Shale Law Weekly Review - April 27, 2020

Written by:

Sara Jenkins – Research Assistant 

Jackie Schweichler – Staff Attorney

Brennan Weintraub – Research Assistant

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

Production and Operation: Oklahoma Corporation Commission Approves Emergency Order Allowing Oil Producers to Shut-in Wells in Response to COVID-19

On April 22, 2020, the Oklahoma Corporation Commission announced approval of an emergency order allowing oil producers to shut-in or reduce production of oil wells for the prevention of waste.  The order was approved in response to a request from LPD Energy Company LLC seeking to prevent waste by stopping or reducing oil production without impacting the company’s lease agreement.  The request stated that due to a decline in demand and oversupply from COVID-19 circumstances, LPD is losing $200,000 per month by producing “economically challenged” wells.  At a hearing on April 17, 2020, the Commission heard testimony and made findings.  No objections to the requested relief were filed or received at the hearing.  The Commission’s Media Advisory stated that the order “gives those operators the freedom and flexibility they need to respond to market forces and decide what actions to take to survive.”

Water Quality: EPA Issues Final Rule Defining Waters of the United States

On April 21, 2020, the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers issued a final rule regarding the definition of “waters of the United States” (WOTUS) under the Clean Water Act.  The rule is titled “The Navigable Waters Protection Rule: Definition of ‘Waters of the United States’” and replaces the previous 2015 WOTUS rule.  The new rule follows President Trump’s Executive Order 13778, which required review of the 2015 WOTUS rule to ensure navigable waters were kept pollution-free while also promoting economic growth.  Additionally, the Executive Order directed EPA to define “navigable waters” in a way that was consistent with Justice Scalia’s opinion in Rapanos v. United States, 547 U.S. 715 (2006).  The final rule’s interpretation of WOTUS includes: “territorial seas and traditional navigable waters; perennial and intermittent tributaries; . . .  certain lakes, ponds, and impoundments of jurisdictional waters; and [adjacent] wetlands.”  The final rule also defines waters that are considered “non-jurisdictional,” and as such are excluded from the definition of WOTUS.  The final rule will take effect on June 22, 2020.

Production and Operation: Government Accountability Office Finds Thousands of Approved Oil and Gas Drilling Permits Not Being Used

In March 2020, the U.S. Government Accountability Office (GAO) issued a report finding that thousands of the Bureau of Land Management’s (BLM) approved drilling permits were not in use. (p. 2).  The report is titled, Oil and Gas Permitting: Actions Needed to Improve BLM’s Review Process and Data System.  The report states that between 2014 and 2019, BLM approved 19,941 drilling permits for wells, out of which 9,991 permits were not being used.  Additionally, during the same time period, 2,628 applications for permits remained under review and 1,137 of the applications were denied by BLM.  GAO made three recommendations to BLM, suggesting that they develop a consistent and documented process for prioritizing permit applications and that BLM should formalize its data processing systems.  BLM only agreed with GAO’s third recommendation to “document and implement corrective actions for the data system based on lessons learned.” 

From the National Oil & Gas Law Experts:

George A. Bibikos, At the Well Weekly (Apr. 17, 2020)

Charles Sartain, Who Said What at the Railroad Commission Market Demand Prorationing Hearing? (Apr. 20, 2020)

Joshua Downer, Railroad Commission of Texas Declines to Order Prorationing – For Now (Apr. 22, 2020)

John McFarland, Proration at the Railroad Commission: Sitton’s Motion to Conditionally Order Texas Operators to Reduce Their Oil Production By 20% is Tabled (Apr. 21, 2020)

AGENCY PRESS RELEASES—STATE/FEDERAL

Pennsylvania Department of Energy Press Releases:

DEP Approves Permit for Underground Injection Well in Allegheny County (Apr. 20, 2020)

U.S. Department of Energy

Department of Energy Announces $28 Million to Develop Ultra-high Temperature Materials for Gas Turbine Applications (Apr. 21, 2020)

Department of Energy Announces $25 Million for Grid Management Systems and Risk Assessment Systems (Apr. 23, 2020)

Department of Energy Announces $131 Million for CCUS Technologies (Apr. 24, 2020)

U.S. Environmental Protection Agency

EPA and Federal Partners Commemorate 10-Year Anniversary of Deepwater Horizon Oil Spill (Apr. 20, 2020)

STATE ACTIONS—EXECUTIVE/LEGISLATIVE

Pennsylvania Executive Agencies—Actions and Notices: 

No actions Apr. 27, 2020. 

