Posts Tagged ‘GGF’

(Posted by Grant Maki, OEC Attorney Of Counsel)

This is the first of a series of posts highlighting a few situations where a landowner could face liability for the conduct of a company that leases their land for natural gas drilling.

So you’ve signed on the dotted line to finalize an oil and gas lease, and now the trucks are rolling in and the drilling rig is being set up right there on your land.  You hear all the machines humming and see workers connecting hoses to some of trucks lined up on the pad.  For the first time, you realize just how much goes into drilling in the Marcellus shale.  You start to wonder: what will happen if something goes wrong?  Could you be left holding the bag for the cleanup of environmental contamination?

It turns out that you could.  Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”, also known as “Superfund”) in 1980 to help clean up sites that have been contaminated with hazardous substances.  The government can clean the contaminated sites and then use CERCLA to force the parties responsible for the contamination to pay back the costs.

Unfortunately for landowners, CERCLA can require payment from a very broad range of “potentially responsible parties,” including the owner or operator of a “facility” and the person who owned or operated a facility during which time the disposal of a hazardous substance occurred.[1]  The term “facility” is defined as “any site or area where a hazardous substance has . . .come to be located”.[2]  This has been interpreted by courts to include a the whole area around the contamination that had the same general function[3]—probably at least an entire well pad in the case of an oil and gas operation.

BUT ISN’T OIL & GAS EXEMPT FROM CERCLA?  It is true that 42 U.S.C. § 9601(14) exempts petroleum and natural gas from regulation under CERCLA.  It does not, however, exempt any materials that have been mixed with petroleum or natural gas, waste products from natural gas drilling operations, or chemicals brought in for use in such operations.  See, for example, United States v. Gurley, 43 F.3d 1188, 1199 (8th Cir.1994) (limiting the exemption to crude petroleum products or refined products, and declining to extend the exemption even to used petroleum products.)  

To make sense of these rules, let’s apply them to a hypothetical gas lease situation.  Say the landowner signs a lease to allow a company to drill for gas on his land.  The company drills the well, harvests the gas, plugs the well, and leaves.  Then, years later, something happens.  Maybe its a few cracks in the cement casing that is supposed to keep the hazardous chemicals that were forced underground from rising to the surface.  Maybe one of the tanks that stored a hazardous substance developed a slow leak that was never noticed until the chemicals seeped through the soil all the way to a nearby creek.  Whatever the cause, imagine that the contamination doesn’t becomes apparent until 30 years after the end of the lease.

If the site qualified for CERCLA, the government could come in and clean it up.  Then it would look for potentially responsible parties to pay them back under CERCLA.  Even though the landowner didn’t handle chemicals or drill the well, they are the “owner” of an “area where a hazardous substance has . . . come to be located”.  That is enough to make them a potentially responsible party under CERCLA.

Now things start to get pretty scary for the land owner.  CERCLA provides for strict liability for any potentially responsible party, without regard to who actually caused the contamination.[4]  CERCLA also provides that all of the potentially responsible parties are held jointly and severally liable for the contamination—this means that the government can put the whole bill on any one responsible party and leave it to them to settle the allocation amongst the other parties.[5]  This means that if the companies that caused the contamination have been dissolved, the landowner could be the only potentially responsible party left, and they would have to pay the entire bill.

It’s far past the scope of this blog post to get into the nuances of exactly when a landowner could be liable, and for how much.  I’s also past the scope of this post to discuss how and to what extent landowners can protect themselves from CERCLA liability—that’s an issue for an individual landowner to bring up with their attorney.

Our purpose here was to show that landowners could be exposed to liability under CERCLA if their land becomes contaminated with hazardous waste as a result of a shale gas lease, even though it wasn’t their fault.  Without the proper protections in the lease, the landowner could have to spend a considerable amount of time and money with a very qualified attorney to defend the case in federal court at the very least. At the worst, they could be left holding the bag for the entire cost of cleanup.

[1] 42 U.S.C. § 9607(a)(1) and (2)

[2] 42 U.S.C. § 9601(9)(B)

[3] See United States v. Twp. of Brighton, 153 F.3d 307, 312-13 (6th Cir.1998).

[4] State of N.Y. v. Shore Realty Corp., 759 F.2d 1032, 1042 (2d Cir.1985)

[5] J.V. Peters & Co. v. E.P.A., 767 F.2d 263 (6th Cir. 1985); U.S. v. ChemDyne Corp., 572 F. Supp. 802

(S.D. Ohio 1982).

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Keep the Burden on the Industry to Protect Ohio from Fracking’s Risks

(Posted by Grant Maki, Attorney, Ohio Environmental Council)

There are a lot of unknowns about the potential impacts of fracking.  The technologies involved in fracking have never been done on this kind of scale before, and the impacts have not been thoroughly studied.  How likely is groundwater contamination—and over what timeframe?  How do we reconcile the divergent reports about the risks to air quality and global warming?  Even our regulators admit that there are many unknowns, and industry is often two steps ahead of regulation.

OEC and its attorneys with the Ohio Environmental Law Center are working now to develop protective regulations to present to ODNR and Ohio EPA to make sure the air, land, and water in Ohio’s Gaslands are protected.

Because of the unprecedented scale of hydraulic fracturing activities expected to come to Ohio, we need an effective set of laws in place that will make sure that people are quickly and fully compensated even for risks that are well understood, like the risk that a truck carrying chemicals to a well site springs a leak.  But when there is so much uncertainty and the State has taken a regulatory approach that can be described as “drill first, ask questions later,” it becomes even more important to plan for the fact that many impacts caused by fracking will “fall through the cracks.”

