In Frederick v. Allegheny Township Zoning Hearing Board, et al, the Pennsylvania Commonwealth Court affirmed a local zoning ordinance allowing oil and gas operations in all zoning districts in the Township as long as they satisfied enumerated standards that were designed to protect the public health, safety and welfare of the citizenry.

Facts and Findings

CNX received a permit to drill a well. The ordinance imposes a 1,000 foot setback and prescribes notice requirements and operational limitations. Citizens owning neighboring tracts complained that the well was not compatible with agricultural and residential use, complaining about noise from pad site preparation and drilling activities.

The objectors did not challenge the Zoning Board’s fact findings. That was either a tactical mistake or a lost cause. One can’t tell from the opinion. The court noted these findings, among others:

  • This is an area that has historically had gas production. There are 242 conventional gas wells in the Township, some of which employ hydraulic fracturing.
  • One farm already has three gas wells plainly visible to persons driving by the property.
  • Nothing will be visible to the neighbors after the well has been drilled and completed.
  • The Zoning Board rejected as not credible the testimony of several experts sponsored by the objectors.

The questions on appeal

  • Did the ordinance violate substantive due process by instituting illegal spot zoning? No
  • Did the ordinance violate Pennsylvania’s Environmental Rights Amendment? No.
  • Did permitting oil and gas development in every zoning district violate the Municipalities Planning Code? No

The objectors’ right to substantive due process was not denied by the ordinance. The ordinance was not spot zoning because it did not treat one spot of land in a different manner than similar surrounding land. The court balanced the public interest served by the ordinance against confiscatory or exclusionary impact of regulation on individual rights. The objectors could not prove that the ordinance was arbitrary or unreasonable and unrelated to the public health, safety, morals and general welfare. The objectors’ “concern” about the negative impact on their health and their land values was deemed to be speculation.

The ordinance did not violate Pennsylvania Constitution Article 1 §27, the Environmental Rights Amendment.

  • The government’s duty to protect environmental resources does not require freezing of existing public natural resource stock.
  • The amendment’s requirements are tempered by legitimate development tending to improve upon the lot of Pennsylvania’s citizens.
  • Political branches are not required to enact specific affirmative measures to promote clean air, water, etc.
  • Objectors could not prove that the zoning ordinance does not reasonably account for the natural, scenic, historic and aesthetic values of the Township’s environment.

The ordinance does not violate Sections 603, 604 and 605 of the MPC. This appeal point was a reiteration of the substantive due process arguments that were rejected.

The court noted the statewide setback requirements and other rules imposed by the Department of Environmental Protection, which has authority to regulate how drilling is conducted, not where it is conducted. Whether the zoning ordinance was wise or the best means to achieve the desired result about is left to the legislature and not the courts.

What is this not like?

Coincidentally (or not) one can compare this act of a legislative authority to New York, which, as you and the beleaguered mineral owners of that state know, determined that the mere possibility of injury was enough to ban fracking throughout the entire state.

Taj Mahal, as good now as he was before. Maybe better?


Co-author Chance Decker

In Murphy Exploration & Production Co. — USA v. Adams the Texas Supreme Court held that an offset well clause in an oil and gas lease did not require the lessee to drill wells calculated to protect against drainage. Four dissenting justices believed the majority disregarded the well-established meaning of “offset well” used in the oilfield for decades. Continue Reading Texas Supreme Court Redefines an Offset Well Clause

Briggs v. Southwestern Energy is another way to say “chaos” in Pennsylvania. The Superior Court ruled that fracking may constitute a trespass when subsurface frac-fluid and proppants cross boundary lines and extend into the subsurface estate of an adjoining property owner from whom the operator does not have a mineral lease, resulting the extraction of natural gas from beneath the adjoining property. Continue Reading Trespass by Fracking Recognized in Pennsylvania

Occasionally we visit issues larger than one-off courthouse decisions. Here are a few selected stories on the extent to which fracking contributes to rising levels of methane and, maybe, to climate change. There are conflicting facts and opinions, so decide for yourself. If you find a tilt in one direction, we’re just levelling the field. See the last entry. Continue Reading What’s New in the Methane Debate?

man bites dogSierra Club v. Chesapeake Operating LLC et al is news more shocking than “Man Bites Dog”! A federal court has acknowledged that others are better equipped to address certain issues than the judiciary!

