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Energy & Environmental Law Blog

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PA Supreme Court Invalidates More of Act 13

Posted in Energy

With the support of its recently elected justices, the Pennsylvania Supreme Court, in an opinion issued on September 28, 2016, held four provisions of Pennsylvania’s Oil and Gas Act (also known as Act 13) to be unconstitutional.  In addressing the severability of various provisions of Act 13, and emboldened by its 2014 plurality decision (which the Court noted as being “scholarly and comprehensive”), the Court held that: (1) private water supplies require the same protection under Act 13 as afforded to public water supplies; (2) the PUC is no longer authorized to review local ordinances to ensure compliance with Act 13; (3) restrictions and obligations placed upon physicians related to the confidentiality of fracturing fluid trade secrets is improper; and, (4) eminent domain powers related to natural gas storage cannot ecumenically be afforded to all gas companies.  A copy of the 88 page majority decision is available here: Robinson Twp. v. Commonwealth.

The four invalidated provisions were rarely, if at all, enforced following the enactment of Act 13 in 2012.  Nevertheless, the Court articulated a concern that the legislature provided special treatment to the natural gas industry when creating and enacting Act 13.  As such, the Court found certain provisions of the Act to be unconstitutional pursuant to a prohibition on special laws.

Of additional importance to natural gas operators, the Court, in dicta, repeatedly emphasized a municipality’s right to enact a zoning ordinance that precludes oil and gas development in various zoning districts, to establish setbacks in excess of those required by Act 13 and, possibly, to limit noise and hours of operation.  This dicta is important because the Court recently granted an allowance of appeal in the Gorsline case, which will determine whether unconventional natural gas development is an industrial activity and, as such, should be restricted to industrial zoning districts.  Further, the joinder of the three newly elected justices to the Sept. 28th majority opinion may also indicate an openness to permit municipalities to further limit natural gas development via local ordinance restrictions.

 

USFWS Proposes Endangered Listing for Rusty Patched Bumble Bee

Posted in Energy, Environment

On September 22, 2016, the U.S. Fish and Wildlife Service proposed to list the rusty patched bumble bee (Bombus affinis) as an endangered species under the Endangered Species Act. The primary reason for the Service’s proposed listing is the 91 percent decline in the bumble bee’s population abundance and distribution since the late 1990s, according to a study conducted in response to a petition to list the bumble bee as endangered. Notably, the bumble bee was abundant in 28 states in the early 1990s, but it has been reported in only 12 states since 2000. The Service sites disease, pesticides, and habitat loss as likely causes of the decline in the bumble bee’s population.

If listed as endangered, unpermitted “takes” of the bumble bee would be prohibited and other federal agencies would be required to consult with the Service prior to taking action to ensure that their actions are not likely to jeopardize the continued existence of the species.

Comments on the proposed listing are due by November 21, 2016.

Supreme Court of Ohio Holds 1989 DMA Is Not Self Executing

Posted in Energy

On September 15, 2016, the Supreme Court of Ohio issued a number of decisions concerning the application of the Ohio Dormant Mineral Act (R.C. 5301.56) (DMA). In the lead case, Corban v. Chesapeake Exploration, L.L.C., et al., 2016-Ohio-5796 , the Court held that:

  •  The 1989 version of the DMA was not self-executing (i.e., did not automatically transfer ownership of dormant mineral rights to the surface owner of the property by operation of law). Rather, the surface owner must have filed a quiet title action seeking a decree that the dormant mineral interest had been abandoned in order to merge the interests;
  •  The 2006 version of the DMA (“2006 DMA”) applies to claims to abandon dormant mineral interests asserted after the effective date of the 2006 DMA (June 30, 2006); and
  • The payment of a delay rental during the primary term of an oil and gas lease does not qualify as a “savings event” under the DMA.

These holdings have a significant impact upon the ownership of severed oil and gas interests located within the State of Ohio. We are currently reviewing these decisions and will be publishing a more detailed client alert shortly. Please check back here for additional information.

Click here to read Corban.

Ohio Oil Production Falls While Gas Production Rises

Posted in Energy

On September 1st, the Ohio Department of Natural Resources (ODNR) released production totals for the second quarter of 2016. The report shows that natural gas production from shale wells increased by over 50% from the second quarter of 2015, while oil production fell over 18% from that same period.

Click here to access ODNR’s second quarter production report.

U.S. EPA Proposes Revisions to Title V Permit Petition Process

Posted in Energy, Environment

On August 24, 2016, U.S. EPA proposed revisions to the rules governing the petition process for Title V permits under 40 CFR Part 70. Section 505 of the Clean Air Act requires permitting authorities to submit a proposed Title V permit to U.S. EPA for a 45-day review period before issuing the final permit. If U.S. EPA does not object to the issuance of the permit within the 45-day period, the CAA authorizes any person to petition U.S. EPA to object to the issuance of the permit. The revisions, which are intended to streamline the petition process, address the following:

1. How to submit a petition to U.S. EPA;
2. The format and minimum content required for Title V petitions;
3. State permitting authorities’ obligation to respond to significant comments on a draft Title V permit;
4. Recommended practices for interested stakeholders; and
5. U.S. EPA’s obligations with respect to responding to a Title V petition.

Comments on the proposed revisions are due by October 24, 2016.

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.