Pennsylvania Legislature:

No actions Apr. 20 - 27, 2020.

FEDERAL ACTIONS—EXECUTIVE/LEGISLATIVE

Federal Executive Agencies—Actions and Notices: 

Energy Department

85 FR 23013 “Epcilon LNG LLC; Application for Long-Term, Multi-Contract Authorization to Export Domestically Produced Natural Gas Through Mexico to Non-Free Trade Agreement Countries After Liquefaction to Liquefied Natural Gas” Notice (Apr. 24, 2020)

85 FR 23014 “Sabine Pass Liquefaction, LLC; Application for Blanket Authorization to Export Previously Imported Liquefied Natural Gas to Non-Free Trade Agreement Countries on a Short-Term Basis” Notice (Apr. 24, 2020)

Federal Energy Regulatory Commission 

85 FR 22730 “Port Arthur LNG Phase II, LLC, PALNG Common Facilities Company, LLC; Notice of Schedule for Environmental Review of the Port Arthur LNG Expansion Project” Notice (Apr. 23, 2020)

85 FR 22730 “Guardian Pipeline LLC; Notice of Request Under Blanket Authorization” Notice (Apr. 23, 2020)

85 FR 22733 “Black Marlin Pipeline LLC; Notice of Filing” Notice (Apr. 23, 2020)

85 FR 23017 “Dakota Natural Gas, LLC; Notice of Application” Notice (Apr. 24, 2020)

Land Management Bureau

85 FR 22750 “Notice of Proposed Reinstatement of Terminated Oil and Gas Lease COC-77358, Colorado” Notice (Apr. 23, 2020)

85 FR 22750 “Notice of Proposed Reinstatement of Terminated Oil and Gas Lease COC-77272, Colorado” Notice (Apr. 23, 2020)

House Energy and Commerce Committee Actions:

No new actions Apr. 20–27, 2020.

Senate Energy and Natural Resources Committee Actions: 

No new actions Apr. 20–27, 2020.

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks:
“Keystone XL Hits Another Snag in Court,” Rigzone

“Oil Price Crashes into Negative Territory for the First Time in History Amid Pandemic,” Reuters

“Oil Drilling, Fracking Could Drop Another 60%,” Energywire

“‘A Big Deal:’ Keystone XL Ruling Could Threaten Other Pipelines,” Energywire

“U.S. Natgas Trading at Premium Over Oil After Crude Price Collapse,” Reuters

“Why Marcellus Shale Stocks Are Lifting, While Other Basins See Drop,” Pittsburgh Business Times

“Satellites Find Highest U.S. Methane Emissions Ever Recorded,” Energywire

“Bankruptcy Looms Over U.S. Energy Industry, From Oil Fields to Pipelines,” Reuters

“Historic Oil Rout Poised to Bust Shale,” Rigzone

“Halliburton Books $1.1 Billion Charge, Slashes Spending by 50%,” Reuters

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Shale Law in the Spotlight – U.S. EPA and Army Corps of Engineers Issue Proposed Revised Definition of “Waters of the United States”

Written by Chloe Marie – Research Specialist

The Obama administration promulgated the Clean Water Rule (CWR) on June 29, 2015, with a stated purpose of better defining the scope of “waters of the United States” that are protected under the Clean Water Act. This regulatory action was criticized by farm groups and others who viewed the entire approach as constituting government overreach. Shortly after being elected, President Donald Trump indicated his intention to loosen the bonds of environmental constraint on the industry, and as a result supported a revision of the CWR.

This article will provide some background on the regulatory process concerning the revision of the CWR as well as an overview of the content of recent proposed rulemaking. 

Background

On February 28, 2017, President Donald Trump issued a Presidential Executive Order to revise, amend, or rescind the Clean Water Rule (CWR) promulgated by the Obama administration. President Trump directed the U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps) to initiate steps towards such revision in the national interest – the Executive Order emphasizes the necessity to “ensure that the Nation’s navigable waters are kept free from pollution, while at the same time promoting economic growth, minimizing regulatory uncertainty, and showing due regard for the roles of the Congress and the States under the Constitution.”

