July 2018 Industry Digest

Court Keeps On Ice Obama-Era Rules For Venting and Flaring

DENVER–In a case that some industry representatives predict ultimately will prove moot, a three judge-panel of the U.S. Court of Appeals for the 10th Circuit has rejected two motions to stay a Trump-era federal regulation dealing with an Obama-era rule governing natural gas flaring and venting on public and tribal lands, media reports say, adding that the court also denied a pair of motions for dismissal.

The Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule, promulgated by the U.S. Department of Interior’s Bureau of Land Management during the Obama administration, is being reviewed for possible revision or elimination by the Trump administration, which published a final rule in December 2017 that temporarily postponed the unimplemented portions of the Obama-era regulation (AOGR, Jan. 2018, pg. 24).

Press accounts indicate Western Energy Alliance President Kathleen Sgamma is pleased with the development. “Time is on our side,” Sgamma is quoted. “Having ruled on these motions, the appeal now moves on to the merits, but briefing will take about as long as BLM will take finalizing the rule. We could have a situation of briefing being done just as the new rule is published, making the entire case moot.”

While some states and industry groups including the Western Alliance had sued BLM over the Obama administration venting and flaring rule, and called for its suspension during litigation, other states joined environmental groups and successfully sued to stop the Trump administration when it attempted to freeze implementation during its review (AOGR, March 2018, pg. 30). In April, Judge Scott Skavdahl for the U.S. District Court for the District of Wyoming ordered a stay in light of the BLM’s plans to revise the rule (AOGR, May 2018, pg. 18).

According to published reports, June’s rulings responded to motions filed in response to Skavdahl’s ruling, with the court denying two stay requests from California, New Mexico and more than a dozen green groups, but also denying two dismissal appeals from Wyoming, Montana, the Western Energy Alliance and the Independent Petroleum Association of America.

Federal Court Denies California Cities’ Claims For Climate Damages

SAN FRANCISCO–A federal judge has tossed out the claims for climate damages two California cities filed against five international oil companies, ruling that determining the contribution of fossil fuels to climate change was beyond the purview of a single court.

On June 25, U.S. District Judge William Alsup in the U.S. District Court for the Northern District of California dismissed the demands by Oakland, Ca., San Francisco and San Francisco County that BP, Chevron Corp., ExxonMobil, ConocoPhillips and Royal Dutch Shell pay for damages the cities might incur as a result of rising sea levels caused by climate change.

San Francisco and Oakland initiated the lawsuit in separate filings in September 2017 in their respective county courts (AOGR, October 2017, pg. 28). San Francisco County was added to the consolidated lawsuit when an amended complaint was moved to federal district court, court records show.

Similar lawsuits have since been filed by the city of Santa Cruz, Ca., Santa Cruz County, Richmond, Ca., and New York City (AOGR, February 2018, pg. 97).

Observing that a public nuisance claim requires proof that “the gravity of the (defendant’s) interference with the public right outweighs the utility of the actor’s conduct,” Judge Alsup determined, “It is true that carbon dioxide released from fossil fuels has caused (and will continue to cause) global warming. But against that negative, we must weigh this positive: Our industrial revolution and the development of our modern world literally has been fueled by oil and coal. Without those fuels, virtually all our monumental progress would have been impossible.

“All of us have benefited,” the judge continued. “Having reaped the benefit of that historic progress, would it really be fair to now ignore our own responsibility in the use of fossil fuels and place the blame for global warming on those who supplied what we demanded?”

Alsup says his order “recognizes, but does not resolve these questions.” However, he points out that the U.S. Supreme Court held in Am. Elec. Power Co. Inc. v. Connecticut that the Environmental Protection Agency’s Clean Air Act authority to set emission standards “has displaced federal common law nuisance claims.”

The plaintiffs also contended they were affected by emissions arising outside the United States, to which Judge Alsup replied, “Questions of how to appropriately balance the worldwide negatives (of CO2 emissions) against the positives of the energy itself . . . demand the expertise of our environmental agencies, our diplomats, our executive and at least the Senate. Nuisance suits in various U.S. judicial districts regarding conduct worldwide are far less likely to solve the problem and, indeed, could interfere with reaching a worldwide consensus.

“In sum,” the judge concludes, “this order accepts the science behind global warming. The dangers raised in the complaints are very real. But those dangers are worldwide. Their causes are worldwide. The benefits of fossil fuels are worldwide. The problem deserves a solution on a more vast scale than can be supplied by a district judge or jury in a public nuisance case.”

Court: EPA Can Use Different Standards According To Location

WASHINGTON–The question of what constitutes a facility for purposes of Clean Air Act oversight remains a matter of geography after a three-judge panel in the U.S. Court of Appeals for the District of Columbia Circuit in early June shot down a petition by a trio of industry groups.

