Pipelines are safe. They already are the safest way to transport energy – and getting safer.

In a recent op-ed published in the Post-Gazette, “Gas Pipelines Represent Prosperity” (Sept. 5 Perspectives), David Spigelmyer and James Kunz of the Marcellus Shale Coalition described the many benefits that Pennsylvanians could see from the expansion of natural-gas pipelines and related energy infrastructure in the commonwealth. That op-ed prompted a response from Art Wegweiser (Oct. 3) adding an important cautionary note about pipeline safety. The good news, according to a 2015 report from the American Gas Foundation, “Natural Gas Pipeline Safety and Reliability: An Assessment of Progress,” is that pipelines are safe — and getting safer.  Read my full article describing the AGF report and industry’s efforts to improve pipeline safety.


Ohio Supreme Court Addresses Post-Production Costs

In Lutz et al. v. Chesapeake Appalachia, L.L.C., Slip Opinion No. 2016-Ohio-7549, the Ohio Supreme Court declined to answer the certified question submitted by the U.S. District Court for the Northern District of Ohio as to whether Ohio follows the “at the well rule” or some version of the “marketable product” rule to calculate royalty payments made under an oil and gas lease. The “at the well rule” permits the lessee to deduct post-production costs from royalty payments made to the lessor. Conversely, the “marketable product” rule places limits on the lessee’s ability to deduct post-production costs under certain circumstances. Rather than adopting a blanket rule, the Court stated that the payment of royalties under a lease will be controlled by the specific language in the lease agreement. If an oil and gas lease is silent on the right to deduct post-production costs, it appears unlikely that Ohio courts will allow such deductions. The Court emphasized that leases should be viewed as contracts and the traditional rules for interpreting contractual terms should be used to determine the allocation of post-production costs under an oil and gas lease.

Many Drone Operators Seeking a Waiver are Missing Required Information

On October 25, the FAA released a statement notifying potential applicants seeking a waiver from the small unmanned aircraft systems (UAS) rules of common errors in the application process.  In the two months since FAA started issuing waivers from the Part 107 rules, the agency has issued over 81 authorizations for flights in Class D and E airspace and 36 waivers of Part 107 requirements.  However, the agency has also denied many waiver applications on account of incorrect or incomplete information. The agency has denied 71 waiver requests and 854 airspace applications.  UAS operators that are seeking a waiver should ensure that they include a detailed description of how they intend to meet the performance based standards issued by FAA.  See previous Babst Calland Pipeline Safety Alert. For example, applicants seeking a waiver of the nighttime operation restriction must provide the methods for which the remote pilot will maintain visual line of sight during darkness; see and avoid other aircraft, people, and ground-based structures during nighttime operations; continuously determine the position of the UAS, and increase the visibility of the UAS at a distance of 3 statute miles unless a system is in place to avoid all non-participating aircraft.  Applicants must also respond promptly to any requests from the FAA for additional information.  If the FAA does not receive a response after 30 days, the agency will deny the waiver request.

The FAA also created the Unmanned Aircraft Safety Team (UAST), a group of industry and government stakeholders.  The UAST team is charged with analyzing data to enhance safety with drone operations.  The UAST held its first meeting in mid-October.

Babst Calland is assisting energy industry clients with rule implementation and strategy involving the use of small UAS. Please contact Brianne Kurdock at (202) 853-3462 or bkurdock@babstcalland.com, James Curry at (202) 853-3461 or jcurry@babstcalland.com, or Keith Coyle at (202) 853-3460 or kcoyle@babstcalland.com for more information.

PHMSA Releases Emergency Order Interim Final Rule

On October 14, the Pipeline & Hazardous Materials Safety Administration (PHMSA) published its Interim Final Rule (IFR) entitled “Pipeline Safety: Enhanced Emergency Order Procedures” in the Federal Register.  The agency had previously issued a pre-publication version of this rule on October 4.  See Babst Calland’s Pipeline Safety Alert.  PHMSA will use these new regulations to implement its emergency order authority conferred by Congress in the “Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016” (PIPES Act).  PHMSA may issue an emergency order to address an unsafe condition or practice, or a combination of unsafe conditions or practices that pose an imminent hazard to public health and safety or the environment.   The IFR contains administrative procedures that PHMSA must follow in determining if an imminent hazard exists, the factors that must be considered before PHMSA issues an emergency order, and the content of those orders, including a description of the persons subject to the restrictions, prohibitions, or safety measures and the standards and procedures for obtaining relief. The IFR also creates a process for administrative review of an emergency order that is largely patterned on the statutory text in 49 U.S.C. § 60117(o), including the referenced procedural rules for HazMat emergency orders in 49 C.F.R. § 109.19.

PHMSA may use this authority starting today, October 14.  Interested parties may file comments on this final rule until December 13, 2016.

PHMSA Releases a Final Rule Expanding the Required Use of Excess Flow Valves

On October 14, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published its Final Rule entitled “Expanding the Use of Excess Flow Valves in Gas Distribution Systems to Applications Other Than Single-Family Residences” (EFV Final Rule) in the Federal Register. The agency had previously issued a pre-publication version of this rule on October 7. See Babst Calland’s Pipeline Safety Alert.  In response to statutory changes and a National Transportation Safety Board recommendation, PHMSA is expanding the existing requirement that operators install an excess flow valve (EFV) on certain natural gas distribution pipelines to include additional types of new or replaced service lines. The agency is also requiring curb valves or other manual shut-off valves on new or replaced service lines with meter capacities above 1,000 standard cubic feet per hour and requiring operators to notify customers of their right to request the installation of an EFV on certain types of service lines. The EFV Final Rule will become effective on April 14, 2017.


