October 13, 2016

State Courts Are Clarifying Legal Authority of Local Governments to Regulate Oil and Gas Activities

The Foster Report

As opponents of oil and gas development increasingly look for ways to exert local control, key state court rulings over the last few years have attempted to clarify, in so-called preemptive challenge cases, what the role of local governments actually is in regard to regulating oil and natural gas activities, explained panelists at the recent Shale Insight Conference in Pittsburgh, Pennsylvania.

Driven by citizen pressure or their own volition, local governments throughout the Appalachian Basin in West Virginia, Ohio, and Pennsylvania are increasingly attempting to limit or ban unconventional shale development through the adoption of ordinances or referenda.

The question in West Virginia and Ohio appears to be a bit clearer, due to court rulings confirming that local governments do not have the authority to regulate oil and gas activities. However, in Pennsylvania, a state that may one day be the nation’s largest producer of gas, the legal authority remains murky, said conference presenter Krista-Ann Staley, an attorney at Babst Calland.

Staley told the Foster Report October 5, that the Pennsylvania Supreme Court’s ruling on September 28 didn’t change the scope of local authority to regulate oil and gas development. Rather, the court ruled to strike provisions concerning the PUC’s and Commonwealth Court’s ability to review ordinances and related penalty provisions. With those provisions of Act 13 stricken, along with the related provisions stricken in the Robinson II decision, the scope of local regulatory authority and the ordinance review process fall back to existing statutes. The existing statutes, interpreted in the 2009 Huntley and Range cases, allow local governments limited powers to regulate oil and gas development in MPC (i.e., zoning, subdivision and land development) and floodplain ordinances. …

October 11, 2016

PADEP’s Chapter 78a Rulemaking Goes into Effect for Unconventional Operations in Pennsylvania

Administrative Watch

On Saturday October 8, 2016, the Pennsylvania Department of Environmental Protection’s new Chapter 78a regulations associated with unconventional wells went into effect when they were published in the Pennsylvania Bulletin. For unconventional well operators, there are substantial changes from prior law affecting operations over the entire life of the well, from permitting to site construction, waste handling, impoundments, pipelines, site restoration and spill remediation.

Critical New Provisions in Chapter 78a

One major revision to the rules arises in sections 78a.15(f) and (g), which set out the pre-application requirements for a well permit at a location that “may impact a public resource.” This provision requires operators who propose to drill a well in such locations to notify the public resource agency, which now by definition includes schools, municipalities, and owners of playgrounds or water supplies, and provide additional information to DEP. The regulation applies if the limit of disturbance of the well site is located in any of eight specified areas, including “in a location that will impact other critical communities” and “within 200 feet of . . . a playground.” The public resource agency must be notified at least 30 days prior to the submission of the well permit application to DEP to allow the agency to provide written comments to DEP and the applicant. The applicant may provide a response to the comments. DEP will then consider various factors, including the comments submitted by both the public resource agency and the applicant, before setting conditions for the well permit based on impacts to public resources.

Pipeline operators are for the first time within the scope of oil and gas regulations promulgated under Act 13. Under section 78a.68a, pipeline operators conducting horizontal directional drilling (HDD) beneath a body of water or a watercourse are subject to notification requirements. …

October 11, 2016

PHMSA Releases a Final Rule Expanding the Required Use of Excess Flow Valves

Pipeline Safety Alert

On October 7, the Pipeline and Hazardous Materials Safety Administration (PHMSA) released a pre-publication version of its Final Rule entitled “Expanding the Use of Excess Flow Valves in Gas Distribution Systems to Applications Other Than Single-Family Residences” (EFV Final Rule).  In response to statutory changes and a National Transportation Safety Board recommendation, PHMSA is expanding the existing requirement that operators install an excess flow valve (EFV) on certain natural gas distribution pipelines to additional types of new or replaced service lines.  The agency is also requiring curb valves or other manual shut-off valves on new or replaced service lines with meter capacities above 1,000 standard cubic feet per hour (SCFH) and requiring operators to notify customers of their right to request the installation of an EFV on certain types of service lines.  The EFV Final Rule will become effective six months after the date of publication in the Federal Register, which is expected within 7—10 days.