The lawsuit, NEDACAP v. EPA, originated when the American Petroleum Institute, National Environmental Development Association’s Clean Air Project (NEDACAP) and the Air Permitting Forum sued the Environmental Protection Agency shortly after it amended the CAA in August 2016, press accounts note.

Those amendments originated in case law dealing with EPA’s position that nonadjacent production sites could be aggregated into a single source for purposes of calculating emissions. Under EPA’s guidance, emissions can be aggregated when the sources are within the same industrial category, located on contiguous or adjacent properties, and under common control by the same person or company.

However, a 2012 ruling in Summit Petroleum Corp. v. EPA by the U.S. Court of Appeals for the 6th Circuit held the agency could not aggregate emissions from a gas sweetening plant and several natural gas wells located within a 43-square-mile area, prompting EPA to issue a memorandum stating the agency would comply with the ruling only within the 6th Circuit’s jurisdiction of Kentucky, Michigan, Ohio and Tennessee.

The same industry litigants won an earlier challenge in 2014, when the D.C. Circuit vacated the 2012 memo (AOGR, July 2014, pg. 17).

However, in June, a second D.C. Circuit panel sided with EPA in its appeal, citing the agency’s August 2016 amendments addressing how the agency should “treat federal court decisions regarding locally or regionally applicable actions that may affect consistent application of national programs, policy and guidance.”

The June ruling states, “It is hardly surprising that judicial review of EPA actions sometimes results in circuit court rulings that are inconsistent with other circuit court rulings applicable to different EPA regions. The amended regulations reflect sensible solutions to issues emanating from intercircuit conflicts and agency nonacquiesence. We therefore defer to EPA’s reasonable construction of the statute and deny the petitions for review.”

Pennsylvania High Court Addresses Zoning, Implementation Of Rules

HARRISBURG, PA.–The Pennsylvania Supreme Court on June 1 issued a pair of unrelated rulings affecting unconventional natural gas development, one revolving around drilling in residential and agricultural districts and the other related to requirements that had been suspended by a lower court in an ongoing appeal of the state’s unconventional oil and gas regulations.

The Pennsylvania Independent Oil & Gas Association reports that in Gorsline v. Board of Supervisors of Fairfield Township, the Supreme Court sided with residents who challenged the Lycoming County township’s decision to allow unconventional gas drilling in a residential/agricultural zone when its zoning ordinance did not specifically authorize the activity. The supervisors contended that well development was “similar to” other permitted uses.

However, the court found that because the ordinance did not expressly authorize a gas well as a use in any of the township’s zoning districts, “such a use cannot enjoy any presumption of being ‘similar to’ uses that are permitted in those districts,” wrote Justice Christine L. Donohue on behalf of the 4-3 majority. She went on to stipulate that drilling is not automatically prohibited in a residential district, but that the municipality must amend its zoning to permit the activity, PIOGA relates.

An analysis by Babst Calland attorney Blaine A. Lucas in PIOGA’s June newsletter emphasizes, “The Supreme Court did not give anti-shale activists the bright-line rule they were hoping for in Gorsline, and, to the contrary, criticized the absolutist position advocated by those who read Robinson Township as mandating that oil and gas development be restricted to industrial zoning districts.”

In the second case, Marcellus Shale Coalition v. Department of Environmental Protection, the Supreme Court took up DEP’s appeal of five sections of the agency’s Chapter 78a unconventional oil and gas regulations that were enjoined from enforcement by the Commonwealth Court in November 2016 as part of MSC’s ongoing challenge to portions of the rules (AOGR, Dec. 2016, pg. 16). The high court upheld the injunction for three of the sections and granted the DEP relief for two others, as the Commonwealth Court continues to consider MSC’s case on the merits, PIOGA explains.

In a notification to its members, the association said the Supreme Court affirmed the preliminary injunction for the Chapter 78a sections dealing with pre-permit notifications for schools, playgrounds and species of special concern; monitoring and remediation obligations in the Area of Review requirements; and certain requirements that apply to both well development and centralized impoundments.

The court also reversed the portions of the injunction that applied to freshwater impoundments and well site restoration. “With this reversal, companies should immediately review the obligations in Sections 78a.59b(b) and 78a.65(d), including registration of freshwater impoundments and certification that such impoundments comply with requirements for liners, fencing and storing mine influenced water,” PIOGA advises. “Companies should also review site restoration obligations under Section 78a.65, which is generally implemented through the ESCGP-2 permit.”

