed rule that would redefine “waters of the United States” (WOTUS) under the Clean Water Act (CWA) and dramatically alter the federal government’s jurisdiction over surface water, including wetlands, throughout the United States. The Trump administration’s proposed rule is intended to replace the Obama administration’s 2015 rule defining WOTUS, known as the “Clean Water Rule” (CWR). The purpose of the 253-page proposed rule is to provide clarity, predictability and consistency in identifying federally regulated waters. The public comment period on the proposed rule will be open for 60 days after formal publication in the Federal Register.

Earlier WOTUS Actions by the Trump Administration

Since taking office, President Donald Trump has prioritized rolling back the CWR’s definition of WOTUS, which is widely regarded as expanding the scope of federal CWA jurisdiction. In February 2017, the president’s Executive Order 13778 directed the agencies to publish a proposed rule rescinding or revising the CWR and to consider defining WOTUS in a manner consistent with the narrower interpretation of WOTUS adopted in Justice Antonin Scalia’s plurality opinion in Rapanos v. United States, 547 U.S. 715 (2006). Scalia’s opinion limits WOTUS to include only relatively permanent, standing or flowing bodies of water. In contrast, the CWR relied heavily on Justice Anthony Kennedy’s concurring opinion in Rapanos, which adopted a “significant nexus” test for CWA jurisdiction. These actions and others by the Trump administration and related judicial decisions have resulted in the current, unique and confusing situation in which the CWR is enjoined in 28 states but in effect in 22 others, including Pennsylvania. …

January 2, 2019

Surviving PADEP and USEPA Environmental Inspections

PA Chamber™ Pennsylvania Environmental Laws and Regulations Guidebook
(by Colleen Grace Donofrio, Michael H. Winek and Chester R. Babst III)
This white paper describes a combined legal/technical approach to help companies minimize potential liabilities that can result from environmental inspections. This approach has been followed successfully by the authors and their clients at many industrial manufacturing facilities. The need for an organized response to enforcement efforts remains a high priority for facilities in light of the changing enforcement priority designations by the Pennsylvania Department of Environmental Protection (“PADEP”) and the U.S. Environmental Protection Agency (“USEPA”) and the potential severity of civil and/or criminal enforcement actions that can be initiated based on findings resulting from environmental inspections.
In order to survive a PADEP and/or USEPA inspection, facilities must: be prepared in advance of the inspection; fully participate in the inspection in a courteous, organized manner; and promptly follow up on the inspection results. Success largely depends on what facilities do during all three phases of the inspection process, not just during the on-site inspection phase itself. The magnitude of any proposed civil penalties can be greatly reduced by following the three-phased approach described in detail below and by applying as much effort, and in many cases more effort, into preparing for the inspection and on following up after an inspection as facilities do during the on-site inspection itself. Facilities are best prepared to survive an inspection if it is assumed that an inspection could occur at any time. In order to limit potential exposure arising from an environmental inspection, it is prudent to put a proactive plan in place today. Such a plan should include actions taken well in advance of receiving notification of an upcoming inspection, as well as actions to be taken during and immediately following the inspection. …

January 2, 2019

Financing for founders: A primer on SAFEs and their use in early-stage financing

Smart Business

(by Jayne Gest with Christian A. Farmakis)

In 2013, San Francisco seed accelerator Y Combinator created a Simple Agreement for Future Equity (SAFE), which can be used in lieu of a convertible note. SAFEs spread throughout the California investment community. Now they’re entering regions like Pittsburgh. Investors, however, haven’t always embraced SAFEs as a reasonable vehicle for seed investment. They may be hesitant or uncomfortable with them.

Christian A. Farmakis, shareholder and chairman of the board at Babst Calland, first encountered SAFEs a few years ago when making a personal investment.

“I didn’t know much about it at the time. I initially thought, ‘How is this different than a convertible note?’” he says. “I read it and thought: ‘If the investment goes well, I’m largely in the same position. If the investment doesn’t go well, I will never be repaid, but I never expected to be.’ So, I signed it.”

Smart Business spoke with Farmakis about what entrepreneurs and investors need to understand about SAFEs.

What are the similarities and differences between SAFEs and convertible notes?

A SAFE is essentially a warrant (a contractual right to purchase equity upon the occurrence of a future triggering event, like a later priced investment round), but with the purchase price paid upfront.

SAFEs are like convertible notes in many ways. They can (a) include a discount on the per share price — a 20 percent discount would provide the investor 125 shares rather than 100; (b) include a valuation cap, capping the investor dilution when the triggering event occurs; and (c) give pricing protection for early investors. Because both are early-stage investment vehicles, the price per equity unit is not determined because the company has no company valuation. …

January 2, 2019

Babst Calland Names Calfe, Cooper, Fortna and James Shareholders

PITTSBURGH, January 2, 2019 – Babst Calland recently named Meredith L. Calfe, Kate H. Cooper, Alana E. Fortna and Rachel E. James shareholders in the Firm.

Meredith Calfe, a member of the Firm’s Energy and Natural Resources Group, concentrates her practice on counseling oil and gas clients on mineral-related transaction matters, including title examination, due diligence and curative work.

