Source: https://eem.jacksonkelly.com/oil-and-gas-development/page/2/
Timestamp: 2019-04-26 12:27:43+00:00

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The U.S. Court of Appeals for the Eighth circuit issued an opinion on May 22nd which illustrates the difficulty for an oil and gas producer to win a subsurface claim without having to go to trial, even when the plaintiff has relatively weak facts to support its claim.
The case involved the disposal of fracking wastes from producing shale oil in the Eastern District of Arkansas. Because the plaintiffs’ property contained an abandoned oil and gas well, the company had attempted to lease the property to dispose of fracking waste from nearby operations. Negotiations failed to result in a disposal lease. The company then leased 3.29 acres on an adjoining property on which it drilled a well only 180 feet from the plaintiffs’ property. The well was drilled into a porous geologic horizon thousands of feet below the surface which extended beneath the plaintiffs’ land. The company then pumped 7.6 million barrels of fracking waste into the well. When sued for subsurface trespass, the company conceded that its leased property could not contain that volume of material. It opposed the plaintiffs’ allegation only on the grounds that certain geologic features may have prevented the movement from the well onto the property. Discovery was limited and both sides relied extensively on experts’ opinions. Nevertheless, the trial court granted the company’s motion for summary judgment.
The Court of Appeals reversed on the basis of the burden of proof, which the District Court wrongly assigned to the plaintiffs. The Court of Appeals found that the plaintiffs had presented sufficient evidence to support a reasonable inference of the waste migrating onto their property. “This reasonable inference creates a genuine issue of material fact, precluding summary judgment.” In short, the company could be right that the geologic conditions prevented the migration, but this was a factual question that the plaintiffs were permitted to take to a jury.
The decision is not remarkable, but it is a cautionary tale about how difficult it is for a company defending a subsurface trespass claim to prevail without having to go to trial.
The case is Stroud, et al v. Southwestern Energy Co., U.S. Court of Appeals for the Eighth Circuit, No. 15-3458 (May 22, 2017).
We have written before about the effect of the Natural Gas Act on environmental permits issued for pipelines. Generally, the Natural Gas Act preempts the effect of many local laws on pipelines, but preserves obligations to obtain permits under the Clean Air and Clean Water Acts. Nonetheless, in 2005, Congress amended the Natural Gas Act to provide that challenges to those permits are to be heard exclusively in the federal courts of appeals and not by state or federal administrative bodies or other courts. See Energy Policy Act of 2005, Pub. L. No. 109-58, Sec. 313, 119 Stat. 594, 689-90; 15 U.S.C. § 717r(d)(1).
In February 2017, the U.S. Army Corps of Engineers issued a § 404 Clean Water Act permit (known as a “fill” permit) to Tennessee Gas Pipeline Company for its Orion natural gas pipeline project in Pennsylvania. Outside of the Natural Gas Act context, § 404 permits by the Corps are typically challenged by third parties in federal district courts under the Administrative Procedures Act. Consistent with the Natural Gas Act requirements that such challenges be lodged in the circuits courts, rather than district courts, the Delaware Riverkeeper filed a petition for review of the § 404 permit and a motion to stay the permit in March.
By order dated April 7, 2017, an individual judge of the Third Circuit Court of Appeals denied a request for a stay of the permit, finding that the Riverkeeper had failed to show that it is likely to prevail on the merits of its challenge. In particular, the Riverkeeper claimed that the Corps’ narrow definition of the term “basic project purpose” required in § 404 applications precluded the Corps from considering practicable alternatives to the pipeline. Additionally, the Riverkeeper claimed that because the pipeline is not “water-dependent,” the Corps was required to show that less damaging practicable alternatives did not exist and failed to do so. The judge, though, pointed to findings in the administrative record compiled by the Corps, which included a project-alternatives analysis and a conclusion that there was no reasonable or practicable alternative available for the project. Accordingly, he ruled that the plaintiffs were unlikely to succeed on the merits of their challenge.
Now, the Riverkeeper has filed a motion with the Third Circuit asking that the court expedite its review of the Riverkeeper’s challenge to the § 404 permit. The Riverkeeper claims that, since its request for a stay has been denied, “construction activity has already begun for significant portions of the Project and is proceeding quickly.” The Riverkeeper claims that when Congress gave original and exclusive jurisdiction to federal courts over actions challenging permits required for natural gas facilities, it also mandated courts to set actions “for expedited consideration.” See 15 U.S.C. § 717r(d)(5).
This article was authored by Robert G. McLusky and Christopher M. Hunter, Jackson Kelly, PLLC.
In an April 18, 2017 letter to oil and gas industry leaders, Environmental Protection Agency (“EPA”) Administrator Scott Pruitt announced that the agency will reconsider its June 3, 2016 methane emissions rule following a petition from three oil and gas industry associations. See EPA Letter here. The industry petition raised objections concerning provisions for receiving an alternative means of emissions limitations and the inclusion of low-production wells. See previous blog article concerning proposed rule here. EPA determined that these objections could not have been raised during the public comment period because they concerned provisions that were not included in the proposed rule.
The June 3, 2016 Methane Rule set standards for methane and volatile organic compounds (“VOC”) emissions from new, modified, and reconstructed natural gas processing plants and compressor stations. See 81 Fed. Reg. 35824 (June 3, 2016). Among other things, the Rule requires an initial monitoring survey at new well sites and compressor stations no later than June 3, 2017. Given EPA’s reconsideration of the Methane Rule in light of industry comments, it also announced plans to issue a 90-day stay of the compliance date for the fugitive emissions monitoring requirements.
The reconsideration process allows EPA to provide an opportunity for public comment on the issues raised in the industry’s petitions that meet the standard of CAA section 307(d)(7)(B), along with any other matter the agency believes will benefit from additional comment.
