September 5, 2023
Shale Law Weekly Review—Week of September 04, 2023
Landowner Royalties: Appeals Court Upholds 2016 Regulations on Oil and Gas Royalty Calculations for Federal and Tribal Lands ⚡
On August 25, 2023, the U.S. Tenth Circuit Court of Appeals filed its decision in a case brought by the American Petroleum Institute (API) against the Federal Government with respect to a set of 2016 amendments affecting how royalties for oil and gas production on federal lands are calculated. American Petroleum Institute v. United States Department of Interior et al, No. 21-8076 (10th Cir.). The amendments at issue included the adoption of a default variation method, the elimination of certain cost deductions for deepwater wells, changes to the method by which gas pricing is calculated, and amendments affecting other valuation and pricing provisions. In the opinion, the appeals court affirmed the District Court’s decision to reject API’s challenges to the amendments, which were brought under the Administrative Procedure Act (APA) and 5 U.S.C. §§ 701–706. At the district level, the Court held that API failed to show that the Interior Department’s Office of Natural Resources Revenue (ONRR) acted “arbitrarily and capriciously” when it enacted the 2016 amendments at issue. In APR’s appeal, the company argues that the ONNR provided insufficient explanation to support the development of new royalty calculations in 2016, which disrupted “decades of interpretation and application of the governing statutes and basic principles of federal royalty valuation.” The Tenth Circuit Court found that the API failed to show that the ONNR’s development of new royalty calculations in 2016 violated the APA. This decision in favor of ONNR was supported by the fact that the agency took what the court believed to be the necessary steps to explain why changes to the royalties’ calculations were made. Moreover, the court found that these explanations were supported by a sufficient amount of relevant data and that the agency had full authority to make reasonable amendments to these policies.
Oil and Gas Leasing: Lawsuits Filed in Response to Changes for Gulf of Mexico Oil and Gas Lease Sale 261
On August 25, 2023, the Department of the Interior’s (DOI) Bureau of Ocean Energy Management (BOEM) published a notice in the Federal Register which removes additional areas from the Gulf of Mexico Oil and Gas Lease Sale 261. The notice was published in response to a settlement reached between the DOI and several environmental groups, which stipulated that Lease 261 be reduced by nearly six million acres and Sierra Club et al., v. U.S. Department of the Interior, No. 8:20-cv-03060-DLB (USDC Md.). The settlement also included additional requirements and alternatives intended to protect the Rice’s whale population.
In response to the publication of the notice, the DOI was named in several lawsuits. On August 24, 2023, the State of Louisiana and Chevron USA Inc. filed a suit claiming that the DOI’s restrictions are in violation of Congress’s directive in the Inflation Reduction Act (IRA), which directed BOEM to carry out leases in accordance with the National OCS Oil and Gas Leasing Program for 2023-2028. State of Louisiana et al v. Haaland et al, No. 2:23-cv-01157 (W.D. La.). On August 28, 2023, Shell Offshore Inc filed a similar suit alleging violations of “the Inflation Reduction Act, Outer Continental Shelf Lands Act, and Administrative Procedure Act.” Shell Offshore Inc v. U.S. Dept of Interior et al, No. 2:23-cv-01167 (W.D. La.). Conversely, several environmental groups also filed a lawsuit on August 25, 2023. This lawsuit claims that the environmental review process for Lease 261 is in violation of the National Environmental Policy Act (NEPA). Healthy Gulf et al v. Haaland et al, No. 1:23-cv-02487 (D.D.C.). The environmental groups allege that the Final Supplemental Environmental Impact Statement failed to take a hard enough look at the climate impacts of Lease 261. Each case awaits further action at trial.
