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Energy & Environmental Law Blog

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WOTUS Litigation Continues to Ebb and Flow

Posted in Environment

On August 16, 2018, a federal district court judge in South Carolina issued a nationwide injunction which halts the effectiveness of USEPA’s “Delay Rule.”  83 Fed.Reg. 5200 et seq.  The Delay Rule purported to delay the effectiveness of the Obama WOTUS Rule until February 2020.  Because of this new ruling, the Obama WOTUS Rule is now in effect in 26 states, including Ohio, Pennsylvania, and Texas.  Other states in which the Obama WOTUS Rule is now in effect are: California, Connecticut, Delaware, Florida, Hawaii, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Oklahoma, Oregon, Rhode Island, Tennessee, Vermont, Virginia and Washington.

Despite the South Carolina Court’s nationwide injunction of the Delay Rule, the Obama WOTUS Rule is still not effective in the other 24 states, including, bizarrely enough, South Carolina.  This is due to two other federal district court judges (in North Dakota and Georgia) previously issuing injunctions halting the effectiveness of the Obama WOTUS Rule itself, but only in certain states that were parties to those cases.  The Georgia decision is currently under appeal to the 11th Circuit Court of Appeals.  The South Carolina decision itself is likely to be appealed, and litigation also continues against both the Delay Rule and the Obama WOTUS Rule in other district courts across the nation.

As a backdrop to all of this litigation, USEPA continues to move forward with a regulatory process to repeal the Obama WOTUS Rule and replace it with a definition of Waters of the United States more in keeping with the late Justice Scalia’s opinion in the Rapanos case, which should represent a more limited view of federal authority.  A public comment period on the “repeal” portion of USEPA’s rulemaking efforts closed on August 13, 2018.  USEPA has yet to finalize the repeal, or propose a different definition.

The morass of injunctions, appeals, rulemakings, and other assorted legal and regulatory actions surrounding the Obama WOTUS Rule and the various USEPA efforts to delay, repeal, and replace the Obama WOTUS Rule shows no signs of abating anytime soon.  We will continue to provide updates as the status of the applicability of the Obama WOTUS Rule continues to shift.

Wyoming Court Upholds Oil and Gas Royalty Rule

Posted in Energy

On August 6, 2018, the U.S. District Court in Wyoming upheld the vast majority of a Obama-era rule issued by the Department of Interior’s Office of Natural Resources Revenue against a challenge by the American Petroleum Institute (API).  The Rule related to enforcement of noncompliance and civil penalties for parties that are subject to the Federal Oil and Gas Royalty Management Act.  API challenged the Rule, arguing that it is arbitrary and capricious and exceeded the agency’s authority under law.

The Court disagreed, upholding the entirety of the Rule with the exception of provisions related to the agency’s ability to seek penalties for a time period during which an administrative law judge had granted a stay of a penalty pending an administrative hearing.

The case is American Petroleum Institute v. U.S. Department of the Interior et al., case number 17-CV-083-F in the U.S. District Court for the District of Wyoming.

Pennsylvania Supreme Court Continues Rulings Against Municipal Zoning Authority

Posted in Energy, Environment

On August 3, 2018, the Pennsylvania Supreme Court vacated another municipal zoning decision favorable to oil and gas development.  In its per curium order of Delaware Riverkeeper Network v. Middlesex Township (N0. 270 WAL 2017), the Supreme Court directed the Commonwealth Court to reconsider its previous decision upholding a local zoning ordinance that permitted oil and gas development in agricultural and some residential areas.  This order, accompanied by the Supreme Court’s recent decisions in Gorsline v. Fairfield Township and Environmental Defense Foundation v. Commonwealth, indicates a willingness by the Supreme Court, including four of its newly elected justices, to limit (or perhaps prohibit) drilling in agricultural and residential zoning districts premised upon the Environmental Rights Amendment to the Pennsylvania Constitution.

Here, the Commonwealth Court had upheld the zoning ordinance based upon a three-part balancing test, which was subsequently revoked by the Supreme Court.  As such, the Commonwealth Court must now decide the case based upon different criteria.  [Interestingly, several unconventional wells have already been drilled pursuant to the challenged ordinance.]