This announcement adds another Obama-era EPA rule being reconsidered or reevaluated under the Pruitt-led EPA.
On April 20, 2017, a South Carolina federal district court dismissed an environmental group’s Clean Water Act (“CWA”) citizen suit against Plantation Pipe Line Company, Inc. (“PPL”) and its parent company, Kinder Morgan Energy Partner, L.P. PPL owns a 3,100 mile petroleum pipeline that leaked 369,000 gallons in December 2014. The leak was repaired within a few days of discovery, and the South Carolina Department of Health and Environmental Control (“DHEC”) quickly engaged to oversee and enforce remediation efforts. Although 209,000 gallons of gasoline and petroleum products were removed from the site, a significant plume remained in the soil and groundwater system.
[T]he term ‘‘point source’’ means any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged.
33 U.S.C. § 1362(14) (emphasis added).
Plaintiffs argued first that the pipeline itself is an unpermitted point source because pollution released from it continues to reach waters of the U.S. The Court noted that there is no continuing discharge from the pipeline and cited a number of cases holding that continuing effects of a past discharge are an insufficient basis for subject matter jurisdiction over a claim for an unpermitted discharge.
Plaintiffs argued, however, that the seeps, flows, and fissures from the spill site are point sources. Essentially, Plaintiffs argued that the ground was the ongoing conveyance mechanism of the spilled petroleum products to nearby streams and wetlands. The Court, though, pointed out that the conveyance must be “discernible, confined, and discrete” in accordance with 33 U.S.C. § 1362(14). Most cases finding unpermitted discharges involve the flow of pollutants through ditches, pipes, holding ponds, spoil piles, or some other man-made conveyance. Here, though, Plaintiffs did not allege that Defendants took any action to collect, channel, or direct pollutants. Instead, Defendants’ only activity at the site was related to remediating the residual effects of the spill. According to the Court, to find that Defendants’ efforts to remediate the site somehow created a point source conveyance for which it could be liable for daily civil penalties under the CWA would discourage remediation of contaminated sites. The Court rejected Plaintiffs’ argument that seeps are point sources, instead holding that “[t]he migration of pollutants through soil and groundwater is nonpoint source pollution that is not within the purview of the CWA.” Id. at 8.
Next, the Court considered whether the CWA regulates the discharge of pollutants from a point source when the “discharge” is transmitted via ground water that is hydrologically connected to surface waters. We have written about this issue previously. The U.S. Environmental Protection Agency has stated that the CWA “requires NPDES permits for discharges to groundwater where there is a direct hydrological connection between groundwater and surface water.” See p. 21, citing 56 Fed. Reg. 64876, 64892 (Dec. 12, 1991) (emphasis added). Within the Fourth Circuit, district courts have reached different conclusions in deciding whether groundwater seeps may constitute a point source discharge subject to the CWA. In Sierra Club v. Old Dominion Va. Power, the Eastern District of Virginia relied on EPA’s statement regarding hydrologically connected groundwater to impose liability where it found a direct hydrological connection between coal ash impoundments and surface waters where the evidence suggested groundwater was moving outwards from the ponds toward surface waters where the hydraulic head/pressure was lower. On the other hand, the Eastern District of North Carolina has held “that Congress did not intend for the CWA to extend federal regulatory authority over groundwater, regardless of whether that groundwater is eventually or somehow ‘hydrologically connected’ to navigable surface waters.” See Cape Fear River Watch, Inc. v. Duke Energy Progress, Inc., 25 F. Supp. 3d 798 (E.D.N.C. 2014).
The District Court concluded that the language of the CWA supports the conclusion that “navigable waters” and “ground waters” are distinct concepts in the CWA and should be regulated accordingly. Plaintiffs’ complaint only alleged that petroleum leaked from the pipeline into the groundwater at the spill site and thereafter slowly migrated toward two creeks and two wetlands. The Court sided with previous decisions holding that “the CWA does not apply to claims involving discharge of pollution to groundwater that is hydrologically connected to surface waters.” Op., p. 16. Accordingly, it dismissed Plaintiffs' Complaint.
With its decision, the Court joins a number of others in recognizing that the CWA does not regulate groundwater pollution. The idea that the ground can be a conduit for point source discharges threatens the interplay between ground and surface water regulation. Generally speaking, groundwater systems are hydrologically connected to surface water; however, not all groundwater makes its way to nearby surface waters. But if any seep or spill on the ground is now potentially a point source conveyance by virtue of some vague notion of a hydrological connection to nearby surface waters, then the ground has effectively become “waters of the United States,” subject to regulation under the CWA. Most states have laws already governing groundwater pollution, so hydrological connection claims threaten to create conflicts between state groundwater pollution control programs and the CWA. For this and other reasons, the better approach is to view the addition of pollutants into navigable waters through migration of groundwater and un-channeled runoff as “nonpoint source” pollution, which is not subject to CWA regulation. The South Carolina District Court’s decision is a welcome addition to the line of cases upholding the clear distinction between point source and nonpoint source pollution.
This article was authored by Christopher M. Hunter, Jackson Kelly, PLLC.
Prior law in Maryland required its Department of the Environment to adopt a regulation by October 1, 2016 for the hydraulic fracturing of wells for exploration or production of natural gas, but provided they would not become effective until October 1, 2017. Further, the Department was prohibited from issuing fracking permits until October 2017.
A new bill passed by both the House and Senate of the Maryland General Assembly, however, would extend the prohibition on fracking permanently. Links to both House Bill 1325 and Senate Bill 0740 appears here. According to press reports, the Governor supports the bill and it is likely to become law.
This article was authored by Robert G. McLusky and Douglas J. Crouse, Jackson Kelly PLLC.

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