U.S. Supreme Court Holds that Natural Gas Pipeline May Cross Under Appalachian Trail

On June 15, 2020, the U.S. Supreme Court held in United States Forest Service v. Cowpasture River Preservation Association that the U.S. Forest Service was authorized to issue a special use permit granting a 0.1-mile right of way under the Appalachian Trail (“Trail”) to Atlantic Coast Pipeline, LLC (“Atlantic”) for a proposed underground natural gas pipeline.  The proposed Atlantic Coast pipeline is 604 miles long and connects West Virginia to North Carolina.  The Supreme Court’s 7-2 decision overturned a ruling by the 4th Circuit Court of Appeals which held that the Forest Service did not have the authority to grant the special use permit and right-of-way.  The 4th Circuit found the Appalachian Trail became part of the National Park System when the Secretary of the Interior delegated its authority over the Trail’s administration to the National Park Service, and the Mineral Leasing Act prohibits pipeline rights-of-way through lands in the National Park System.  In overturning the 4th Circuit, the Supreme Court found that the Department of the Interior’s decision to assign responsibility over the Trail to the National Park Service did not transform the land over the Trail passes into land within the National Park System.  Therefore, the Forest Service had the authority to issue the special use permit because administrative action by the Forest Service in making the transfer of the Trail could not alter Congressional action in creating the Trail in the first instance.

Developers of the Atlantic Coast pipeline argued that upholding the 4th Circuit’s ruling would prevent natural gas development on the east coast.  During oral argument, several of the justices’ questions seemed to indicate a desire to find a practical solution to the problem that the transfer of the Trail to the Park Service created for Atlantic.  Though this Supreme Court decision is a victory for Atlantic, Atlantic still faces an uphill battle to construct the pipeline as several more necessary approvals are currently tied up in litigation.

Changes to Alaska’s Mining Laws – Qualification Statutes

Senate Bill 155, amending Alaska’s mineral tenure statutes, took effect April 30, but also addresses certain historical events affecting state mining claims. As previously reported, the amendments clarify who can hold state mining rights. But maybe more importantly, the law now addresses the effect of past qualification issues on the validity of the mineral interests.

Alaska law has long required that a corporation could hold state mining rights only if it is organized under U.S. law (including the laws of any state or territory) and qualified to do business in the State of Alaska. But in some instances, a mining claim’s history includes a time when a foreign entity held the mining claims or the business qualifications had lapsed in some manner and then been cured. The effect of these historical events on the current validity of the claims was unclear. Continue Reading

Draft North Slope Area Plan Available for Public Review and Comment

Stoel Rives is actively monitoring developments in the North Slope Area Plan (NSAP).  This week, the Public Review Draft of the NSAP was issued for public review and comment. Comments must be received by mail, email, fax, or through the online public comment portal by not later than July 15, 2020. Comments may also be hand delivered to the DNR Resource Assessment and Development Section office in Anchorage during normal business hours of operation.

We will continue to monitor developments related to the NSAP and provide updates.  However, should you have questions related to the NSAP or the Public Review Draft, please contact our office.

Alaska’s Mineral Tenure Statutes Amended

Governor Mike Dunleavy signed Senate Bill (“SB”) 155 amending Alaska’s mineral tenure statutes, effective April 30, 2020. The legislation addresses issues regarding qualification to hold state mining claims, location of claims, statements of annual labor, and automatic abandonment of mining claims. The amendments and additions to the statutes clarify a number of issues and assure that state mining claims are not deemed abandoned without due process.

Qualifications

SB 155 amends AS 38.05.190 to clarify who may hold exploration and mining rights. As amended, the law expressly authorizes limited liability companies qualified to do business in Alaska and registered trusts to acquire and hold state mining claims. Previously, it was not clear that these types of entities could hold claims, or what effect such ownership may have on the claims. The amendments include a notice and cure process by which the Department of Natural Resources (“DNR”) may void a mining interest if a qualification defect is not cured within 90 days after notice. The requirement that an owner be a citizen of the United States or a business entity organized in the United States, with limited exceptions, remains in the statute. Continue Reading

Alaska DNR Issues Guidance for Placer Mining Operations During COVID-19

The Department of Natural Resources (“DNR”) Division of Mining, Land and Water has issued guidance for placer mining operations to comply with the state’s COVID-19 health mandates. Mining is identified as “critical infrastructure” in the Alaska Essential Services and Critical Workforce Infrastructure Order. Before traveling to their placer operation, and while at their operation, miners must practice appropriate social distancing and comply with Health Mandate 10 regarding interstate travel and self-quarantine, and Health Mandate 12 regarding intrastate travel.

Miners traveling from outside of the state are required to quarantine for 14 days upon arrival. This quarantine must occur before miners begin to acquire supplies or mobilize their placer operations. Miners who are located in the state and those who have completed the required 14-day quarantine should purchase supplies and provisions in their local home area before traveling to their placer operation. Additionally, if workers are required to travel between communities, a plan must first be submitted to the state outlining how they will avoid spreading COVID-19.

Alaska Suspends Fees for Easements, Rights-of-Way, and Mining Leases

State of Alaska Governor Mike Dunleavy has issued COVID-19 Disaster Order of Suspension No 2, suspending a long list of statutory and regulatory provisions. The list of suspended statutes includes AS 38.05.850 which authorizes the state to grant easements and rights-of-way for roads, pipelines, and other facilities associated with the extraction of minerals. Under such authorizations, payment due dates are suspended and no late fees will be charged. The Order suspends each statute or regulation until 11:59 p.m. on May 11, 2020, unless otherwise noted.

