Energy & Environmental Law Blog

Energy & Environmental Law Blog

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Eleventh Circuit Defers to Sixth Circuit in WOTUS Challenge

Posted in Energy, Environment

This entry provides an update to our blog post on February 23, 2016 regarding the Sixth Circuit’s decision that it has jurisdiction to adjudicate challenges to the EPA-Army Corps WOTUS rule. On August 16, 2016, the Eleventh Circuit Court of Appeals stayed 10 states’ lawsuit challenging the WOTUS rule. In reaching its decision to stay the case, the Eleventh Circuit explained that “The case before us and the case before the Sixth Circuit involve the same parties on each side, the same jurisdictional and merits issues, and the same requested relief.” Accordingly, the Court held that adjudicating the states’ case “would be a colossal waste of judicial resources” and “there is no good reason not to stay our hand in the present case until the Sixth Circuit decides the case before it.”

The states in the Eleventh Circuit case are Georgia, Kentucky, Alabama, Florida, Indiana, Kansas, South Carolina, Utah, West Virginia, and the North Carolina Department of Environment and Natural Resources.

Changes Coming to Taxation of Oil and Gas Reserves in Ohio

Posted in Energy

The Ohio Tax Commissioner recently issued a memorandum to county auditors regarding significant changes to the taxation of oil and gas reserves starting in tax year 2016.  These significant changes include:

  • Elimination of filing forms 6 and 6A.
  • Values will now be based upon production volumes reported to the Ohio Department of Natural Resources (ODNR).  After hearing from industry representatives, the Ohio Tax Commissioner acknowledged that this approach may lead to higher values than statutorily permitted in some circumstances.  Accordingly, the Ohio Tax Commissioner announced a temporary fix to address this circumstance.
  • The new approach will overvalue oil and gas reserves in some circumstances because amounts reported to ODNR are produced amounts, whereas O.R.C. 5713.051 requires that values be based on volumes “produced and sold.”  The temporary fix is re-instatement of DTE form 6A for the limited purpose of ensuring that producers will be permitted to challenge any overassessment based on the difference between “produced” and “produced and sold.”  If producers wish, they can file a DTE form 6A with each county auditor where there is a difference between “produced” and “produced and sold.”
  • Tax bills will be issued only to producers; royalty interest holders will no longer receive tax bills.  As a result, producers will be responsible for collecting taxes owed by royalty interest holders.
  • The memorandum confirms that minerals bartered as a form of payment are considered sold and should be reported as taxable production.

Going forward, the changes discussed above will significantly change how the ad valorem tax is collected.  As such, it will be very important to accurately report production volume to ODNR, accurately track shrinkage, and confirm that ODNR is accurately attributing volume to each active production site.

Learn more about what to do if there are discrepancies in taxable volume amounts in this Vorys State and Local Tax Alert.

Ohio Supreme Court to Consider Constitutionality of 1989 DMA

Posted in Energy

On Tuesday, August 16th, the Supreme Court of Ohio will hear oral argument in Tribett v. Shepherd, a case involving the 1989 version of the Ohio Dormant Mineral Act (1989 DMA).

The Court is currently considering a number of cases involving the 1989 DMA, many of which are stayed pending the court’s decision in Walker v. Shondrick-Nau. But earlier this year, the Court lifted its stay in Tribett on the following issues:

Proposition of Law No. III: Interpreting the 1989 version of the DMA as “self-executing” violates the Ohio Constitution.

  1. The 2006 Version of the DMA Is the Only Version of the DMA to be Applied After June 30, 2006, the Effective Date of Said Statute.
  2. Interpreting the 1989 Version of the DMA as “Self-Executing” Violates the Ohio Constitution.

Proposition of Law No. VII: A claim brought under the 1989 version of the DMA must have been filed within 21 years of March 22, 1989 (or, at the very latest, March 22, 1992), or such claim is barred by the statute of limitations in R.C. 2305.04.

For more on the background of the Tribett case, head over to Court News Ohio. The day’s oral arguments will begin at 9:00 a.m. (Tribett will be the second argument of the day). The oral argument can be viewed live and a replay will also be made available on The Ohio Channel.

Governor Kasich Signs Executive Order for Implementation of Oil and Gas Emergency Notification System

Posted in Energy, Environment

On August 9, 2016, Governor Kasich signed Executive Order 2016-04K authorizing the immediate adoption of rules creating an emergency notification process for oil and gas related emergencies, such as an uncontrolled fire or the release of natural gas, oil, brine, hazardous substances and other wastes at a production or processing facility. Under the rules, such emergencies are to be reported to ODNR’s Division of Oil and Gas Resources Management who will then coordinate statewide notification and responses.

The Executive Order expires in 120 days or upon the formal adoption of ODNR’s Incident Notification Rule, whichever occurs first. Additional information on ODNR’s implementation of the one-call emergency notification system, including the draft Incident Notification Rule, is available on ODNR’s website.

Division Is Issuing State Lands Unitization Orders

Posted in Energy

Recently, Ohio’s Division of Oil and Gas Resources Management (Division) has issued several unitization orders that include unleased lands owned by the State of Ohio, including lands owned by the Department of Transportation (see here), the Ohio Rail Development Commission (see here), and the Department of Information Technology (see here).  The orders are on terms that closely match previous unit orders issued by the Division under R.C. 1509.28, with one notable exception – given the duration that some have been pending, the Division has allowed 25 months from the approval of the order to commence drilling operations as opposed to the 12-month period it usually prescribes.

