June 23, 2016

Babst Calland Regulatory Update for Drillers & Midstreamers

Marcellus Drilling News

The legal beagles of top energy law firm Babst Calland recently released their sixth annual energy industry report called, “The 2016 Babst Calland Report – An Unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead; Legal and Regulatory Perspective for Producers and Midstream Operators.” This annual review of energy and natural resources development activity acknowledges the continuing evolution of this industry in the face of economic, regulatory, legal and local government challenges. In an MDN exclusive, we have the first six pages of the 68-page report (see below), along with details on how you can request a full copy. Worth the read!…

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June 23, 2016

The Aliso Canyon Effect: Underground Gas Storage Incident Influences Pipeline Safety Reauthorization

Pipeline Safety Alert

On June 22, 2016, President Obama signed into law the “Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016” (PIPES Act, S.2276). The PIPES Act reauthorizes the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) federal pipeline safety program through fiscal year 2019, provides PHMSA with significant new authority, and requires the agency to prioritize the completion of outstanding mandates from the previous reauthorization in 2011. Of note, the PIPES Act requires PHMSA to develop underground gas storage standards, provides PHMSA with significant new authority to issue industry-wide emergency orders, and requires PHMSA to update its regulations for Liquefied Natural Gas (LNG) facilities. Babst Calland’s Pipeline and HazMat Safety team provides the following observations on these key provisions.

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June 21, 2016

Understanding rights, opportunities as a creditor or asset purchaser in bankruptcy proceedings

The PIOGA Press

This article is an excerpt of the 2016 Babst Calland Report – “An unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead. Legal and Regulatory Perspective for Producers and Midstream Operators.

In 2015, 42 North American oil and gas exploration and production companies filed for bankruptcy protection.  At least another 29 have filed in 2016, and continuing price pressure may result in more bankruptcy filings.  Given this state of affairs, companies operating in the oil and gas sector should understand how their rights and obligations are affected when their contractual counterparties become bankruptcy debtors, and how to take advantage of business opportunities presented through the bankruptcy process.

Assumption or Rejection of Contracts

One of the main purposes of the Bankruptcy Code is to afford a commercial debtor the opportunity to rehabilitate and reenter the stream of commerce as a productive enterprise.  One tool afforded to debtors is the right under Section 365 of the Bankruptcy Code to determine which of its “executory contracts” dating from prior to the bankruptcy filing are beneficial, and which are burdensome, and to reject those that are burdensome, thereby relieving the debtor of the obligation to perform burdensome contracts going forward.  The Bankruptcy Code does not define the term “executory contract,” but the term is generally understood to encompass those contracts where the obligations of both parties are unperformed to the degree that the failure of either party to complete performance would constitute a material breach.  Section 365 also permits a debtor to reject its unexpired leases.

The question of whether a debtor can reject particular sorts of contracts can hinge on issues determined under state law.  More specifically, the treatment of oil and gas leases, gathering agreements and transportation agreements can vary, depending on the treatment of those agreements under the state law governing those agreements. …

June 21, 2016

Federal Regulatory Eyes New Rules for Gas Gathering Lines

Pipeline & Gas Journal

The department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency charged with administering the nation’s pipeline safety program, published a long-awaited notice of proposed rulemaking (NPRM) for gas transmission and gathering pipelines

Under development for more than four years, the NPRM proposes significant changes to PHMSA’s safety standards for gas pipeline facilities in 49 C.F.R., Part 192. Of particular importance to the upstream and midstream sectors, the NPRM includes a proposal to modify the federal safety standards for onshore gas gathering lines in four significant ways.

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June 21, 2016

Managing Our Production Potential

West Virginia Executive

Located in the heart of the Appalachian Basin, at the crossroads of the Marcellus and Utica shales, West Virginia sits atop one of the world’s most prolific deposits of hydrocarbons. Recent technological advances, particularly the emergence of horizontal drilling and hydraulic fracturing, have left the oil and gas industry well positioned to develop these resources for decades to come. However, the use of advanced drilling techniques is only the first step in the commercial development of these energy products. A safe and efficient transportation network is necessary to move hydrocarbons from production areas to end users.

Data compiled by the U.S. Department of Transportation and the results of several studies confirm that pipelines are generally the safest and most effective means of transporting the country’s energy products, particularly when compared to other modes of transport. According to the American Gas Association, the natural gas industry spends more than $20 billion annually to ensure the safety of the more than 2.5 million miles of gas pipelines located in the United States. The American Petroleum Institute and Association of Oil Pipe Lines report that the liquids pipeline industry spends at a similar rate—more than $2 billion annually— to maintain the integrity of the nation’s nearly 200,000 miles of pipeline that transport crude oil, natural gas liquids (NGLs) and other petroleum products.

