Written by:
Sara Jenkins -
Research Assistant
Jackie Schweichler -
Staff Attorney
The following
information is an update of recent local, state, national, and international
legal developments relevant to shale gas.
Public Lands: Audit
Finds Pennsylvania Failed to Collect Royalties from Oil and Gas Companies
Developing on State Game Lands
On May 23, 2019, The
Pennsylvania Auditor General released a Performance Audit Report (audit) for the Pennsylvania Game Commission
(Commission), finding the Commission failed to adequately track oil and gas
royalties from producers operating on state game lands. The audit lists several
issues it found in the Commission’s accounting practices regarding the
collection and monitoring of royalties owed. These issues include relying on
data submitted by oil and gas producers without confirming the data’s accuracy,
failing to audit producers or collect interest on late payments, and failing to
deposit royalty checks in a timely manner. The Commission recognized its
failure to properly account for royalty revenues, citing small staff and high
demand of other duties.
Municipal Regulation:
Pennsylvania Supreme Court Rules That Residents of Neighboring Municipality Can
Testify on Possible Impact of Proposed Natural Gas Facility
On May 31, 2019, the
Supreme Court of Pennsylvania ruled that the testimony of residents in another municipality could be
considered as evidence when reviewing an application for a well site (EQT
Production Company v. Borough of Jefferson Hills; Pa. Sup. Ct., No. 4 WAP
2018). The Borough of Jefferson Hills (Borough) filed the appeal to the Pennsylvania
Supreme Court, arguing that not allowing neighboring residents to testify of
personal experiences would exclude “probative, relevant, and credible evidence”
in land use hearings. The Appellees, EQT Production Company and ET Blue Grass
Clearing, LLC, stated that the Borough Council’s original decision to deny its
conditional use application based on the testimony of other residents “was not
supported by substantial evidence.” Ultimately, the court held that residents’
testimonies regarding the “impacts to their health, quality of life, and
property” may be considered by a municipality when “deciding whether to approve
a conditional use application.”
Pipelines: New York
State Appeals FERC Ruling in Northern Access Pipeline Project
On May 28, 2019, the New
York Department of Environmental Conservation (DEC) filed a Petition for Review
of a decision by the Federal Energy Regulatory Commission (FERC), which allowed
the Northern Access pipeline project (Project) to move forward (N.Y. Dep’t
of Envtl. Conservation v. FERC, 2d Cir., No. 19-1610). On August 6, 2018,
FERC ruled that New York DEC waived its water quality certification
authority under section 401 of the Clean Water Act by failing to act on the Project’s
application for certification within one year of receiving it. The New York DEC
is requesting that the U.S. Court of Appeals for the Second Circuit review and
set aside the ruling as “illegal, unreasonable, arbitrary and capricious.” The Northern Access Project is operated by National Fuel Gas Supply
Corporation and Empire Pipeline, Inc. The Project is expected to add 96 miles
of natural gas pipeline from McKean County, Pennsylvania to Erie County, New
York.
Pipelines: Iowa Supreme
Court Affirms Decision Allowing Use of Eminent Domain to Build Dakota Access
Pipeline
On May 31, 2019, the
Supreme Court of Iowa affirmed a district court decision allowing use of eminent domain to build
a crude oil pipeline through Iowa (Puntenney v. Iowa Utilities Board,
No. 17–0423). On March 10, 2016, the Iowa Utilities Board (IUB) issued a decision authorizing Dakota Access, LLC to begin construction of the
pipeline. Petitioners, consisting of landowners and an environmental group,
filed an appeal after the district court denied judicial review of IUB’s
authorization. The Supreme Court of Iowa concluded that “the use of eminent
domain for a traditional public use such as an oil pipeline does not violate
the Iowa Constitution.” The Dakota Access Pipeline began service on June 1,
2017, and it has the capacity to transport 450,000 barrels of oil per day.
