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H.B. 390 Clarifies Ohio Unitization Program

Posted in Energy

On June 28, 2016, Ohio Governor Kasich signed into law House Bill 390, which, among other matters, clarifies the status of pending applications for unit operations concerning mineral rights owned by the Ohio Department of Transportation.  In particular, it requires the chief of the Division of Oil and Gas Resources Management to issue unit orders with respect to such applications within forty-five days of the law’s effective date (i.e., 90 days after signing) (where some applications had been pending for nearly two years).  Importantly, given the change in market circumstances, it also provides that if approved, the applicant is not required to commence unit operations for a period of two years from the order’s effective date.

You can read the full text of the new law after the break.

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Second Try for Post-Production Costs Prohibition

Posted in Energy

On June 27, 2016, the Pennsylvania House Environmental Resources and Energy Committee revived previously introduced legislation designed to clarify that the Guaranteed Minimum Royalty Act would provide for a minimum unconventional gas royalty of 12.5% even when post-production costs are applied. The committee voted to send House Bill 1391 to the full House for consideration.  [Link to House Bill 1391.]

Depending on the language of its oil and gas leases, an energy company may deduct a proportionate share of post-production costs from final royalty payments. Such costs can include compression, dehydration, transmission and other expenses incurred between the wellhead and a final market point of sale.  When these charges are deducted, final royalty payments often are below 12.5%.

In the 2010 case of Kilmer v. Elexco Land Services, Inc., the Pennsylvania Supreme Court held that the Guaranteed Minimum Royalty Act did not address the deduction of post-production costs and their impact on royalties.  As such, the Court determined that, absent a legislative prohibition to the contrary, post-production costs may be deducted from landowner royalties when the lessee has undertaken the job of treating, processing, marketing and selling the natural gas produced under a lease that is otherwise silent as to post-production costs.

This is the bill’s second attempt at passage. In 2014, the same House committee approved a similar bill, but legislative leaders prohibited a full vote.  At that time, some energy companies argued that the bill was unconstitutional because it would revise existing leases.  The current bill was introduced in 2015, but its sponsors did not press the issue with the full legislature at that time because of the state’s on-going budget stalemate.  Currently, the bill’s sponsors are lobbying legislative leaders for a floor debate and formal consideration of the measure.

U.S. EPA Finalizes Rule Prohibiting Oil/Gas Wastewater Discharges to POTWs

Posted in Energy, Environment

On June 27, 2016 U.S. EPA finalized a regulation under the Clean Water Act that prohibits the discharge of wastewater from certain oil and gas extraction facilities to POTWs. Specifically, the rule applies to onshore extraction from shale and/or tight geologic formations – referred to as unconventional oil and gas resources. EPA determined that current industry practice, including wastewater disposal in UIC wells, wastewater reuse/recycling, and management in centralized waste treatment facilities, provided a technology basis for promulgating a zero discharge standard for unconventional oil/gas extraction facilities.

The final rule, which becomes effective on August 29, 2016, does not apply to conventional oil and gas extraction facilities or coalbed methane facilities.

Federal Court Strikes Down BLM’s Hydraulic Fracturing Regulations

Posted in Energy

We previously wrote about the Bureau of Land Management’s attempt to regulate hydraulic fracturing on federal and Indian lands. On June 21st, a federal court in Wyoming ruled that the BLM exceeded the scope of its authority by attempting to regulate hydraulic fracturing on federal and Indian lands, ruling that “Congress has not directed the BLM to enact regulations governing hydraulic fracturing. Indeed, Congress has expressly removed federal agency authority to regulate the activity, making its intent clear.”

The decision was appealed to the 10th Circuit Court of Appeals. We will keep you posted on further developments with this case.

TSCA Reform: Major Chemical Management Changes on the Horizon

Posted in Articles, Environment

The Toxic Substances Control Act (“TSCA”) became law in 1976 with the objective of regulating chemicals in commerce that posed an “unreasonable risk of injury to human health or the environment.”  While originated with good intent, TSCA had become a stale law that lacked clarity for industry and regulators alike.  Now, after years of legislative efforts, and with the support of many (including industry, environmentalists, public health officials, and bipartisan efforts in Congress), TSCA is soon to receive a major update through the Frank R. Lautenberg Chemical Safety for the 21st Century Act.

The reformed TSCA, signed into law yesterday by President Obama, will implement changes that affect every industry importing, manufacturing, or processing an industrial chemical substance.  The law aims to strengthen chemical regulation by clarifying EPA’s role in regulating new chemicals and mandating the EPA evaluate all chemicals currently in commerce.  These changes will not be instant; but, industry should expect a need to implement major changes in chemical management within three to five years.

Some of the most significant changes to TSCA include:

  • EPA will be mandated to review all chemicals currently existing in commerce, beginning with those chemicals it deems high priority.
  • Industry will now need the approval of EPA to move forward with the commercialization of a new chemical.
  • EPA will regulate chemical substances based solely on the risk that substance provides to human health and the environment.  TSCA’s previous “balancing test” between the risk of a chemical and the chemical’s economic impact has been eliminated.
  • EPA will no longer be required to impose the “least restrictive” requirements when regulating chemicals in commerce.  TSCA’s previous language requiring chemical regulation at the least burdensome alternative to industry has been eliminated.
  • EPA will have the power to preempt state laws that may contradict its risk finding in certain circumstances.  For instance, states will be barred from banning or restricting the use of chemicals for which EPA has issued a safety determination.
  • EPA will have the authority to order chemical testing from industry to review pre-manufacture notices or “significant new use” notices.
  • Confidential Business Information claims will be more difficult to make and will expire in 10 years.

