July 5, 2014

The Pennsylvania Commonwealth Court Invalidates Additional Provisions of Act 13

Administrative Watch

Last week, the Pennsylvania Commonwealth Court issued an opinion invalidating additional sections of Act 13 of 2012, Pennsylvania’s comprehensive overhaul of the former Oil and Gas Act. The cumulative effect of this ruling, combined with the Pennsylvania Supreme Court’s previous landmark decision in December 2013, is that all of Chapter 33 of Act 13 has been declared invalid, with the exception of the definitions section (Section 3301) and most of the updated version of the former Oil and Gas Act preemption provision (Section 3302). Local zoning matters relating to oil and gas will “now be determined by the procedures set forth under the [Municipalities Planning Code (MPC)] and challenges to local ordinances that carry out a municipality’s constitutional environmental obligations,” and the Commonwealth Court and the Pennsylvania Public Utility Commission (PUC) no longer have the authority to review local ordinances for compliance with Act 13 and to withhold well fees where ordinance defects are found. On the other hand, the Commonwealth Court rejected challenges to Act 13’s provisions regarding disclosure of spills, the identity and amount of hydraulic fracturing additives and the exercise of eminent domain for gas storage purposes.

The Remand

In its December 2013 opinion, the Pennsylvania Supreme Court invalidated two key provisions of Act 13 addressing the uniformity of and limitations on municipal ordinances, specifically Section 3303, regarding consistency with environmental acts, and Section 3304, which identified multiple ways in which municipal ordinances had to provide for the “reasonable development of oil and gas resources.” In addition, the Supreme Court remanded a number of issues to the Commonwealth Court for further consideration. The issues addressed by the new Commonwealth Court opinion were: (1) whether Section 3302 and Sections 3305 through 3309 of Act 13 were so intertwined with Section 3303 and Section 3304 that they were not “severable” and therefore also had to be invalidated; …

June 10, 2014

Municipalities Can’t Treat Methadone Facilities Differently From Clinics; Land Use and Planning

The Legal Intelligencer

In 1999, the Pennsylvania General Assembly amended the Municipalities Planning Code (MPC), 53 P.S. §10101 et seq., to establish statewide zoning regulations for methadone treatment facilities. Section 621 of the MPC, 53 P.S. § 10621, essentially prohibited a methadone treatment facility from being located within 500 feet of an existing school, public playground, public park, residential housing area, child care facility, church, meetinghouse, or other place of worship established prior to the proposed methadone treatment facility. Section 621 also authorized a municipality to permit, in its discretion, the establishment and operation of a methadone treatment facility within this established 500-foot spatial restriction so long as the municipality conducted a public hearing on the proposed request and provided prior written notice of the hearing to adjacent property owners.

In 2007, the U.S. Third Circuit Court of Appeals ruled in New Directions Treatment Services v. City of Reading, 490 F.3d 293 (3rd Cir. 2007), that the MPC’s methadone treatment facility restrictions violated Title II of the Americans with Disabilities Act, 42 U.S.C. §12131 et seq., and the federal Rehabilitation Act, 29 U.S.C. §701 et seq. In New Directions, the operator of a methadone clinic sought to open a new treatment center in an area of the city interspersed with private residences. Only three lots within the city complied with the MPC’s methadone treatment facility location-based restrictions; the property leased by the operator did not. After holding a series of public hearings, the city council denied the operator’s application based on Section 621 of the MPC. The operator and individual methadone patients filed suit in the U.S. District Court for the Eastern District of Pennsylvania, raising both constitutional and federal statutory claims. …

June 5, 2014

Federal Court Rejects USEPA’s Attempt to Limit Summit Ruling to Sixth Circuit

Administrative Watch

The U.S. Court of Appeals for the District of Columbia Circuit has vacated a USEPA memorandum aimed at limiting the reach of Summit Petroleum Corp. v. USEPA, (6th Cir. Aug 7, 2012), a case which condemned USEPA’s use of a functional interrelationship test in making single source determinations for air permitting. In Summit, the Sixth Circuit Court found that the regulatory term “adjacent” unambiguously relates only to physical proximity, and that USEPA’s contrary interpretation, which evaluated the functional interrelatedness of emission sources to determine whether they were adjacent, was inconsistent with both the plain meaning of the federal Clean Air Act (CAA) regulations and their history.