Pipelines: Minnesota
Court of Appeals Reverses Decision on Enbridge Energy Pipeline Project
On June 3, 2019, the
State of Minnesota Court of Appeals reversed a decision from the Minnesota Public Utilities Commission
(Commission) regarding the Enbridge Energy, LP pipeline project (Project)(In
re Applications of Enbridge Energy, Nos. A18-1283, A18-1291, A18-1292). The
Commission previously determined that the final environmental impact statement (EIS) for the Project was adequate. However,
the court ruled that the final EIS was not adequate, because it did not address
the potential impacts an oil spill could have on Lake Superior’s watershed. The
court added that the Commission acted in an arbitrary and capricious manner
when it failed to address the oil spill issue, despite the issue being raised
in public comments on the draft EIS. Enbridge Energy’s Project would replace the existing Line 3 pipeline from the North
Dakota-Minnesota border to the Minnesota-Wisconsin border.
Pipelines: New Jersey
Denies Permits and Water Quality Certificate for NorthEast Supply Enhancement
Project
On June 5, 2019, the New
Jersey Department of Environmental Protection (NJDEP) denied Transcontinental Gas Pipe Line Co’s (Transco) application for
five permits and a water quality certificate for the NorthEast
Supply Enhancement Project (Project). NJDEP denied the permits based on Transco’s failure to
demonstrate compliance with the Freshwater Wetland Protection Act, the Flood
Hazard Control Act, and the Coastal Zone Management rules. Williams, the
operator of Transco, responded to the ruling, stating “[w]e believe that we can be responsive to
the issues raised by the agency and intend to resubmit the application to the
agency in a timely manner.” Similarly, on May 15, 2019, the project was denied
water quality certification by New York’s Department of Environmental
Conservation. The project is designed to expand the existing Transco pipeline
system in Pennsylvania, New Jersey, and New York, providing an additional 400
million cubic feet of natural gas per day to the Northeast.
Surface Owner Rights:
West Virginia Supreme Court Rules That Use of Surface to Drill into Neighboring
Properties Without Surface Owner Permission is Trespass
On June 5, 2019, the
Supreme Court of Appeals of West Virginia ruled that use of surface land to drill horizontal wells under
neighboring properties without the consent of the surface landowner was
considered trespass (EQT Production Company v. Crowder, W. Va. Sup. Ct.,
No. 17-0968). The Plaintiffs, landowners in West Virginia, had a lease with the
Defendant, EQT Production Company (EQT), to extract oil and gas from below
their land. The Plaintiffs brought suit when EQT began using their surface land
to drill horizontal wells to extract oil and gas from neighboring properties.
The Supreme Court affirmed the lower Circuit Court decision, granting partial
summary judgment and awarding Plaintiffs $190,000 in damages.
Pipelines: Court Vacates
Injunction Against Keystone XL
On June 6, 2019, the
U.S. Court of Appeals for the Ninth Circuit granted a motion in favor of TransCanada Corporation to vacate
the district court’s order and dissolve the permanent injunction that had halted
construction of the Keystone XL pipeline (Indigenous Envtl. Network, v. U.S.
Department of State, No. 18-36068). The U.S. District Court for the
District of Montana previously ordered project construction to halt in November 2018. Several months
later, on March 29, 2019, a new presidential permit was issued authorizing pipeline facilities for
the project. In light of the new presidential permit, this most recent order
dismissed the prior appeals as moot and removed the injunction.
Water Quality /
Pipelines: EPA Issues Guidance on Section 401 of the Clean Water Act
On June 7, 2019, the
Environmental Protection Agency (EPA) issued guidance on Section 401 of the Clean Water Act. The guidance, Clean Water Act Section 401 Guidance for Federal
Agencies, States, and Authorized Tribes, provides clarification and recommendations for
Section 401 implementation. Specifically, the guidance covers certification
timelines, the scope of certification conditions, and information within the
scope of review. EPA was ordered to issue guidance on Section 401 in the April
2019 Presidential Executive Order, Promoting Energy Infrastructure and Economic Growth.
Induced Seismicity:
Alberta Orders New Fracking Restrictions Near Dam to Limit Potential for
Earthquakes
On May 27, 2019, the
Alberta Energy Regulator (Alberta) issued Subsurface Order No. 6 (Order) imposing hydraulic fracturing
(fracking) restrictions near the Brazeau Dam to limit the potential for induced
quakes in the area. The order restricts fracking within five kilometers (3.1
miles) of the dam if operations are targeting the Duvernay shale formation. The
order also restricts fracking within 3 kilometers (1.9 miles) of the dam if
operations are targeting shale formations located above the Duvernay formation.