Offshore Drilling: DOI Revises Regulations on Blowout Prevention and Well-Control Systems
On August 22, 2023, the Department of the Interior issued a final well control rule, “revising certain regulatory provisions published in the 2019 final well control rule for drilling, workover, completion, and decommissioning operations” relating to offshore oil and gas operations on the Outer Continental Shelf. 88 Fed. Reg. 57334 (Aug. 22, 2023) (to be codified at 30 C.F.R. pt. 250). The revisions pertain to equipment, operational, and reporting requirements for blowout preventer (BOP) systems. The revised rule mandates BOP systems to consistently seal the wellbore and exceed the well’s “maximum anticipated surface pressure.” The rule requires operators to report equipment failures within 30 days to the Office of Offshore Regulatory Programs and any third party designated by Bureau of Safety and Environmental Enforcement (BSEE). Operators are also required to investigate equipment failure within 90 days and submit the report on their analysis within 120 days.
CENTER PROGRAMS & RESOURCES
Understanding Agricultural Law – A free monthly Zoom webinar series for all agricultural and rural business advisors. One hour of substantive CLE credit available for Pennsylvania-licensed attorneys at no charge. Recordings and materials from the series, more information, and registration available here.
September 22, 2023, noon – 1 pm (ET). Understanding the Basics of Pesticides. (Register)
Center Staff Attorney Brook Duer will present a webinar entitled, “Legal Considerations for Retail Farmers Market” with the Small Business Development Center (SBDC) at Gannon University.
September 14, 2023, noon – 1 pm (ET). Legal Considerations for Retail Farmers Market” with the Small Business Development Center (Register)
Penn State Extension will hold the Starting and Improving Farms Conference at the Toftrees Golf Resort in State College, Pennsylvania. Staff Attorney Jackie Schweichler will provide a provide a presentation on Agritourism Law on September 20th as part of the Agritourism Workshop starting at 1:15pm.
September 20th, 2023, 1:15 pm (ET). Agritourism Law. (Register)
Follow us on Twitter @AgShaleLaw—Top #ShaleLaw HotLinks
Court rejects appeal on regulations used to value oil and gas for royalties (Oil & Gas Journal)
Proposed gas pipeline safety rule has big problems, trade groups say (Oil & Gas Journal)
EIA: US crude inventories down 10.6 million bbl (Oil & Gas Journal)
Rystad: US shale reinvestment rates hit 3-year high amid inflation, muted oil prices (Oil & Gas Journal)
Connect with us on Facebook.
Penn State Farmland Energy Legal Podcast: Listen to the latest episode here.
Oil & Gas Law & Policy Resources:
Energy Connects, Cheiron announces new oil discovery in the Gulf of Suez (August 23, 2023)
Bloomberg, Permian Shale Drilling Shrinks at Fastest Pace in Three Years (August 25, 2023)
Grace Kaste, New York Cap and Invest should think twice before linking to the Western Climate Initiative (August 28, 2023)
Charles Sartain, Will the Fixed or Floating Suits Ever End? (August 29, 2023)
Bloomberg, London Is Now the World’s Largest Low-Emissions Zone. Was the Fight Worth It (August 29, 2023)
Lockman & Brauch, Decommissioning Offshore Oil and Gas Infrastructure in the Face of Climate Change and the Energy Transition (August 31, 2023)
FEDERAL ACTIONS—EXECUTIVE & LEGISLATIVE
U.S. DEPARTMENT OF ENERGY PRESS RELEASES
U.S. Department of Energy Projects Strong Growth in U.S. Wind Power Sector (August 24, 2023)
DOE Announces $126 Million for Small Businesses to Pursue Clean Energy Research and Development (August 25, 2023)
Biden-Harris Administration Announces $300 Million to Speed Up Transmission Permitting Across America as Part of Investing in America Agenda (August 29, 2023)
