Effective November, 21, 2016, the U.S. Fish and Wildlife Service (USFWS) revised its guiding 1981 Mitigation Policy to provide a new structure for mitigation during permitting in order to diminish the impact of private development upon fish, wildlife, plants and their habitats. The policy revision’s stated purpose is to replace project-by-project or single-source mitigation with the use of landscape-scale mitigation (which applies a hierarchy for impacts to resources and their values, services, and functions), consistent with the Presidential Memorandum on Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment and the Secretary of Interior’s Order 3330, “Improving Mitigation Policies and Practices of the Department of the Interior.” According to the USFWS, the overarching goal of landscape-scale mitigation should be a “net gain” in conservation outcome, or, at the very least, “no net loss” of resources, their value, services, and functions resulting from proposed action. However, development supporters criticize the policy for its failure to define “net benefit’ and “no net loss” which creates uncertainty that could create bureaucratic delays in permitting.
Ohio producers will soon be able to transport more natural gas out of the state. In a recent article, the U.S. Energy Information Administration (EIA) summarized several pipeline projects that are in various stages of development. According to the EIA, these projects could add an additional 6.8 billion cubic feet per day (Bcf/d) of takeaway capacity from the Utica region by the end of 2018. Click here to read the article.
In a recent decision, Harper v. Muskingum Watershed Conservancy Dist., the Sixth Circuit Court of Appeals dismissed a qui tam action brought under the False Claims Act (FCA), 31 U.S.C. 3729, against the Muskingum Watershed Conservancy District (MWCD). MWCD received property through a deed from the United States government. The deed contained restrictions providing that the property would revert to the United States if MWCD alienated it or stopped using it for recreation, conservation, or reservoir-development purposes. Between 2011 and 2014, MWCD executed several oil and gas leases on the property. The relators were several Ohio residents who alleged that by entering into the leases, MWCD had triggered the reversionary provisions of the deed, and that its continued possession of the property violated provisions of the FCA concerning unlawful retention of government property. On November 21, 2016, the Sixth Circuit affirmed the dismissal of the lawsuit, concluding that relators relied on provisions of the FCA that contained scienter requirements, and that relators’ complaint failed to allege that MWCD knowingly committed any of the alleged violations.
Click here to read the decision.
On November 2nd, the Supreme Court of Ohio issued its decision in Lutz v. Chesapeake Appalachia, L.L.C. In its opinion, the Court declined to answer a certified question from the Northern District of Ohio regarding whether Ohio follows the “at the well” rule or the “marketable product” theory with respect to post-production costs, leaving it up to the federal court to interpret the parties’ contracts under traditional cannons of contract construction.
To learn more about this decision, read our Client Alert.
The Superior Court of Pennsylvania recently upheld a lower court decision finding that Atlas Resources, LLC (“Atlas”) qualified as a statutory employer under Section 302(a) of the Workers Compensation Act (the “Act”). As a statutory employer, Atlas is entitled to immunity from the wrongful death suit brought by the estate of a rig worker who was killed while working on the drilling rig. The deceased rig worker was an employee of a drilling company subcontracted by Atlas for the “removal, excavation or drilling of . . . minerals” on land subject to an oil and gas lease taken by Atlas. The drilling company paid the workers’ compensation benefits to the decedent’s beneficiary after the accident. Even though compensation payment was not made by Atlas, the Superior Court held that Atlas was still entitled to the benefit of immunity since the benefit is solely dependent upon a party’s qualification as the statutory employer under the Act – regardless of whether it was the party who actually paid the compensation.
The Superior Court’s interpretation of the plain meaning of Sections 302(a) and 203 of the Act is consistent with prior Pennsylvania court decisions; however, oil and gas operators should be aware of the growing sentiment for the Pennsylvania legislature to reconsider the Act. This call for change was echoed by the Superior Court in its decision. The Superior Court opined that the Act should not permit a general contractor to utilize the benefits of immunity unless it also undertakes the duties intended by the Act. General contractors, including oil and gas operators, should remain vigilant as the calls for legislative intervention increase.
Click here to read the full decision.
In Sunoco Pipeline L.P. v. Teter, Ohio’s Seventh District Court of Appeals rejected a landowner challenge to Sunoco’s acquisition of an easement through eminent domain to construct its Mariner East 2 Pipeline. The landowner contested Sunoco’s exercise of eminent domain on the basis that pure propane and pure butane (i.e., the liquids to be transported by the pipeline) were not “petroleum” for purposes of R.C. 1723.01, which permits common carriers to appropriate land. The court found that while R.C. 1723.01 did not define “petroleum,” other Ohio statues and administrative code provisions indicated that pure propane and butane were considered petroleum, and that such a construction was supported by considering the technical or industry definition of “petroleum” as well as its historic meaning. Further, the court rejected the landowner’s claim that the appropriation was not “necessary” or for a “public use.”
Click here to read the decision.
On October 17, 2016, the Bureau of Land Management released a Notice of Competitive Oil and Gas Internet-Based Lease Sale for approximately 1,600 acres of the Wayne National Forest in Monroe, Noble and Washington Counties, Ohio. The notice of the lease sale was issued shortly after the BLM issued a final Environmental Assessment and associated Finding of No Significant Impact related to oil/gas leases within the Wayne National Forest.
The lease sale will be held on December 13, 2016 at 8:00 am EST, and includes federal land in the States of Arkansas and Mississippi in addition to the land in the Wayne National Forest. Additional information regarding the lease sale and the Environmental Assessment/No Significant Impact finding are available on the BLM website.
On Saturday, October 8, 2016, the Pennsylvania Department of Environmental Protection enacted its new regulations covering unconventional natural gas well pad development. The new regulations include area of review requirements to protect public resources (which may apply to wells located near schools, playgrounds and parks), stronger water supply restoration standards, the development and maintenance of Preparedness, Prevention and Contingency Plans, a general prohibition on waste disposal pits and well record/completions report requirements. Additional information on the regulations can be found in the Pennsylvania Bulletin. Industry challenges to these regulations will likely occur after the DEP begins enforcement efforts.
If you have any questions about these new regulations or potential challenges, then contact Michael Vennum or Josh Hannold at Vorys’ Pittsburgh office.
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.
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.