Climate Change Conspiracy?

Posted in Energy, Environment

In 2015, several attorneys general began an investigation into energy companies, focusing upon whether those companies lied to the public about the risk of climate change or to investors about how such rights might hurt the oil business.  Subsequently, ExxonMobil Corp., a primary target of those investigations, sued two attorneys general in an effort to thwart such investigations.  More recently, the Energy & Environment Legal Institute and the Free Market Environmental Law Clinic have accused New York’s attorney general, Eric Schneiderman, of attempting to suppress the free speech of those who dissent from the climate change political agenda.  The non-profit organizations have filed suit to force Schneiderman to disclose records that will show illicit coordination among the state attorneys general and environmentalists intended to silence critics of climate change.

The lawsuit, Energy & Envtl. L. Inst. v. Schneiderman, is discussed in more detail at the following link: Law360 News Report.

States and Industry Groups Challenge U.S. EPA’s Oil & Gas Methane Regulations

Posted in Energy, Environment

In July, the State of North Dakota filed suit in the U.S. Court of Appeals for the D.C. Circuit challenging U.S. EPA’s final rule amending the Agency’s 2012 New Source Performance Standards for the Oil and Gas Sector. Opposition to the amendments, which became effective on August 2, 2016, has increased significantly since North Dakota first filed suit. The state of Texas filed suit last week and, on the same day that the amendments became effective, a coalition of 14 states, including the State of Ohio filed suit alleging the final rule exceeds U.S. EPA’s authority under the Clean Air Act and requests that the Court vacate the rule. The Independent Petroleum Association of America, joined by several other industry groups, also filed suit on the same day.

The states and state agencies joining Ohio are Alabama, Arizona, Kansas, Kentucky, Louisiana, the Michigan Attorney General’s office, Montana, Oklahoma, South Carolina, Wisconsin, West Virginia the Kentucky Energy and Environment Cabinet and the North Carolina Department of Environmental Quality.

The Court has ordered the Petitioners to file a statement of issues by September 1, 2016.

Good News for Pennsylvania Natural Gas Production

Posted in Energy

PA DEPIn its 2015 Oil and Gas Annual Report, the Pennsylvania Department of Environmental Production reported a record 4.6 trillion cubic feet of natural gas had been produced from Pennsylvania-based wells.  The annual rate was a bright spot among otherwise precarious news that has overshadowed the Marcellus Shale industry for the previous two years.  However, the increased production rates were accompanied by other good news that indicate Saudi Arabia’s increased production ploy may be losing its competitive edge to the U.S. shale plays.

To read the entire annual report, click on 2015 Oil and Gas Annual Report.

Climate Change and Pennsylvania’s Environmental Rights Amendment

Posted in Energy, Environment

In 2015, several minors living in Pennsylvania filed a climate change lawsuit in the Commonwealth Court of Pennsylvania against the Governor and various state agencies, demanding that the Executive Branch develop a comprehensive plan to protect them from alleged deleterious effects of global climate change.  The youths premised their argument upon Article I, Section 27 of the Pennsylvania Constitution known as the Environmental Rights Amendment.  (The “ERA” was the primary authority asserted by those who, in 2012, brought forth a constitutional challenge to Pennsylvania’s Oil and Gas Act.)  The ERA provides that “[t]he people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment.  Pennsylvania’s public natural resources are the common property of all the people, including generations yet to come.  As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.”

The plaintiffs requested that the Court direct the Executive Branch, as the trustee over natural resources, to: (1) conduct various proactive studies to determine how the environmental values set forth in the ERA may be impacted by climate change and increasing concentrations of carbon dioxide and green house emissions; and, (2) promulgate regulations to reduce harmful levels of such substances.  Further, the plaintiffs asked the Court to issue certain declarations related to the public trustee duties established by the ERA.

On July 26, 2016, the Court issued its decision denying the relief requested by the plaintiffs.  The Court held that the balancing act of environmental and societal concerns, that may be mandated by the ERA, is achieved through the legislative process.  Because the Court did not find any legislative enactments or regulatory provisions that mandated the Executive Branch to perform any of the actions sought by the plaintiffs, the Court denied the applicable mandamus requests: “Under the current scheme, deciding whether to conduct particular studies, promulgate regulations or issue executive orders detailing the process by which environmental decisions are made, and to prepare and implement comprehensive regulations addressing climate change are either discretionary acts of government officials or is a task for the General Assembly.”

Please contact Michael Vennum in Vorys’ Pittsburgh office (mkvennum@vorys.com) for a copy of the Court’s opinion.

Miller v. Cloud

Posted in Energy

In a recent decision, Miller v. Cloud (July 22, 2016), Ohio’s Seventh District Court of Appeals concluded that an estate intended to transfer its interest in the minerals to a property through an auction sale, notwithstanding language in an executor’s deed that contained the words “SURFACE ONLY.” The court further found that the deed could be reformed to conform with the intentions of the parties, and that a statute of limitations did not bar the suit. However, the court found that the seller—who had previously obtained a sizable oil and gas lease bonus on the belief that she was the rightful owner of the minerals—was not required to disgorge that bonus as there was no showing that the seller committed any wrongdoing and disgorgement would be inequitable.

You can read the decision here.