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Butler Decision Reversed And All Is Right With The World

April 25, 2013 by Suzanne Ilene Schiller

In September of 2011, we first posted about the case of Butler v. Estate of Powers in which the Pennsylvania Supreme Court reversed a Pennsylvania trial court decision holding that, under long-standing precedent, any grant of mineral rights that did not expressly include natural gas similarly did not include shale gas.  The Superior Court disagreed, relying on United States Steel Corp. v. Hoge, 468 A.2d 1380 (Pa. 1983)(Hoge II) which held that the party with the rights to coal also had rights to the coalbed gas contained in the coal.  Instead, the Superior Court remanded the case to the trial court for an evidentiary hearing on, in essence, whether shale gas is similar to coalbed gas and should be treated that way.  At the time we first discussed the Butler case, we concluded:

This case, which appears to be one of first impression in Pennsylvania, is certain to be carefully watched because, whatever the outcome, it will have a dramatic impact on Marcellus shale exploration and production as well as exploration and production from other shale formations such as the Utica Shale. 

Well, watch it we did, and the result is now in hand.  Yesterday, the Pennsylvania Supreme Court, in Butler v. Charles Powers Estate, No. 27 MAP 2012 (Apr. 24, 2013) reversed the Superior Court and affirmed, for now and all time, that there is a rebuttable presumption that a grant or reservation of “mineral rights” in Pennsylvania deeds does not include natural gas, including shale gas, unless expressly stated, and that presumption can only be overcome by parole evidence concerning the intent of the grantor and grantee.

In its decision, the Supreme Court recounted, in detail, the history of this unique Pennsylania rule, noting that while it is different from those in other states (where natural gas is indisputably considered a “mineral”), its roots go back well over 175 years, since 1836 in fact, and that countless deeds and documents have been based upon the simple principle that one applies the “common understanding” of the word minerals, and that “common understanding” is that “minerals” are only those elements that are metallic in nature.

The Court also addressed the Hoge II decision.  While it did not expressly overturn it, it noted that the Hoge court did not even reference the leading case on interpretation of mineral rights in this context, Dunham & Shortt v. Kirkpatrick , 101 Pa. 36 (Pa. 1882).  Additionally, the Court also identified several distinguishing features of Hoge II.  First, the  Hoge II deed did expressly mention natural gas, giving the landowner the right to “drill through” the coal to reach it.  Additionally, the deed gave the owner of the coal “ventilation” rights, acknowledging the existence of gas within the coal, but not reserving the rights to it, most likely because at the time, it was not commercially exploitable. Finally, the Butler Court noted that shale gas is the same chemical composition as natural gas, just trapped at a different layer of earth, whereas coalbed gas is structurally different.  (As an aside, as the Court’s decision affirms the long-standing rule that “common understanding” and not scientific definitions guide deed interpretation, referencing this difference in the gases is curious).   

One final item of note.  The Court expressly did not address, as waived, whether natural gas might be considered an “appurtenance” of oil, which was reserved in the deed.  That being said, in a footnote the Court signaled its view of the argument, stating that oil and natural gas have consistently been treated as separate substances for the purposes of deed interpretation.  Thus, we should not be holding our breaths to see that argument addressed again by the Court.

Posted in Case Update, Decisions of Note, Marcellus Shale, Oil and Gas, Real Estate, Uncategorized | Tagged , , , , , | Leave a Comment »

Who Goes There? NJ Supreme Court Holds that NJDEP Cannot Conduct Nonconsensual Warrantless Inspections of Residential Property

April 5, 2013 by Suzanne Ilene Schiller

Relying on the United States Constitution’s Fourth Amendment protection against unreasonable search and seizure, yesterday the New Jersey Supreme Court , in NJDEP v. Huber, ___ N.J. ____ (Apr. 4, 2013), held that the New Jersey Department of Environmental Protection (“NJDEP”) does not have an unfettered right to inspect residential property in order to ensure compliance or determine violations of the Freshwater Wetlands Protection Act, even when the property in question is subject to an FWPA permit.