Ohio’s Utica Oil Production Dips, Gas Production Grows

Posted in Energy

According to quarterly production data released by the Ohio Department of Natural Resources, oil production in the state from Utica shale wells dipped since the fourth quarter of 2015, reports the Akron Beacon Journal:

The oil data is new evidence of the continuing industry downturn from low commodity prices hitting Ohio. That downturn has forced some drilling companies into bankruptcy and dramatically slowed shale drilling across the United States.

Until now, oil and natural gas production in Ohio had been growing because of heavy Utica drilling in recent years.

Oil production dipped 12.3 percent from the fourth quarter of 2015, according to first-quarter 2016 production from 1,302 horizontal Utica wells.

But it’s a different story for natural gas production:

Natural gas production from Ohio’s Utica Shale in the first quarter grew by 8.7 percent from fourth quarter 2015.

It increased from nearly 303 billion cubic feet per day in fourth quarter 2015 to 329.5 billion cubic feet in first quarter 2016.

Natural gas production grew by 80 percent from first quarter 2015 to first quarter 2016, the state said.

You can check out the quarterly production data here.

Supreme Court Holds CWA Jurisdictional Determinations are Final Agency Actions

Posted in Energy, Environment

On May 31, 2016, The U.S. Supreme Court held that Clean Water Act jurisdictional determinations by the Army Corps of Engineers are final agency actions that can be reviewed by federal courts.  In reaching its decision, the Supreme Court declined to follow a 2014 decision from the Fifth Circuit which held that jurisdictional determinations are merely a notification of a property’s classification, and held that such determinations meet the criteria for final agency actions.  Notably, the Court held that a jurisdictional determination “marks the consummation of the Corps’ decisionmaking on the question whether a particular property does or does not contain ‘waters of the United States’” and that the “definitive nature of approved JDs also gives rise to direct and appreciable legal consequences.”

New U.S. EPA Environmental Justice Agenda Announced

Posted in Articles, Environment

On Monday, May 23, U.S. EPA released a draft of its final Environmental Justice Strategic Plan for the Years 2016-2020, which is open for comment until July 7, 2016.  The plan focuses on three major goals.  The first goal is to deepen the environmental justice practice within EPA programs, specifically to improve the health and environment of overburdened communities, which EPA plans to achieve through use of rulemaking, permitting, compliance and enforcement, and science.  The second goal, to work with partners to expand impact in overburdened communities, involves working with state and local governments, federal agencies, community-based organizations, and tribes and indigenous peoples to consider and implement best-practices starting from the ground-level.  Finally, the third goal is to demonstrate progress on environmental justice challenges, through tasks related to disparities in exposure of children to lead, increased access to drinking water, improvement to air quality to reach national ambient air quality standards for low-income populations, and decreased exposure to contaminants at hazardous waste sites. 

Overall, EPA seeks to strengthen its capacity for addressing environmental justice concerns by placing greater emphasis on low-income communities into their regular agency activities, such as rulemaking, permitting, and enforcement.  It seeks to view communities more holistically with improved tools for monitoring and screening environmental pollutants and health risks and gain more insight through collaboration with state partners.  For more information from EPA, click here.  You can find the entire draft of the 2020 Environmental Justice Action Agenda here.

U.S. EPA Issues Draft Information Request on Methane Emissions

Posted in Energy, Environment

On the same day that U.S. EPA finalized amendments to the New Source Performance Standards for the oil and gas industry (click here for our blog post on the final rule), the Agency issued a draft  Information Collection Request (ICR) to require oil and gas companies to provide extensive information on methane emissions from various sources.  The draft ICR is comprised of two parts: (1) an operator survey to collect information on the number and types of equipment at onshore production facilities, and (2) a facility survey to collect detailed information on emissions sources and control devices in use at onshore production, gathering, boosting, processing, transmission, storage and import/export facilities.  Owners/operators have 30 days to respond to the operator survey, and 120 days to respond to the detailed facility survey.

Click here for a copy of the unofficial version of the ICR.  EPA will accept comments on the draft ICR for 60 days after publication in the Federal Register.

U.S. EPA Finalizes NSPS OOOO Amendments

Posted in Energy, Environment

On May 12, 2016, U.S. EPA finalized amendments to the New Source Performance Standards (NSPS) for the oil and natural gas source category at 40 CFR Part 60, Subpart OOOO, and established new standards at 40 CFR Part 60, Subpart OOOOa.  The final rule establishes standards for greenhouse gas emissions in the form of limitations on methane emissions, and requires additional sources not originally subject to Subpart OOOO to comply with with the VOC and methane limitations prescribed under the rule.

Click here for a copy of the unofficial version  of the final rule.  The final rule will be effective 60 days after publication in the Federal Register.