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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.

USEPA Proposes Revision to Policy on Ambient Air Exclusion

Posted in Energy, Environment

U.S EPA recently issued a draft guidance document titled Revised Policy on Exclusions from “Ambient Air” (Draft Guidance) in which the Agency revises its 1980 policy on the exclusion of certain areas from the scope of “ambient air” under the Clean Air Act. Under the National Ambient Air Quality Standards (NAAQS) program, “ambient air” is defined as “that portion of the atmosphere, external to buildings, to which the general public has access.” 40 CFR 50.1(e). Longstanding EPA policy provides that the regulatory definition of “ambient air” excludes the atmosphere “over land owned or controlled by the source and to which public access is precluded by a fence or other physical barriers.” The Agency’s policy is based on three core conceptual elements in the regulatory definition of ambient air: (1) access, (2) general public, and (3) external to buildings.

Most EPA determinations regarding the applicability of the exclusion have focused on the access element. Notably, EPA has explained that the access element of the ambient air policy encompasses two concepts – physical or practical access, and legal access. In response to stakeholder requests that EPA consider revising the policy to provide for more flexibility, and after considering past case-specific decisions, the Agency determined that physical barriers are not the only means of satisfying the access element of the exclusion from ambient air.

EPA’s revised ambient air policy replaces “a fence or other physical barriers” with “measures, which may include physical barriers, that are effective in deterring or precluding access to the land by the general public.” The Draft Guidance instructs air agencies to evaluate the effectiveness of a “measure” in precluding public access based on the relevant, specific circumstances, and notes that video surveillance, monitoring, clear signage (with or without fencing), routine security patrols, drones, swamps or large tracts of undeveloped land surrounding a facility may adequately preclude public access.

EPA is accepting comments on the Draft Guidance through December 21, 2018.

USEPA Concludes Reconsideration of 2009 NSR Project Aggregation Interpretation

Posted in Environment

On November 7, 2018, USEPA concluded its reconsideration (“2018 Reconsideration Action”) of a January 15, 2009 interpretation regarding NSR project aggregation (the “2009 NSR Aggregation Action”).  See 74 Fed.Reg. 2376 et seq.  The 2009 Aggregation Action never became effective in 2009, because the NRDC filed a petition for reconsideration that resulted in USEPA indefinitely staying the effectiveness of the 2009 Aggregation Action and USEPA accepting comments on the same.  USEPA received a number of comments, but did not take any action to either implement or revoke the 2009 Aggregation Action, which has remained stayed until now.  USEPA has now determined to retain “the interpretation set forth in the 2009 NSR Aggregation Action, while not adopting any changes to the relevant rule text.”  2018 Reconsideration Action at 1.

In the 2009 Aggregation Action, USEPA stated that “Activities at a source should be aggregated when they are substantially related. To be ‘‘substantially related,’’ there should be an apparent interconnection—either technically or economically—between the physical and/or operational changes, or a complementary relationship whereby a change at a plant may exist and operate independently, however its benefit is significantly reduced without the other activity.”  74 Fed.Reg. 2378.  USEPA went on to note that “When there is no technical or economic relationship between activities or where the relationship is not substantial, their emissions need not be aggregated for NSR purposes” and that “The test of a substantial relationship centers around the interrelationship and interdependence of the activities, such that substantially related activities are likely to be jointly planned (i.e., part of the same capital improvement project or engineering study), and occur close in time and at components that are functionally interconnected.”  Id.  That said, “timing, in and of itself, is not determinative in a decision to aggregate activities. We do not believe that timing alone should be a basis for aggregation because it is inconsistent with our policy discussed earlier in this notice that the appropriate basis for aggregation should be a substantial technical and economic relationship.”  Id. at 2379.

In addition to establishing the “substantially related” test, the 2009 Aggregation Action also established a rebuttable presumption that “if a previous physical or operational change has operated for a period of three or more years, permitting authorities may presume that a newly constructed change is not substantially related to the earlier change.”  74 Fed.Reg. 2380.  “In order to rebut the presumption of nonaggregation, there should be evidence that demonstrates a substantial relationship between the activities.”  Id.  Furthermore, “in applying this presumption, the time period separating physical or operational changes should be calculated based on time of approval (i.e., minor NSR permit issuance).”  74 Fed.Reg. 2381.  Although the 2009 Aggregation Action establishes a rebuttable presumption for non-aggregation, there is no presumption that activities separated by less than three years should be aggregated.  74 Fed.Reg. 2380 (“we are setting forth our view that activities separated by less than three years have no presumption.”)

