New WV Law Regarding Decedents’ Real Estate

On May 13, 2016, West Virginia Governor Early Ray Tomblin signed into law Senate Bill No. 702 which amends §44-8-1 of the Code of West Virginia dealing with the real estate of decedents.  Under this amended law, if a decedent devises the proceeds of the sale of real estate to certain individuals, but the real property is never sold, then those individuals entitled to the proceeds would automatically acquire title to the real estate upon the closing of decedent’s estate, absent contrary testamentary intent.  If the decedent’s estate is not closed, then title would vest with such individuals five years after the death of the testator.  Senate Bill No. 702 provides a title examiner with greater certainty in determining current ownership of decedents’ oil and gas property and will serve to reduce title risks to oil and gas companies in leasing or acquisition activities.


Ohio Appeals Court Rules on Forced Pooling Issue

The Tenth District Court of Appeals issued a ruling in Simmers v. City of North Royalton, affirming the decision of the Oil and Gas Commission which overturned a mandatory pooling order of the Chief of the Division of Oil & Gas Resources Management. The case was decided under R.C. 1509.27 — the statute utilized by conventional oil and gas operators to apply for a mandatory pooling orders. R.C. 1509.27 allows the Chief to issue a mandatory pooling order on a “just and equitable” basis to property owners that do not voluntarily enter a lease to participate in a drilling unit.

In the case, the City of North Royalton did not voluntarily enter into a lease with the oil and gas operator due to purported safety concerns. In addition, the City was required to hold a public hearing before entering the proposed lease. Prior to the public hearing, the oil and gas operator applied for a permit and for a mandatory pooling order both of which were granted by the Chief.

The City appealed the Chief’s orders to the Oil and Gas Commission. The Commission found the Chief limited his consideration of whether negotiations for a lease with the City were conducted on a “just and equitable” basis to the financial considerations of the lease, but not the City’s safety concerns. The Commission found the Chief should had considered the safety concerns of the City in his order granting mandatory pooling.

The Commission’s decision was appealed to the Franklin County Court of Common Pleas and then to the Tenth District Court of Appeals. The Court of Appeals agreed with the decision the Commission under a deferential standard of review. The Court rejected the argument of the Chief that any safety issues are addressed in the permitting stage holding it “may not provide sufficient protection to a municipality concerned about particular safety issues …”

The majority opinion elicited a dissent from Judge Sadler relying on the statutory provisions of R.C. 1509.27. In particular, the dissent focused on the protection of “correlative rights” the mandatory pooling statute afford property owners. Those “correlative rights” relate to the monetary compensation a property owner may receive from oil and gas extracted from his property and that Ohio law only permits the Commission to consider non-economic factors (such as safety) to the extent they may affect the value of the property owner’s correlative rights.

The dissent also expressed its view that the Commission did not have jurisdiction to consider safety issues in the context of an appeal from the order of the Chief granting a mandatory pooling application.

EPA Releases Key Methane Reduction Measures and Final Source Aggregation Rule

Today the U.S. Environmental Protection Agency (EPA) announced the availability of several highly-anticipated regulatory measures affecting both existing and new emission sources in the oil and natural gas sector.  EPA has released the pre-publication version of its final New Source Performance Standards (NSPS) rulemaking to reduce emissions of methane and volatile organic compounds from new, modified, and reconstructed sources.  The agency received more than 900,000 public comments on the proposed NSPS rulemaking that was released in August 2015.

In March, EPA announced its intent to also regulate methane emissions from existing sources in the oil and natural gas sector.  Today EPA issued a draft Information Collection Request (ICR) directing oil and natural gas companies to submit extensive information to support the development of a federal rule targeting existing sources.  Public comments will be accepted for 60 days following publication of the draft ICR in the Federal Register.  As a related measure, EPA will soon release a voluntary “Request for Information” inviting industry, government, and public interest stakeholders “to provide information on innovative strategies to accurately and cost-effectively locate, measure and mitigate methane emissions.”