An EFV is a safety device installed inside a distribution service line between the main and the meter which can reduce the risk of an incident in the event of damage to the line by shutting off excessive gas flows.  Since 2010, PHMSA has required operators to install EFVs on new or replaced gas service lines servicing single-family residences (SFRs) unless the service line meets certain exceptions.

EFVs must now be installed on the following service lines: 

  • Branched service lines to a SFR installed concurrently with the primary SFR service line (a single EFV may be installed to protect both lines);
  • Branched service lines to a SFR installed off a previously installed SFR service line that does not contain an EFV;

    • …

October 4, 2016

Robinson Township Revisited: The Pennsylvania Supreme Court Addresses Remaining Challenges to Act 13

Administrative Watch

The Pennsylvania Supreme Court declared the last remaining challenged sections of Act 13 of 2012 to be invalid in an opinion issued September 28, 2016 in the Robinson Township v. Commonwealth line of cases (“Robinson IV”). The Supreme Court agreed with the Commonwealth Court that the portions of Act 13 giving the Public Utility Commission (“PUC”) and the Commonwealth Court jurisdiction to (1) review local zoning ordinances, (2) withhold impact fee payments and (3) award attorneys’ fees against municipalities were not “severable” from the sections of Act 13 imposing statewide zoning standards for oil and natural gas development previously invalidated by the Supreme Court in December 2013 (“Robinson II”).

Regarding Chapter 32 of Act 13, the Supreme Court reversed the Commonwealth Court and held that Act 13’s provisions for the disclosure of hydraulic fracturing additives in a medical context and notice of spills to public drinking water suppliers but not to owners of private wells were unconstitutional “special laws.” Finally, the Supreme Court reversed the Commonwealth Court and held that the grant of eminent domain powers to companies for gas storage purposes violated the constitutional prohibitions against takings in the Fifth Amendment of the U.S. Constitution and Article I, Section 10 of the Pennsylvania Constitution.

With respect to the plurality opinion in Robinson II, the PUC asked the Court to disavow its analysis of Article I, Section 27 of the Pennsylvania Constitution, commonly known as the Environmental Rights Amendment (“ERA”), as not precedential and “out of step” with the wisdom of prior existing law. Because the question had not been preserved, the Court declined to consider it.

In its discussion of the questions presented by the PUC appeal, the Supreme Court also addressed the viability of Section 3215, which has been the subject of both controversy and litigation with the Department of Environmental Protection (“DEP”). …

October 4, 2016

PHMSA Releases Emergency Order Interim Final Rule

Pipeline Safety Alert

On October 4, the Pipeline & Hazardous Materials Safety Administration (PHMSA) issued a pre-publication Interim Final Rule (IFR) implementing the new emergency order authority that PHMSA received in the PIPES Act of 2016.  The IFR will become effective on the date of its publication in the Federal Register, which is expected within days.  PHMSA has provided a 60-day public comment period.

Federal agencies may issue IFRs without providing prior notice and comment under the good cause exception in the Administrative Procedure Act. The courts have emphasized that the good cause exception is to be narrowly construed, and that the existence of a statutory deadline does not, in and of itself, constitute good cause unless a delay would threaten real harm.  PHMSA’s justification for issuing the IFR is that the PIPES Act contains a 60-day deadline for establishing temporary emergency order regulations, making compliance with the notice and comment requirements in the APA impracticable and not in the public interest.

As required by the PIPES Act, the IFR contains administrative procedures that PHMSA must follow in determining if an imminent hazard exists, the factors that must be considered by PHMSA before issuing an emergency order, and the content of those orders, including a description of the persons subject to the restrictions, prohibitions, or safety measures and the standards and procedures for obtaining relief. The IFR also creates a process for administrative review of an emergency order that is largely patterned on the statutory text in 49 U.S.C. § 60117(o), including the referenced procedural rules for HazMat emergency orders in 49 C.F.R. § 109.19.