Following the Summit ruling, in December 2012, the USEPA Office of Air Quality Planning and Standards issued a memorandum (known as the “Summit Directive” or “Directive”) to all Regional Air Division Directors and Air Program Managers advising that, in the Sixth Circuit states of Michigan, Ohio, Tennessee and Kentucky, USEPA permitting officials “may no longer consider interrelatedness in determining adjacency when making source determination decisions.” With respect to regions of the country beyond the Sixth Circuit, however, the Summit Directive specified that agency officials would continue to consider functional interrelatedness in making source determinations.

A petition for review of the Summit Directive was filed shortly thereafter with the D.C. Circuit Court by a non-profit trade association representing resource extraction and manufacturing companies. The National Environmental Development Association’s Clean Air Project (NEDA/CAP) argued that the Directive violated CAA and regulatory provisions requiring national uniformity when administering CAA programs. NEDA/CAP also argued that the Directive resulted in a competitive disadvantage for member companies located outside of the Sixth Circuit, where USEPA would continue to rely on vague notions of functional interrelatedness to aggregate emission sources and thus require major source permitting. …

June 5, 2014

Supreme Court Narrows CERCLA Preemption of State Limits on Tort Claims

Administrative Watch

In an opinion strictly interpreting the statutory text of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the U.S. Supreme Court limited the scope of a CERCLA provision that is designed to extend state law claims for personal injury or property damage resulting from hazardous substance contamination. Although the case may have limited practical application because of the relatively unique nature of the North Carolina law involved, the Supreme Court’s decision in CTS Corp. v. Waldburger has the effect of cutting off the plaintiffs’ claims for injuries allegedly caused by decades-old contamination.

As background, Congress enacted Section 9658 of CERCLA in 1986 to protect plaintiffs from having their personal injury or property damage claims prematurely extinguished by operation of state statutes of limitation. Under the “discovery rule” established by Section 9658, state statutes of limitation will not begin to run until a plaintiff discovers (or reasonably should have discovered) that the claimed harm was caused by contamination. Any state statute that holds otherwise is preempted by CERCLA.

In CTS, the Supreme Court was asked whether Section 9658, which by its express terms preempts conflicting state statutes of limitations, also preempts state statutes of repose. Although statutes of limitations and statutes of repose both may operate to prohibit a plaintiff from bringing a claim based on the passage of time, the two policies have distinct purposes. A statute of limitations requires a plaintiff to file a lawsuit within a certain timeframe after the claim arises in order to limit stale claims where evidence and witnesses may have been lost. On the other hand, a statute of repose represents a legislative policy decision that a defendant should be free from liability after a certain time (i.e., a “hard stop” to tort liability). …

April 15, 2014

Billboard Regulation: Proceed With Caution; Land Use and Planning

The Legal Intelligencer

Over the past several decades, as they have become increasingly common and conspicuous, billboards also have become a source of land use litigation in both state and federal courts. The legal issues implicated by their regulation are broad, and include First Amendment and exclusionary zoning claims. As a result, local governments seeking to control the location and style of billboards must be sure to navigate carefully when weighing a landowner’s or an advertising company’s interests against those of the general public.

Most recently, on Feb. 11, 2013, the U.S. Court of Appeals for the Third Circuit rendered a decision in Interstate Outdoor Advertising v. Mount Laurel, 706 F.3d 527 (3rd. Cir. 2013), which upheld a New Jersey municipality’s zoning ordinance banning billboards. There, a billboard company challenged the ordinance because it prohibited commercial and non-commercial billboards in the township, asserting that it violated free speech guarantees under the First Amendment to the U.S. Constitution. The court disagreed, and found that the township sufficiently justified the ban with a report from the township engineer reviewing 37 articles on billboard and traffic safety and the township planner’s testimony that the ban preserved the “billboard-free aesthetic charm and character of the area.”

