Four years after the Supreme Court of Ohio struck down the City of Munroe Falls’ attempt to regulate oil and gas development through zoning, a lower appeals court held that the City and its law director could not sanctioned for attempting to enforce ordinances that required Beck Energy to obtain a zoning certificate and/or variance prior to drilling wells within the city. See State of Ohio, ex rel. Thomas W. Kostoff v. Beck Energy Corp (Apr. 3, 2019). The sanctions motion came in response to the City’s suit for declaratory judgment in 2016 in order to determine whether all municipal zoning matters were preempted by state law—a question the City claimed was left open by the 2015 Supreme Court decision.
On April 10, 2019, President Trump issued two Executive Orders (EOs) to facilitate the construction of primarily energy-related infrastructure, including pipelines. EO 13867, Issuance of Permits with respect to Facilities and Land Transportation Crossings at International Borders, was issued to expedite permitting of facilities crossing the international border, such as oil and gas pipelines to and from Canada. EO 13868, Promoting Energy Infrastructure and Economic Growth, aims to promote efficient permitting processes, reduce regulatory uncertainties, and develop new energy infrastructure.
Additional details on the two EOs are available here.
Ohio’s Seventh District Court of Appeals recently held once again that fee oil and gas interests are subject to possible extinguishment under Ohio’s Marketable Title Act (MTA). See Stalder v. Bucher, 2019-Ohio-936. In Stalder, the mineral owners advanced two arguments against extinguishment. First, they claimed that the MTA no longer applies to mineral interests. In their view, Ohio’s Dormant Mineral Act (DMA) supersedes the MTA because it is the more specific statute as to terminating mineral interests. The Court rejected this argument. According to the Court, oil and gas interests are subject to both the MTA and DMA. Second, they maintained that an exception to extinguishment applied. The Court agreed and thus preserved the oil and gas interest in the mineral owners’ favor.
On March 29, 2019, U.S. EPA finalized a New Owner Clean Air Act (CAA) Audit Program for new owners of upstream oil and natural gas exploration and production facilities – i.e. well sites, tank batteries, and vapor control systems (the “Program”). The Program encourages new owners voluntarily to conduct a self-audit of newly acquired facilities, and identify, correct and self-disclose CAA violations to U.S. EPA in accordance with the Oil and Natural Gas Exploration and Production Facilities New Owner Audit Program Agreement (“Agreement”).
In order to participate in the Program, new owners must meet certain eligibility requirements and notify U.S. EPA within nine months following the acquisition of covered facilities regarding their intent to participation in the Program. Under the Agreement, U.S. EPA will not impose a civil penalty for CAA violations that are properly disclosed and corrected. The Agreement requires vapor control system-related violations to be corrected within 180-days of discovery, and other violations to be corrected within 60-days of discovery. It should be noted that U.S. EPA reserves the right to enter into an Agreement if the Agency or a states has already discovered CAA noncompliance at newly-acquired facilities.
On March 15th, the Pennsylvania Commonwealth Court issued its opinion in Anadarko Petro. Corp. v. Pennsylvania, No. 60 C.D. 2018 (Pa. Commw. Ct. March 15, 2019), holding that the Pennsylvania Attorney General could file action for unfair lease negotiations under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (the “Unfair Trade Law”), but could not currently use the Unfair Trade Law to assert antitrust violations as to such alleged activity. The Attorney General alleged that Anadarko and Chesapeake agreed to split portions of northeast Pennsylvania between them so that each would effectively have exclusive areas in which to seek oil and gas leases, without the fear that the other would tender competing offers to private landowners who were prospective lessors. The Attorney General equated this practice as deceptive and actionable antitrust behavior pursuant to the Unfair Trade Law. Anadarko and Chesapeake, however, argued that the Unfair Trade Law does not apply to the leasing of private mineral interests and, moreover, being private matters, the Attorney General was precluded from asserting his claims.
The court held that the Unfair Trade Law was enacted to benefit the public at large by eliminating practices as asserted by the Attorney General and, further, the Unfair Trade Law does not place restrictions on the Attorney General to bring such claims. The court noted that a landowner’s relinquishment of title to oil and gas rights for terms of years was the functional equivalent of a sale, which is covered by the Unfair Trade Law. As to the antitrust assertion, the court noted that the Unfair Trade Law permits the Attorney General and General Assembly to both define monopolistic behavior, but such definition must be completed through a statutory rule making process. As of now, neither the Attorney General nor the General Assembly has done so. Therefore, the court concluded that the Attorney General could not proceed with an antitrust claim because the asserted collusive actions have not been expressly defined as monopolistic behavior for purposes of the Unfair Trade Law.