Consequently, on March 6, 2017, the two federal agencies published in the Federal Register a Notice of Intent to review and rescind or revise the CWR. The Notice states that the agencies will provide a revised interpretation of the term “navigable waters” in conformity with the opinion of Justice Scalia in Rapanos v. United States to allow for clarity on how the Clean Water Act applies to the stakeholders’ activities.

On July 27, 2017, the agencies issued a Proposed Rule setting out milestones for reviewing and revising the CWR. As a first step, EPA and the Corps proposed to rescind the 2015 definition of “waters of the United States.” They proposed to re-establish the regulatory definitions of U.S. waters that existed prior to the enactment of the 2015 CWR. The proposed rule also specified that “nothing in this proposed rule restricts the ability of States to protect waters within their boundaries by defining the scope of waters regulated under State law more broadly than the federal law definition.” The second step was to develop a new definition of the U.S. waters subject to a separate notice and comment rulemaking. The public comment period on this Proposed Rule closed on September 27, 2017.

On June 29, 2018, the agencies published a supplemental notice of proposed rulemaking to the proposed repeal of the 2015 CWR providing further clarification and seeking additional comments on the impacts of permanently repealing the 2015 rule in its entirety. The additional public comment period closed on August 13, 2018.

Most recently, EPA and the Corps issued a pre-publication version of a proposed revised definition of “Waters of the United States” on December 11, 2018.

Proposed Revised Definition of “Waters of the United States”

The agencies propose to include the following terms into the definition of U.S. waters: “traditional navigable waters, comprising the territorial seas; tributaries that contribute perennial or intermittent flow to such waters; certain ditches; certain lakes and ponds; impoundments of otherwise jurisdictional waters; and wetlands adjacent to other jurisdictional waters.”

The agencies also propose to redefine the terms tributary, ditches, adjacent wetlands, abut, and direct hydrologic surface connection. Further, the proposed rule clarifies the concept of “waters of the United States,” which would not be defined as broadly as in the 2015 CWR. In this regard, the agencies explained that U.S. waters must be understood within the ordinary meaning of the term and would include oceans, rivers, streams, lakes, ponds, and wetlands.

The definition of U.S. waters in the proposal would exclude water features “that flow only in response to precipitation; groundwater, including groundwater drained through subsurface drainage systems; certain ditches; prior converted cropland; artificially irrigated areas that would revert to upland if artificial irrigation ceases; certain artificial lakes and ponds constructed in upland; water-filled depressions created in upland incidental to mining or construction activity; stormwater control features excavated or constructed in upland to convey, treat, infiltrate, or store stormwater run-off; wastewater recycling structures constructed in upland; and waste treatment systems.”

The proposed rule suggests that developing geospatial datasets of U.S. waters could help in jurisdictional determinations. The proposal states that “these datasets, when fully developed, would promote greater regulatory certainty and relieve some of the regulatory burden associated with determining the need for a permit and play an important part in helping to attain the goals of the CWA.”

On December 28, 2018, EPA and the Corps announced that a public hearing will be held in Kansas City, KS, on January 23, 2019 to provide interested parties an opportunity to present their comments on the proposed revised definition.

Stay tuned for further legal and regulatory developments!

References:

-       Exec. Order No. 13778, 82 Fed. Reg. 12497 (Mar. 3, 2017)

-       Notice of Intent; Intention to Review and Rescind or Revise the Clean Water Rule, 82 Fed. Reg. 12532 (Mar. 6, 2017)

-       Proposed Rule; Definition of “Waters of the United States” -Recodification of Pre-Existing Rules, 82 Fed. Reg. 34899 (July 27, 2017)

-       Supplemental Notice of Proposed Rulemaking; Definition of “Waters of the United States” -Recodification of Pre-Existing Rules, 83 Fed. Reg. 32227 (July 12, 2018)

-       Proposed Rule; Revised Definition of “Waters of the United States,” U.S. EPA Pre-Publication Version (Dec. 11, 2018)

-       Notice of Public Hearing; Revised Definition of “Waters of the United States,” 83 Fed. Reg. 67174 (Dec. 28, 2018)

Additional resources on this topic from the Center for Agricultural and Shale Law:

-       Shale Law in the Spotlight – Executive Order on the “Waters of the United States” Rule (March 8, 2017)

This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.