South Dakota High Court Dismisses An Appeal By Keystone XL Opponents

PIERRE, S.D.–TransCanada Corporation’s Keystone XL Pipeline won a legal victory when the South Dakota Supreme Court dismissed an appeal from pipeline opponents, ruling that a lower state court lacked jurisdiction to hear their appeal of an earlier court decision.

The Cheyenne River Sioux Tribe, Yankton Sioux Tribe and Dakota Rural Action were appealing a 2017 ruling from the Circuit Court of the Sixth Judicial Circuit that upheld regulatory approval of the project. In its June 13 decision, the Supreme Court said the lower court did not have jurisdiction to rule on the Public Utilities Commission’s decision.

According to court documents, 314 miles of the Keystone XL’s tar-sands crude oil pipeline runs through South Dakota. The 36-inch diameter pipeline, running from Alberta, Canada, to delivery points in Oklahoma and Texas, can carry as much as 900,000 barrels a day.

TransCanada secured a construction permit for the South Dakota portion of the pipeline in 2010. One of the permit’s requirements was beginning work in the state within four years. After the Obama administration denied permission to build across the international border, TransCanada asked the commission to recertify the permit to extend that time limitation, the court record shows.

The PUC held public hearings beginning in July 2015 on the recertification request, and the following January accepted the certification, the Supreme Court decision notes. While the three plaintiffs were asking a circuit court to overturn the commission’s decision, the Trump White House invited TransCanada to resubmit its border crossing request. The company obtained that federal permit in March 2017. After the lower court affirmed the commission’s decision to extend the state permit, the groups appealed to the South Dakota Supreme Court.

The high court’s decision notes that because it concluded the circuit court lacked jurisdiction to hear the appeal, it did not weigh the case’s merits.

In its decision, the Supreme Court found that:

  • State law limits appeals for certification proceedings to parties involved in the permit’s issuance;
  • Although the PUC accepted the appellants’ claim that appeals were possible under the state’s Administrative Procedure Act, only the legislature is authorized to grant such appeals; and
  • The appellants contend they are entitled to judicial review of the commission’s decision because it violated their procedural due-process rights affecting property and liberty interests, but the decision involved the utility’s filing for a certificate rather than adjudicating a party’s legal rights.

“Although the commission issued an order accepting TransCanada’s certification, nothing in the statute required that it issue such an order,” the decision states. “Rather, the commission’s acceptance of TransCanada’s certification was an administrative act that was part of the commission’s supervisory responsibilities to regulate already permitted activities.”

Federal Judge Orders Agencies To Set Aside National Forest Leases

SANTA FE, N.M.–Ruling in favor of four environmentalist groups, a federal judge has ordered the Bureau of Land Management to set aside 13 oil and natural gas leases covering 19,000 acres while it reconsiders the downstream impacts of drilling in New Mexico’s Santa Fe National Forest.

In her June 14 ruling in San Juan Citizens Alliance v. U.S. Bureau of Land Management and U.S. Forest Service, Senior U.S. District Judge M. Christina Armijo says federal environmental law requires the government to consider the cumulative impacts on climate change of energy production from federal lands. Armijo also held that BLM did not analyze the cumulative impacts to air, groundwater sources and surface water quality, court documents state.

The judge disagreed with claims that BLM failed to adequately consider mitigation measures or that it improperly relied on an air resources technical report in its analysis.

Joining the San Juan Citizens Alliance in the lawsuit were WildEarth Guardians, Amigos Bravos, Dine Citizens Against Ruining Our Environment and the Sierra Club.

In their suit, the groups allege BLM violated the National Environmental Policy Act by:

  • Failing to consider all the environmental impacts of oil and gas development;
  • Failing to provide a convincing statement of reasons to justify not preparing an environmental impact statement; and
  • Issuing leases during a pending resource management plan amendment and forest plan revision.

The Forest Service is accused of violating NEPA by failing to consider the impacts of oil and gas drilling, as well as new information and circumstances, the court decision says.

According to Armijo, the plaintiffs argue BLM failed to consider the impacts of granting leases on greenhouse gas emissions and climate change, air quality, water resources and the cumulative impacts of lease development. The federal agencies contended the allegations ignored their environmental assessment tiered to the Forest Service’s 2008 final environmental impact statement and 2012 final supplement to the FEIS, both of which they said satisfied NEPA requirements.

“The court concludes that BLM’s failure to estimate the amount of greenhouse gas emissions that will result from consumption of the oil and gas produced as a result of developing wells on the leased areas was arbitrary. This error also requires that BLM reanalyze the potential impact of such greenhouse gases on climate change in light of the recalculated amount of emissions in order to comply with NEPA,” Armijo writes.

