Shale Law Weekly Review - January 16, 2018

Written by:
Jacqueline Schweichler - Education Programs Coordinator
Tori Wunder - Research Assistant

The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.

Municipal Regulation: Sanctions Imposed Against Attorneys in Grant Township Lawsuit 
On January 5, 2018, the United States District Court for the Western District of Pennsylvania issued an order imposing sanctions against two attorneys defending Grant Township’s Community Bill of Rights. The Pennsylvania General Energy Company, LLC (PGE) received approval for an injection well in May 2014. In June 2014, Grant Township adopted a Community Bill of Rights that prohibits wastewater disposal from oil and gas activities. PGE subsequently filed this lawsuit arguing that the Community Bill of Rights is unconstitutional and invalid.  According to the Pittsburgh Post-Gazette, the $52,000 sanction was imposed for pursuing “frivolous claims and defenses.” The case is entitled Pennsylvania General Electric Company, LLC v. Grant Township. For more information on the timeline of this case, see our Shale Law in the Spotlight article from last fall.

Production and Operation: The Ohio Supreme Court Rules That There is No Implied Covenant for Further Exploration 

On January 3, 2018, the Ohio Supreme Court decided that there is no implied covenant for further exploration contained within oil and gas leases. In Alford v. Collins-McGregor, the court determined that drillers are not required to explore deeper strata for oil and gas under their lease, so long as they “reasonably develop.” In Alford, the landowners requested, and were denied, a partial termination of their leases because the lessee had failed to explore deeper into the formation. Ohio’s rejection of the implied covenant to explore further brings them in line with the Texas and Oklahoma supreme courts, who have also rejected the covenant.

Municipal Regulation: Pennsylvania Appeals Court Rules That Township Residents May Not intervene in Gas Facility Zoning 

On January 11, 2018, the Commonwealth Court of Pennsylvania issued an opinion in the case regarding the proposed MarkWest Energy Partners, LP natural gas compressor station to be built in Cecil Township. Some residents of Cecil Township are attempting to intervene in the zoning approval of the station, raising opposition to its construction. The court upheld the decision of the trial court and ruled against the residents, stating in part that they had waited too long before intervening.

Pipelines: FERC Denies Request to Stay Construction of the NEXUS Pipeline

On January 10, 2018, the Federal Energy Regulatory Commission (FERC) declined to issue a stay of construction for the NEXUS pipeline project. In September 2017, the Sierra Club and several environmental organizations filed requests for rehearing and requested a stay of construction. The environmental groups argued that their request for rehearing raised substantial questions and there would be no remedy to the environmental impact of the pipeline once it has been fully completed. FERC, however, concluded that the environmental groups were unable to establish that they would suffer irreparable harm absent a stay and that delay of the project would be adverse to public interest.

Pipelines: FERC Denies Petition from Constitution Pipeline in Favor of New York DEC 

On January 11, 2018, the Federal Energy Regulatory Commission (FERC) issued an order declining to declare that the New York State Department of Environmental Conservation (New York DEC) waived its authority to issue a water quality certification for the Constitution Pipeline. The Constitution Pipeline Company, LLC (Constitution) first applied for a certificate of public convenience and necessity in June 2013. In April 2016, New York DEC denied Constitution’s application and Constitution filed a petition with FERC requesting an order stating that New York DEC had waived their authority by failing to act within a “reasonable period of time.” In its order, FERC ruled that New York DEC acted appropriately and within the one-year timeframe, given the changes and resubmissions of Constitution’s application.

Climate Change: New York City Sues Fossil Fuel Companies for Climate Change Damages 

On January 9, 2018, New York City filed a lawsuit against several oil and gas companies for contributing to climate change (City of New York v. BP P.L.C., et al. Case No. 18 v. 182). The lawsuit includes charges of public nuisance, private nuisance, and trespass. The complaint alleges that these corporations produced, marketed, and sold fossil fuels with the knowledge that fossil fuels exacerbate global warming. New York City alleges that they have suffered damages including “inundation, erosion, and regular tidal flooding of its property.” According to New York City Mayor Bill de Blasio, the city has experiences billions of dollars of damage as a result of climate change. In addition to the lawsuit, New York City announced plans to divest up to $5 billion in fossil fuel investments.

