July 15, 2016

Congress and the FAA Ease the Way for Use of Drones by the Energy Industry

Pipeline Safety Alert

The Federal Aviation Administration (FAA) recently issued regulations permitting the use, with certain limitations, of small unmanned aircraft systems (small drones) for non-hobby and non-recreational purposes. On July 13, 2016, Congress passed several provisions specific to drone use by the energy industry as part of the reauthorization bill for the FAA.

FAA Reauthorization

On July 13, 2016, Congress passed the “FAA Extension, Safety, and Security Act of 2016 (the Bill)”. The Bill, which authorizes a short-term extension of the funding for the FAA, includes several provisions covering the operation of unmanned aircraft systems (i.e., drones). Of particular interest to the energy industry, Congress–

• Amends section 331 of the FAA Modernization and Reform Act of 2012. This particular statute previously defined “small unmanned aircraft” as weighing less than 55 pounds. The Bill amends this definition to clarify that the 55-pound limit “includ[es] everything that is on board or otherwise attached to the aircraft. ”

• Requires the Secretary of Transportation to establish a process within 180 days to allow applicants to petition the FAA to prohibit or restrict the operation of an unmanned aircraft “in close proximity to a fixed site facility.” A “fixed site facility” includes energy production, transmission, and distribution facilities and equipment, oil refineries, and chemical facilities.

• Requires the FAA to allow a person to apply to operate an unmanned aircraft system during the day or at night beyond the visual line of sight of the individual operating the aircraft as long as the operator is conducting the unmanned aircraft operation to ensure compliance with (1) federal or state regulatory requirements including surveys associated with permit applications for new pipelines; (2) the pipeline safety regulations (49 C.F.R. …

July 6, 2016

New OSHA Injury Reporting Rule Will Preclude Automatic Post-Incident Drug Screens

Employment Bulletin

Many employers have implemented policies mandating employees involved in an accident at the workplace to undergo drug and alcohol screening. Effective August 10, 2016 such blanket, automatic policies will likely run afoul of the injury reporting requirements of the Occupational Safety and Health Act (Act).

On May 12, 2016, the Occupational Safety and Health Administration (OSHA) issued its Final Rule amending employers’ obligations to report and record injuries, and clarifying its interpretation of the injury reporting requirements of the Act. 29 CFR §1904.35(b)(1)(i) requires the employer to establish a “reasonable procedure for employees to report work-related injuries and illnesses ….” OSHA “clarified” this requirement by adding the following: “A procedure is not reasonable if it would deter or discourage a reasonable employee from accurately reporting a workplace injury or illness …”

In the comments accompanying the Final Rule, OSHA noted that many commenters to the proposed rule complained that employer policies requiring automatic post-injury drug and alcohol testing were a form of adverse action that discouraged reporting. The comments state that:

Although drug testing of employees may be a reasonable workplace policy in some situations, it is often perceived as an invasion of privacy, so if an injury or illness is very unlikely to have been caused by employee drug use, or if the method of drug testing does not identify impairment but only use at some time in the recent past, requiring the employee to be drug tested may inappropriately deter reporting.

OSHA concluded that “the evidence in the rulemaking record shows that blanket post-injury drug testing policies deter proper reporting.” OSHA did not ban all post-incident reporting, but the comments set forth the agency’s view that it should be severely limited:

[T]his final rule does not ban drug testing of employees. …

June 29, 2016

Final Rule Alters Salary Threshold for Overtime Pay

The Legal Intelligencer

The Rolling Stones said it best: “Time is on my side, yes it is.” This has never been more accurate after the publication of the much-anticipated final rule updating overtime regulations, as an estimated 4.2 million workers who were previously exempt from receiving overtime pay may be eligible for overtime starting Dec. 1, 2016.

On May 18, President Obama and Department of Labor Secretary Thomas E. Perez announced the publication of the Department of Labor’s Final Rule titled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees.” The final rule updated overtime regulations, including an update on the salary and compensation levels needed for employees to be considered exempt, (29 CFR Part 541).