House, Senate Differ Over ESA Provisions

WASHINGTON–A month after the House of Representatives approved legislation funding the U.S. military that contained provisions restricting endangered species listings, the U.S. Senate passed a similar bill without those conditions.

The House version of HR 5515, the National Defense Authorization Act sponsored by Representative Mac Thornberry, R-Tx., includes language on the greater sage grouse and lesser prairie chicken. A rider to the bill prohibits listing either bird under the Endangered Species Act for 10 years, and after that pause, requires the Interior Department to consider all state and federal conservation efforts before making any ESA determinations.

Another rider to HR 5515, approved by the House on May 24, removes the American burying beetle’s endangered listing, and bars any judicial review of the section of the legislation discussing the three species.

The Senate approved its defense authorization act on June 18 without the ESA riders. The two versions of the legislation were to be sent to a conference committee to resolve differences.

According to the Independent Petroleum Association of America, Representative Rob Bishop, R-Ut., is responsible for the ESA riders. Media reports indicate Bishop argued that they were important to limit conservation impacts on military activities on the 27 ranges and 19 training areas in the western United States.

IPAA adds that attempts in previous years to include language on the sage grouse and prairie chicken failed because of resistance from Senator John McCain, R-Az., chairman of the Senate Armed Services Committee, who sought to limit unrelated measures in the annual defense bills.

With Senator McCain in his home state undergoing medical treatment, IPAA notes Senator Jim Inhofe, R-Ok., will handle the military legislation.

Inhofe’s office says the 2019 legislation authorizes $716 billion in funding for the Department of Defense and national security programs at the Department of Energy, an increase from last year’s $700 billion authorization.

API Coalition Supports Offshore Development

WASHINGTON–The American Petroleum Institute has launched Explore Offshore, which it describes as a coalition of more than 100 diverse community organizations, associations, businesses and local leaders in Virginia, North Carolina, South Carolina, Georgia and Florida that support increased access to and responsible development of U.S. offshore natural gas and crude oil using advanced technologies.

The coalition is co-chaired by former Secretary of the Navy and U.S. Senator Jim Webb, D-Va., and former Secretary of Veterans Affairs Jim Nicholson, according to the June 6 announcement.

Co-Chair Webb calls Explore Offshore “a much-needed, common-sense step for America’s energy future. In its move toward an ‘all of the above’ energy policy, America needs to correct a timeworn oversight and modernize the unnecessarily restrictive approach to the exploration and safe development of offshore oil and gas resources.”

Adds Nicholson, “With 94 percent of the Outer Continental Shelf off limits to exploration and development, and demand for natural gas and oil expected to rise, we must take this opportunity to increase our domestic energy reserves. Offshore oil and gas development also provides important, higher-paying job opportunities for our veterans across the country.”

API says Explore Offshore’s mission is to unite supporters of offshore energy development and promote its benefits to the U.S. economy, energy self-sufficiency, and national security. The coalition will host local events, and will engage and educate local communities on safe and responsible access to U.S. resources and the related positive economic and energy benefits, API says.

For information visit https://exploreoffshoreusa.org.

Anti-Dumping Order Made On Steel Flanges

WASHINGTON–Chinese exporters have sold stainless steel flanges in the United States at 257.11 percent less than fair market value, the U.S. Department of Commerce says in a June 6 announcement of a final anti-dumping duty (AD) determination. Consequently, Commerce says it has instructed U.S. Customs and Border protection to continue collecting cash deposits from importers based on that final rate.

Commerce announced a preliminary AD determination on stainless steel flanges imported from China and India on March 20 (AOGR, April 2018, pg. 98). It also announced a final countervailing duty (CVD) determination on stainless steel flange imports from China on April 6 (AOGR, May 2018, pg. 18) and ordered Customs to collect CVD deposits of 174.73 percent.

The agency adds that the U.S. International Trade Commission is scheduled to issue a determination whether domestic industry was materially injured by those imports around July 19. Commerce says imports of stainless steel flanges from China were valued at $21.8 million in 2017.

Affected by both the AD and CVD determinations are unfinished, semi-finished and finished stainless steel flanges forged to material specifications of ASTM/ASME A/SA 182 in grades 304, 304L, 316 and 316L. The orders include well neck, threaded, slip-on, lap joint, socket weld and blind flanges ranging from 0.5 to 24.0 inches nominal pipe size. Specifically excluded are cast stainless steel flanges manufactured to ASTM A351, according to Commerce.

Chinese exporters specifically mentioned in the announcement are Shanxi Guanjiaying Flange Forging Group Co., Hydro-Fluids Controls Ltd., Songhai Flange Manufacturing Co. Ltd., and Dongtai QB Stainless Steel Co. Ltd.