Sierra Club alleged that that deep injection of liquid waste from operations by Chesapeake, Devon and New Dominion has contributed to earthquakes throughout Oklahoma and southern Kansas. Sierra asserted that waste disposal activities present an imminent and substantial endangerment to the public health or environment. This was a citizen suit under the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act.

There is reason to be concerned

Sierra Club alleged:

  • Earthquakes in Oklahoma increased more than 300-fold from before 2009 to 2015, from 167 to 5,838.
  • The severity has increased.
  • Seismologists say a magnitude 7 quake is possible in the Nehama fault.
  • Earthquake risks in Oklahoma are now the highest in the nation.

What the parties wanted

Sierra Club wanted an order requiring defendants to:

  • Reduce “immediately and substantially” the amount of wastes injected into the ground,
  • Reinforce vulnerable structures that would be impacted by a large magnitude earthquakes, and
  • Establish independent earthquake monitoring and prediction.

The defendants urged the court to:

  • Allow the Oklahoma Corporation Commission to take action in response to increased seismicity in the state.
  • Dismiss, because Sierra did not join every company that disposes of liquid wastes, and
  • Dismiss, because the claims fall outside the “zone of interests” Congress intended to protect under RCRA.

The court sided with the defendants, concluding that dismissal is appropriate under the Burford abstention and primary jurisdiction doctrines. Here’s why:

  • In 1981 the EPA gave primary enforcement responsibility for underground injection control to the state of Oklahoma.
  • Oklahoma vests that authority in the Oklahoma Corporation Commission.
  • The OCC exercises exclusive jurisdiction over injections wells.
  • The OCC has an extensive regulatory structure in place for injection well control.

Abstention doctrines explained

The Burford abstention doctrine says that where timely and adequate state court review is available a federal court must decline to interfere with the state agencies where there are difficult questions of state law whose importance transcends the results in the case at bar and where exercise of federal review of the question would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.

Oklahoma has established and is operating its own program to regulate wells, OCC oversight encompasses more wells than just those operated by these defendants, the issue is one of substantial public concern, and timely and adequate state court review is available to the plaintiff.

The primary jurisdiction doctrine protects the administrative process from judicial interference, and it applies here. The court should refer issues not within its conventional experience to the administrative agency having more specialized experience, expertise and insight.

Why is this a big deal?

Essentially, the court recognized that highly complex and technical issues should not be regulated by the courts. This presents fundamental differences between courts and regulatory agencies: The OCC is equipped as a regulatory body to apply continuous, persistent and flexible regulatory power, which the court can’t do. Immediate and substantial reduction in wastewater requires specific scientific and technical expertise, which the OCC has and the court doesn’t.

You don’t need to bite your dog.

 

wolfCo-author Sandra Mazan

U.S. District Court Judge Scott Skavdahl in State of Wyoming et al v. U.S. Department if Interior et al. struck down Bureau of Land Management regulations applying to hydraulic fracking on federal and Indian lands. He concluded that the BLM had no authority from Congress to issue such regulations.

Background

In March 2015, the BLM issued the regulations, which addressed three areas of oil and gas development: wellbore construction, chemical disclosure and water management, each of which is already subject to state or federal regulation. According to BLM, the Rule was enacted in response to public concern about whether fracturing can cause underground water contamination and an increasing need for stronger regulation.  In response, industry proponents (the IPAA, Petroleum Association of America, Western Energy Alliance, the states of Wyoming and Colorado, and intervenors the states of North Dakota and Utah and the Ute Indian Tribe of the Uintah and Ouray Reservation) filed petitions for review of the regulations under the Administrative Procedure Act contending that it should be set aside as:

  • arbitrary,
  • not in accordance with law,
  • in excess of the BLM’s statutory authority, and
  • contrary to the federal trust obligation to Indian tribes.