The order follows a 4.3 magnitude earthquake, which occurred in the area in March 2019.
Production and
Operation: Natural Gas Production in Pennsylvania Shows Overall Increase
Compared to 2018
On May 30, 2019, the
Pennsylvania Independent Fiscal Office (IFO) released a report showing a nearly 15 percent increase of natural
gas production in the state for the first quarter of 2019, as compared to the
same quarter in 2018. Susquehanna County had the highest overall first quarter
production and increase, with growth from 349.2 bcf in the first quarter of
2018 to 408.9 bcf in 2019. The report shows a 26 percent increase in horizontal
well production from 2017 to 2019, and in each of the last eleven consecutive
quarters, there has been increased natural gas production. According to the
report, Pennsylvania ranks second in the country for gross natural gas
production from all well types.
Pipelines: U.S.
Transportation Secretary Proposes Legislation Reauthorizing PHMSA’s Pipeline
Safety Programs
On June 3, 2019, U.S.
Transportation Secretary, Elaine L. Chao, submitted a legislative proposal that would reauthorize the Pipeline and Hazardous Materials
Safety Administration’s (PHMSA) pipeline safety programs through 2023. In a press release issued by PHMSA, Chao stated, “[t]he Department
looks forward to working with Congress to pass a robust pipeline safety
reauthorization bill that will strengthen the safety of critical energy
transportation infrastructure.”
The proposal, if passed,
will extend program grants and research awards, provide incentives for pipeline
operators who exceed federal pipeline safety regulations, and create pilot
programs to promote safe liquid transportation by pipeline.
From the National Oil
& Gas Law Experts:
John McFarland, Burlington v. Texas Crude – another Supreme Court Case on
Post-Production Costs, (June 5, 2019)
Dena Adler, U.S. Climate Change Litigation In The Age Of Trump: Year
Two—a New Sabin Center Working Paper, (June 7, 2019)
Pennsylvania
Legislation:
HB1568: would create the Pipeline Safety and Communication Board and
outline its powers and duties (Referred to Veterans Affairs and Emergency Preparedness - June 7, 2019)
HB1567: would require public utilities to obtain approval form the PA
Public Utility Commission before they could use eminent domain in constructing
a pipeline (Referred to Consumer Affairs - June 4, 2019)
SB716: would prohibit a moratorium form being placed on non-surface
disturbance natural gas leases on state forest land (Referred to Environmental Resources and Energy - June 5, 2019)
SB717: would use funds generated from new gas leases on state forest
land for conservation projects (Referred to Environmental Resources and Energy - June 5, 2019)
SB677: would require pipeline operators to conduct an end-of-life
study on natural gas pipelines in Pennsylvania (Referred to Consumer Protection and Professional
Licensure - June 5, 2019)
HB1585: would impose a volumetric severance tax on unconventional gas
wells in Pennsylvania (Referred to Environmental Resources and Energy - June 6, 2019)
SB725: would impose a volumetric severance tax on unconventional gas
wells in Pennsylvania (Referred to Environmental Resources and Energy - June 6, 2019)
“As Adelphia pipeline clears hurdles, Bucks officials
raise zoning concerns” - The Philadelphia Inquirer
“Innovation To Reduce Environmental Impact From Oil And
Gas Industry Operations While Reducing Costs Of Production” - Oil and Gas Online
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This week we published
two new Shale Law in the Spotlight articles: Shale Law in the Spotlight – Pending Applications for LNG
Export Projects in the United States: Mississippi, Oregon, and Texas and Shale Law in the Spotlight – Pending Applications for LNG
Export Projects in the United States: Alaska, Florida, and Louisiana
Check the May Agricultural Law Brief! Each month we compile the biggest legal
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