Court Requires $5.69 Million Bond For Objector To Well Pad To Move Forward With Appeal

Babst Calland represents an oil and gas operator in Lycoming County, PA, where a recent court order requires an objector to a well pad to post a $5.69 million bond in order to move forward with a land use appeal.  The basic facts of the case are described below.  Inflection Energy (PA) LLC (Inflection) is an oil and gas operator that received conditional use approval for a well site in Loyalsock Township’s Agricultural Rural (A-R) zoning district.  An objector appealed that approval to the Court of Common Pleas of Lycoming County.  The appeal contained no allegations that Inflection failed to meet any of the objective requirements of the Loyalsock Township Zoning Ordinance.  In response to that appeal, Inflection filed a petition for bond with the Court alleging that the primary purpose of the appeal was for delay, that the appeal was frivolous on the merits, and that the objector should post a bond to compensate Inflection for that delay if the objector chooses to move forward with the appeal.  At the hearing before Senior Judge Brendan J. Vanston, Inflection presented as witnesses two Inflection employees who testified that the objector had stated that the appeal was brought only to delay the development of the well pad.  On November 6, 2015, Sr. Judge Vanston entered an Order of Court finding that the appeal was frivolous and that the objector shall post a bond with the Court in the amount of $5.69 million by December 4, 2015 in order to proceed with the appeal.

Ohio Supreme Court Rules on Dormant Mineral Act Issue

In Chesapeake Exploration v. Buell, the Ohio Supreme Court held that oil and gas leases constitute “title transactions” under Ohio’s Dormant Mineral Act (“DMA”). Under the DMA a “title transaction” constitutes a saving event to preclude severed mineral rights from being deemed abandoned and reunited with rights to the corresponding surface property. Of critical importance is whether an oil and gas lease constitutes a “title transaction” under the law. While the DMA defines the term “title transaction” it did not state whether an oil and gas lease constitutes a title transaction. The Court concluded that a “title transaction” is any transaction affecting title to any interest in land and that oil and gas leases affected title to land.

Court Upholds Zoning Ordinance Permitting Oil and Gas Well Development In Agricultural/Residential Zoning District

On October 21, 2015, Judge Richard McCormick, President Judge of the Westmoreland County Court of Common Pleas, issued a decision and order upholding the validity of Allegheny Township’s zoning ordinance, which permits oil and gas well development in the Township’s R2 Agricultural/Residential Zoning District. The decision in Frederick v. Allegheny Township Zoning Hearing Board, No. 1898 of 2015 (Com. Pl. Westmoreland Co. Oct. 21, 2015), affirms a previous decision of the Township’s Zoning Hearing Board. Babst Calland represented CNX Gas Company LLC (CNX), an intervenor in the case, before both the Common Pleas Court and the Zoning Hearing Board.

CNX applied for and received a zoning compliance permit to develop an unconventional gas well pad in the Township’s R2 District, in which oil and gas well development is permitted as a use by right. Neighboring property owners Dolores Frederick, Beverly Taylor, and Patricia Hagaman appealed to the Zoning Hearing Board, challenging both the issuance of the permit and the validity of the Township’s zoning ordinance, alleging that permitting oil and gas well development in the R2 District violated the Pennsylvania Supreme Court’s plurality decision in Robinson Township v. Commonwealth of Pennsylvania. Following several nights of hearings and oral argument, the Zoning Hearing Board ruled that the zoning ordinance was valid and upheld the issuance of the zoning compliance permit. Objectors then appealed to Common Pleas Court.

Since the Robinson decision, zoning ordinances authorizing oil and gas development have been challenged in several municipalities, with objectors essentially arguing that those ordinances are invalid because they are not strict enough. In most of these cases, the objectors have asserted that the zoning ordinance violated the Pennsylvania Environmental Rights Amendment (as interpreted by the Robinson plurality) because it permitted oil and gas development, a use they characterize as “industrial”, in agricultural, residential and other non-industrial districts. To date, all of those challenges have been rejected by local zoning hearing boards, although several of those decisions have been appealed to Common Pleas Court. Frederick is significant in that it is the first case in which a Court has addressed a Robinson based ordinance validity challenge. This case is precedential in Westmoreland County and is instructive to Courts in the other counties of the Commonwealth.

In Frederick, Judge McCormick first observed that Robinson was not binding precedent because it was only a plurality decision. The Court also pointed out that that Robinson did not address the constitutionality of a local ordinance, but instead involved a statute of statewide application (Act 13) that was invalidated because it interfered with the right of municipalities to make local zoning determinations. In any event, the Court went on to conclude that the Allegheny Township zoning ordinance was consistent with the Robinson plurality. Significantly, citing the extensive record developed before the Zoning Hearing Board, Judge McCormick expressly rejected the objectors’ contention that the zoning ordinance’s authorization of oil and gas uses “is inconsistent with the agricultural and residential character of the Township.” That record established that (1) there was a long history of oil and gas development in the Township, including a number of wells and a pipeline in close proximity of the objectors’ properties, (2) in the R2 District approximately 75% of the land mass is leased to oil and gas operators, (3) having the well pad on his property enabled the surface owner to continue actively farming his property instead of developing it for a residential subdivision, and (4) permitting oil and gas operations in the R2 District enhances the Township’s ability to maintain its rural character. The Court also cited to expert testimony which concluded that oil and gas operations have safely coexisted within rural communities throughout the Commonwealth.