The process allows for the filing of a petition for review seeking a formal hearing before an Administrative Law Judge (ALJ), or an informal hearing before the Associate Administrator. …

September 16, 2016

Ohio Supreme Court Decides Cases Interpreting the Ohio Dormant Mineral Act

Administrative Watch

On September 15, 2016, the Ohio Supreme Court issued three opinions and dispensed with 10 other related cases regarding the interpretation of the application of the Ohio Dormant Mineral Act (O.R.C. § 5301.56) (ODMA). The issues surrounding the ODMA resulted in all-or-nothing litigation regarding ownership of dormant mineral interests between surface owners and mineral owners, and oil and gas lessees claiming through both sides.

The Ohio Supreme Court determined that the 1989 version of the ODMA (1989 Act) was not self-executing in that title to abandoned mineral interests did not vest in surface owners automatically by operation of law, but that surface owners claiming that mineral interests were abandoned were required to seek a judicial determination as to abandonment by filing a quiet title action. Therefore, any surface owner claiming title to abandoned minerals under the 1989 Act was required to obtain a court order confirming that the interests were abandoned and vested in the surface owner under the law. The Court also determined that the 2006 version of the ODMA (2006 Act) displaced the 1989 Act, and that any surface owner claiming title to abandoned minerals after the enactment of the 2006 Act must follow the notice and recording procedures set forth in the 2006 Act. Finally, the Court held that the payment of delay rentals under an oil and gas lease are insufficient savings events under the ODMA.

The lead case of Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No, 2016-Ohio-5796, was an appeal from the United States District Court for the Southern District of Ohio, Eastern Division, which certified two questions to the Supreme Court: (1) whether the 2006 Act or the 1989 Act applies to claims asserted after 2006 alleging that oil and gas rights vested in the surface owner, and (2) whether the payment of delay rentals under an oil and gas lease constitutes a “title transaction” and therefore a “savings event” under the ODMA. …

September 12, 2016

FAA Issues Performance-Based Standards for Applicants Seeking a Waiver of the Small Unmanned Aircraft Rules

Pipeline Safety Alert

The Federal Aviation Administration (FAA) recently issued its Performance-Based Standards highlighting information that an applicant must include in order to seek a waiver of Part 107, the rules that apply to the operation of a small unmanned aircraft system (small UAS or drones). (See previous Babst Calland pipeline safety alerts for more information on the Small UAS Final Rule and the waiver process.)

Applicants may seek a waiver from many of the Part 107 regulations. However, the line-of-sight restriction (14 C.F.R. § 107.31) is of particular interest to the energy industry who may want to use a small UAS to conduct inspections of linear infrastructure. Applicants seeking a waiver of the line-of-sight requirement must demonstrate the method or means by which it will be able to:

• continuously know and determine the position, altitude, attitude, and movement of the small UAS to ensure the aircraft remains in the area of intended operation;
• avoid other aircraft, people on the ground, and ground-based structures and obstacles at all times;
• increase the visibility of the small UAS in order to be seen at a distance of three statute miles unless a system is in place that can avoid all non-participating aircraft;
• be alerted of any malfunction affecting the operation of the small UAS; and
• ensure that all persons participating in the operation have relevant knowledge of all aspects of operating a small UAS that is not within the visual line of sight of the remote pilot.

Since the effective date of the small UAS Final Rule, the FAA has granted 76 waivers of various sections of Part 107. The majority of these applications sought a waiver of the daytime operation limitation but at least two waivers were focused on line of sight. …

September 6, 2016

How many employees are on your field location (for purposes of the FLSA)?

The PIOGA Press

By now you have probably heard that on December 1 the salary threshold required for employees to qualify for the executive, professional or administrative exemptions allowed by the Fair Labor Standards Act (FLSA) will double. While certainly significant, this recent update to the overtime regulations was not unexpected, as the salary threshold has not been increased since 2004.