Ms. Calfe is a 2009 graduate of the University of Pittsburgh School of Law.

Kate Cooper, a member of the Firm’s Corporate and Commercial Group, counsels for-profit and non-profit entities in connection with mergers, acquisitions and divestitures, and a broad range of general corporate matters, including business planning and structuring, commercial contracts, securities law matters and governance issues.

Ms. Cooper is a 2010 graduate, cum laude, of Boston College Law School.

Alana Fortna is a member of the Firm’s Litigation, Environmental, Employment and Labor, and Emerging Technologies groups. Ms. Fortna represents clients in complex commercial litigation with a focus primarily on environmental litigation, including large-scale cost recovery actions under CERCLA and state law statutes, actions seeking injunctive relief under RCRA, and citizens’ suits brought under various federal statutes and regulatory programs. She also leverages her litigation experience to help companies and other entities with emerging technologies strike a balance between innovation and risk management.

Ms. Fortna is a 2010 graduate, magna cum laude, of Duquesne University School of Law.

Rachel James, a member of the Firm’s Energy and Natural Resources Group, represents energy clients on oil, gas and mineral-related transaction matters, including title examination, due diligence activities, curative work and the acquisition and disposition of oil and gas fee and leasehold assets. …

January 1, 2019

Oil and Gas Development in West Virginia Involving Unknown or Unleased Parties

Institute for Energy Law Oil & Gas E-Report

(by Joshua F. Hall, Nikolas Tysiak and Jason Zoeller)

West Virginia law presents unique challenges regarding jointly owned property in situations where a minority owner cannot be identified, is not available or refuses to join in the leasing of oil and gas. It is not uncommon for oil and gas rights in West Virginia to be owned by members of the same family for several generations, and the result is that an operator may need to approach multiple parties to lease a single parcel. Historically, West Virginia law has placed strict requirements on a lessee in leasing cotenants and required the consent of all parties before oil and gas operations could commence. However, when leasing all cotenants in an oil and gas property is not feasible, there are several statutory options available in West Virginia that may provide relief to an operator, including a new Cotenancy Modernization and Majority Protection Act that was passed this year.

For the full article, click here.

For the full report, click here.

December 20, 2018

Municipal Regulation of Agricultural Operations in Pennsylvania

The Legal Intelligencer

(by Blaine A. Lucas and Alyssa E. Golfieri)

Pennsylvania municipalities are “creatures of the state” and thus may only exercise those powers expressly and implicitly delegated to them by the General Assembly. One area in which municipalities have been delegated authority is the regulation of land uses. The Pennsylvania Municipalities Planning Code, 53 P.S. Section 10101 et seq., establishes the framework for zoning and subdivision and land development regulation in Pennsylvania. However, a municipality’s powers are not without limitation. The General Assembly, by statute, has constrained the manner and degree to which municipalities can regulate certain types of land use. The Pennsylvania Right-to-Farm Act, 3 P.S. Section 951 et seq., (RTFA) and the Pennsylvania Agricultural, Communities and Rural Environment Act, 3 Pa.C.S. Section 311 et seq., (ACRE) are two such examples.

The RTFA was enacted in 1982 for the purpose of limiting the circumstances under which “normal agricultural operations” may be the subject matter of nuisance suits and zoning regulations. Specifically, the RTFA mandates that every municipality regulating a public nuisance exempt from its scope “normal agricultural operations” as long as the operations do not have a “direct adverse effect on the public health and safety.” It also requires municipalities to permit the direct sale of agricultural commodities on property owned and operated by a landowner who produces 50 percent or more of the commodities sold, regardless of applicable zoning regulations.

In 2005, the General Assembly recognized that owners and operators of normal agricultural operations needed a cost and time efficient way to challenge local regulatory actions running afoul of the RTFA and, in response, enacted ACRE. ACRE provides a means for those engaged in these activities to challenge and seek the invalidation of unauthorized ordinances or enforcement actions related to those ordinances. …

December 18, 2018

U.S. EPA and Army Corps Propose Redefining “Waters of the United States” Under the Clean Water Act

Environmental Alert

(by Lisa M. Bruderly and Gary E. Steinbauer)

Last week, the U.S. Environmental Protection Agency and Army Corps of Engineers (collectively, the Agencies) released a long-awaited proposed rule that would redefine “waters of the United States” (WOTUS) under the Clean Water Act (CWA) and dramatically alter the federal government’s jurisdiction over surface water, including wetlands, throughout the U.S. The proposed rule is part of the Trump administration’s efforts to rescind a 2015 rule defining WOTUS, known as the “Clean Water Rule” (CWR), that was promulgated by the Agencies during the Obama administration and to provide clarity, predictability and consistency in identifying federally regulated waters. The public will have 60 days to comment once the new proposed definition of WOTUS is published in the Federal Register. This Alert provides an overview of the 253-page proposal, identifies some of the key proposed changes, and discusses opportunities to comment on the proposed new definition of WOTUS and other questions posed by the Agencies.

