Tuesday, June 11, 2019

Shale Law Weekly Review - June 11, 2019

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:
Charles Sartain, Lease Contamination Claim Squelched by Limitations, (June 4, 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)

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