Additionally, today EPA released the pre-publication version of its final Source Determination Rule aimed at clarifying the term “adjacent” for air permitting purposes.   The final rule is intended to clarify when oil and gas equipment and activities constitute a single source that is subject to “major source” permitting requirements under the Clean Air Act.  In general, according to EPA’s fact sheet, the final rule provides that pollutant-emitting activities are adjacent “if they are located on the same site or on sites that share equipment and are within 1/4 mile of each other.”

Finally, EPA also released the pre-publication version of a final Federal Implementation Plan rule to clarify air permitting requirements for oil and natural gas sources located in Indian Country, specifically.

Administrative Watch: Environmental Groups File Suit Over Absence of Regulation of Oil & Gas Waste

On May 4, 2016, seven environmental groups followed through on a prior threat to sue the United States Environmental Protection Agency (EPA) by filing a lawsuit against the EPA in a bid to force the agency to develop tailored rules for the disposal, storage, transportation, and handling of oil and gas waste under the Resource Conservation and Recovery Act (RCRA) Subtitle D solid waste program.  In an effort to trigger movement on the issue, the environmentalists had previously sent the EPA a 60-day Notice of Intent to Sue in August 2015; however, according to the environmentalists, the agency did not formally respond to the Notice.  The Complaint, filed with the U.S. District Court for the District of Columbia, alleges 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 waste, and (2) reviewed and/or revised its guidelines for state solid waste management plans for oil and gas waste.

For more information, read our Administrative Watch.

House ERE Committee Moves to Bar Chapter 78/78a Regulatory Package

On May 3, 2016, the Pennsylvania House Environmental Resources and Energy Committee (“ERE Committee”) voted 19-8 to advance a concurrent resolution that would disapprove the Chapter 78/78a regulations that were approved for promulgation by the Environmental Quality Board (“EQB”) in February of this year.  The concurrent resolution states that the regulations:  (1) violate Act 126 of 2014, which requires EQB to promulgate conventional and unconventional regulations separately; (2) disregard the Pennsylvania Supreme Court’s ruling in Robinson Township, which enjoined portions of Section 3215 of the Oil and Gas Act (also known as Act 13 of 2012); and (3) do not comply with the Regulatory Review Act.  The House and Senate have 30 calendar days, or 10 voting session days, whichever is longer, from the date the resolution is reported out of committee to pass the concurrent resolution and present it to the Governor.  If the Governor does not veto the concurrent resolution, or if his veto is overridden by the General Assembly, EQB will be barred from promulgating the regulations.

U.S. Army Corps of Engineers Releases Final Pennsylvania General Permit

On May 2, 2016, the U.S. Army Corps of Engineers (“USACOE”) released the final Pennsylvania State Programmatic General Permit-5 (“PASPGP-5”).  USACOE administers this permit program jointly with the Pennsylvania Department of Environmental Protection (“DEP”) to authorize the placement of dredged or fill material into regulated waters.  USACOE has issued PASPGP-5 for a five-year period.  The permit will go into effect on July 1, 2016.

PASPGP-5 replaces the previously issued PASPGP-4 and contains significant modifications from PASPGP-4.  Perhaps most notably, PASPGP-5 replaces the Category I through III system of agency review in favor of a “Reporting” versus “Non-Reporting” system.  In general, Category I and II activities under PASPGP-4 are called “Non-Reporting Activities” under PASPGP-5, and Category III Activities are now called “Reporting Activities.”  PASPGP-5 also includes terms that address the “grandfathered” status of certain activities that were previously authorized under PASPGP-4.  In some cases, such projects must be submitted to USACOE to determine if the project qualifies for coverage under PASPGP-5.

Pennsylvania DEP Expanding Air Monitoring Network Near Natural Gas Development

On April 27, 2016, the Pennsylvania Department of Environmental Protection (DEP) announced that it has initiated an “unprecedented expansion” of the Commonwealth’s particulate matter air monitoring network to include additional monitors in areas near natural gas development.  The expansion project will include 10 additional DEP monitoring stations and has a target completion date of fall 2017.

DEP plans to implement the expansion project in three stages, with one monitoring station added to each of 10 counties.  DEP completed Phase 1 earlier this year with the addition of air monitoring stations in Towanda Township, Bradford County, and Holbrook Township, Greene County.  The Department expects to complete Phase 2 by the end of 2016 by adding monitoring stations in Fayette, Indiana, Lycoming, Susquehanna, and Wyoming Counties.  Phase 3 has a target completion date of fall 2017 and will include air monitoring stations in Clarion, Jefferson, and McKean Counties.