Administrative Watch: PADEP’s Chapter 78a Rulemaking Goes into Effect for Unconventional Operations in Pennsylvania

On Saturday October 8, 2016, the Pennsylvania Department of Environmental Protection’s new Chapter 78a regulations associated with unconventional wells went into effect when they were published in the Pennsylvania Bulletin.  For unconventional well operators, there are substantial changes from prior law affecting operations over the entire life of the well, from permitting to site construction, waste handling, impoundments, pipelines, site restoration and spill remediation.  For more information, check out our Administrative Watch.

SRBC Issues Notice of Proposed Rulemaking

On September 21, 2016, the Susquehanna River Basin Commission (SRBC) published a Notice of Proposed Rulemaking/Notice of Public Hearings in the Federal Register.  The proposed regulations would affect application requirements for project approval and renewal, standards for the review of projects (including consumptive use mitigation proposals), and procedures for hearings and enforcement actions.  There are also several proposed definitional changes.  For example, the SRBC has proposed a new definition of “production fluids”, a term used throughout SRBC regulations applicable to unconventional natural gas projects.

Supplemental information about the rulemaking is available on the SRBC’s webpage.  The SRBC has also scheduled informational webinars in October (11th and 17th), and four public hearings on the rulemaking later this year.  Comments are due on the proposed rulemaking on or before January 30, 2017.

In connection with the proposed rulemaking the SRBC also issued a draft Consumptive Use Mitigation Policy, which describes the SRBC’s interpretation of proposed changes to consumptive use mitigation requirements.  Written comments on the policy are due by January 6, 2017.

Ohio Supreme Court Rules on Interpretation of Ohio Dormant Mineral Act

Today, the Ohio Supreme Court issued three written opinions interpreting the Ohio Dormant Mineral Act (O.R.C. §5301.56) (the “ODMA”) and decided 10 related cases based upon its decisions set forth in the written opinions. Notably, in Corban v. Chesapeake Exploration L.L.C., (Slip Opinion No. 2016-Ohio-5796), the Supreme Court held that the 1989 version of the ODMA (the “1989 Act”) did not automatically abandon oil, gas and mineral rights in favor of the surface owner. Instead, the Supreme Court interpreted the statute to require the surface owner to seek a judicial decree that the mineral rights were abandoned. The Court focused on the statutory phrase “shall be deemed abandoned and vested in the owner of the surface” in determining that the legislature intended the 1989 Act to serve as a method of terminating abandoned mineral rights through a quiet title action rather than automatically transferring the mineral interests to the surface owner by operation of law. Additionally, the Court held that payment of delay rentals under a lease does not constitute a “title transaction” under Ohio law since the payment of delay rentals are not filed or recorded in the county recorder’s office.

In Walker v. Shondrick-Nau, Exr., (Slip Opinion No 2016-Ohio-5793), the Ohio Supreme Court built upon its decision in Corban and held that, if a surface owner failed to quiet title under the 1989 Act prior to the enactment of the 2006 version of the ODMA (the “2006 Act”), then the 1989 Act is unavailable and the surface owner can only pursue a claim to abandon mineral interests under the 2006 Act.

Finally, in Albanese, Exr. v. Batman et al., (Slip Opinion No. 2016-Ohio-5814), the Ohio Supreme Court followed the rationale of Corban regarding the necessity of filing an action to quiet title under the 1989 Act prior to the enactment of the 2006 Act. The Court further held that under the 2006 Act mineral rights cannot be deemed abandoned if the owner of the minerals had not been served notice of the abandonment pursuant to the 2006 Act. The notice requirement is mandatory under the 2006 Act.

Citing to the above cases, the Supreme Court decided 10 additional cases consistent with the three written opinions. The 10 cases are listed below:

Carney et al. v. Shockley et al., (Slip Opinion No. 2016-Ohio-5824)
Dahlgren et al. v. Brown Farm Prop. L.L.C., et al., (Slip Opinion No. 2016-Ohio-5818)
Eisenbarth et al. v. Reusser et al., (Slip Opinion No. 2016-Ohio-5819)
Farnsworth et al. v. Burkhart et al., (Slip Opinion No. 2016-Ohio-5816)
Swartz v. Householder et al., (Slip Opinion No. 2016-Ohio-5817)
Shannon et al. v. Householder et al., (Slip Opinion No. 2016-Ohio-5817)
Taylor et al. v. Crosby et al., (Slip Opinion No. 2016-Ohio-5820)
Thompson et al. v. Custer et al., (Slip Opinion No. 2016-Ohio-5823)
Tribett v. Shepherd et al., (Slip Opinion No. 2016-Ohio-5821)
Wendt et al. v. Dickerson et al., (Slip Opinion No. 2016-Ohio-5822)

Pipeline Safety Alert: FAA Issues Performance-Based Standards for Applicants Seeking a Waiver of the Small Unmanned Aircraft Rules

The Federal Aviation Administration (FAA) recently issued Performance-Based Standards highlighting information that an applicant must include in order to seek a waiver of Part 107, the rules that apply to the operation of a small unmanned aircraft system.  The FAA previously released the form and instructions on how to apply for a waiver from certain requirements (See previous Babst Calland pipeline safety alerts for more information on the Small UAS Final Rule and the waiver process.).  Babst Calland’s Pipeline and HazMat Safety team has prepared a Pipeline Safety Alert noting observations on the Performance-Based Standards as they pertain to the line-of-sight requirement (14 C.F.R. § 107.31).