On February 21, 2019, the Sixth Circuit Court of Appeals dismissed a petition for review of air permits issued by Ohio EPA for two compressor stations to be constructed along the NEXUS pipeline in Ohio. The Court dismissed the petition for review for lack of jurisdiction, holding the environmental groups that filed the petition for review failed to establish standing. In reaching its decision, the Court highlighted that “petitioners bore the burden of establishing the irreducible constitutional minimum of standing” which requires petitioners demonstrate that they (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. The Court also noted that a citizen group can establish standing on behalf of their members, but such “representational standing” requires the group to show that “its members would otherwise have standing to sue in their own right.”
The Court held that petitioners failed to demonstrate the first element of standing – i.e. injury in fact. To demonstrate injury-in-fact, petitioners were required to “make specific allegations establishing that at least one identified member had suffered or would suffer harm.” The Court highlighted that petitioners could not rest on bare allegations to establish a concrete injury. Rather, petitioners were required to “present specific facts through citations to the administrative record or affidavits or other evidence” that at least one member of each petitioner group would suffer a concrete particularized harm from the compressor stations’ emissions.
As an aside – the procedural history of the case is worth mentioning. The environmental groups first appealed Ohio EPA’s issuance of the air permits to the Environmental Review Appeals Commission (ERAC). However, ERAC, which has exclusive jurisdiction over appeals from final actions of Ohio EPA and ordinarily would hear appeals of air permits issued by Ohio EPA, dismissed the groups’ appeal for lack of jurisdiction. Notably, ERAC held that the federal Natural Gas Act vested original and exclusive jurisdiction of the appeal in the federal Courts of Appeals (see 15 U.S.C. 717r(d)(1)).
Ohio’s Seventh District Court of Appeals was recently asked to analyze whether a fee oil and gas reservation can be extinguished under Ohio’s Marketable Title Act (the “MTA”). In Miller v. Mellott, 2019-Ohio-504, two different groups claimed ownership over the oil and gas. The surface owners claimed title under the MTA. The mineral owners claimed title through a reservation included in a 1947 deed. The trial court granted summary judgment in favor of the mineral owners. It held Ohio’s Dormant Mineral Act, “not the MTA, is the remedy available to a surface owner attempting to quiet title to a severed mineral interest.” On appeal, the appellate court found that the trial court “erred in refusing to apply the MTA.” Thus, it signaled that the MTA can be used to extinguish fee oil and gas reservations. However, the appellate court concluded that this error did not require reversal. After reviewing the chain of title, the appellate court found that the surface owners did not have a “root of title.” Thus, they could not extinguish the severed oil and gas interest under the MTA.
On February 14, 2019, U.S. EPA issued a comprehensive Action Plan for addressing Per- and Polyfluoroalkyl Substances (PFAS) in environmental media. The Action Plan, which was developed in response to significant public input received by EPA over the past year, describes EPA’s short- and long-term multi-media and multi-program approach for addressing PFAS. Notable activities that EPA will implement under the Action Plan include: establishing a maximum contaminant level for PFOA and PFOS under the Safe Drinking Water Act; strengthening the Agency’s enforcement authorities and clarifying cleanup strategies by designating PFOA and PFOS as hazardous substances; proposing nationwide drinking water monitoring for PFAS to inform regulatory action; adding PFAS to to the Toxics Release Inventory; conducting scientific research to better understand and manage PFAS risks; and developing a risk communication plan to disseminate PFAS information to the public.
Per the Action Plan, activities that EPA anticipates implementing in 2019 include proposing a national drinking water regulatory determination for PFOA and PFOS, and developing interim cleanup recommendations to address groundwater contaminated with PFOA and PFAS. The Action Plan notes that EPA will continue to engage other federal agencies, states, industry groups and associations, and the public in its implementation of the Action Plan.
Last week, the Sixth Circuit Court of Appeals affirmed a lower court decision upholding the constitutionality of Ohio’s statutory unitization procedures. See Kerns v. Chesapeake Exploration, L.L.C., 6th Cir. No. 18-3636 (Feb. 4, 2019). Read more about that decision in our Client Alert.
On December 13, 2018, the Supreme Court of Ohio clarified the preservation of interests under the Ohio Marketable Title Act (OMTA). See Blackstone v. Moore, Slip Opinion No. 2018-Ohio-4959. In its decision, the Court held that under the OMTA, a deed reference to a previously reserved royalty interest is sufficiently-specific to preserve that royalty interest where the reference identifies the type of interest created and the person to whom the interest was granted.