The Fair Labor Standards Act

Pursuant to the Fair Labor Standards Act (FLSA), an employee is entitled to overtime of one and one-half times the employee’s regular rate of pay for hours worked over 40 in a workweek. However, certain executive, administrative, and professional employees are exempt from this rule. These employees are commonly referred to as “exempt employees.” To be considered exempt, three tests must be met: The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (salary basis test); the amount of salary paid must meet a minimum specified amount (salary level test); and the employee’s job duties must primarily involve executive, administrative or professional duties as defined by the regulations (duties test).

Combination of ‘Long’ and ‘Short’ Duties Test

Prior to 2004, the regulations implemented both a “long” and “short” duties test. The long test paired a lower salary requirement with a more stringent duties test—meaning that to qualify a worker could perform no more than 20 percent of their time on nonexecutive, administrative, or professional duties. …

June 29, 2016

What Constitutes a Zoning Map Change for Notice Requirements

The Legal Intelligencer

On March 2, the Commonwealth Court rendered a decision in Embreeville Redevelopment v. Board. of Supervisors of West Bradford Township, 134 A.3d 1122 (Pa. Commw. Ct. 2016), which clarified when a zoning ordinance amendment, although solely textual on its face, constitutes a zoning map change and triggers the additional notice requirements under Section 609(b) of the Municipalities Planning Code, 53 P.S. Section 10609(b).

The Municipalities Planning Code, 53 P.S. Section 10101 et seq., (MPC), which establishes the framework for zoning and land use regulation in Pennsylvania, sets forth the detailed procedure a municipality must follow when adopting or amending a zoning ordinance. In pertinent part, a municipality intending to amend its zoning ordinance, regardless of whether the proposed amendment is a text amendment or a zoning map change, must: transmit a copy of the proposed amendment to the county planning agency (if one has been created) for review and comment; transmit a copy of the proposed amendment to the municipality’s planning commission for review and comment (if the planning commission did not prepare the amendment); hold a public hearing on the proposed amendment; and publish notice of the public hearing on the proposed amendment twice, in two successive weeks, in a newspaper of general circulation in the municipality no more than 30 and no less than seven days before the public hearing, (see MPC Sections 304(a)(3) and 609; 53 P.S. Sections 304(a)(3) and 609). In addition to the foregoing requirements, if a proposed amendment involves a zoning map change, Section 609(b) of the MPC requires that a municipality also conspicuously post notice of the public hearing on the properties affected by the proposed map change; and mail notice of the public hearing to the owners of property affected by the proposed map change. …

June 23, 2016

EPA Issues Technical Guidance For Assessing Environmental Justice In Regulatory Analysis

Administrative Watch

The United States Environmental Protection Agency’s (“EPA’s”) latest publication demonstrates that issues relating to environmental justice will have a significant impact on regulatory actions in the near future and will be an important topic during the public comment period for proposed rules. On June 7, 2016, EPA issued the publication Technical Guidance for Assessing Environmental Justice in Regulatory Analysis (“Guidance”), which recommends technical approaches that EPA analysts can use to incorporate environmental justice concerns during the rulemaking process.

EPA defines “environmental justice” as “the fair and meaningful treatment of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” When evaluating proposed regulatory actions, EPA recommends analysts conduct an initial screening of environmental justice concerns to determine the appropriate level of analysis through the rulemaking process. Specific consideration should be given to “proximity of sources to low-income populations, minority populations, and/or indigenous peoples, unique exposure pathways, and a history of environmental justice concerns associated with the pollutant being regulated.”

With respect to evaluating the environmental justice issues in Human Health Risk Assessments that are conducted to support a regulatory action, EPA’s new Guidance provides factors to consider when designing various assessments during the planning, scoping, and problem formulation portions of the rulemaking process. These assessments stress the importance of considering disproportionate impacts on certain population groups or demographics due to a potential for increased vulnerability and susceptibility to environmental stressors.

This Guidance complements EPA’s existing Environmental Justice Action Development Process Guide and is a significant component of “EJ 2020,” which is a broader strategy to advance and address issues of environmental justice by the year 2020. EPA is currently seeking comments until July 7, 2016 on its draft EJ 2020 Action Agenda, which proposes integrating environmental justice concerns to all EPA actions, including the rulemaking considerations found in the Guidance, as well as permitting and enforcement actions. …

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!…

Read more.

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.

Click here for PDF.

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.

Read more.

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.

Read more. 

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. …

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