Biden-Harris Administration Announces Availability of $350 Million in Grants to States to Cut Methane Emissions from Oil and Gas Sector (August 30, 2023)
U.S. ENVIRONMENTAL PROTECTION AGENCY PRESS RELEASES
FEDERAL EXECUTIVE AGENCIES (Federal Register Aug. 26 – Sept. 1, 2023)
Environmental Protection Agency
88 FR 59662: Rule, Effective date 2/26/2024: “Alternate PCB Extraction Methods and Amendments to PCB Cleanup and Disposal Regulations” (August 29, 2023)
Federal Energy Regulatory Commission
88 FR 60448: Notice: “Combined Notice of Filings” (September 1, 2023)
Energy Department
88 FR 58575: Notice, Effective date 9/27/2023: “Energy Conservation Program for Consumer Products: Representative Average Unit Costs of Energy” (August 28, 2023)
Natural Resources Conservation Office
88 FR 60174: Notice, Comments Close 10/2/2023: “Mississippi Trustee Implementation Group Deepwater Horizon Oil Spill Draft Restoration Plan 4 and Environmental Assessment: Restoration of Wetlands, Coastal and Nearshore Habitats; Nutrient Reduction (Nonpoint Source); and Provide and Enhance Recreational Opportunities” (August 31, 2023)
Pipeline and Hazardous Materials Safety Administration
88 FR 60356: Rule, Effective date 10/31/2023: “Hazardous Materials: Suspension of HMR Amendments Authorizing Transportation of Liquefied Natural Gas by Rail” (September 1, 2023)
Ocean Management Bureau
88 FR 58310: Notice: “Gulf of Mexico, Outer Continental Shelf, Oil and Gas Lease Sale 261” (August 25, 2023)
Other Agencies
88 FR 60527: Notice, Comments Close 10/2/2023: “Sugar Camp Energy LLC Mine No. 1 Significant Boundary Revision 8 Environmental Impact Statement” (September 1, 2023)
88 FR 60166: Proposed Rule, Comments Close 10/30/2023: “Authority of NTSB in Railroad, Pipeline, and Hazardous Materials Investigations” (August 31, 2023)
88 FR 58123: Proposed Rule, Comments Close 10/25/2023: “Proposed Chumash Heritage National Marine Sanctuary” (August 25, 2023)
U.S. HOUSE ENERGY AND COMMERCE COMMITTEE
H.R.4576 “Safeguarding Domestic Energy Production and Independence Act of 2023” Referred to the Subcommittee on Commodity Markets, Digital Assets, and Rural Development. (August 28, 2023)
U.S. SENATE ENERGY AND NATURAL RESOURCES COMMITTEE
STATE ACTIONS—EXECUTIVE & LEGISLATIVE
PENNSYLVANIA DEPT. OF ENVIRONMENTAL PROTECTION PRESS RELEASES
Shapiro Administration Expands Environmental Justice Protections with Updated Policy and Improved Mapping Tool (August 29, 2023)
Shapiro Administration Awards $2.9 Million to Schools, Businesses, and Local Governments Working to Switch to Zero- or Low- Emission Vehicles (August 31, 2023)
PENNSYLVANIA EXECUTIVE AGENCIES (Pa. Bulletin Vol. 53, No. 35—September 2, 2023)
Department of Environmental Protection
53 Pa.B. 5515: Applications: “Applications, Actions and Special Notices”
53 Pa.B. 5576: Notices: “Aggregate Advisory Board Meeting; Date Change for the August 2, 2023, Meeting”
Pennsylvania Legislature
HB 1643 “An Act amending Title 75 (Vehicles) of the Pennsylvania Consolidated Statutes, in inspection of vehicles, further providing for prohibition on expenditures for emission inspection program.” Referred to TRANSPORTATION [House] (August 29, 2023)
HR 185 “A Resolution directing the Joint State Government Commission to conduct a study on the feasibility of using geothermal energy technologies that utilize abandoned mining locations and operations in this Commonwealth and issue a report of its findings and recommendations to the House of Representatives.” Referred to ENVIRONMENTAL RESOURCES AND ENERGY, [House] (August 29, 2023)
Written by:
Kendal Ashman, Research Assistant
Kole Zellers, Research Assistant
Dillon Lightfoot, Research Assistant
Sergio Porras, Research Assistant
Jackie Schweichler, Staff Attorney