This long-running case involved residential property owned by the Hubers which was subject to a Freshwater Wetlands General Permit precluding certain activities on portions of the property. After a neighbor complained that the Hubers appeared to be mowing vegetation and conducting fill activity in the restricted area, an NJDEP supervisor went to the property to inspect. Eventually, an administrative order was issued assessing the Hubers a monetary penalty and directing them to restore the property. On appeal, the Hubers claimed that they did not consent to the inspection and therefore the testimony of the inspector should have been excluded.

Although affirming the lower court’s decision upholding the administrative order based upon evidence other than the testimony of the inspector, the NJ Supreme Court agreed with the Hubers as to the constitutional issue. Although recognizing that the FWPA contained broad language that compelled property owners to allow the NJDEP to enter onto a permittee’s property at reasonable times, the Court held that the FWPA “does not purport to authorize forcible, nonconsensual entry in to the backyard of a residential property owner.” Rather, the inspection scheme contained within the FWPA struck an appropriate balance between the significant state interest in preserving wetlands and the privacy rights of homeowners who have a greater privacy expectation than commercial property owners operating in a closely regulated industry. In summary, the Court held that:

Based on the FWPA’s integrated scheme governing freshwater wetlands in New Jersey, land subject to FWPA restrictions so important as to be required by law to be filed of record, which was done here, is subject to the statutory, reasonable right of interest and inspection. In exercising that right, the [NJDEP] must comply with its processed, which require presentation of credentials before seeking consent to entry at reasonable times. If entry is denied, the Commissioner may order that entry be provided, . . . and the [NJDEP] shall be entitled, pursuant to the rules of court, to judicial process to compel access to the property subject to the FWPA permit.

(Citations omitted).

The Court left open, however, several questions that no doubt will be addressed by future courts. For example, the Huber’s property was also subject to a conservation easement but the Court declined to address whether nonconsensual entry was permissible pursuant to the easement because the easement was unknown to the NJDEP inspector at the time of his visit. In addition, the Court did not decide “what showing is required under the FWPA for the [NJDEP] to gain entry to residential proper that is not subject to a FWPA permit.” (Emphasis added).

Posted in Clean Water Act, Real Estate, Wetlands | Tagged , , , , , , | Leave a Comment »

CWA Pre-Suit Notice Must Be Specific, But Not That Specific

March 18, 2013 by Suzanne Ilene Schiller

On March 13, 2013, the First Circuit issued its opinion in Paolino v. JF Realty, LLC, No. 12-2031 (1st Cir. Marc. 13, 2013), reversing in part the District Court’s dismissal of a Citizen’s Suit brought pursuant to the Clean Water Act, and in so doing addressing an “issue of first impression in the First Circuit as to the standard for measuring the sufficiency of the mandatory pre-suit notice which must be given” before such a suit can be brought.  

The suit was initiated by the owners of a five-acre parcel sited downhill from property owned and operated by the defendants, in which plaintiffs allege that the plaintiffs relocated a ditch to drain a contaminated pond and divert storm run-off into, eventually, the Robin Hollow Reservoir, and that the drainage ditch created an “intermittent stream” across their property.  As this was the third attempt by the plaintiffs to meet the citizen suit requirements of the CWA, the district court dismissed the case with prejudice, finding that the pre-suit notice did not describe with sufficient specificity the CWA violations, and in particular, the specific CWA standards or limitations that were being violated or which of the multiple defendants were responsible for the violations.   

In its decision, the First Circuit adopted as its standard the requirement that the plaintiffs must provide sufficient information so as to (a) identify the plaintiffs, (b) provide basic contact information, and (c) “allow[] the putative defendants to identify and remedy the alleged violations.”  (Emphasis added).  Focusing on the language in 40 C.F.R.  § 135.3(a) that pre-suit notice must permit “the recipient” to identify the specific information required, and noting that any more stringent requirements could place an impossible or unnecessary burden on plaintiffs, the Court held that the notice need not contain every date on which violative discharges occurred if an adequate number of dates were provided along with a description of the activity resulting in the discharges, the pollutants alleged to have been discharged and the levels of those pollutants allowed.   Because this information would ”permit[] the defendants to identify [the specific standard of the CWA alleged to have been violated] themselves and to remedy the alleged violations if accurate,” it met the requirements of the Clean Water Act.  