Finally, both the 2009 Aggregation Action and the 2018 Reconsideration Action acknowledge that “Permitting authorities, as they have long done, will continue to exercise their best judgment in determining the technical and economic relationship of activities.”  74 Fed.Reg. 2379; 2018 Reconsideration Action at 33-34.

The 2018 Reconsideration Action, and through it, the 2009 Aggregation Action, will become effective when the 2018 Reconsideration Action is published in the Federal Register.  Petitions for judicial review of the 2018 Reconsideration Action can be filed with the D.C. Circuit Court of Appeals up to sixty days after its publication in the Federal Register.

U.S. EPA Proposes Amendments to Performance Standards for Oil and Natural Gas Sector

Posted in Energy, Environment

On October 15, 2018, USEPA proposed amendments to the new source performance standards (NSPS) for the oil and natural gas sector at 40 CFR Part 60, Subpart OOOOa (“Subpart OOOOa”). The proposed amendments to Subpart OOOOa are a result of USEPA’s reconsideration of certain aspects of Subpart OOOOa in 2017. Specifically, the proposed amendments address the Subpart OOOOa provisions governing fugitive emissions requirements, well site pneumatic standards, and professional engineer certification requirements.

With respect to the fugitive emissions requirements, EPA is proposing to revise the monitoring frequencies depending on the type of well site and to eliminate monitoring requirements when all major production and processing equipment is removed from a well site. Several amendments to definitions related to fugitive emissions are also proposed.

With respect to pneumatic pumps, EPA is proposing to expand the technical infeasibility provision to all well sites. EPA is also proposing to amend the certification requirements for closed vent system design and technical infeasibility for pneumatic pumps by allowing certification by either a professional engineer or an in-house engineer with relevant expertise.

Other proposed amendments are intended to clarify the requirements for requesting alternative means of emission limitation, the location of a separator during flowback operations, whether screenouts and coil tubing cleanouts are regulated as part of flowback operations. Finally, EPA proposed amendments to clarify several issues regarding the implementation of Subpart OOOOa including alternative work practice standards for reciprocating compressors, calculating potential emissions from storage vessels, exempting equipment at onshore processing plants that is used only during emergencies, and streamlining reporting and recordkeeping requirements.

Comments on the proposed amendments to Subpart OOOOa are due by December 17, 2018.

5th Circuit Holds Statute of Limitations Does Not Apply to Government’s Injunctive Relief Claim for Clean Air Act Preconstruction Permit Violation

Posted in Energy, Environment

On October 1, 2018, the 5th Circuit Court of Appeals upheld the dismissal of claims for civil penalties for violations of the Clean Air Act’s (“CAA”) major source Preconstruction permit requirement (CAA § 165(a); 42 U.S.C. § 7475(a)) because the claims were filed more than five years after the claim accrued, but held that the government’s claim for injunctive relief for the same violation is not subject to the applicable 5-year statute of limitation. The case involved two power plants that underwent multiple capital projects and operational changes, which resulted in significant amounts of SO2 and NOx emissions, without obtaining a preconstruction permit in accordance with CAA § 165. The capital projects and operational changes were implemented at various times between October 15, 2005 and April 1, 2009. The government filed suit on August 16, 2013 alleging that the defendant-power companies violated and continue to violate the preconstruction requirements under CAA § 165, and sought civil penalties and injunctive relief. The defendants moved to dismiss five of the six CAA § 165 violations as time barred – i.e. the alleged unpermitted construction occurred outside the 5-year statute of limitations.

Section 165(a) of the CAA requires any proposed major source of emissions (or a major modification to a major source) to obtain a permit before beginning construction. 28 U.S.C. § 2462 bars CAA claims for the enforcement of any civil fine, penalty, or forfeiture that accrued more than five years before suit was filed.