Court’s Findings

  • Hydraulic fracking does not fall within BLM’s jurisdiction. Existing BLM regulations pertaining to surface disturbance, reporting requirements and pollution to groundwater in oil and gas operations do not evidence BLM’s broad authority to regulate the fracking process.
  • Congress had not delegated authority to BLM to regulate hydraulic fracking.
  • By enactment of the Safe Drinking Water Act (the SDWA) in 1974, Congress delegated authority to the Environmental Protection Agency to regulate hydraulic fracking on federal, state, and Indian lands; however, by amendment in the 2005 Energy Policy Act, Congress unambiguously excluded hydraulic fracking operations (not involving diesel fuels) from EPA regulation under the SDWA. (You may thank U.S. Rep. Joe Barton for that provision.)
  • By specifically removing the EPA’s authority to oversee fracking under the SDWA, Congress did not intend for another federal agency (i.e., the BLM) to step in and assume a similar role.

The Takeaways

There are several:

  • There is no statutory authority for a federal agency’s regulation of fracking.
  • Score this as a victory for proper statutory interpretation and the rule of law.
  • And a defeat for federal encroachment into activities already regulated by the states.
  • We’ll have to wait and see if this remains the status quo. The BLM has appealed.

To commemorate this ruling we need a happy song.

truthinessTruthiness: A quality characterizing a “truth” that a person making an argument or assertion claims to know intuitively, “from the gut” or because it “feels right” without regard to evidence, logic, intellectual examination or facts.

Today we explore truthiness in action. Let’s start with the loftiest bully pulpit in the land. The Washington Post gave President Obama four pinocchios  for his justification for cancelling the Keystone XL Pipeline.

  • The Prez: Keystone oil “will bypass the United States and its products will end up in foreign markets”.
  • The Post: Most of the products to be refined at Gulf Coast refineries will be consumed the United States.
  • The Prez: Keystone was just for Canadian oil and we should be focusing on American infrastructure, American jobs and American producers.
  • The Post: 65,000 BOD will be moved from the Bakken; U.S. energy companies control 30% of Canadian oil sands production.

Propaganda disguised as truthiness

According to Energy in Depth, anti-fracking activists use lies to scare us, such as:

  • Fracking causes widespread water contamination,
  • Fracking causes earthquakes (specifically, all injection wells induce earthquakes),
  • Fracking causes climate change and increases air pollution (Really? See the Sierra Club article below),
  • Fracking negatively impacts health (especially in babies),
  • Fracking chemicals are not disclosed,
  • Fracking is not regulated,
  • The industry does not provide safety measures for workers.

See the article for details explaining why they are wrong.

Facts  

Michael Lynch in Forbes runs through 11 of what he calls myths about the economics of petroleum and labels them either wrong, misinterpreted, or irrelevant.

An Energy In Depth report quantifies the threat of earthquakes from injection wells. To summarize:

  • Percentage of U.S. disposal wells potentially linked to seismicity – 0.55%
  • Percentage of disposal wells operating without seismicity – 99.45%
  • Percentage of Class II injection wells potentially linked to seismicity – 0.15%
  • Percentage of Class II injection wells operating without seismicity – 99.85%

The numbers are similarly low in Texas.

Could go either way?

This could be truth or truthiness. Energy In Depth reports that the Sierra Club admits but downplays the contribution of cheap natural gas to the reduction in carbon emissions in the United States. Read the article itself and all the links and decide for yourself who is more correct. This one could be a matter of your point of view.

Why this blog uses cute pictures

A study examining truthiness was carried out by Eryn Newman of Victoria University of Wellington. Experiments showed that people are more likely to believe that a claim is true regardless of evidence when a decorative photograph appears alongside.

An interlude

Today we have a movie interlude. You will want to view this if college is in the present or future for you or someone for whom you are responsible.

lion eatingWhat should we make of the Oklahoma Supreme Court’s order sending a suit alleging injuries from an earthquake back to the trial court?  Did the court unleash the lions, tigers and bears of the litigation world … or not? At this point, the answer is, not much for an injection well operator to worry about now.  This was a procedural ruling.