For the same reason, the Court also rejected the argument that the Notice had to identify which defendant(s) were liable for which discharges.  Given the “extensive history of changing hands amongst the defendants, [the defendants were] in a much better position than the plaitniffs to determine their respective responsibilities,” the Court held.

Posted in Clean Water Act, Procedure | Tagged , , | Leave a Comment »

Army Corps’ Jurisdictional Determination Is Not A Final Agency Action Within The Meaning Of The Administrative Procedures Act

March 9, 2013 by Suzanne Ilene Schiller

The U.S. District Court for the Middle District of Louisiana recently ruled that an U.S. Army Corps of Engineers’ approved jurisdictional determination finding wetlands subject to the Clean Water Act (CWA) is not a final agency action within the meaning of the Administrative Procedure Act (APA). The court further held that its holding was not impacted by the U.S. Supreme Court’s recent decision in Sackett v. EPA.

In Belle Company, LLC v. United States Army Corps of Engineers, No: 12-247-BAJ-SCR (M.D. La. Feb. 28, 2013), plaintiffs, believing that their property contained no jurisdictional wetlands, applied for and received from the Louisiana Department of Environmental Quality a permit to construct and operate a solid waste landfill. Years after the permit approval, the U.S. Department of Agriculture informed plaintiffs that their property had never been classified as “converted cropland,” a classification which would have exempted plaintiffs’ property from CWA requirements. To resolve the issue, plaintiffs sought a jurisdictional determination from the Army Corps, who issued a preliminary jurisdictional determination that plaintiffs’ property contained wetlands subject to the CWA. The Corps subsequently issued an approved jurisdictional determination confirming the presence of jurisdictional wetlands. Pursuant to the administrative appeals process under 33 CFR § 331, plaintiffs appealed the jurisdictional determination to the Corps’ division engineer, who ultimately concluded that the property contained wetlands subject to the CWA. Plaintiffs then sought a declaratory judgment and an injunction against the Corps’ for its issuance of the approved jurisdictional determination.

A court may not review the decisions of an administrative agency unless there is a “final agency action” under the APA. In Bennett v. Spear, 520 U.S. 154, the Supreme Court articulated a two-part test for determining whether an agency action is final within the meaning of the APA. First, an agency action must mark the “consummation” of an agency’s decision-making process and cannot be “merely tentative” or “interlocutory.” Second, the agency action must have determined a party’s “rights or obligations,” or be one from which “legal consequences flow.”

The court found that plaintiffs satisfied the first prong of the Bennett Test because they appealed the jurisdictional determination in accordance with statutorily prescribed administrative process to the district engineer who concluded that the jurisdictional determination was correct. As such, there was no further agency action that plaintiffs could have expected regarding the presence of jurisdictional wetlands. Plaintiffs, however, failed to satisfy the second prong of the Bennett Test because in concluding that plaintiffs’ property contained jurisdictional wetlands, the Corps simply reminded plaintiffs of their existing duties under the CWA. Therefore, the jurisdictional determination did not decide plaintiffs’ rights or obligations, nor did any legal consequences flow from the decision. Quoting Fairbanks North-Star v. U.S. Army Corps of Engineers, 543 F.3d 586 (9th Cir. 2008), the court noted that a jurisdictional determination “at most simply reminds affected parties of existing duties imposed by the CWA itself and commands nothing of its own accord.” The fact that plaintiffs would need to seek a 404 permit from the Corps or amend their landfill permit application was irrelevant, as the court found these CWA obligations to be preexisting.

Furthermore, the court distinguished this case from the Supreme Court’s recent Sackett decision, where EPA issued a compliance order that also included a jurisdictional finding that plaintiffs’ property contained wetlands. The Supreme Court ruled that the order constituted a final agency action within the meaning of the APA. In accordance with the order, the Sackett plaintiffs faced potential fines for each day that they refused to follow EPA’s demand for remedial action. In the present case, however, the court noted that there was no evidence that plaintiffs had done anything to violate the CWA, and plaintiffs did not face any imminent penalties. In fact, the court noted that plaintiffs are still able to apply for and receive a permit for any activities that might result in discharge of pollutants to the wetlands on their property, giving them options unavailable to the Sackett plaintiffs. Because of these factual distinction, the court held that Sackett was not controlling.