In upholding the ordinance, the Third Circuit cited the U.S. Supreme Court’s 1981 ruling in Metromedia v. San Diego, 453 U.S. 490 (1981), which expressed deference to local lawmakers and reviewing courts regarding billboard impacts and ultimately upheld San Diego’s ban on off-site commercial advertising based on traffic and safety concerns. The Third Circuit demonstrated similar deference by holding that Mount Laurel’s ordinance was a reasonable means of achieving the town’s substantial interests in traffic safety and aesthetics.

Despite the Third Circuit’s decision in Mount Laurel, Pennsylvania municipalities should proceed with caution when considering similar regulations. …

April 5, 2014

RACT Rulemaking Expected to Impact Major Sources of NOx and VOC Emissions in Pennsylvania

Administrative Watch

Proposed regulatory amendments published on April 19, 2014 are likely to affect hundreds of facilities in Pennsylvania. The Pennsylvania Department of Environmental Protection (PADEP) has estimated that 141 sources will need to install additional pollution control equipment under the proposal. In addition, environmental advocacy groups began criticizing the rule as being too lenient even before it was published.

The Pennsylvania Environmental Quality Board published proposed amendments to PADEP regulations in 25 Pa. Code Chapters 121 and 129 (relating to general provisions; standards for sources). The proposed rule would require all major stationary sources of nitrogen oxides (NOx) or volatile organic compound (VOC) emissions, or both, to apply “reasonably available control technology” (RACT). NOx and VOC controls are required because the Commonwealth is located in the Northeast Ozone Transport Region.

The proposed rule would establish presumptive RACT for nine source categories: combustion units; boilers; process heaters; turbines; engines; municipal solid waste landfills; municipal waste combustors; cement kilns; and other sources that are not regulated elsewhere under Chapter 129. Facility owners and operators would be required to either meet the presumptive RACT emission limitations and requirements or negotiate alternative requirements with PADEP.

The Pennsylvania Environmental Quality Board will hold three public hearings on the RACT proposal in May 2014. Public comments will be accepted until June 30, 2014. If you own or operate a major stationary source of NOx or VOC emissions, or both, your facility is likely to be affected by this rulemaking. For additional information regarding compliance options, please contact Michael H. Winek at (412) 394-6538 or mwinek@babstcalland.com, or Meredith Odato Graham at (412) 773-8712 or mgraham@babstcalland.com.

Click here for PDF.

 

February 5, 2014

EPA Issues Rule to Create e-Manifest System

Administrative Watch

On January 13, 2014, the United States Environmental Protection Agency (EPA) released a final rule that will allow entities to complete manifest forms required under the Resource Conservation and Recovery Act (RCRA) through a computer-based e-Manifest system hosted by EPA. The rule will offer hazardous waste handlers an efficient alternative to the current time-consuming paper manifest forms. However, generators who want to use the system will be charged user fees and must ensure that all downstream waste handlers also agree to use the system. Entities will still be allowed to use paper manifest forms on an interim basis, which must be sent to EPA for manual entry into the e-Manifest system once it is developed.

The e-Manifest Alternative
The new e-Manifest forms will carry the same legal force as the paper forms, and individual states cannot require paper forms to be completed if the e-Manifest system is used. There are several issues that handlers should be aware of when using the e-Manifest system:

• to use the e-Manifest system, the rule requires all entities in the chain of custody to agree upfront to use the system instead of using paper forms. Generators should ensure that transporters and receiving facilities are willing to participate in the e-Manifest system;

• the e-Manifest system is XML-based. Entities who want to use the system should ensure their computing system supports XML architecture; and

• the rule states that manifest data are not confidential business information. Aggregate data requests from the e-Manifest system may possibly reveal customer lists for receiving facilities, or process information for generators.

While not yet finalized, e-Manifests will likely be executed by using a PIN/password and ID system under the following steps:

• the generator enters waste descriptions, certifies in the system that the waste shipment is properly packaged, and presents a government-issued photo ID to the transporter during pickup. …

February 5, 2014

Ohio Issues Draft Rules on Oil and Gas Well Site Construction

Administrative Watch

The Ohio Department of Natural Resources, on February 21, 2014, published draft rules concerning horizontal well site construction. The public comment period for the draft rules ends on March 10, 2014. A subsequent 30-day comment period will be announced after the draft rules are formally proposed. The draft rules are available on the Division of Oil and Gas Resources Management’s website,oilandgas.ohiodnr.gov.