Judge McCormick also rejected several of the objectors’ related arguments. Specifically, the Court ruled that the Township zoning ordinance did not constitute illegal “spot” zoning and did not violate sections 604 and 605 of the Pennsylvania Municipalities Planning Code. In so concluding, the Court stated that the Township’s “legislative body sought to further the general welfare of its citizens by permitting them to benefit economically from oil and gas resources and royalites, and enabling them to retain the agricultural use and rural setting of their land.”   Finally, the Court found that the authorization of oil and gas development did not violate the community development objectives of the Township zoning ordinance.

Application for Mountain Valley Pipeline Filed with FERC

According to the Washington Observer-Reporter, a formal application for the Mountain Valley Pipeline was filed with the Federal Energy Regulatory Commission (“FERC”) last week.  The pipeline will extend 301 miles and connect the shale gas fields of northwestern West Virginia with Pittsylvania in western Virginia.  FERC has acknowledged receipt of the pipeline application and will soon set a 30-day public comment period.

Federal Court Invalidates Portions of a Local Ordinance, Which Banned the Use of Underground Injection Wells

On October 14, 2015, the United States District Court for the Western District of Pennsylvania invalidated several provisions of a Grant Township, Indiana County, Pennsylvania local ordinance that was intended to prevent an oil and gas operator from operating an injection well that had been permitted by the U.S. Environmental Protection Agency.  In Pennsylvania General Energy Company, L.L.C. v. Grant Township, C.A. No. 14-209, 2015 U.S. Dist. LEXIS 139921 (W.D. Pa. Oct. 14, 2015), Pennsylvania General Energy Company, L.L.C. challenged the constitutionality, validity and enforceability of the Grant Township ordinance that sought to establish a self-described Community Bill of Rights Ordinance.  For additional information, read our recent Administrative Watch.

Environmental Groups Plan Suit Over Absence of Regulation of Oil and Gas Waste

On August 26, 2015, seven environmental groups sent the U.S. Environmental Protection Agency (EPA) a Notice of Intent to Sue the agency in an attempt to force the agency to develop tailored rules for oil and gas wastes under the Resource Conservation and Recovery Act (RCRA) Subtitle D solid waste program.  The groups argued that the agency has not within the statutorily required three-year timeframe (1) reviewed and, where necessary, revised RCRA’s Subtitle D solid waste regulations for oil and gas wastes, and (2) reviewed and/or revised its guidelines for state solid waste management plans for oil and gas wastes.  For additional information, read our recent Administrative Watch.

Rice and Gulfport Enter Into Midstream Joint Venture in Utica Shale

As reported by Oil and Gas Investor, Rice Midstream Holdings, LLC, a subsidiary of Rice Energy Inc., and Gulfport Energy Corporation have teamed up to build a pipeline gathering and water line system in Ohio’s Utica Shale.  Over the next six years, the companies plan to spend a combined $640 million on 165 miles of pipeline that will connect Gulfport’s Utica shale wells in Belmont and Monroe Counties to interstate pipelines.  Speaking of the joint venture, Rice’s CEO, Daniel J. Rice IV, stated: “This joint venture will be one of the premier midstream systems in the prolific dry gas core of the Utica…”  Gulfport will dedicate about 77,000 leasehold acres and an existing 11-mile pipeline to the joint venture, and Rice will be responsible for constructing and operating the assets.  The parties have further agreed that Rice will own 75% of the joint venture and Gulfport will own the remaining 25%.  Each partner will be responsible for its proportionate share of costs.

Ohio Judge Rules in Favor of Permitting Surveys in NEXUS Pipeline Case

The Medina County Court of Common Pleas issued a decision allowing surveys to be completed on tracts of land along the proposed NEXUS pipeline route. In Nexus Gas Transmission, LLC v. Houston, the Court ruled that the plain language of Chapter 163 of the Ohio Revised Code provides a right to access private property for the purpose of taking surveys for the pipeline project. The ruling will allow the NEXUS pipeline owners to move ahead with obtaining approval for the project from the Federal Energy Regulatory Commission.

USACE Revises PASPGP-4, Requests Comments on Draft PASPGP-5

On September 29, 2015, the U.S. Army Corps of Engineers (USACE) issued a public notice regarding revisions to the Pennsylvania State Programmatic General Permit – 4 (PASPGP-4).  In general, PASPGP-4 authorizes the discharge of dredged or fill materials and the placement of temporary or permanent structures that result in impacts to one acre or less of waters of the United States, including jurisdictional wetlands.  The revisions announced by USACE are intended to “streamline the PASPGP-4 review process by adding Avoidance Measures (AMs) identified on a Pennsylvania Natural Diversity Inventory (PNDI) receipt for Federally listed threatened or endangered species as a Special Condition of the PASPGP-4 without the need for a [USACE] review of the application.”  The revisions allow certain PASPGP-4 applications to proceed under Category I or Category II review.  The changes are effective immediately.

Also on September 29, USACE released a separate public notice requesting comments on its plan to issue, for a five-year period, PASPGP-5.  PASPGP-5 would replace PASPGP-4, which is set to expire on June 30, 2016.  Comments regarding the proposed new version of the general permit are due on October 29, 2015.

Ohio Oil and Gas Commission Issues First Decision on Forced Pooling

The Ohio Oil and Gas Commission issued its first decision under R.C. 1509.28 to provide for the compulsory pooling of property for oil and gas unit operations. In Gary L. Teeter Revocable Trust v. Division of Oil & Gas Resources Management, the Ohio Oil and Gas Commission ruled that a 69-acre farm must be included in unit operations occurring under the property. While the Commission ruled that the property would be “forced” into a unit against the will of the owner of the property, it specifically noted that the owner “benefits from from the statutory protections enacted to ensure that he will be fairly compensated for any resources that might be drawn from beneath his property as a result of the operation of a well, which the majority of his neighbors wish to have drilled.”