This change is of course not the only recent wage and hour development of which oil and gas employers must be aware. In addition to the fact that Wage and Hour Division of the United States Department of Labor (DOL) has been specifically targeting the oil and gas industry since 2012, there are other, far less distinct trends that have been taking shape over the past year. The DOL and the National Labor Relations Board (NLRB) have announced new rules and cases that could increase employee headcounts and expand the concept of joint employment. In short, for purposes of the FLSA, some oil and gas employers may actually have more employees than their payrolls indicate.

Determining whether independent contractors are actually employees

In response to the trend of increasing employee misclassification investigations and private wage and hour lawsuits, last summer the DOL issued a 15-page interpretative memorandum with an aim to provide “additional guidance” for determining who is an employee and who is an independent contractor under the FLSA. Although classification as an independent contractor can be advantageous (or even preferable) for workers and businesses alike, improperly classified workers do not receive certain workplace protections such as the minimum wage, overtime compensation, unemployment insurance and workers’ compensation. Improper classification also frequently results in lower tax revenues for the government and an unfair advantage against those employers that do properly classify their workers. …

August 31, 2016

FAA Releases Application and Instructions for Small Drone Waivers

Pipeline Safety Alert

On August 29, 2016, the Federal Aviation Administration (FAA) released the form and instructions on how to apply for a waiver from certain requirements included in the “Operation and Certification of Small Unmanned Aircraft Systems” Final Rule.  This final rule went into effect on August 29, 2016, and permits the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. See Babst Calland’s previous Pipeline Safety Alert on small drones for more information.  This new waiver process will be of interest to the energy industry.

The FAA will allow operators of small drones to apply for a waiver from the following requirements:

  • Operation from a moving vehicle or aircraft (§ 107.25)
  • Daylight operation (§ 107.29)
  • Visual line of sight aircraft operation (§ 107.31)
  • Visual observer (§ 107.33)
  • Operation of multiple small unmanned aircraft systems (§ 107.35)
  • Yielding the right of way (§ 107.37(a))
  • Operation over people (§ 107.39)
  • Operation in certain airspace (§ 107.41)
  • Operating limitations for small unmanned aircraft (§ 107.51)

The FAA will not consider waivers for the carriage of property of another by aircraft for compensation or hire.  An applicant must describe the risks of the waivered operation and identify appropriate risk-mitigation strategies to ensure that the proposed operation can be safely conducted.

The ability to seek a waiver is particularly important to the energy industry which may choose to use small drones for inspections of infrastructure. For example, a waiver of the line-of-sight requirements may make the use of small drones for pipeline right-of-way patrols more practical. …

August 29, 2016

Nonconforming Use Certificates Cannot Extinguish a Nonconforming Use

The Legal Intelligencer

On July 14, the Commonwealth Court rendered a decision in Hunterstown Ruritan Club v. Straban Township Zoning Hearing Board, 2016 Pa. Commw. LEXIS 327 (Pa. Commw. Ct. 2016), confirming that a property owner’s failure to register a nonconforming use with a municipality and obtain a nonconforming use certificate is not fatal to the continuance of the use.

The law in Pennsylvania regulating legal, nonconforming uses is well settled. A nonconforming use is a use that predates a prohibitory zoning regulation; it constitutes a vested, constitutional property right that may be continued unless the use is a nuisance, abandoned, or extinguished by eminent domain, as in Hafner v. Zoning Hearing Board of Allen Township, 974 A.2d 1204, 1210 (Pa. Commw. Ct. 2009). For example, an existing legal auto body shop does not have to move upon the adoption of a zoning ordinance that prohibits the shop in its present location. Rather, the shop can continue to operate as a nonconforming use.

The burden of proving the existence of a nonconforming use falls upon the property owner. In order to establish a nonconforming use, a property owner must present objective evidence that the subject property was devoted to such use at the time the prohibitory zoning regulation was enacted, as in Appeal of Lester M. Prange, 647 A.2d 279, 281 (Pa. Commw. Ct. 1994). Finally, property owners with a legal, nonconforming use have a constitutionally protected right to expand the use, notwithstanding its status as nonconforming, as in Lench v. Zoning Board of Adjustment of the City of Pittsburgh, 852 A.2d 442, 444 (Pa. Commw. Ct. 2005). This right of natural expansion is not, however, unlimited. Pennsylvania courts have consistently concluded that while a property owner may increase the intensity of a nonconforming use (e.g., an increase in the number of users or an increase in the frequency of the use), a nonconforming use may not be expanded if it would be: inconsistent with the public interest; …

August 23, 2016

How Many Employees Do You Have (for Purposes of the FLSA)?