The rules require approval of a well site by the Chief of the Division of Oil and Gas prior to construction of the site. “Well site” is defined as including the well pad, all associated production activities, and access roadways. The rules require submission of an application containing extensive and detailed information, including detailed drawings, a sediment and erosion control plan, a dust control plan, a geotechnical report, and a storm water hydraulic plan.

The rules create an approval process that is not linked to the issuance of well drilling permits, and is therefore a new, independent approval requirement. The rules as drafted present numerous and significant issues regarding establishing the boundaries of a well site and the nature and extent of information needed to obtain approval of the site.

For additional information on the draft rules, and to obtain assistance on submitting comments, please contact David Northrop at 412-394-6590 or dnorthrop@babstcalland.com.

Click here for PDF.

 

December 20, 2013

The Pennsylvania Supreme Court Invalidates Key Provisions of Act 13

Administrative Watch

In a far-reaching decision that may reverberate far beyond the oil and gas industry, the Pennsylvania Supreme Court has ruled that several critical provisions of Act 13, the General Assembly’s 2012 comprehensive update to the former Oil and Gas Act, are unconstitutional. In addition to invalidating a key section of Act 13 placing limits on the regulatory authority of local governments, the Court’s ruling also struck down a number of the legislation’s well location restrictions administered by the Department of Environmental Protection (“DEP”).

The decision of the Supreme Court in Robinson Township v. Commonwealth is the culmination of litigation filed in early 2012 by seven municipalities, along with two local elected officials, the Delaware Riverkeeper Network, and a physician challenging the legality of Act 13, primarily contending that the legislation unconstitutionally limited the authority of local governments to regulate the oil and gas industry. The challenge also asserted that a section of Act 13 that authorized DEP to grant waivers from certain well location restrictions was unconstitutional because it did not set forth any standards to be considered in addressing such requests.

Limits on Local Regulation

By far the most contentious issue in the litigation was the petitioners’ claim that Section 3304 of Act 13, which placed limits on the powers of local governments, was invalid. Section 3304 requires that all local ordinances provide for the “reasonable development of oil and gas resources,” specifically that they: (1) authorize most oil and gas operations as permitted uses in all zoning districts, with the exception that wells located in residential districts may be prohibited or required to go through the conditional use process if the well bore is located within 500 feet of an existing building; …

November 6, 2013

Ohio House Bill 72: Revisions to Procedures Under ORC § 5301.332 (Lease Forfeiture) and § 5301.56 (Dormant Mineral Act)

Administrative Watch

On October 31, 2013, Ohio Governor Kasich signed Substitute House Bill 72 (HB 72) into law. HB 72 amends various Sections of the Ohio Revised Code (the Code), in part, to modernize the county recorder requirements. Regarding Sections of the Code which set forth procedural requirements for the forfeiture of oil and gas leases (Section 5301.332) and the abandonment of severed mineral interests (Section 5301.56 (2006), also known as the Dormant Mineral Act), HB 72 adds the requirement that a Notice of Failure to File be recorded in order to effectuate the forfeiture of an oil and gas lease or the abandonment of a mineral interest under the Dormant Mineral Act. This replaces the current procedural requirement that the recorder place a marginal notation on the lease or on the record of which the severed mineral interest is based to complete a claim under these Sections of the Code. HB 72 becomes effective on January 30, 2014.

Lease Forfeiture
Section 5301.332 of the Code provides a lessor with the right to pursue the forfeiture of a lease so long as there are no producing or drilling oil or gas wells, and: (i) the lease term expired, or (ii) the lessee failed to comply with the covenants of the lease. Currently, the lessor is required to serve notice of the lessor’s intent to declare the lease forfeited, and subsequently file an affidavit of forfeiture. If the lessee, or the lessee’s successors or assigns fail to provide notice to the lessor that the lease is still effective within 60 days of the lessor’s notice, then the lessor may cause the county recorder to note upon the margin of the lease that “This lease cancelled pursuant to affidavit of forfeiture recorded in Lease Vol. …