Recognizing that safety is a shared responsibility, the pipeline industry works closely with the Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency that regulates the safety of this vast and growing network of pipelines. The PHMSA’s primary charge is to establish and enforce minimum federal safety standards for pipeline facilities. It also administers a certification program that allows state authorities to regulate certain kinds of pipelines within their jurisdictions. …

June 17, 2016

South Fayette battles over ordinance despite low demand for gas rights

Pittsburgh Post-Gazette

No one wants to drill for oil and gas in South Fayette anymore.

That’s not part of a new settlement that aims to put to bed a years-long conflict between the township and a group of landowners who felt South Fayette was trying to exclude drilling from its borders.

But it’s a loud unsaid.

The low price of natural gas has likely dampened the appetite of Range Resources, the Texas-based shale operator that once leased land from the Kosky family and their business interests, and of the landowners who continue to spend hundreds of thousands of dollars fighting the township.

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June 16, 2016

The 2016 Babst Calland Report – An Unprecedented Time for the Oil & Gas Industry: Price Down, Supply Up, Reform Ahead; Legal and Regulatory Perspective for Producers and Midstream Operators

Babst Calland released its sixth annual energy industry report

June 9, 2016

Your Company’s “TO DO” List for Chemical Substances Regulation and Compliance

Administrative Watch

Now that the House of Representatives has passed Toxic Substances Control Act (TSCA) reform legislation, which is the Frank R. Lautenberg Chemical Safety for the 21st Century Act (H.R. 2576), on May 24, 2016 followed by Senate passage on June 7, 2016, the reconciled legislation is finally on its way for President Barack Obama’s signature. The president is expected to quickly sign it. So what does this mean for your company? Although this is by no means complete, here is a “to do” list to frame your company’s TSCA reform efforts.

1. PROMOTE SOUND SCIENCE: Take advantage of public comment opportunities for your company and its scientific and legal advisors to weigh in on the USEPA’s Year 1 mandate to establish a risk-based chemical screening process and criteria for designating chemicals as low or high priority substances, as well as guidance for submitting risk assessments through the new chemical review PMN process. In preparing comments, look to USEPA’s 2014 TSCA Work Plan as an indicator of what USEPA’s work product is likely to look like and consider weaving in real world examples of sound and proven risk assessment methodologies. The TSCA Work Plan program is the USEPA’s current blueprint for conducting safety assessments, prioritizations, and risk management evaluations. So the USEPA is likely to build upon what it has already developed. Many non-rulemaking policies, procedures, and guidance must also be reviewed, revised as warranted or newly developed by the end of Year 2 so do not miss comment opportunities as they arise.

2. LOOK FOR DATA GAPS: Because all new and existing chemical substances actively being made, sold and/or distributed will ultimately be evaluated/re-evaluated by the USEPA under the risk evaluation standards that are developed, now is a good time for your company to look at the existing/available exposure data and develop new data for any information gaps. …

June 7, 2016

Roadblocks present for pertrochemical expansion in region

Pittsburgh Tribune Review

Attracting companies such as Royal Dutch Shell to build their petrochemical plants along the Ohio River was the easy part, as far as Keith Burdette is concerned.

The challenge will come in accommodating a related manufacturing complex that officials in three states hope to establish around ethane crackers, said Burdette, executive director of the West Virginia Development Office.

“We’re not trying to build a facility anymore. We’re trying to build an industry,” he told several hundred people Monday at a petrochemical conference in Downtown Pittsburgh. “Building an industry is a lot more complicated.”

As Shell prepares to start construction of a multibillion-dollar facility in Beaver County, and two other companies weigh building crackers in Ohio and West Virginia, officials at the conference said they must make sure the region has the infrastructure, workforce and real estate that the industry needs to expand.

“We have to work that much harder with respect to what our next steps are,” said Dennis Davin, secretary of Pennsylvania’s Department of Community and Economic Development.

Shell this month said it made the decision to go ahead with construction, nearly five years after it started looking in the region. The cracker, which will convert ethane liquids from Marcellus shale wells to the building blocks of plastics, is expected to attract manufacturers interested in using its products.

Davin said those companies will need a place to build.

“Our issue right now is that in Western Pennsylvania … we don’t have enough construction-ready sites for things that we know are going to happen in follow-on investment from this,” he said. “We know that there are going to be plastics manufacturers, fertilizer manufacturers … and downstream companies that are going to look for sites.”