Faced with a motion to dismiss, the court concluded that the district court, and not the Oklahoma Corporation Commission, has exclusive jurisdiction over the claims.

Ladra v. New Dominion is a private tort action in which a homeowner seeks damages for personal injuries and property damages she alleges were proximately caused by wastewater injection wells in Lincoln County, Oklahoma.

Since 2009 Oklahoma has experienced a drastic increase in the frequency and severity of earthquakes.  The one at issue for Ms. Ladra was 5.0 in magnitude.  Her house shook, the chimney fell into the living room, rocks fell and caused her significant injury to her knees and legs, says the petition.

In Oklahoma procedure, a motion to dismiss is generally viewed with disfavor. The court is to accept as true all of the plaintiff’s factual allegations, with all reasonable inferences to be drawn from them. The moving party bears the burden to show the legal insufficiency of the petition.

What the ruling actually did

The court’s conclusion was that the OCC’s jurisdiction is limited solely to the resolution of public rights, and the agency has no authority to hear and determine disputes between private parties in which the public interest is not involved.  The OCC has no authority to entertain a suit for damages. Private tort actions are exclusively within the jurisdiction of district courts.  By the same token, an OCC order approving an operation (such as a disposal well permit) does not immunize an operator from lawsuits in the district courts.

Takeaways

  • This ruling has nothing to do with the substance of the plaintiff’s claims. It’s about jurisdiction.
  • Don’t try to predict the outcome. There is lots scientific of evidence to develop, and there is the question of how an Oklahoma jury might balance the value of hydraulic fracturing against health and safety of residents living close to injection wells.
  • Operators are fond of saying that the typical earthquake in the vicinity of wastewater injection wells is minimal – 2.0 or 3.0 on the Richter scale. But this one is alleged to have been 5.0, which in the world of seismology exponentially more severe than a 2.0 or 3.0.
  • 2.0 to 3.9 earthquake damage ranges from felt slightly by some people, no damage, to noticeable shaking of interior objects (2.0 o 2.9); generally none to minimal damages, some objects may fall off shelves (4.0 to 4.9).
  • 5.0 to 5.9: Can cause damage of varying severity to poorly constructed buildings; none to slight damage to all other buildings. Felt by everyone.
  • Despite the breathless anticipation from radical environmental groups, this ruling does not present the demise of hydraulic fracturing.

In the end, it could be a good day for someone.

trumpYou do, whether you are a vendor or an operator. Matador Production Company vs. Weatherford Artificial Lift Systems, Inc. is a treatise on what can go wrong with a frac job: Failure of pumps, worker inexperience, failure of the “delayed release gel breaker”, failure to clean gel hoses, failure to pump enough gel and proppant, loss of materials, profuse apologies, invoices, refusal to pay invoices, and … litigation. It also suggests what you need for an enforceable MSA and the likely result if you don’t have one.

The Lessons

If you are trying to enforce an MSA:

  • Disclaimers and exculpatory clauses in six point font on the last page of a six-page stimulation recommendation will not satisfy the conspicuousness requirement of the express negligence rule (about which, see below).
  • Terms and conditions to be found on the vendor’s web site, if the customer bothers to look, are insufficient.
  • Between two parties who had never before worked together, an MSA signed three months after the FUBAR is not admissible at trial.
  • A properly prepared and administered MSA can save a party – the vendor in this case – lots of time, money and grief.

The Trial

Weatherford sued on a sworn account alleging $314,000 due on invoices. Matador counterclaimed for economic damages of $2,300,000. after summary judgment for Weatherford on the sworn account, the jury found that Weatherford failed to use reasonable skill and diligence and breached its implied warranty of a good and workmanlike performance of services. But Weatherford’s breach was excused because Matador waived compliance with the contract and released Weatherford from liability arising from the contract. It did this in the Master Service Agreement.

The Appeal

Reversed. Weatherford could not rely on the MSA (see the lessons). In the MSA Matador released Weatherford for Weatherford’s negligence, agreed that acceptance of delivery indicates inspection and approval of the equipment, and waived its right to consequential damages. A release by one party of another for the released party’s own negligence must be CONSPICUOUS IN THE CONTRACT (this is the express negligence doctrine). As a result of Weatherford’s failure to properly prepare and administer its MSA Weatherford’s home run at trial morphed into a bases-loaded strikeout on appeal.

