Shale Law Weekly Review – June 8, 2020

Pipelines: Court of Appeals Denies Stay of Court Order in Pipeline Permit Case
On May 28, 2020, the U.S. Court of Appeals for the Ninth Circuit declined to stay a district court order that enjoined the use of Nationwide Permit 12 (NWP 12) for the construction of new oil and gas pipelines. (Northern Plains Resource Council v. U.S. Army Corps of Engineers, No. 20-35412).  The U.S. Army Corps of Engineers (Corps) filed its Motion for Stay Pending Appeal on May 13, 2020.  The Corps argued that the district court order was “improper” because it granted relief that was not requested by the Plaintiffs.  Plaintiffs, the Northern Plains Resource Council, had requested an injunction for the Keystone XL pipeline project.  Rather than granting an injunction that would halt the Keystone XL pipeline, the district court enjoined use of the NWP 12 for all new pipeline construction.  In its recent decision, the Court of Appeals denied the Corps’ request for a stay pending appeal stating that the Corps did “not demonstrate[] a sufficient likelihood of success on the merits and probability of irreparable harm.”

Water Quality: EPA Issues Final Rule Regarding Clean Water Act Certification
On June 1, 2020, the Environmental Protection Agency (EPA) announced the issuance of a final rule (Rule) regarding Clean Water Act section 401 certification.  Section 401 of the Clean Water Act is used to evaluate impacts that infrastructure, including oil and gas pipelines and facilities, may have on water sources.  According to EPA’s news release, the Rule was issued based on Executive Order 13868, which required updating and reviewing current federal policies to reflect the promotion of energy infrastructure.  EPA Administrator Andrew Wheeler made a statement that the Rule was meant to prevent “abuses of the Clean Water Act” that delay infrastructure projects indefinitely and to create “clear guidelines” that give the projects “a path forward.”

Landowner Royalties: Pennsylvania Court Denies Release of Third Party Sales in Royalty Calculation Case
On May 18, 2020, the U.S. District Court for the Middle District of Pennsylvania denied the release of third-party sales information in a case disputing royalty calculation methods. (Elbow Energy, LLC v. Equinor USA Onshore Properties, Inc., No. 4:19-CV-01873).  Plaintiff Elbow Energy brought an action against Defendant Equinor USA Onshore Properties for breach of contract after Equinor failed to use an alternate royalty calculation method provided for in the lease.  For the alternative royalty calculation method to be triggered, the lease terms require Elbow to “notif[y] and provide[] to [Equinor] three bona fide, arms length transactions documenting . . . gas prices” paid by other purchasers in the area.  Elbow previously sent Equinor documentation on royalty payments to co-owner, Alta Marcellus Development LLC, that Elbow claimed was sufficient to trigger the alternate calculation method.  Elbow moved to compel the production of documents relating to Equinor’s sales to unaffiliated third parties.  The court denied Elbow’s Motion to Compel stating that the sales documents were “unlikely to contain the information needed to address Equinor’s objection to the Alta statements.”

Landowner Royalties: Pennsylvania Court Approves Class Certification for Class Action Claim of Underpaid Royalties
On May 18, 2020, the U.S. District Court for the Middle District of Pennsylvania, granted a class certification for a class action lawsuit regarding underpaid royalties. (Slamon v. Carrizo (Marcellus), LLC, No. 3:16-CV-2187).  Landowners brought suit against Carrizo (Marcellus), LLC, Reliance Marcellus II, LLC and Reliance Holdings USA, Inc. (collectively “Reliance”) alleging breach of contract related to royalty terms in their oil and gas leases.  Plaintiff James Slamon alleged Defendants underpaid royalties “to him and a class exceeding one hundred members.”  Plaintiff then moved to certify the class of Plaintiffs.  The court granted Plaintiff’s motion in part and denied it in part.  More specifically, the court granted certification of the No Deductions and Highest Price Classes while denying certification of the Implied Duty Class and certification of all Classes.

National Energy Policy: Executive Office Accepts EPA Final Rule Relating to Oil and Gas Sector for Internal Review
On June 2, 2020, the U.S. Office of Management and Budget accepted an oil-and-gas-related final rule filed by the Environmental Protection Agency (EPA) for internal review.  The rule was proposed in October 2018, and it amended the new source performance standards for the oil and natural gas sector.  The amended standards included changes to monitoring emissions at wells sites and compressor stations and requirements for pneumatic pumps at well sites.  The rule is classified as “economically significant” and will affect oil and gas extraction and pipeline transportation sectors. (OMB website).  After internal review, the amended standards in the final rule will be finalized.

From the National Oil & Gas Law Experts:
George Bibikos, Federal Court in PA OK’s Royalty Owners’ Class Action (May 29, 2020)

Charles Sartain, Texas Supreme Court Puts Perpetuities in Limbo in Anti Washout Clauses (June 5, 2020).

John McFarland, Bush v. Lone Oak Club – Texas Supreme Court Once Again Dives Into the Arcane Law of Water Boundaries (May 26, 2020)

Romany Webb, Doe Proposal to Categorically Exclude Natural Gas Exports is Fatally Flawed (June 1, 2020)

AGENCY PRESS RELEASES—STATE/FEDERAL

Pennsylvania Department of Energy Press Releases:
No new releases May 29–June 8, 2020.

U.S. Department of Energy
Secretary Brouillette and Minister Taylor Sign Historic U.S.-Australia SPR Lease Agreement (June 3, 2020).

 U.S. Environmental Protection Agency
No significant actions May 29-June 8, 2020.

STATE ACTIONS—EXECUTIVE/LEGISLATIVE

Pennsylvania Executive Agencies—Actions and Notices: 
No actions June 5, 2020.

Pennsylvania Legislature:
SB 790 “An Act relating to conventional wells and the development of oil, gas and coal; imposing powers and duties on the Department of Environmental Protection” Referred to Rules and Executive Nominations (May 28, 2020).

HB 2555 “An Act amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, in natural gas competition, further providing for duties of natural gas distribution companies and for consumer protections and customer service; and, in restructuring of electric utility industry, further providing for definitions, for standards for restructuring of electric industry and for duties of electric distribution companies” Referred to Consumer Affairs (May 28, 2020).

FEDERAL ACTIONS—EXECUTIVE/LEGISLATIVE

Federal Executive Agencies—Actions and Notices: 

Bureau of Safety and Environmental Enforcement
85 FR 33704 “Agency Information Collection Activities; Proposals, Submissions, and Approvals: Oil and Gas Drilling Operations” Notice (June 2, 2020).

Environmental Protection Agency
85 FR 34524 “Air Quality State Implementation Plans; Approvals and Promulgations: New Hampshire; Negative Declaration for the Oil and Gas Industry; Withdrawal” Rule (June 5, 2020).

Federal Energy Regulatory Commission 
85 FR 34548 “Prohibition of Energy Market Manipulation Rule” Proposed Rule (June 5, 2020).

House Energy and Commerce Committee Actions:
No significant actions May 29-June 8, 2020.

Senate Energy and Natural Resources Committee Actions:
EC4198 “A communication from the Acting Chief of the Regulations and Standards Branch, Bureau of Safety and Environmental Enforcement, Department of the Interior, transmitting, pursuant to law, the report of a rule entitled ‘Oil and Gas and Sulfur Operations on the Outer Continental Shelf – Civil Penalty Inflation Adjustment’” Received in the Office of the President of the Senate; to the Committee on Energy and Natural Resources (June 5, 2020)

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Written by:
Sara Jenkins – Research Assistant
Jackie Schweichler – Staff Attorney
Kaela Gray – Research Assistant