The challengers, like those in the other cases noted above, are strong anti-fracking advocates, who seek to limit unconventional drilling to industrial zoning districts.  However, such districts are oftentimes not available for leasing or applicable parcels are too small for the construction of well pads.  Further, such restrictions limit the extraction of natural gas from a miniscule portion of the subsurface area within the municipality.  On a favorable note to exploration and production companies, the Supreme Court specifically claimed that its recent decisions “should not be misconstrued as an indication that oil and gas development is never permitted in residential/agricultural districts or that it is fundamentally incompatible with residential or agricultural use.”

Supreme Court of Ohio One Step Closer to Addressing Statute of Limitations Case

Posted in Energy

In Browne v. Artex Oil Co., Case No. 17 CA 20, the Fifth District recently determined that an action to declare an oil and gas lease terminated due to a lack of production was subject to a breach of contract statute of limitations period of either eight or fifteen years (for more, see here).  On August 2, 2018, the Fifth District determined that its ruling in Browne was in direct conflict with a decision from the Fourth Appellate District in Rudolph v. Viking International Resources Co., No. 15CA26, 2017-Ohio-7369 (which applied a 21-year statute of limitations applicable to adverse possession claims), and thus certified the question of the appropriate statute of limitations to the Supreme Court of Ohio (see here).  The Supreme Court has yet to take the case up on appeal, but if it does, we will be sure to report back.

USEPA Issues Supplemental Notice of Proposed Rulemaking for Waters of the United States, Seeks Additional Comments

Posted in Environment

On June 29, 2018, USEPA issued a supplemental notice of proposed rulemaking (the “Supplemental Notice”) to its July 2017 proposed action to repeal the 2015 definition of “waters of the United States” adopted under the Obama Administration.  The Supplemental Notice includes additional justification for the repeal of the 2015 definition, and also clarifies that USEPA is still seeking to repeal the entirety of the 2015 definition as step one in a two-step process.  The second step, yet to be initiated, will be to adopt a new regulatory definition for waters of the United States based on Justice Scalia’s opinion in the Rapanos plurality opinion.

The 2015 definition has yet to go into effect due to a combination of court-issued stays, and, more recently, USEPA’s promulgation of a final rule adding an effective date to the 2015 definition which delays its effectiveness until 2020.  This effective date delay rulemaking is currently under legal challenge by a variety of states and environmental groups, as is the 2015 definition itself being challenged in court by a different group of states as well as industry groups.

Given the volume and variety of litigation that has already occurred surrounding the definition of waters of the United States, any final rulemaking repealing the 2015 definition will almost assuredly be subject to additional litigation.  The Supplemental Notice may represent USEPA’s effort to provide better support for a future final rule to withstand any such challenge.

USEPA is accepting additional comments on the Supplemental Notice for 30 days following its publication in the Federal Register, until August 13, 2018.  Comments can be submitted under Docket ID No. EPA-HQ-OW-2017-0203 at https://www.regulations.gov/.

Federal Court Rejects Takings Challenge to Ohio’s Statutory Unitization Law

Posted in Energy

On June 13, 2018, a federal district court rejected a takings challenge to a unit order issued by the Ohio Division of Oil and Gas Resources Management under the state’s statutory unitization law, R.C. 1509.28    The court found that “the statutory unitization procedure set forth in R.C. § 1509.28 operates to protect the correlative rights of landowners….and it was passed as a valid exercise of Ohio’s police power.”  See Kerns v. Chesapeake Exploration, LLC , N.D. Ohio No. 5:18 CV 389 (June 13, 2018).   Although the constitutionality of statutory unitization or its analog, mandatory pooling, is well-settled nationwide, Kerns is the first decision to squarely consider Ohio’s unitization law.

Click here to read the decision.

[Disclosure: Vorys represented Chesapeake Exploration, LLC in this case].

FLSA Case Highlights the Importance of Wage-Hour Laws

Posted in Energy

A newly filed collective action in Ohio federal court against an oil and gas company highlights the importance of wage-hour law compliance and the potential ramifications for failing to do so. The case, Casarez v. Producers Service Corp., pending in the U.S. District Court for the Southern District of Ohio, involves the proper calculation of overtime compensation for employees paid under a “Belo” plan.  Read more about this case in our Client Alert.

