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Appellate Court Again Holds Ohio’s Marketable Title Act Applies to Fee Oil and Gas Interests

Posted in Energy

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.

 

 

 

U.S. EPA Finalizes New Owner Clean Air Act Audit Program for Oil and Natural Gas Sector

Posted in Energy, Environment

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.

Pennsylvania Court Rules on Unfair Trade Practices as to Natural Gas Leasing

Posted in Energy

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.

Sixth Circuit Holds Environmental Groups Lack Standing to Challenge Air Permits for NEXUS Pipeline Compressor Stations

Posted in Energy, Environment

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)).

Court of Appeals Signals Ohio’s Marketable Title Act Applies to Fee Mineral Interests

Posted in Energy

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.

 

 

U.S. EPA Issues Comprehensive PFAS Action Plan

Posted in Environment

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.

Sixth Circuit Affirms Constitutionality of Ohio’s Statutory Unitization Procedures

Posted in Energy

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.

Supreme Court of Ohio Clarifies Ohio Marketable Title Act

Posted in Energy

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.

Check out the decision here and learn more by reading our Client Alert.

USEPA and Army Corps Propose New WOTUS Rule

Posted in Energy, Environment

On December 11, 2018, USEPA and the Army Corps of Engineers proposed a new rule defining “water of the United States” (WOTUS) subject to USEPA/Army Corps jurisdiction under the Clean Water Act. The proposed rule would replace the 2015 WOTUS rule, which has been the subject of litigation across the country, with a more narrow WOTUS definition. Specifically, the new proposed rules defines 6 categories of waters subject to USEPA/Army Corps jurisdiction:

• Traditional navigable waters
• Tributaries to those navigable waters, meaning perennial or intermittent rivers and streams that contribute flow to a traditional navigable water in a typical year
• Certain ditches, such as those used for navigation or those affected by the tide
• Certain lakes and ponds that are similar to traditional navigable waters or that provide perennial or intermittent flow in a typical year to a traditional navigable water
• Impoundments such as check dams and perennial rivers that form lakes or ponds behind them
• Wetlands that abut or have a direct hydrologic surface connection to another water in the U.S.

Notably, the proposed rule clarifies that WOTUS does not include water features that flow only in response to precipitation, several types of ditches, and stormwater control features, among others.

A pre-publication version of the proposed WOTUS rule can be accessed here. The agencies will take comment on the proposal for 60 days after publication in the Federal Register.

Court of Appeals Addresses the Amount of Diligence Required under the 2006 DMA

Posted in Energy

Earlier this week, Ohio’s 7th District Court of Appeals again addressed the amount of diligence required to identify the holders of severed mineral interests under the 2006 version of Ohio’s Dormant Mineral Act (2006 DMA). In Sharp v. Miller, 2018-Ohio-4740, the Court reaffirmed its earlier ruling in Shilts v. Beardmore that the 2006 DMA only requires a surface owner to exercise reasonable due diligence to ascertain the names and addresses of mineral holders prior to serving its notice of abandonment by publication. Further, the Court held that whether a surface owner’s actions constitute “reasonable due diligence” will depend on the facts and circumstances of each individual case. Thus, there is no right-line rule or definition of “reasonable due diligence.”  Actions that may be reasonable in one case may not be reasonable in another case.

In Sharp, the surface owners searched the local probate records and deed records, but their search failed to reveal the names of any heirs of the record mineral owners. Moreover, the only address the surface owners found in their search was a post office box that formerly belonged to one of the record mineral owners. Their search did produce a Release of Estate from Administration for one of the record mineral owners. However, that Release did not reference the subject mineral interest. A title report ordered by the surface owners also failed to reveal any potential heirs. 

The surface owners did conduct an in-depth, 80-hour internet search for the heirs of the record mineral owners. However, that search occurred after the surface owners had already served their notice of abandonment by publication. Notwithstanding the lack of a prior internet search, the Court held that the surface owners exercised reasonable due diligence under the circumstances of this case. The Court found that a prior internet search would likely not have been helpful to the surface owners because the only names they had for such a search were the names of the record mineral owners. Further, the Court found that there is no evidence that a simple internet search could have revealed the names of the actual heirs of the record mineral owners. In making this finding, the Court was likely influenced by the fact that the surface owners were only able to create a partial list of heirs from their extensive internet search.