This post was authored by MGKF associate Michael Dillon.

Posted in Clean Water Act, Procedure, Real Estate, Wetlands | Tagged , , | Leave a Comment »

Public Interest Group Can’t Stand Up To Wal-Mart

February 25, 2013 by Suzanne Ilene Schiller

A recent decision from the Appellate Division of the Supreme Court of New York reminds that one should never take for granted any procedural matter and, in particular, standing to sue.

In Clean Water Advocates of New York, Inc. v. NY State Dept. of Environmental Conservation, No. 514924 (Feb. 21, 2013), plaintiffs brought suit seeking to challenge the approval of a stormwater pollution preservation plan submitted by Wal-Mart Stores, Inc. in connection with the construction of a superstore in Lockport, Niagra County.  To establish standing, Plaintiff, a not-for-profit corporation, submitted an affidavit of only one member, who stated that she lived within 900 feet of the proposed Wal-Mart location, and up to 22 miles from the waters which Plaintiff alleged would be affected.  Evidently, she did not, however, allege any particular harm that she would suffer, nor did Plaintiff allege any harm that any of its members would suffer that was in any manner different from harm that might be suffered by the public at large.  This was, needless to say, a mistake.

Under New York law, a plaintiff must show both an “injury-in-fact” and that the alleged injury falls within “the zone of interests or concerns sought to be promoted or protected by the statutory provision under which the agency has acted.” New York State Assn. of Nurse Anesthetists, 2 NY3d at 211). An “injury-in-fact” means that the plaintiff, or in the case of an organization, at least one of its members, will suffer actual injury that is personal to the plaintiff and not mere conjecture.  With little discussion, but plenty of legal citation, the Court in Clean Water Advocates made clear that standing was not a mere formality, and without real evidence meeting the criteria, dismissal of the claim was proper.

Posted in Procedure, Real Estate | Tagged , | Leave a Comment »

Court Rules That Natural Gas Act Precludes State Hearing Board From Entertaining Appeal of CWA Permits

February 8, 2013 by Suzanne Ilene Schiller

As a result of increasing development of natural gas drilling, pipelines are popping up everywhere.  And with them has come a mound of litigation.  In a February 5, 2013 decision, the United States District Court for the Middle District of Pennsylvania has ruled, as a matter of first impression, that permits issued by a state agency (in this case, the Pennsylvania Department of Environmental Protection (“PADEP”)) under the federal Clean Water Act (the “CWA”) may be challenged only in federal court, and not in a state adjudicatory proceeding.

In the case at issue, Tennessee Gas Pipeline Co., LLC v. Delaware Riverkeeper Network, No. 3:13-CV-46 (M.D.Pa. Feb. 5, 2013), the Federal Energy Regulatory Commission (“FERC”) had issued a Certificate of Public Convenience and Necessity under the Natural Gas Act (“NGA”) to Tennessee Gas Pipeline Company (“TGPC”) to allow it to upgrade its pipelines in Pennsylvania and New Jersey.   A condition of the Certificate was that TGPC obtain requisite state environmental permits, including permits under the certain sections of the CWA, which in Pennsylvania are issued by the PADEP.   PADEP issued three such permits to TGPC, which certain environmental groups, led by the Delaware Riverkeeper Network, appealed to Pennsylvania’s Environmental Hearing Board (the “EHB”).  In response, TGPC filed an action in federal court seeking an injunction preventing the EHB from hearing the matter on the ground that the NGA preempted state review of the permits.  The environmental groups were named as defendants, and subsequently Michael Krancer, Pennsylvania Secretary of Environmental Protection, was granted leave to intervene.

After a fairly in-depth analysis of the applicable statutes and the few relevant cases, the Court granted preliminary relief, while acknowledging that it was “writing on a clean slate.”  First, the Court denied that the matter was one of statutory preemption because while there is preemptive language in the NGA, there is an express exception for the rights of States under, among other federal statutes, the CWA.  15 U.S.C. § 717b(d).   Next, the Court addressed the nature of the permits issued and, rejecting the arguments of the defendants and Secretary Krancer, held that despite being issued by PADEP and pursuant to Pennsylvania law, two of the three permits “carr[ied] the label of [the] CWA certifications” required under FERC’s Certificate and the third was so interrelated that “separate reviews” could lead to conflicting outcomes and would be judicially cumbersome.” 