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks

"Oil and gas heavyweight joins defense of BLM's methane rollback" - EENews

"Region’s ‘priciest natural gas’ ignites pipeline debate" - Telegram

"Attorneys sanctioned in legal fight over oil and gas wastewater disposal well" - Pittsburgh PG

“Economic Impact of Sunoco’s Mariner East More Than Double What Was Originally Projected" - Vista Today

"Ineos To Challenge Scotland's Ban On Fracking" - EPMag

"For those living along Sunoco's Mariner East 2 pipeline, a human chain of frustration" - Post-Gazette

"Oil and gas drilling permits remain strong in Ohio, Pa." - Farm & Dairy

"API: Oil and gas should be included in federal infrastructure push"  - OGJonline

"Chesapeake willing to settle shale royalty dispute in Pa."  - Shale Gas Reporter

Connect with us on Facebook! Every week we will post the CASL Ledger which details all our publications and activities from the week.

See our Global Shale Law Compendium and this week’s article, Shale Law Governance in Pennsylvania - Legislation from 2013 to 2016.

Check out this week’s Shale Law in the Spotlight: Oil and Natural Gas Severance Taxes in the United States (North Dakota, Arkansas, Colorado, and New Mexico)

Stay informed with our monthly Agricultural Law Brief located here.

Shale Law in the Spotlight: Recent Litigation Relating to Wastewater Injection Well Prohibition in Grant Township

Written by Chloe Marie – Research Fellow

In March 2017, Pennsylvania DEP approved permits for Class II Oil and Gas Related Injection Wells in Highland Township, Elk County, and Grant Township, Indiana County, Pennsylvania. The grant of these permits followed many years of legal proceedings resulting from opposition to the application filed by Seneca Resources Corporation in Highland Township and the application filed by Pennsylvania General Energy in Grant Township. In both instances, local ordinances were enacted to prohibit the wastewater injection wells.

This article will address the litigation pertaining to the Grant Township’s Community Bill of Rights Ordinance. In a prior article, we focused on the litigation relating to the Highland Township’s Ordinance.

The lawsuit timeline (Pennsylvania General Energy Company, LLC v. Grant Township, docket no. 1:14-cv-00209)

On May 2, 2013, Pennsylvania General Energy (PGE) submitted a UIC permit application to the U.S. Environmental Protection Agency (EPA) for conversion of a production well – the Yanity Well – into a Class II-D brine disposal injection well in Grant Township, Indiana County, Pennsylvania. The public comment period was open through October 28, 2013. EPA issued the UIC permit to PGE on March 19, 2014.

On April 7, 2014, several residents of the township filed three petitions seeking review of the UIC permit with the EPA Environmental Appeals Board (EAB) alleging that “the [U.S. Environmental Protection Agency Region 3] failed to respond adequately to public comments submitted regarding the permit and question whether the permit conditions are adequate to protect the groundwater aquifer.” These cases were consolidated, and on August 21, 2014, EAB issued an order denying all three petitions for review finding that the Region provided sufficient answers to the questions and concerns set forth by the petitioners. EPA Region 3 then issued a favorable final permit decision regarding the UIC permit on September 11, 2014.

In the midst of all these developments at the federal level, Grant Township adopted a Community Bill of Rights Ordinance on June 3, 2014, prohibiting any corporation or government from engaging in projects and activities that would violate the Ordinance, including waste disposal generated by oil and gas activities within the township’s boundaries. As a result, PGE initiated legal action on August 8, 2014, against Grant Township in the U.S. District Court for the Western District of Pennsylvania challenging certain provisions of the Ordinance. In its complaint, PGE declared that “as a direct and proximate cause of Grant Township’s adoption of the Community Bill of Rights Ordinance, PGE will be precluded from operating the Yanity Well for legally permissible injection purposes and will have to seek more costly alternatives for managing produced fluids.” PGE asked the U.S. District Court to enjoin Grant Township from enforcing the Community Bill of Rights Ordinance and declare that the Ordinance is preempted by state law as well as unconstitutional under federal laws.