Thus, lawmakers should be concerned with creating a set of rules that can quickly and cost-effectively adjudicate disputes surrounding the harms caused by fracking.   Lawmakers should also try to create a set of rules that gives the people who know the most about the industry—the fracturing companies themselves—the proper incentives to avoid harms by forcing them to internalize all of the costs of their activities.

So beyond the necessary water quality and property rights regulations that desperately need strengthened, the actual legal and regulatory structure, itself, also needs an overhaul.

The Law Center has developed a list of five recommendations for how lawmakers can prepare the legal system to “fill in the cracks” in our regulatory scheme.  Because there is so much unknown about this industry—in part because the technology and industry practices are changing rapidly and vary from site to site—the proposed framework is designed to assign costs to the drilling companies while placing minimal administrative burden on the courts.

Read the Law Center’s Fracking Litigation Report VOL. 1 Filling in the Structural Cracks of Fracking Regulation for details on what the General Assembly can do to fix the system.

First, pre-drilling, post-drilling, and continuous environmental quality monitoring should be borne by the industry . . period.

Secondly, drilling companies should be held strictly liable for all harms caused by fracking operations, and rules should be put in place to minimize the administrative burden on both the courts and on parties seeking redress.

Furthermore, insurance requirements should be required to provide for potential catastrophic risks, and a severance tax should be levied to pay for latent harms that are not yet apparent, and to plug the abandoned oil wells that provide a potential pathway for fracking fluid migration.

Finally, drilling companies should have to pay attorneys fees and court costs for plaintiffs who successfully sue them for damages.

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(Posted by Grant Maki, Of Counsel for the Ohio Environmental Council)

John and Marilyn Saveson live on their family farm and want to pass it on to their children, as Savesons have done for generations.   Savesons have lived on that land since John Saveson’s great-grandfather acquired it in a state of wilderness over a century ago.  

Today, John and Marilyn feel a strong connection to this piece of land that is so tied up in their family history.  They also have a strong conservation ethic—just one of the old-fashioned farming values that have been passed down through generations of Savesons.

So they called the Natural Resources Conservation Service and asked about enrolling their land in the Wetlands Reserve Program (“WRP”).  This program is part of the U.S. Farm Bill, and it provides financial and technical assistance to help farmers install wetlands on part of their property and dedicate it to conservation.  The Savesons had put other land into the WRP once before, so they felt confident that they were doing the right thing for future generations.  They set aside most of their land for wetland conservation, and plotted out a small area on the remaining land for their children to build homes.

The Savesons excitedly signed the papers in 2010 and started working on constructing the wetland.

But they were in for a rude surprise.  In 2011 the Department of Taxation changed course on a decades old practice.  For the past 30 years, lands enrolled in WRP have qualified for a lower tax status known as the “Current Agricultural Use Valuation” (“CAUV”).  CAUV applies to all agricultural lands and all lands enrolled in a qualifying conservation program under the federal government.

In October 2011, however, the Department of Taxation decided that WRP lands no longer qualified.  Without passing any legislation or even providing any public notice, the Department sent out a memo to local auditors that WRP lands should be taxed more heavily.  Even though the Savesons had already put their land into WRP a year before the Department of Taxation changed its mind, they were given a tax bill of over $50,000.

There are a lot of things that aren’t right about this.  The Department of Taxation is throwing the small family farmer, Ohio’s wetlands, and the Ohio Constitution’s prohibition on retroactive laws under the bus-  All, in one move.  We at the OELC are thrilled to have the Savesons as clients.  That’s why we appealed this case at the Board of Revisions in August, and we’re ready to take it all the way to the Supreme Court if we have to.

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(Posted by Grant Maki, Of Counsel, Ohio Environmental Council)

Yesterday, OELC filed comments to Ohio EPA on a rather delicate situation in a very delicate area — Cash-strapped public school’s need for updates and expansion against destroying some of the few high quality wetlands Ohio has left.

SheffieldSheffield Lake City School District, in Lorain County plans to expand its high school.  Unfortunately, the project would fill in 5.6 acres of rare, high-quality category 3 wetlands.  On the positive side, the Schools proposed to place the remaining 39.4 acres of equally high-quality wetland on their property under a conservation easement that would preserve them in perpetuity.

The Schools were almost forced into this situation as previous poor planning left them with a parcel covered in wetlands and a pot of money that is specifically limited by a ballot initiative to be spent only on construction and renovation—not buying new land.

The Schools made a good faith effort to limit their impact to the wetland.  Their original design would have filled over 12 acres of wetland—over twice what they are proposing to fill today.  Still, the proposal has numerous inadequacies that we pointed out in our comments.

Probably the most important issue that we focused on is the Schools’ plan to run a wetlands ecology class in the property.  If that class is structured correctly, the students could improve and maintain the wetland while learning about ecology by doing things like removing invasive species.  But if these same activities are not done in the right way, they could actually harm the wetland.  We urged the Schools to find a highly qualified wetlands scientist to design the curriculum and train school faculty on wetland stewardship.

The Schools’ application also mentioned plans to put one or more trails through the wetland.  Trails can have significant impacts to sensitive species that may live in the wetland.  We asked that all trails be routed around the edge of the wetland, rather than through the middle of it.

We hope that the Schools and Ohio EPA, who will ultimately approve or deny the permit application, will take note of our comments and address these problems.

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