What to Do?

Am I suggesting that a MSA is more important for the vendor than the customer? No. The purpose of an MSA is peace of mind brought about by certainty, to establish from the outset – before there is a disagreement having major financial consequences – who will be liable for acts and omissions and who will be responsible for damages. Get your MSA in place, whether you are a vendor or producer. Take care of potential exposure with proper and sufficient insurance coverage.

Au Contraire

Didn’t the customer benefit from not having an MSA? Yes, but if he had been the negligent party, maybe not.

Donald Trump is My Favorite!

Favorite what, I didn’t say. But, “Why”? you ask.

Because of his unparalleled ability to prance, preen and posture.

What others say about him.

How he sees himself

amniotic fluidFirst, an apology. I have brought shame to my own self and this blog for failing to invoke trigger warnings about activities I will mention again, after the appropriate trigger warning. (I had no idea there were so many.)

Trigger Warning

This post will refer to activities in oil and gas production as they are commonly described in the industry. This post will feature the mindset of the industry and its enemies. Don’t take my word for it. Read the links themselves. First, see James Lileks‘ treatment of trigger warnings in National Review.

Fracking (ouch) had mixed poll results in a recent Gallup Poll.  Perhaps that is because of …

Hysteria

Michael Lynch in Forbes cites emotional, bordering on the ridiculous, claims by anti-frackers, including our favorite Yoko and related anti-fracing groups who resort to demagoguery and overuse and misuse of “frac”.

Women in the oil business, do know what you are? Sandra Steingraber is an environmental activist who “peer-reviewed” the study relied on by Gov. Cuomo to ban fracking in New York. She opined that the only jobs for women in the “fossil fuel industry” are as prostitutes and hotel maids. But then, there is …

Science

Energy in Depth reports that according to the California Council on Science and Technology, five myths by fracking opponents have been debunked:

  • Hazardous chemicals are released by hydraulic fracturing,
  • Hydraulic fracturing directly causes ground water contamination,
  • Fluid injected in the process of fracing causes earthquakes,
  • Upstream oil and gas sources represent small proportions of toxics in certain highly-urbanized areas in the South Coast air district. Eliminating oil and gas production would not eliminate air pollution problems in the San Joaquin Valley. (To be fair about it, oil and gas facilities emit significant air toxics in the area and are responsible for a large fraction of H2S emissions.)
  • Fracturing operations use a large amount of fresh water compared to other human water use.

CCST is a “non-partisan, impartial not for profit corporation established in 1988 by an assembly concurrent resolution to provide objective advice from California’s best scientists and research institutions on policy issues involving science.”

According to a grudgingly favorable report from Treehugger, billions of gallons of treated wastewater from fracking operations are being delivered to California almond and pistachio producers for irrigation.

The Massachusetts Institute of Technology reports that electrodialysis may provide a cost effective treatment of salty water from hydraulic fracturing.  Both of these reports show progress in the important area of water use. Do not let the likes of CERES tell you nobody but them is doing anything about it.

Announcing the Gray Reed Safe Room

By now you are aware of “safe rooms” on college campuses – havens for those youngsters who are so traumatized by ideas that offend their firmly and sincerely held personal beliefs that they can’t function. I learned about the one at Brown University from a source not The Onion and not first presented on April 1st. That’s what you get for $48,272 in annual tuition.

Gray Reed goes one better than Brown.  Sand is an irritant to sensitive young skin, a little one could gag on a chunk of Play Doh, and communing with your inner three-year-old isn’t sufficiently therapeutic. In the Gray Reed safe room there will be the frolicking puppies, but also more! To bring a profound and perfect peace to the utterly infantilized, participants in the Gray Reed safe room will be bathed in a warm, gently flowing stream of amniotic fluid. No harsh abrasives or choking hazards. You can’t get any closer to “home” than that.

A Bo Diddley interlude.

Coming soon: Huckleberry Finn, uncensored.