September 6, 2013

Compliance With the Clean Air Act May Not Be Enough

Administrative Watch

A recent Third Circuit decision indicates that compliance with the requirements of the Clean Air Act (CAA) may not be sufficient to protect an owner or operator from state common law tort claims. In Bell v. Cheswick Generating Station (Aug. 20, 2013), the Court of Appeals for the Third Circuit held that the CAA does not preempt state common law claims that are based on the law of the state where the source of the pollution is located. Therefore, the Court allowed the Bell plaintiffs to proceed with state tort claims against the Cheswick Generating Station, despite comprehensive regulation of the power plant’s emissions under the CAA.

Bell involves a class action complaint, with a putative class consisting of at least 1,500 individuals living within one mile of the Cheswick Generating Station, a coal-fired electrical generation facility in Springdale, Pennsylvania (the Plant). The Bell plaintiffs allege that the Plant’s emissions led to the deposition of ash and other contaminants on their properties, and they seek damages under common law tort theories, including nuisance, negligence and trespass. The Plant argued that it is extensively regulated by federal, state and local authorities under the CAA, and that state tort law is preempted because its use would undermine the comprehensive design of CAA regulation and disrupt the work of regulators. The Bell plaintiffs argued that the plain text of two savings clauses in the CAA authorizes state law tort claims related to air emissions.

The Court applied the Supreme Court’s opinion in International Paper Co. v. Ouellette (1987), which interpreted the savings clauses of the Clean Water Act. Because the Clean Water Act and CAA savings clauses use almost identical language, the Court restated the Ouellette holding in the context of the CAA, and held that the CAA “does not preempt state common law claims based on the law of the state where the source of the pollution is located.” Therefore, the Bell claims, brought under Pennsylvania law against a source located in Pennsylvania, are not preempted. …

August 6, 2013

EPA Allows New Standard for Conducting Environmental Due Diligence

Administrative Watch

On August 15, 2013, the United States Environmental Protection Agency (EPA) published a proposed and “direct final” rule that expands the options available to parties seeking to qualify for certain defenses to liability under Superfund and other laws. This change will provide prospective purchasers with additional choices when conducting environmental due diligence. Although it will take some time for the market to catch up with this change, it is likely that conducting due diligence using this newest approach will add additional cost and time to a proposed real estate transaction.

Background
When acquiring commercial or industrial real estate, it is critical to conduct due diligence into the environmental conditions and prior uses of the target property. Understanding these conditions not only allows the purchaser to evaluate the potential limitations and risks associated with the property, but this due diligence can also be used to establish defenses to environmental liability. For example, under the federal Superfund law (CERCLA), bona fide prospective purchasers and other “innocent” landowners can be protected from certain environmental liability if they undertake “all appropriate inquiry” (AAI) into the prior ownership and uses of a property before acquiring it.

EPA has established specific standards and practices for conducting AAI (the AAI Rule), and in doing so, specifically recognized ASTM’s 2005 Standard for conducting Phase I Environmental Site Assessments (ASTM E1527-05) as being compliant with the AAI Rule. ASTM is currently revising its 2005 Standard, which will be published as ASTM E1527-13 (the 2013 Standard) when finalized. EPA’s proposed rule would provide parties with the option of using either the 2005 Standard or the new 2013 Standard when conducting AAI.

The 2013 Standard
EPA noted in the proposed rule’s preamble that the agency reviewed the 2013 Standard and determined that there are only “slight differences” between the AAI Rule, the 2005 Standard and the 2013 Standard. …

August 6, 2013

Owners and Operators of New Unconventional Wells in Pennsylvania are Subject to New Air Emission Control Requirements

Administrative Watch

On August 8, 2013, the Pennsylvania Department of Environmental Protection (DEP) announced that unconventional gas well sites will no longer be unconditionally exempt from the requirement to obtain an air quality plan approval. The Air Pollution Control Act authorizes DEP to exempt certain sources from the requirement to obtain a plan approval, i.e., the state air quality “permit” which authorizes the construction and temporary operation of air emissions sources. DEP had previously provided a blanket exemption for both conventional and unconventional well sites, such that operators did not need to obtain a plan approval from DEP prior to constructing wells, wellheads and associated equipment. DEP’s new policy retains the existing broad exemption for conventional well sites, but makes significant changes with respect to unconventional well sites.