The Court then turned to Section 19 of the NGA, which provides that the United States Court of Appeal for the circuit where the subject natural gas project is situated “shall have original and exclusive jurisdiction over any civil action for review of an order or action of a . . . State administrative agency acting pursuant to Federal law to issue, condition, or deny any permit, license, concurrence, or approval . . . required under Federal law.”  The first stop was determining whether the EHB is a “State administrative agency,” because if it is, then by implication, the EHB would not be precluded from hearing the appeal (which subsequently would have to be challenged in the federal courts of appeal) and, instead, a party could be required to exhaust its remedies – including challenging the permits in the EHB – before seeking federal review.   However, the Court held that the EHB is an adjudicative, not administrative, body, and that the intent of Section 19 was to limit its application to agencies that issue, condition or deny permits, not entities that review those decisions.  Further, since Section 19 does not refer to “final” action on a permit and in light of the legislative history, there was not only no requirement of exhaustion but, instead, that it was Congress’ intent “to cut out all [state] review after the original agency made its permitting decision.”[1] 

Having reached the conclusion that TGPC was likely to prevail on the merits – that is, that the NGA precluded review of the permits by the EHB – the Court then quickly disposed of the other elements of preliminary relief, finding that TGPC would suffer irreparable harm if it was forced to litigate the validity of its permits before an entity that had no jurisdiction and if its project was delayed by the additional layer of review by the EHB.  FERC and TGPC’s timetable for completion of the project tipped the equitable scales in TGPC’s favor, and finally the Court found that the public interest was served by allowing the project “to move forward in a timely manner.”

There is little doubt, one suspects, that this decision will be appealed.  Additionally, its concepts are almost certainly applicable in other settings, and it is likely to spawn further challenges to the jurisdiction of state adjudicative bodies where state agencies are involved in the administration of federal laws.

[1] The Court also rejected the argument that review by the EHB would allow for a more full record upon review to the circuit courts.

 

Posted in Cases To Watch, Clean Water Act, Marcellus Shale, Oil and Gas, Procedure | Tagged , , , , , , , , , , , | Leave a Comment »

Defining “Contribute” Under RCRA – Contractor Not Liable For Actions Of Subcontractor

December 12, 2012 by Suzanne Ilene Schiller

As most of our readers know, the Resource Conservation and Recovery Act (RCRA)gives the EPA control over  the generation, transportation, treatment, storage, and disposal of hazardous waste, often described as “cradle-to-grave” coverage of hazardous wastes.  One of its provisions, 42 U.S.C. § 6972(a)(1)(B), allows any person to bring suit against another “who has contributed . . . to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste which may present an imminent and substantial endangerment to health or the environment.”

In National Exchange Bank and Trust v. Petro-Chemical Systems, Inc., et al., Case No. 11-CV-134 (E.D. Wisc. Dec. 3, 2012), plaintiff NEBT retained defendant Petro-Chemical to conduct tightness testing of an underground fuel oil storage tank.  Petro-Chemical subcontracted to Tankology, who was alleged to have improperly reconnected certain piping after testing, resulting in a spill of the fuel oil.  NEBT contended that Petro-Chemical was liable because it subcontracted the work and failed to inspect the tanks after Tankology completed its testing.  On summary judgment, Petro-Chemical argued to the contrary; since it did not perform the testing and had not otherwise generated or handled the oil, it did not “contribute” to the spill. 

Notwithstanding the fact that courts have held that the term “contributed” is to be liberally construed, the District Court agreed with Petro.   Even under the broadest interpretation, the Court rejected the idea “that Congress intended the term ‘contributed’ to be an invitation to string together an expansive causal chain of tangential defendants.”  Thus, distingishing the instant action from one in which the contractor or hiring party generated the waste,  “a contractor like Petro-Chemical is not liable under the RCRA simply because it hired an allegedly malfeasant subcontractor.” 

Posted in Cost Recovery, RCRA, Waste | Tagged , , , , | Leave a Comment »

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