North America Shale Blog

North America Shale Blog

Off the Tracks: Quantifying Potential Monetary Exposure From Crude-by-Rail Incidents

Posted in Shale, Transportation

railThis article is the second in a three-part series that began with “Off the Tracks: A Data-Driven Analysis of Crude-by-Rail Liability Factors, Exposure, and Potential Solutions,” which was published on December 19, 2015.

In Part One of this series, we analyzed factors that influence liability for crude-by-rail (CBR) incidents. But knowing the liability factors leads to a second question: What is my monetary exposure?

Rail transportation has a strong operational safety record. And the CBR industry—in response to a meteoric rise in crude oil traffic—has leveraged rail’s proven track record to refine risk-management techniques in response to past incidents. Should a CBR incident occur, however, the analysis below provides a benchmark to evaluate potential monetary exposure.

Unit-train scale CBR incidents are a new phenomenon, and there is not yet a statistically meaningful dataset of regulatory fines, settlements, and jury verdicts. For that reason, we have expanded our inquiry to include the consequences of not only CBR incidents, but also those involving other railborne hazardous materials as well as passenger train derailments involving injuries and fatalities. This expanded inquiry better illustrates the extent of potential liability associated with CBR incidents. Continue Reading

The Fight to Stop the EPA’s “Clean Power Plan” Continues in the D.C. Circuit, Amid an Uncertain Future for Its Presumed Ultimate Destination – the Supreme Court

Posted in EPA Issues

Electricity power plant

On February 19, 2016, 27 states, the United States Chamber of Commerce, and over 150 different organizations and entities (the “Petitioners”) filed their joint Opening Brief on Core Legal Issues (the “Opening Brief”), related to their petitions for review of the Environmental Protection Agency’s (EPA’s) final agency action titled “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units,” or as it is commonly referenced, the “Clean Power Plan” (the “Final Rule”).

According to the comprehensive and detailed Opening Brief, the Final Rule relies on “an obscure provision of the Clean Air Act,” to institute “an ‘aggressive transformation’ of the mix of electricity generation in nearly every [s]tate by systematically ‘decarboniz[ing]’ power generation and ushering in a new ‘clean energy’ economy.” Opening Brief, at 3. EPA has taken this bold step, even though Congress has never adopted any legislation specifically intended to achieve this result. Id. Continue Reading

EQT Wins a Temporary Victory, but the Future of Oil and Gas Operations in Fayette County, West Virginia, Is Still Undecided

Posted in Oil and Gas, Water, West Virginia

OilWellEQT Corp. won a temporary victory in its continuing effort to defend against the potential shutdown of its 200 oil and gas wells and one wastewater injection well in Fayette County, West Virginia, after the District Court for the Southern District of West Virginia issued a preliminary injunction on February 8 enjoining the enforcement of a new county ordinance aimed at stopping all operation of oil and gas wells in Fayette.

On January 12, the Fayette County Commission adopted an ordinance banning the storing, disposing, handling, treating, and processing of gas or oil waste within the boundaries of Fayette County. The ordinance was created in response to citizen complaints about a wastewater injection well in Fayette County operated by Danny Webb Construction, another well operator in Fayette County seeking to enjoin the ordinance. After receiving a petition with 5,000 signatures pleading for a ban on wastewater wells in Fayette, the Commission began to develop the new ordinance. Drafting of the ordinance was headed by the West Virginia Mountain Party, a grassroots political party that believes the county has the right to protect its citizens from the alleged hazardous waste that comes from these wells. Continue Reading

Thirty States and Numerous Other Interested Parties Seek an Immediate Supreme Court Stay of the EPA’s “Clean Power Plan”

Posted in EPA Issues

supreme court iStock_000000865139_LargeOn January 26, 2016, 29 states and state agencies, including Oklahoma, Texas, West Virginia, Ohio, Colorado, and Mississippi (the “29 States”), submitted an application (the “29 States Application”) to the United States Supreme Court seeking an immediate stay of the October 23, 2015, final rule of the United States Environmental Protection Agency (“EPA”) titled “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units” (the “Final Rule”).

The move came in response to the D.C. Circuit Court of Appeals’ January 21, 2016, ruling denying an immediate stay of the Final Rule, pending the court’s decision on various parties’ petitions for a review of the legality of the Final Rule. Continue Reading

Recent Federal Legislation Rings In the New Year With Some Exciting Developments for Both the Renewable and Oil Energy Industries

Posted in Oil and Gas

Library of Congress in Washington DC

On December 18, 2015, the current divided United States Congress, which has not been known for many grand compromises, passed an omnibus spending bill featuring key measures related to renewable energy tax credits and to the export of crude oil produced in the United States. President Obama signed the legislation, known as the Protecting Americans from Tax Hikes (“PATH”) Act of 2015, into law later that same day.

