The following information is an update of recent local, state, national, and international legal developments relevant to shale gas:
Pennsylvania House Environmental Resources and Energy Committee Advances Minimum Royalty Bill
On June 27, 2016, a bill concerning minimum royalty payments to natural gas lessors advanced from the Pennsylvania House of Representatives Environmental Resources and Energy committee to the full chamber. The bill would amend the 1979 Oil and Gas Lease Act by prohibiting deductions that lower royalty payments below the 1/8 (12.5%) state minimum. The bill also provides remedies for lack of sufficient royalty payments. The minimum royalty payment requirements of the bill would apply to both existing and future unconventional gas well leases.
Delaware Riverkeeper Network Moves to Intervene in Litigation
On July 5, 2016, the Delaware Riverkeeper Network (DRN) filed a brief to intervene in Wayne Land and Mineral Group, LLC v. Delaware River Basin Commission, a lawsuit filed by Wayne Land and Mineral Group, LLC, claiming in the complaint that the Delaware River Basin Commission (DRBC) lacked the authority under the DRBC Compact to regulate shale oil and gas drilling on the Plaintiff’s land in the Delaware River Basin. DRN argues that it should be allowed to intervene in the lawsuit because it meets the four factors required for intervention under Fed. R. Civ. P. 24(a)(2). DRN filed to intervene in this lawsuit because the declaratory judgment sought by WLMG, if granted, would open the Delaware River Basin to natural gas exploration and would threaten DNR’s environmental interests in the Basin.
Oil Company Seeks Indemnification from Insurance Company in Earthquake Suits
New Dominion filed suit on June 16, 2016 after defendant insurer Lloyd’s refused to cover earthquakes allegedly induced by New Dominion’s drilling activities. Lloyd’s is seeking a declaration that the insurance policy purchased by New Dominion does not pertain to earthquakes, and therefore Lloyd’s has no duty to indemnify the oil company for damages resulting from earthquakes caused by hydraulic fracturing. Lloyd’s is proceeding on the theory that the claimed damages do not result from a "pollution condition," which places it outside the realm of the Site Pollution Liability Policies.
Federal Court Gives Green Light to LNG Expansion
On June 28, 2016, The D.C. Court of Appeals upheld FERC’s authorization of two LNG expansion projects in Louisiana and Texas. Sierra Club challenged the authorization due to concerns of increased natural gas production nationally. The court found, however, that there was no reason that liquefying more natural gas should lead to increased natural gas production rather than drawing on existing natural gas resources. In order for Sierra Club’s concerns to come to fruition, it would be necessary for more LNG exports to be approved, not more production. Only the Department of Energy, not FERC, can authorize an increase in exports. Furthermore, the court found that a cumulative-impact analysis need only be local as opposed to the nation-wide approach suggested by Sierra Club.
The SEC Discloses New Rules on Reporting for Oil and Gas
On June 27, 2016, the SEC unveiled a new rule requiring companies to report oil, gas, and mineral related payments equal to or more than $100,000 when made to governments.
PHMSA Increases the Maximum Civil Penalties Issued for Pipeline Safety Law Violations
On June 30, 2016, the Pipeline and Hazardous Materials Administration (PHMSA) published an interim final rule that will become effective on August 1, 2016. Therefore, federal agencies must adjust their civil monetary penalties by August 1, in addition to making annual adjustments thereafter in order to account for changes in inflation. Under this rule, the maximum administrative civil penalties that can be issued for a violation of pipeline safety laws is increased by a multiplier of 1.02819. For example, a $200,000.00 fine for a violation of pipeline safety laws will be increased to $205,638.00.
North Dakota Finalizes Spill Prevention Regulations
On June 29, 2016, the North Dakota Industrial Commission approved new regulations to amend the North Dakota Administrative Code, specifically Chapters 43-02-03 (Oil & Gas), 43-02-05 (Underground Injection Control), and 43-02-08 (Stripper Well Property Determination), with the intention of reducing spills by the oil industry. The rules will go to the Legislature’s Administrative Rules Committee, which has the power to block, pass, change, or delay the new regulations.
U.S. Supreme Court Agrees to Hear Limited Appeal from Venezuela
On June 28, 2016, the U.S. Supreme Court granted certiorari of Venezuela v. Helmerich & Payne International. The lawsuit began in 2010, when Helmerich & Payne International sued the Venezuelan government for expropriating rigs from the Oklahoma drilling company. Venezuela argued that it was immune from the suit under the Foreign Sovereign Immunities Act (FSIA). The U.S. District Court of Appeals for the District of Columbia affirmed the district court’s denial of Venezuela’s motion to dismiss the expropriation claim. Under the Court’s order, the only question that will be considered by the Court on appeal is “whether the pleading standard for alleging that a case falls within the FSIA’s expropriation exception is more demanding than the standard for pleading jurisdiction under the federal-question statute, which allows a jurisdictional dismissal only if the federal claim is wholly insubstantial and frivolous.”
The International Energy Agency (IEA) Launches a Four-year Energy Project
On July 1, 2016, the IEA released a press release announcing the launch a four-year project on “improved energy data and evidence-based energy policy-making” in Eastern Europe, Caucasus, and Central Asia. This energy project, titled EU4Energy, is intended to improve “energy data quality and collection and the development of energy efficiency indicators” among the target countries through support of an interactive web portal, which will act as a hub for energy-related information.
BLM Releases Draft of Final Environmental Impact Statement on Roan Plateau
In its final Roan Plateau environmental impact statement, BLM advances a preferred management alternative that incorporates the terms of a 2014 settlement agreement. Under this plan, 34,780 acres would be closed to oil and gas leasing, while 21,720 acres would be subject to No Ground Disturbance/No Surface Occupancy restrictions. While this management plan imposes limits on oil and gas development on the Roan Plateau, it does not entirely foreclose it.
Committee on the Effects of Diluted Bitumen on the Environment Releases a Comparative StudyIn June, the National Academies of Sciences, Engineering, and Medicine released a new report outlining the differences between diluted bitumen and other types of crude oil. The study explores, among other things, the potential environmental impacts of diluted bitumen. The study found that the environmental impact of diluted bitumen is similar to that of other crude oils in the beginning, but exposure to the environment after an oil spill changes the diluted bitumen. The evaporation of the lighter diluent leaves the bitumen dense, viscous, and very adhesive. This gives the bitumen the potential to sink to the sediments below water and attach to surfaces. Along with the possible environmental difficulties posed by bitumen, the study also provides recommendations for preparing for diluted bitumen spills.
Written by Chelsea Wilson and Jessica Deyoe - Research Assistants