PA Law Weekly

Earlier this summer, our firm reminded you about major changes that take effect on Dec. 1, 2016, when the salary threshold required for employees to qualify for the executive, professional, or administrative exemptions allowed by the Fair Labor Standards Act (FLSA) is doubled. While certainly significant, the updated overtime regulations were not unexpected as the salary threshold has not been increased since 2004.

This sweeping change is not however, the only recent wage-and-hour development of which employers must be aware. There are other, far less distinct trends that have been taking shape over the past year. The Wage and Hour Division of the United States Department of Labor (DOL) and the National Labor Relations Board (NLRB) have announced new rules and cases that could increase employers’ head counts and expand the concept of joint employment. In short, for purposes of the FLSA, some employers may actually have more employees than their payrolls indicate.

INDEPENDENT CONTRACTORS

In response to the trend of increasing employee misclassification investigations and private wage-and-hour lawsuits, last summer the DOL issued a 15-page interpretative memorandum with an aim to provide “additional guidance” for determining who is an employee and who is an independent contractor under the FLSA. Although classification as an independent contractor can be advantageous (or even preferable) for workers and businesses alike, improperly classified workers do not receive certain workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. Improper classification also frequently results in lower tax revenues for the government and an unfair advantage against those employers that do properly classify their workers.

The FLSA broadly defines the word “employ” as “to suffer or permit to work.” According to the U.S Supreme Court in United States v. …

August 17, 2016

EPA bans unconventional wastewater discharges to POTWs

The PIOGA Press

On June 28, the U.S. Environmental Protection Agency (EPA) published the rule “Effluent Limitation Guidelines and Standards for the Oil and Gas Extraction Point Source Category” in the Federal Register. The final rulemaking, which takes effect August 29, prohibits the discharge of unconventional wastewater pollutants from production, field exploration, drilling, well completion or well treatment to publicly owned treatment works (POTWs).

The rule amends the effluent limitation guidelines (ELGs) found in 40 CFR Part 435, which set the effluent limitations and guidelines for oil and gas extraction under the Clean Water Act. Subchapter C of Part 435, which applies to onshore production of oil and gas, already prohibits the discharge of wastewater pollutants into navigable waters from any source associated with production, field exploration, drilling, well completion or well treatment. The final rulemaking extends the Subchapter C prohibition to include the indirect discharge of unconventional wastewater pollutants through POTWs.

EPA defines unconventional wastewater pollutants, in part, to include drilling muds, drill cuttings, produced sand and produced water. EPA defines “unconventional oil and gas” as “crude oil and natural gas produced by a well drilled into a shale and/or tight formation (including, but not limited to, shale gas, oil, tight gas, and tight oil).” In the accompanying “Technical Development Document for the Effluent Limitations Guidelines and Standards for the Oil and Gas Extraction Point Source Category,” EPA notes that its final definition of unconventional oil and gas is “generally consistent with those in other readily available sources,” including the Pennsylvania Code.

EPA states in the preamble that the final rule is not projected to affect current industry practice or to result in incremental compliance costs because “the data reviewed by EPA show that the [unconventional oil and gas] extraction industry is not currently managing wastewaters by sending them to POTWs.” Nonetheless, operators might consider reviewing the U.S. …

August 15, 2016

No Legal Windfall Yet From Rising Pa. Natural Gas Production

The Legal Intelligencer

While Pennsylvania’s natural gas production is on the rise, energy lawyers in the state said that will not have an immediate impact on their practices. But, they said, the numbers forecast a bright future for multidisciplinary energy practices in Pennsylvania, as well as the overall state economy.