Pennsylvania Supreme Court Prohibits Enforcement of Unconventional Gas Well Regulations

Posted in Uncategorized

On June 1, 2018, the Pennsylvania Supreme Court upheld most of the provisions of an injunction issued by the Commonwealth Court in 2016 preliminarily enjoining the Department of Environmental Protection (the “DEP”) from enforcing various regulations relating to unconventional natural gas operations (see Marcellus Shale Coalition v. Pa. Dep’t of Envtl. Prot., Case No. 115 MAP 2016).  The disputed regulations, published in 25 Pa. Code ch. 78a, pertain to the following:

  1. operators’ pre-permitting notice obligations relating to certain public resources;
  2. operators’ obligations relative to monitoring and remediating nearby wells;
  3. upgrading or closing of existing well development impoundments;
  4. re-permitting or closing of existing centralized impoundments; and,
  5. the imposition of erosion and sediment control measure requirements pertaining to site restoration which are potentially exempted under the Clean Streams Law.

The Court agreed that the Commonwealth Court did not err in issuing its temporary preliminary injunction.  However, with respect to the contested regulations relating to existing well-development impoundments and the purported abrogation of an exemption under the Clean Streams Law, the Court concluded that the Marcellus Shale Coalition had not carried its burden to demonstrate a clear right to relief and, as such, reversed the grant of preliminary injunctive relief while the lower court continues to consider the case on its merits.

Pennsylvania Supreme Court Limits Municipal Oil and Gas Zoning Authority

Posted in Energy

On June 1, 2018, the Pennsylvania Supreme Court, in a 4 to 3 decision, held that, without first establishing a sufficient evidentiary record, a Township cannot permit oil and gas drilling in a zoning district unless that use is specifically authorized by the municipal zoning ordinance.  In Gorsline v. Fairfield Twp. Board of Supervisors, the Court stated that because the applicable zoning ordinance did not expressly authorize gas wells in any of the township’s zoning districts and the gas company failed to develop a factual record related to “similarity of use,” natural gas drilling cannot be presumed to be a permitted use within the township.   The Court held that, in order to permit oil and gas drilling, Fairfield Township must change its zoning ordinance to permit drilling in designated areas and set forth “whatever limitations and conditions it decides are appropriate for the protection of its citizenry.”  What limitations and conditions the members of the Court deem necessary and appropriate have not yet been determined; however, that issue may be resolved in a pending case wherein the Court is reviewing the constitutional validity of the zoning ordinance of Allegheny Township, Westmoreland County.  Stay tuned for details!

 

Ohio Appellate Court: Oil and Gas Lease Expiration Claims Governed by 15-Year Contract Statute of Limitations

Posted in Energy

In Browne v. Artex (May 31, 2018), Ohio’s Fifth District Court of Appeals held that a claim that an oil and gas lease expired for lack of production is governed by Ohio’s statute of limitation for contract claims—not the state’s longer statute of limitations for recovery of possession of real property.

In Browne, the plaintiffs alleged that their oil and gas lease had lapsed for lack of production from 1981-1999.  The defendant-lessee asserted that plaintiffs’ claims were barred by Ohio’s statute of limitations for contract claims in R.C. 2305.06 (which, prior to being amended in September 2012, provided for a 15-year limitations period).  Plaintiffs disagreed, contending that the applicable limitations period was 21-years under R.C. 2305.04, relating to the recovery of possession of real property.

The trial court agreed with the lessee and the court of appeals affirmed.  Quoting the Supreme Court of Ohio, the court of appeals noted that “courts must look to the actual nature or subject matter of the case, rather than to the form in which the action is pleaded.”   Here, “[a] review of the complaint reveals the ‘actual nature or subject matter of the case’ is a dispute over the written terms of the lease agreement,” and specifically, the lease’s habendum clause.  Therefore, the proper limitations period was set by Ohio’s statute of limitations for contract claims, the appellate court found.

Click here to read the decision.

[Disclosure: Vorys represented amicus curiae The Ohio Oil & Gas Association in this case].