On October 10, 2014, PGE also filed a Motion for Preliminary Injunction against Grant Township outlining that Grant Township exceeded its authority in adopting the Community Bill of Rights Ordinance given the fact that Grant Township is a Second Class Township and thus is not allowed to regulate injection activities pursuant to the Second Class Township Code, 53 P.S. §§ 65101 et seq.

On December 15, 2014, both PGE and Grant Township filed cross motions for judgments on the pleadings. PGE argued that “the Community Bill of Rights Ordinance impermissibly regulates the development of oil and natural gas, which is exclusively and comprehensively regulated by [state law]” while Grant Township asserted that it was “entitled to judgment on the pleadings because the people of Grant Township possess the inherent and constitutional right of local, community self-government and legal doctrines asserted by PGE in this action violate this right.”

On March 19, 2015, Grant Township filed a motion to dismiss for lack of standing and mootness because PGE had yet to receive a DEP permit necessary for the construction and operation of an injection well. On the same day, Grant Township also filed a motion to stay pending the issuance of a well permit from DEP. On October 14, 2015, the U.S. District Court denied Grant Township’s motion to dismiss and granted, in part, PGE’s motion for judgment on the pleadings enjoining Grant Township from enforcing portions of the Community Bill of Rights Ordinance.

On October 26, 2015, Grant Township filed a motion for reconsideration of the U.S. District Court’s judgment issued on October 14, 2015. Grant Township alleged that the court “erred … in failing to expressly rule on whether the people of Grant Township have an inalienable and constitutional right of local community self-government, and … by omitting consideration of the Pennsylvania Constitution’s Environmental Rights Amendment as an independent legal basis for the Community Bill of Rights Ordinance.”

Interestingly, on November 3, 2015, Grant Township enacted a Home Rule Charter Ordinance replacing the Community Bill of Rights Ordinance. Consequently, on December 28, 2015, Grant Township filed a motion to dismiss the case for lack of jurisdiction claiming that  “in light of the passage of the Home Rule Charter repealing the Ordinance … PGE no longer has a basis to seek injunctive relief and its claims in this regard are moot and this Court no longer possesses subject matter jurisdiction over it.” On January 20, 2016, PGE filed a motion to strike in response to Grant Township’s above motion. On February 5, 2016, the U.S. District Court denied Grant Township’s motion for reconsideration contending that this motion is “nothing more than an attempt to relitigate its motion for judgment on the pleadings.” In addition, the Court granted PGE’s motion to strike Grant Township’s motion to dismiss for lack of jurisdiction.

Since February 5, 2016, activity on the case has continued – to include discovery proceedings and actions involving intervenors. The case remains pending.

Pennsylvania DEP timeline

On April 22, 2014, PGE filed a first well permit application with the Pennsylvania DEP (DEP) to change the use of the Yanity Well from a production well to a disposal well; DEP discovered procedural and substantive deficiencies in PGE’s application, and thus PGE withdrew its application.

PGE filed a second well permit application, and DEP granted such permit on October 22, 2014, but revoked it on March 13, 2015, stating that PGE did not meet all applicable legal requirements under Pennsylvania Clean Streams Law.

On March 31, 2015, PGE filed its third well permit application, and on June 1, 2015, DEP held a public hearing seeking input to the permit application. DEP approved the well permit application on March 27, 2017. On the same date, Pennsylvania DEP initiated a lawsuit against Grant Township seeking to invalidate the new Home Rule Charter Ordinance (Pennsylvania DEP v. Grant Township of Indiana County, Commonwealth Court of Pennsylvania, docket no. 126 MD 2017).