2018 was a banner year for M&A activity in the energy space, with numerous high dollar value transactions in the upstream, midstream, downstream and oil field services (OFS) segments. As investors in the public securities markets have shown a significantly decreased appetite for new issuances of equity by energy companies, the preferred exit or growth strategy for 2018 has been through strategic mergers, acquisitions or divestitures. These transactions have manifested themselves in various forms: asset acquisitions and divestitures, private equity investment into “drillcos” with strategic oil and gas companies, public-public mergers between OFS companies and upstream shale drillers, and simplification transactions by master limited partnerships (MLPs) in the midstream space. In addition to all this M&A activity, one element has become significantly more prevalent in the oil and gas industry throughout 2018 and shows no signs of letting down for 2019: water. Continue Reading Oil & Gas… & Water!
With the Texas Legislature having now convened for the 2019 session, various key environmental issues are anticipated to be the subject of debate and legislative action. Based on bills filed to date, interim charges and recommendations made by the Texas Commission on Environmental Quality (TCEQ), environmental initiatives to be considered are expected to address, among others, the following subjects:
- Hurricane Harvey and related issues. Issues involving Hurricane Harvey, the Category 4 hurricane which dealt a devastating blow to the Texas coast in 2017, its financial impacts, response and recovery efforts and preparation for future events have been the subject of extended scrutiny by lawmakers and government officials. Last session, a number of wide-ranging interim charges were made to various Senate and House committees to study Harvey-related issues. These interim charges included the following:
- Evaluation of water infrastructure projects that would help with flood mitigation;
- Examination of communication mechanisms for flood warnings and inclement weather forecasting systems;
- Review of best practices for ensuring environmental safety during maintenance, startup and shutdown activities due to emergencies;
- Identification of options to expedite debris removal including eliminating unnecessary regulation and streamlining the process;
- Evaluation of the interaction between federal, state and local agencies in charge of responding to natural disasters; and
- Study of the response of public entities that own or operate dams to large-scale rain events.
Among the bills filed to date addressing flooding and disaster issues are House Bill (HB) 26 authored by Representative Will Metcalf relating to the creation of an alert system to notify affected persons of certain releases from certain dams, HB 34 by Representative Richard Peña Raymond relating to a statewide disaster alert system, HB 274 by Representative Sarah Davis relating to the creation of the disaster reinvestment and infrastructure planning revolving fund and Senate Bill (SB) 179 by Senator Borris L. Miles relating to the establishment of a task force to conduct a comprehensive study on flood control infrastructure for Harris County. In addition, Senator Charles Perry, the Chair of the Senate Committee on Agriculture, Water and Rural Affairs, has indicated that he will introduce legislation detailing the creation of a State Flood Plan, along with a funding component, to include measures to prevent and mitigate flooding and minimize the impact of a flood event.
- The Texas Emissions Reduction Program (TERP), which was created in 2001 to provide voluntary monetary incentives to reduce harmful pollutants from mobile sources and help bring Texas into compliance with federal air quality standards, was the subject of House and Senate interim charges from the last legislative session. As background, the TERP program had been previously set to expire on August 31, 2019, but legislation enacted last session extended the program to the end of the biennium in which Texas attains the national ambient air quality standards for ground-level ozone. While authorization for the TERP program was extended, the TERP funding mechanisms were not. In addition, the fees collected to fund TERP, which include certificate of title fees, vehicle registration and inspection fees, and motor vehicle taxes, have significantly exceeded the amounts currently allocated to the TERP program, and the surplus has been used to certify the state’s budget. In its November 28, 2018, report in response to interim charges, the Senate Finance Committee recommended the following: (i) consideration of ways to maximize TERP appropriations to ensure compliance with the Federal Clean Air Act and to ensure that funding achieves its intended purpose; (ii) regular review by the Texas Legislature, in collaboration with the TCEQ, of individual TERP grant programs, their value and economic benefit to the state; and (iii) review of the current TERP fee structure.
- Expedited and streamlined environmental permitting. The Senate Committee on Natural Resources and Economic Development has reported that the possible allocation of additional resources and/or provision of additional flexibility in administering the TCEQ’s expedited air permitting program may merit further review by the Texas legislature. In addition, the TCEQ’s legislative recommendations include three proposals aimed at streamlining and expediting the processing of permits. First, with regard to the expedited processing of air applications, the TCEQ has proposed certain changes to improve permit processing timeframes. Specifically, the TCEQ has recommended that the current statute be modified to make clear that the surcharge revenue associated with expedited air applications may be used for agency employees that process only expedited air applications during the work week and to provide for double overtime pay for time worked by employees over their regularly scheduled work hours. Second, with regard to uncontested water district matters, the TCEQ has proposed changes to allow the TCEQ’s Executive Director to approve uncontested water district dissolutions and district conversions without the necessity of a hearing before the TCEQ Commissioners. Third, with regard to certain water right permit amendment applications that have no impact on the environment or senior water rights, TCEQ has recommended exempting such applications from requirements regarding technical review, notice and hearing.
- The solid waste permitting and compliance process. In its December 2018 Interim Report to the 86th Legislature, the Senate Committee on Natural Resources and Economic Development, which had been charged with studying the permitting and compliance processes for waste disposal and a review of the allocation of municipal solid waste fees, identified a number of issues that may merit additional oversight during this legislative session. These include modifying the current notice of deficiency process to separate out non-substantive application deficiencies, adjusting the statutory fund allocation of the municipal solid waste disposal fee and possible procedural improvements in the permitting process for municipal solid waste facilities located in a floodplain.