The Pennsylvania Department of Environmental Protection published its annual Oil and Gas Report earlier this month, which said Pennsylvania’s natural gas production rate increased to a record high, despite a nationwide downturn in oil and gas drilling activities.

“It reaffirms the idea that we have a stable and productive amount of natural gas,” said Joseph Reinhart, co-chair of Babst Calland’s energy and natural resources practice group. “That means good things for the economy including the lawyers.”

Lawyers said the production statistics will draw industry to Pennsylvania. But the positive consequences, particularly in the legal industry, may not be immediate, as infrastructure remains lacking and the industry overall is still experiencing a downturn.

“It’s going to take a few years for things to play out,” northeast Pennsylvania energy lawyer Stephen Saunders said. When it does, “people that are really committed to keeping up to the developments in the industry, they’re going to have work to do.”

According to the DEP report, more than 4.6 trillion cubic feet of natural gas was produced in Pennsylvania last year, up from about 4.1 trillion in 2014 despite a reduction in the number of natural gas wells being drilled.

Last week, acting DEP Secretary Patrick McDonnell said Pennsylvania’s Marcellus Shale natural gas wells are the most productive in the United States, according to a report in the Observer-Reporter, a southwestern Pennsylvania newspaper.

Reinhart noted that the annual report is not even up to date, since it is based on 2015 numbers. …

August 4, 2016

The Fair Labor Standards Act in the 21st Century: Mitigating the Risks of Wage and Hour Litigation

Webinar and Presentation

With an exponential increase in wage and hour class action lawsuits, prosecutions of federal and state minimum wage and overtime law violations, as well as Department of Labor (DOL) audits and investigations, employers need to stay informed about these developments. Babst Calland employment and labor attorneys outline some of the wage and hour litigation trends, provide practical guidance on the red flag issues that can lead to litigation, and provide practical tips on proactive ways to mitigate legal risk and exposure.

To view the presentation slides, click here. If you would like to speak with a Babst Calland attorney regarding these matters or arrange for a presentation, please contact John A. McCreary, Jr., Mychal S. Schultz, or Stephen A. Antonelli of the Employment & Labor Practice Group.

July 19, 2016

Governor Wolf signs Act 52 of 2016, erasing Chapter 78 revisions

The PIOGA Press

On June 23, Governor Tom Wolf signed Act 52 of 2016, the Pennsylvania Grade Crude Development Act, formally Senate Bill 279. Act 52 abrogates the Environmental Quality Board’s (EQB) revisions to the Chapter 78 regulations concerning conventional oil and natural gas wells and creates the Pennsylvania Grade Crude Development Advisory Council.

In February, the EQB approved the Chapter 78 (conventional wells) and Chapter 78a (unconventional wells) Subchapter C revisions by a vote of 15-4. The Chapter 78 revisions would have altered or created new obligations for permit applications and renewals, water supply replacement, predrilling surveys and reviews, erosion and sediment control, emergency response plans, wastewater management, disposal of drill cuttings, site restorations, spills and releases, and production reporting. The revisions also included 31 different requirements for electronic applications, notifications and submittals.

Act 52 applies only to the conventional regulations. The Chapter 78a unconventional regulations are currently undergoing review at the Pennsylvania Office of Attorney General and are expected to be published in late summer.

In addition to abrogating the pending revisions to Chapter 78, Act 52 specifies that any future rulemaking concerning conventional wells must be undertaken separately and independently of unconventional wells and other subjects. Future rulemakings concerning conventional wells must include a regulatory analysis form submitted to the Independent Regulatory Review Commission (IRRC) that is restricted to the subject of conventional wells.

Act 52 addresses the primary criticism of PIOGA and other trade associations and the Department of Environmental Protection’s Conventional Oil and Gas Advisory Committee (COGAC) regarding EQB’s Chapter 78 revisions. Specifically, Act 126 of 2014 required EQB to promulgate proposed regulations relating to conventional wells separately from proposed regulations relating to unconventional wells, which should have removed pending revisions applicable to conventional operations proposed in 2013. …

Top