As his boss, Gov. …

June 2, 2016

Court: Oil and Gas Operations Compatible with Agricultural Uses

The Legal Intelligencer

Editor’s note: The authors represented Cardinal before the township, trial court and Commonwealth Court.

On Jan. 7, the Pennsylvania Commonwealth Court rendered a decision in Kretschmann Farm v. Township of New Sewickley, 2016 Pa. Commw. LEXIS 33 (Pa. Commw. 2016), which addressed the heated debate over the compatibility of oil and gas operations and agricultural uses.

In 2014, Cardinal PA Midstream, (Cardinal) applied to the board of supervisors of New Sewickley Township, Beaver County for conditional use approval to construct and operate a natural gas compressor station in the township’s A-1 agricultural district. Pursuant to the township’s zoning ordinance “compressor station” is permitted as a conditional use in the A-1 agricultural district, provided that the use meets certain express standards and criteria.

The township board of supervisors held a public hearing on Cardinal’s application, during which Cardinal presented testimony on: (1) its experience in the natural gas industry; (2) its operations; (3) compliance with the zoning ordinance’s express standards and conditions; (4) review and approval by the Pennsylvania Department of Environmental Protection of its erosion and sediment control plan and air permit; (5) incorporation of landscaping to block the site’s visibility from neighboring landowners and roads; (6) conformity to the township’s noise standards; (7) proposed driveway construction, traffic generation and road improvements.

Adjacent property owners, who operate an organic farm, and others opposed Cardinal’s application. During the public hearing, the property owners expressed concern over potential impacts of the compressor station on their produce, water and air, and the compatibility of natural gas drilling operations with agricultural uses. Township residents also expressed concern over the potential placement of pipelines in the township, light pollution from flares, the compatibility of compressor stations with uses in residential/agricultural areas, and the potential long-term effects of emissions generated by oil and gas operations. …

June 1, 2016

U.S. Supreme Court Finds Clean Water Act Jurisdictional Determinations Reviewable

Administrative Watch

On May 31, 2016, the Supreme Court of the United States unanimously ruled in U.S. Army Corps of Engineers v. Hawkes Co. that approved jurisdictional determinations (JDs) issued by the U.S. Army Corps of Engineers (USACE) under the federal Clean Water Act are final agency actions subject to judicial review. Like the Court’s 2012 landmark opinion in Sackett v. EPA (finding that an Administrative Order to Comply is immediately appealable), the Hawkes decision effects a fundamental change in the framework for addressing jurisdictional disputes under the statute.

The Clean Water Act regulates the discharge of pollutants into “waters of the United States,” imposing substantial criminal and civil penalties for unpermitted discharges. Because it is often difficult for an owner to determine whether a specific parcel contains jurisdictional waters, the USACE issues two types of JDs on a case-by-case basis. “Preliminary” JDs are expressly non-binding, merely advising a property owner that jurisdictional waters may be present on a parcel. “Approved” JDs, on the other hand, convey the Corps’ definitive position as to the presence or absence of jurisdictional waters. Moreover, the USACE and the U.S. Environmental Protection Agency (USEPA) are parties to a Memorandum of Agreement (MOA) that makes Approved JDs binding on both agencies for five years.

In Hawkes, the plaintiffs received an Approved JD that found a peat wetland (that plaintiffs sought to mine) constituted jurisdictional waters because of its “significant nexus” to the Red River of the North, located some 120 miles away.  …

May 26, 2016

Federal Court Invalidates Portions of a Pennsylvania Local Ordinance

OOGA Bulletin

On October 14, 2015, the United States District Court for the Western District of Pennsylvania invalidated several sections of a Grant Township, Indiana County, Pennsylvania local ordinance that was enacted to prevent an oil and gas operator from operating an underground injection well that had been permitted by the United States Environmental Protection Agency. In Pennsylvania General Energy Company, L.L.C. v. Grant Township, Civil Action No. 14-209, 2015 U.S. Dist. LEXIS 139921 (W.D. Pa. Oct. 14, 2015), Pennsylvania General Energy Company, L.L.C. filed a complaint in federal court against Grant Township to challenge the constitutionality, validity and enforceability of a Grant Township ordinance that sought to establish a self-described Community Bill of Rights Ordinance (the Ordinance).