Also, the Division of Mining, Land and Water has issued a finding that payments due under a land sale contract or lease “that are or will be prevented because of the COVID-19 pandemic are prevented by an act of God and may be extended” until 5:00 p.m. on July 10, 2020. The extension expressly applies to an Upland Mining Lease, a Mill Site Lease, and an Offshore Mining Lease. To qualify for the extension, an affected person must submit a written request including an explanation of how the COVID-19 pandemic has prevented or will prevent their compliance with the required land sale contract or lease payment.

AOGCC Implements Electronic Permitting Procedures in Response to Office Shutdowns Caused by COVID-19

tax creditLast month, the Alaska Oil and Gas Conservation Commission (AOGCC) announced that it would be implementing electronic permitting procedures in response to office shutdowns caused by COVID-19. The electronic process will also serve as the initial step in developing a fully electronic permitting and reporting system.

The initial system will utilize “AOGCC-designed fillable PDF and Excel forms, emails, and secure FTP sites provided by each Operator.” The Industry Guidance Bulletin 20-001, released by AOGCC, provides guidance on how to complete permit to drill and sundry applications. The Industry Guidance Bulletin 20-002 includes instructions for filling out and submitting AOGCC-designed forms for sundry and well completion reports.

As of April 1, all sundry reports and well completion reports must be submitted via digital formal. Also effective April 1, “Operators shall hold data submittals until a secure, operator-hosted FTP server is available for AOGCC access, which shall be no later than April 20, 2020.” All materials submitted electronically will be stored in accordance with AOGCC’s confidential documents protocols.

Reversing 30-Year Policy, U.S. DOJ Says Settlements Can No Longer Include Supplemental Environmental Projects (SEPs)

This post was co-authored by Beth Ginsberg & Krista McIntyre.

The U.S. Department of Justice (U.S. DOJ) recently issued a memorandum stating that settlements, including consent decrees, entered by the Environmental Protection Agency (EPA) and other federal agencies can no longer include a Supplemental Environmental Project (SEP), unless the SEP is expressly authorized by Congress. Companies and individuals accused of violating environmental laws and permits, like Clean Air Act and Clean Water Act permits, commonly agree to perform SEPs to fund projects that go beyond compliance instead of paying a higher cash penalty to the U.S. Treasury. Going forward, companies, individuals, and local governments will no longer have SEPs as a settlement option.

To support this policy reversal after more than 30 years, U.S. DOJ cites to the Miscellaneous Receipts Act, which grants only Congress the authority to decide how to appropriate federal funds. The U.S. DOJ views SEPs as federal funds, and, in U.S. DOJ’s opinion, the EPA and other federal agencies lack the authority to divert those funds to third party recipients and to select the projects that should receive the funds. The power of the purse rests squarely with Congress. “[W]ith SEPs, money otherwise destined for the Treasury finds its way to another destination, not at the insistence of Congress, where the Constitution puts that authority, but instead at the insistence of an administrative agency, or a non-federal entity, or some combination thereof.” Continue Reading

PHMSA Issues Guidance on Enforcement During COVID-19 Outbreak

Like many other regulators, on March 20, 2020 the Pipeline and Hazardous Materials Safety Administration (PHMSA) released guidance on enforcement activity during the novel coronavirus (COVID-19) outbreak. The guidance states that “PHMSA does not intend to take any enforcement action with regard to [operator qualification] and [control room management] requirements, and will consider exercising its enforcement discretion with regard to Part 199 drug testing requirements.” PHMSA is “taking into consideration the exigent circumstances” that may cause regulated operators difficulty in compliance with:

  • 49 C.F.R. §§ 192.801-.809, 193.2707-.2709, 193.2713-.2717, and 195.501-.509 (operator requirements); and
  • 49 C.F.R. §§ 192.631(d)(4) and 195.446(d)(4) and (h) (control room requirements).

PHMSA’s guidance provides that operators unable to maintain compliance with the regulations should communicate with their regulator and maintain documentation explaining:

  • what specific requirements are not being met;
  • how the noncompliance is related to COVID-19; and
  • what alternative measures are being taken to ensure safety.

Continue Reading

Update on Alaska’s Ongoing Budget, Regulatory and Tax Disputes

tax creditIn my latest State Tax Notes column, I provide an update on H.B. 331, which was passed by the State Legislature in 2018 to create a mechanism to finance the purchase of some $700 million in outstanding rebatable tax credits. I also look at continuing budget tensions in the state, efforts to reduce and simplify various regulations, and the Alaska ‘Fair Share Act’ Initiative, which if enacted would impose a sizable tax increase on some North Slope oil producers.

A lawsuit was filed in 2018 challenging the constitutionality of H.B. 331, and the Department of Revenue is waiting to proceed with the bond program until after the litigation is completed. In January 2019, a judge of the Juneau Superior Court dismissed the complaint, the plaintiff filed an appeal to the Alaska Supreme Court, and oral arguments were held before the court in September. The court has not issued its decision, but once it does, it will likely be several months for the DOR to start the bond program and a few more before it begins purchasing tax credits.

Alaska’s budget tensions have also continued, with higher oil production costs, the threat of production declines and reduced prices continuing to affect state revenues, already highly dependent on the oil and gas industry. The DOR noted that unrestricted general fund revenue was $2.6 billion in fiscal year 2019 and is projected to be $2.1 billion in fiscal 2020 and $2 billion in fiscal 2021.

My next column will include an update on legislative and agency activity surrounding Alaska’s fiscal regime and any tax measures, and a status report on the Alaska Supreme Court appeal concerning H.B. 331. Depending on the status of the Fair Share Act initiative, I may also include a more in-depth discussion about the initiative process in Alaska and the proposal itself.

Read the article here.

Originally published as “Alaska: Preparing for a Tumultuous Year” on January 20, 2020, by State Tax Notes.

LexBlog