Relevant Background

Since taking office, President Donald Trump has prioritized rolling back the CWR’s definition of WOTUS, which is widely regarded as expanding the scope of the federal government’s jurisdiction under the CWA. In February 2017, the president signed Executive Order 13778 directing the Agencies to review the CWR’s definition of WOTUS and to publish a proposed rule rescinding or revising the CWR. The Order also directs the Agencies to consider defining WOTUS in a manner consistent with the narrower interpretation of WOTUS adopted in Justice Antonin Scalia’s plurality opinion in Rapanos v. United States, 547 U.S. 715 (2006). Justice Scalia’s opinion limits WOTUS to include only relatively permanent, standing or flowing bodies of water. …

December 12, 2018

Comment period ending for EPA’s proposal to reconsider key parts of methane rule

The PIOGA Press
(by Meredith Odato Graham and Gary E. Steinbauer)
In 2016, the U.S. Environmental Protection Agency finalized a rule that established first-time federal standards for methane emissions from new, modified, and reconstructed sources in the oil and gas industry. The so-called new source performance standards (NSPS) at 40 C.F.R. 60, Subpart OOOOa (Subpart OOOOa), have since become the subject of considerable debate and litigation. Consistent with the Trump administration’s other deregulatory efforts, EPA published a proposal in the Federal Register in October that aims to reduce the Subpart OOOOa regulatory burden for industry.
EPA estimates that the proposed improvements to the rule could save industry tens of millions of dollars in compliance costs each year. EPA held a public hearing in November and is accepting stakeholder comments through December 17.
Significant changes to applicable requirements
The 52-page rulemaking notice describes several proposed amendments to Subpart OOOOa. EPA is addressing certain issues that were presented to the agency in formal petitions for reconsideration, as well as “other implementation issues and technical corrections” brought to the agency’s attention after Subpart OOOOa was promulgated. For example, it is proposing significant changes to the requirements for fugitive emissions components, including revised leak monitoring frequencies. Whereas the current regulation subjects well sites to semiannual leak monitoring, the revised Subpart OOOOa would require monitoring every other year for low production well sites and annually for all other well sites. The required frequency of compressor station monitoring would be reduced from quarterly to either semiannual or annual. (The proposal includes distinct monitoring requirements for well sites and compressor stations on the Alaska North Slope.) EPA also is proposing to reduce the schedule for repairing leaks from 30 to 60 days. …

November 30, 2018

Sincerely Held Secular Beliefs Do Not Qualify for Religious Exemption From Flu Shot Policy

The Legal Intelligencer
(by Stephen A. Antonelli)
It’s that time of year again. The days are getting shorter, the weather is getting colder, and families are starting to think about the menu for their Thanksgiving dinners.
And I still haven’t gotten my flu shot.
It’s on my to-do list, I promise. It’s not that I don’t like going to the doctor, or that I am particularly afraid of needles, but when it comes to the flu shot, for some reason, I tend to procrastinate. Some employees who work in the health care industry do not have the option of procrastinating when it comes to getting a flu vaccine because their employer requires them to be vaccinated.
The Center for Disease Control (CDC), the Advisory Committee on Immunization Practices (ACIP), and the Healthcare Infection Control Practices Advisory Committee (HICPAC) recommend that all U.S. health care workers get vaccinated annually against influenza. This recommendation applies to physicians, nurses, nursing assistants, therapists, technicians, emergency medical service personnel and anyone potentially exposed to infectious agents that can be transmitted to and from health care workers and patients. As a result, many health care employers require their employees to get vaccinated annually.
Employers that mandate flu vaccinations should be sure to allow employees to request exemptions to their flu shot policies for medical reasons, including but not limited to, allergies to the vaccine or its components or a history of Guillain-Barré syndrome. Employers should also allow an exemption to employees with sincerely held religious beliefs that conflict with receiving the vaccination. Employers may then require employees who have been granted an exemption to wear a mask when interacting with patients or coworkers. Not surprisingly, mandatory flu vaccinations policies have been the subject of litigation, including several cases filed by the Equal Employment Opportunity Commission  (EEOC). …

November 30, 2018

Paving the Way for Autonomous Vehicles

TriState Infrastructure Summit 
On Tuesday, November 27, 2018, 160 industry and public sector representatives attended the 2018 TriState Infrastructure Summit, presented by the TriState Infrastructure Council and its partners, at the Regional Learning Alliance in Cranberry Township, Pa.  The Summit addressed transportation and infrastructure needs in the Ohio River Valley integral to the petrochemical industry and related economic growth in the region.
Stan Caldwell, CMU Executive Director of Traffic21 and Mobility21 participated with Justine Kasznica of law firm Babst Calland’s Mobility, Transport and Safety practice on the panel Paving the Way for Autonomous Vehicles hosted by Babst Calland.  The presentation included a discussion about autonomous vehicles in the broader context of infrastructure design and development, and issues related to urban infrastructure and research and advancements in mobility technologies.
O. Chris Jackson, Production Unit Manager for Logistics, Shell Polymers, Pennsylvania, was the keynote speaker for the event on Regional Transportation and Infrastructure Considerations for a World Class Petrochemical Complex.
For more information, including a complete agenda for the TriState Infrastructure Summit, click here.

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