PGE drills for and produces natural gas in Grant Township and other municipalities in Pennsylvania. PGE took steps to reclassify an existing vertical gas well located in Grant Township as an underground injection well.  As background, in Pennsylvania, most produced fluid from natural gas operations, particularly unconventional operations, is recycled by using it down-hole to complete other wells.  Produced fluid that is not recycled is commonly treated at centralized wastewater treatment facilities or injected into permitted disposal wells.  Most of the injected material is brine and other produced fluid that returns to the surface after drilling and during operation of a well.  However, there are many fewer commercial and captive injection wells in Pennsylvania than there are in Ohio at this time.

In Pennsylvania, EPA is responsible for implementing the Underground Injection Control Program under the federal Safe Drinking Water Act, and for regulating the construction, operation, permitting, and closure of injection wells.  When reviewing a UIC permit application, EPA evaluates whether the proposed injection will protect underground sources of drinking water from the subsurface injection of fluids.  …

May 25, 2016

ACCESS ACT to be heard in House subcommittee

West Virginia Record

WASHINGTON, D.C. — The House Judiciary Committee’s Subcommittee on Constitution and Civil Justice will be holding a hearing today on the ACCESS (ADA Compliance for Customer Entry to Stores and Services) Act, which aims to protect small businesses from the widespread abuse of the Americans with Disabilities Act (ADA).

Congressman Ken Calvert (R-CA), who is sponsoring the bill, will testify before the committee in support of the bill he says will help prevent plaintiffs’ lawyers from “trying to enrich themselves on the backs of the disabled.”

The ACCESS Act, also known as H.R 241, would require an aggrieved person to notify a business of an ADA violation in writing, and give the business owner 60 days to provide the aggrieved individual a detailed description of improvements to remedy the violation. Then, the owner would have 120 days to remove the infraction. Failure to meet these conditions would be grounds to further the lawsuit.

Calvert told the West Virginia Record that as a property owner himself, he has had to deal with complaints from people who find minor discrepancy in a building or in following the regulations, and instead of being given time to correct the infraction, owners get slapped with lawsuits and “lawyers get rich.”

“We all want to have access (for) the disabled, we just don’t want to make this an excuse for lawyers to sue small business owners,” he said. “Nobody is objecting to making sure that we have access for the disabled.”

Calvert said some of the infractions are very minor, like not having a sign in the right location or neglecting to paint a line in the right way.

Instead of rushing to file lawsuits, Calvert said business owners should be given an opportunity to fix infractions and comply with the law. …

May 25, 2016

Proposed Rule Impacts Gas Gathering

American Oil & Gas Reporter

WASHINGTON–A pipeline safety regulation published in April by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration goes beyond traditional natural gas transmission to have serious implications for onshore gas gathering.

PHMSA published its long-awaited notice of proposed rule making for natural gas transmission and gathering pipelines on April 8. Under development for more than four years, the NOPR proposes significant changes to the regulations for gas pipeline facilities in 49 CFR Part 192, including regulations for onshore gas gathering lines.

Adopted a decade ago, the current regulations rely, in large part, on American Petroleum Institute Recommended Practice 80, Guidelines for the Definition of Onshore Gas Gathering Lines, which is a voluntary consensus standard for classifying onshore production operations and gas gathering lines. Current regulations contain an exemption for gas gathering lines in rural, Class 1 locations–i.e., areas where 10 or fewer buildings intended for human occupancy are located in the vicinity of a gathering line.

The NOPR proposes to change these regulations by:
• Modifying the requirements for determining whether a pipeline qualifies as an onshore gas gathering line;
• Applying portions of the Part 192 regulations to certain previously unregulated Class 1 gas gathering lines; and
• Applying federal reporting requirements to all gas gathering lines (whether regulated or not).

May 24, 2016

Robert M. Stonestreet presents proposed changes by WV DEP governing classification of state waters

Robert M. Stonestreet served as a panelist addressing environmental regulatory reform issues in Charleston at the West Virginia Chamber of Commerce Environmental and Energy Conference on May 24, 2016. The panel provided an overview and evaluation of recent revisions to West Virginia’s regulatory programs along with ideas for additional changes to further improve the programs. Robert’s presentation focused on changes to further improve the programs. Robert’s presentation focused on changes proposed by the West Virginia Department of Environmental Protection to the policy and procedure governing classification of state waters as drinking water sources, and how those proposed changes will affect the regulated community.

The Environmental and Energy Conference is the most comprehensive, informative and practical seminar on the significant state, regional and national issues that may affect operations and business activities in the state of West Virginia. The day-long event is well attended by professionals from almost every segment of the regulated and energy-production community.

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