The vote totals in favor of passage in the U.S. House of Representatives (316-113) and the U.S. Senate (65-33), as well as President Obama’s speedy signing of it, revealed PATH’s strong bipartisan support, which had been the result of lengthy negotiations over the preceding months.  Continue Reading

Off the Tracks: A Data-Driven Analysis of Crude-by-Rail Liability Factors, Exposure, and Potential Solutions

Posted in Shale, Transportation

railCrude oil prices are now approaching what pundits believe is likely to be the bottom phase in the current market cycle. Due to the price downturn, the arbitrage window that drives a substantial portion of crude-by-rail (“CBR”) shipping volumes is closed. Yet once the price recovery begins, producers and refiners will again avail themselves of CBR’s speed and flexibility, and the market will see oil carload volumes recover accordingly. As such, we believe the current time presents an ideal opportunity to assess CBR risk and liability issues to help guide operators, shippers, and regulators as they prepare for an upswing in activity likely to begin in late 2016.

This article is the first in a three-part series and will address the primary factors that influence CBR liability: from factors that influence relatively ordinary fines to the factors that arise in the worst-case scenario. Part Two in the series will analyze the monetary magnitude of liability risks that accompany the liability factors outlined in Part One. And Part Three will offer insights into how BakerHostetler can help railroads, terminal operators, and crude oil shippers fine-tune their risk management strategies and reduce legal exposure as CBR activity begins to recover. Continue Reading

2015 ONRR Civil Penalties: Where, Why, and How Much

Posted in Land Use

European landscape. View of earth from an airplane window.

The Office of Natural Resources Revenue (“ONRR”), a unit within the United States Department of the Interior, is responsible for collecting and disbursing revenues from energy production on federal and Indian lands and offshore on the Outer Continental Shelf.[1]

The agency verifies reporting, conducts audits, and enforces laws, regulations, lease terms, and orders.[2] The agency also issues civil penalties for noncompliance.[3]

For example, if ONRR sends you a Notice of Noncompliance and you do not correct all of the violations identified within 20 days (or longer, if so specified), you become subject to civil penalties of up to $500 per day per violation.[4] What is more, ONRR believes each incorrect line on a Form ONRR-2014 or Oil and Gas Operations Report (“OGOR”) is a separate violation.[5] Continue Reading

EQT’s Lengthy Battle With the Pennsylvania Department of Environmental Protection Gets Its Day in State Supreme Court

Posted in EPA Issues, Fracking, Pennsylvania

Natural_Gas_Drilling_Rig_PeekingOn November 17, 2015, Pittsburgh-based energy company EQT Production Co. (“EQT”) presented its oral argument before the Pennsylvania Supreme Court, requesting it set aside a February 20, 2015, ruling of Commonwealth Court Judge Rochelle S. Friedman. Specifically, she had held EQT could not bypass the state’s administrative Environmental Hearing Board (“EHB”) stage in its efforts to contest the Pennsylvania Department of Environmental Protection’s (the “DEP’s”) determination regarding fines EQT owes for a fracking water leak. EQT v. DEP, 114 A.3d 438 (Commw. Ct. Pa. 2015).

The basis of this dispute stems from EQT’s discovery on May 30, 2012, that one of its impoundments, located in Tioga County, Pennsylvania, was leaking water generated from hydraulic fracturing. Id. EQT emptied the site of impaired sludge and began a formal cleanup process under the state’s “Land Recycling and Environmental Remediation Standards Act.” Id. EQT has continued to remediate the affected soil and groundwater. Id. Continue Reading

Crude-By-Rail Update: Siting a Crude Oil Transloading Terminal in California? Developers Should Seek Old Industrial Sites and Proactively Embrace the Environmental Impact Review Process

Posted in Oil and Gas, Transportation

railProposed crude-by-rail (CBR) projects in California increasingly face opposition lawsuits designed to stall and derail the terminals. The suits often focus on alleged noncompliance with the California Environmental Quality Act (CEQA)—a tactic that has produced success.[1] Undoubtedly, CEQA review presents its own delays and costs to industrial development. But if approached in the correct way, the CEQA process offers a significant opportunity to build a favorable foundation for CBR terminals and potentially forestall opposition lawsuits. Continue Reading

Lower Oil and Gas Prices Met With an Uptick in Unpaid Overtime, Worker Misclassification, and Other Wage Suits

Posted in Shale, Texas

122910-1.cdrOn Monday, the United States Energy Information Administration released a Drilling Productivity Report. The report projects that total oil output from seven major U.S. shale regions will fall by 118,000 barrels per day to about 4.95 million barrels per day in December. This is the largest monthly decline on record. The Bakken and Eagle Ford Shale regions are anticipated to show declines next month, marking the 10th straight month of declines in those formations. Total U.S. shale production is projected to fall for an eighth consecutive month in December.

The slowdown in production in the Eagle Ford Shale coincides with a surprising uptick in litigation, specifically, lawsuits over unpaid overtime and wages. In fact, through the first 10 months of this year, 72 such lawsuits were filed in the United States District Court for the Western District of Texas in San Antonio. This is a dramatic increase from the 28 lawsuits filed in 2014 and the 10 filed in 2013. The actions are brought under the Fair Labor Standards Act. Many blame the downturn in shale production for the increase in lawsuits. Continue Reading