DEP released a revised final technical guidance document entitled, “Air Quality Permit Exemptions,” which lists plan approval exemptions by category of emission sources. The newly revised list reflects changes to Exemption No. 33, pertaining to compressed natural gas fueling, and Exemption No. 38, pertaining to conventional and unconventional oil and gas exploration, development, production facilities and associated equipment and operation. Although revised Exemption No. 38 still exempts both conventional and unconventional “wells, wellheads, and associated equipment,” DEP will now require unconventional well operators to meet several criteria in order to qualify for the exemption. These new criteria involve controls and practices that are more stringent than federal air regulations. The new conditions on Exemption No. 38 include:

• Owners and operators must conduct an annual leak detection and repair (LDAR) program for valves, flanges, connectors, storage vessels, and compressor seals that are in natural gas or hydrocarbon liquids service—essentially, LDAR must be implemented across the entire well pad;
• Storage vessels/storage tanks must meet 95% or greater emissions reductions for VOCs; …

July 6, 2013

Oil and Gas Lease Act Signed Into Law, Addresses Joint Development

Administrative Watch

On July 9, 2013, Governor Corbett signed into law Senate Bill 259, also known as the Oil and Gas Lease Act (Act), amending the Guaranteed Minimum Royalty Act. In addition to providing new rights and requirements as to payments resulting from the production under oil and gas leases, the Act authorizes an oil and gas operator to combine contiguous leased acreage for more efficient development unless any such lease expressly prohibits unitization or pooling. Section 2.1 of the Act provides:

Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontal drilling unless expressly prohibited by a lease. In determining the royalty where multiple contiguous leases are developed, in the absence of an agreement by all affected royalty owners, the production shall be allocated to each lease in such proportion as to the operator reasonably determines to be attributable to each lease.

Accordingly, if the leases are silent as to pooling and unitization, operators are authorized to pool or unitize contiguous leases and develop such leases by horizontal drilling without acquiring the consent of the lessor. However, if a lease expressly prohibits pooling and unitization, the Act does not alter the terms of such lease and an operator would still be required to obtain an amendment of lease from the lessor to permit the pooling and unitization of the leasehold acreage. Similarly, the Act does not provide an operator with the right to compel the pooling or unitization of unleased acreage. Although most modern leases address the lessee’s right to pool and unitize leaseholds, the Act provides those operators working under leases that are silent as to pooling with new rights to move forward with the efficient development of contiguous leaseholds. …

July 1, 2013

Ohio Enacts Biennial Budget Bill With oil and Gas Regulatory Changes

Administrative Watch

After months of negotiation, the state of Ohio’s biennial budget was signed into law on June 30, 2013 by Governor John Kasich. The new budget covers a wide range of topics, but it is notable for what it does not include – an increase in the oil and gas severance tax. The budget also makes several changes to oil and gas industry regulations. The changes include:

• Horizontal well owners must report production on a quarterly basis rather than an annual basis;

• Beginning on March 31, 2015, well owners must disclose the country of origin of all steel pipes used in the drilling process;

• Only synthetically lined pits or impoundments may be used for temporary storage of brine and other fluids;

• After January 1, 2014, the storage, recycling, treatment, processing or disposal of brine or other waste substances must be in accordance with a permit issued by the chief of the Ohio Department of Natural Resource’s Division of Oil and Gas Resources Management, and the chief is required to adopt rules addressing the issuance of the permits;

• The owner of a horizontal well must test drill cuttings for the concentration of radium-226 and radium-228 if the material is technologically enhanced naturally occurring radioactive material (TENORM) and is not reused in connection with the well, disposed of by injection or transported out of Ohio;

• The owner or operator of a solid waste facility may accept material containing TENORM if the material contains less than five picocuries per gram above natural background of radium-226 or radium-228; and

• Material that is not TENORM, but has come in contact with refined oil-based substances, may only be disposed at an authorized solid waste facility or used in accordance with rules adopted by the director of environmental production. …

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