The 5th Circuit Court followed other Circuits holding that an action for civil penalties for violations of the major source preconstruction permit requirement under CAA § 165(a) must be brought within five years of the first day of the alleged construction period. Notably, the Court held that the language of CAA § 165(a) “can only be read one way: the Preconstruction requirements are terms and conditions with which the facility must comply in order for the facility to begin construction. They are not requirements that arise at a point in time after the facility has begun construction or resumed operation.” The court further clarified that “any claim asserted under § 7475(a) accrues at the moment unpermitted construction commences” and the violation does not extend into operation. The Court also noted that compliance with BACT requirements is a precondition for granting a preconstruction permit, not an obligation imposed on the continuing operation of the facility.

With respect to the claim for injunctive relief, however, the court held that the government, in its sovereign capacity, is not subject to any limitations period, unless Congress expresses its clear consent thereto. The Court explained that the applicable statute of limitations in this case (28 U.S.C. § 2462) makes no reference to injunctive relief. Accordingly, the court remanded the injunctive relief claims to the District Court for further consideration. The District Court must now decide what, if any, equitable relief is appropriate.

Ohio Supreme Court Continues to Address Community Bill of Rights Cases

Posted in Energy, Environment

On September 21, 2018, the Ohio Supreme Court held in State ex rel. Twitchell et al. v. Saferin et al., that the Lucas County Board of Elections (BOE) did not abuse its discretion in denying a writ of mandamus to place a proposed amendment to the Toledo City Charter on the November ballot.  Slip Opinion No. 2018-Ohio-3829.  An organization called Toledoans for Safe Water proposed the Lake Erie Bill of Rights (LEBOR) initiative to create legal rights for the Lake Erie ecosystem to “exist, flourish, and naturally evolve.” It also recognized the rights of the people of the City of Toledo to a clean and healthy environment.  Lake Erie Bill of Rights, Section 1(a).  The initiative would “prohibit activities and projects that would violate the bill of rights.”  Lake Erie Bill of Rights, Preamble.

The Supreme Court concluded it was proper for the Lucas County BOE to refuse to place the LEBOR on the November ballot because the LEBOR would have created a new cause of action to enforce the newly created rights. The decision in Twitchell echoed the Supreme Court’s holding in State ex rel. Bolzenius v. Preisse, decided on September 14, 2018.  As we previously noted in a blog post dated September 18, 2018, the Court found the Columbus Community Bill of Rights exceeded municipal authority because it, too, created a new cause of action.

The Relators in both the Twitchell and Bolzenius cases have filed a motion for reconsideration of the Supreme Court decisions in those cases.   In both motions, Relators argued that the Court should have analyzed the constitutionality of House Bill 463.  Additionally, the Relators in the Twitchell case pointed to a recent Southern District of Ohio ruling that pre-election content-based censorship of local initiatives by BOEs violate the First Amendment of the Constitution.  The BOEs and Amici/Intervening Respondents in both cases have filed memoranda in opposition, and the parties in both cases await final decisions by the Supreme Court.

Ohio Supreme Court Denies Compensation to Landman

Posted in Energy

Yesterday, September 25, 2018, the Supreme Court of Ohio issued the decision of Dundics v. Eric Petroleum Corporation, 2018-Ohio-3826, which could have broad implications for third-party landmen, land companies and oil and gas producers in Ohio.  In that decision, the Court held that the Ohio Real Estate Brokers’ statute, R.C. Chapter 4735, applies to transactions involving oil and gas.  Specifically, the Court held that an outside landman must be a licensed real estate broker in order to seek compensation for work performed in obtaining an oil and gas lease on behalf of a producer.

In Dundics, an outside landman sued a producer for breach of contract, claiming that the producer failed to make promised payments for work performed by the landman in obtaining oil and gas leases.  The producer moved to dismiss the lawsuit, arguing that because the landman was not a licensed real estate broker, the landman was not entitled to enforce his agreement with the producer.  The trial court granted the motion to dismiss and the court of appeals affirmed.

The Supreme Court affirmed the dismissal of the lawsuit.  The Court found that because oil and gas interests are included within the broad definition of “real estate” under R.C. 4735.01(B) and because there was no exception for oil and gas leases or landmen, the statute applied, and the landman was unable to seek compensation for his work because he was not a licensed broker.