- Groundwater and surface water issues. Issues related to the regulatory framework of groundwater conservation districts and river authorities were also the subject of interim charges. The Senate Committee on Agriculture, Water and Rural Affairs found that having a groundwater conservation district process that is similar across neighboring districts would be beneficial.
To date, more than a 1000 bills and resolutions have been filed for consideration by the Texas legislature. Thousands more will likely follow. While school finance and property taxes are expected to figure prominently in the issues to be tackled by the Texas legislature, it is plain that a number of environmental measures will merit monitoring as the legislative session unfolds over the next several months.
The US National Ambient Air Quality Standards (NAAQS) are the centerpiece of the US Clean Air Act (CAA) and establish allowable concentration levels for six “criteria air pollutants”: ozone, particulate matter, lead, carbon monoxide, nitrogen dioxide, and sulfur dioxide. The CAA requires the US Environmental Protection Agency (EPA) to review and, as appropriate, revise the NAAQS at least every five years, and EPA has, since 1970, regularly adopted increasingly stringent standards. Whether those revisions have gone far enough or too far has become a predictably contentious issue, with each review involving debates over science, the role of EPA’s Clean Air Science Advisory Committee (CASAC), the discretion of the EPA Administrator, and the format of the review process itself, among many other issues. Continue Reading The New NAAQS Review Process Begins to Take Shape
On December 20, 2018, the Federal Energy Regulatory Commission (Commission) held its December 2018 open meeting. This was the first meeting for Commissioner Bernard McNamee, who was confirmed by the Senate on December 6, 2018. Given his recent confirmation, Commissioner McNamee voted present on the consent agenda. Commissioner McIntyre was absent due to continuing health issues and did not vote on the consent agenda. Continue Reading FERC December 2018 Open Meeting Highlights
Industrial hemp has officially returned as a legal agricultural commodity in the United States. On December 20, President Trump signed into law the Agriculture Improvement Act of 2018, otherwise known as the 2018 Farm Bill. See PL 115-334, December 20, 2018, 132 Stat 4490. The 2018 Farm Bill re-legalizes the production of hemp after the crop was banned for more than eighty years under federal law. Hemp is a “cousin” of marijuana; both are varieties of the Cannabis sativa L. plant, but hemp does not have the psychoactive properties of marijuana. Hemp is one of the oldest cultivated industrial crops in the nation. It was grown as early as the 1600s until the mid-1930s when state and federal laws effectively ended the legal production, sales and use of the cannabis plant. The Controlled Substances Act of 1970 (CSA) officially categorized “marihuana” as a Schedule I controlled substance, which was defined to include “all parts of the plant Cannabis sativa L.,” such as hemp. Continue Reading 2018 Farm Bill Ushers In New Era of Industrial Hemp Cultivation and Regulation
The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly referred to as the Superfund law, directed the United States Environmental Protection Agency (EPA) to create a list of the country’s most hazardous waste sites. Sites are proposed to be placed on this “National Priorities List” (or NPL as it is known to environmental law professionals) if they exceed a certain risk score, or Hazard Ranking, and added to the List if the ranking is confirmed after a formal notice-and-comment process. A detailed set of regulations called the National Contingency Plan (NCP) governs how sites placed on the NPL will be investigated, alternative remedies evaluated, and a final remedy selected and then implemented. The NPL, the NCP, and various EPA guidance memoranda have established what practitioners acknowledge is an imperfect but generally workable process in which EPA and states work with potentially liable parties to manage cleanups at NPL sites. Continue Reading EPA’s Superfund “Emphasis List” : Some New Questions
Last week, the US Environmental Protection Agency (EPA) and US Army Corps of Engineers (Corps) (together, the Agencies) issued a long-awaited proposal to redefine the “waters of the US” (WOTUS) subject to federal regulation and permitting requirements under the Clean Water Act (CWA). The reach of the CWA is notoriously unclear, but knowing which areas on your property are jurisdictional and will require permits is critical to project planning and timelines. If finalized, the proposed rule would replace the Obama administration’s contentious 2015 WOTUS Rule and eliminate the regulatory patchwork that currently exists as the 2015 WOTUS Rule is being implemented in only certain parts of the country. Continue Reading EPA and Corps Release Long-Awaited Proposal to Redefine WOTUS
Nearly two years into the current administration, many questions remain regarding the Environmental Protection Agency (EPA) and US Department of Justice’s (DOJ) approach to environmental enforcement. EPA and DOJ have both issued various policies that we have covered in past blog posts that provide some level of insight on priorities and procedures, but a better assessment can only be made by looking at cases initiated, referred, resolved or concluded after a trial. Continue Reading Environmental Enforcement: Are There Any Trends?
Can permitted, well-operated septic systems at vacation resorts give rise to liability under the Clean Water Act (CWA)? That is the question an Environmental Non-Governmental Organization (eNGO) is asking a federal district court to decide in two cases pending in Massachusetts federal court. Continue Reading eNGO Alleges Cape Cod Resorts Violate the Clean Water Act
Responding to an EPA collection request can be costly, time consuming and stressful for the target of the request—especially because failure to submit a timely and accurate response can result in significant civil or criminal penalties. On November 21, EPA’s Office of Water (OW) and Office of Civil Enforcement (OCE) issued new policies that, if followed, promise to make the process more reasoned and less burdensome. Continue Reading New EPA Guidance Aims to Reduce Burdens, Increase Collaboration of Information Collection Process