Statement from Environmental Regulatory Attorney Jean Mosites Who Testified at Yesterday’s Chapter 78 Hearing in Harrisburg

The following statement is from Babst Calland environmental regulatory attorney Jean Mosites who provided testimony at yesterday’s daylong public hearing on the subject of proposed revisions to 25 Pa. Code Chapter 78 submitted by the Department of Environmental Protection.

As evidenced by the quality and quantity of thoughtful testimony given by businesses that will be impacted by these regulations, yesterday’s 3-2 vote by the Independent Regulatory Review Commission (IRRC) will not necessarily be the final word on Chapter 78.  While legal and procedural concerns were discussed at the IRRC meeting yesterday in its review of the final form rule-making to revise 25 Pa. Code Chapter 78, the Commissioners were required to vote on this extensive and complicated regulatory package as a whole in an up or down vote.

In my testimony yesterday, I indicated that the DEP did not meet its obligations under the Regulatory Review Act (RRA).  It failed to comply with critical provisions of the RRA at key points along this entire rulemaking process.  The final form rule does not reflect either consensus or balance, is not justified by a compelling public need and will do far more harm than good for this industry and the Commonwealth, its environment and its citizens.

The rule will now be reviewed by the Attorney General as to form and legality and may be considered by the House and Senate Environmental Resources and Energy Committees for a joint resolution to bar the regulation, a resolution that would go to the Governor for signature or veto.  Barring any unforeseen developments, the rule could be published as final and immediately effective in June or July 2016.

Pennsylvania IRRC Approves Chapter 78/78a Regulations

On April 21, 2016, the Independent Regulatory Review Commission (IRRC) approved the Environmental Quality Board’s Chapter 78 (conventional wells) and Chapter 78a (unconventional wells) regulations by a vote of 3-2.  Vice Chairman Mizner, in making a motion to disapprove the regulation, noted that the Department of Environmental Protection did not:

  1. provide enough information on the cost of the regulations;
  2. meet its burden to show that the revisions as applied to conventional operations are necessary;
  3. conduct the required flexibility analysis for small businesses;
  4. adequately consult with the Conventional Oil and Gas Advisory Committee or the Oil and Gas Technical Advisory Board; or
  5. develop a consensus on the regulations with industry.

The motion to disapprove the regulation failed by a vote of 3-2, followed by the motion to approve the regulation.  Commissioners voting to approve the regulation noted that consensus on the regulation was likely impossible to achieve but that the Department had acted earnestly to develop necessary regulations for an evolving industry and that current regulations are not adequate.

Both the House and Senate Environmental Resources and Energy Committees previously voted to disapprove the regulations.  IRRC’s approval begins a 14-day window in which the legislative committees may report to the House or Senate a concurrent resolution barring the revisions.  If a resolution adopted by the General Assembly is not vetoed, or if the Governor’s veto is overridden, the Environmental Quality Board is barred from promulgating the final regulations.  The Attorney General will conduct a review of the regulation as to form and legality before the regulation may be published in the Pennsylvania Bulletin as final.  Publication of the rule as final could occur in June or July of 2016, becoming effective immediately on the day of publication.

Ohio EPA Seeks Comment on Draft General Permits for Compressor Stations

On April 7, 2016, the Ohio Environmental Protection Agency (OEPA) announced a public comment period for a package of draft general permits for oil and natural gas midstream compressor stations.  Applicants seeking coverage under a general permit would be required to demonstrate that the facility meets the general permit eligibility criteria.  A general permit establishes pre-defined permit terms, including requirements relating to equipment installation, operating standards, monitoring, recordkeeping, and reporting.  OEPA stated that the new general permits would authorize emissions from a wide variety of sources, including: natural gas-fired compressor engines; diesel engines; dehydrators; flares; compressors; equipment (pipes, pumps, etc.); liquid storage tanks; truck loading operations; and pigging operations.  Comments are due May 18, 2016.