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.

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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.

EPA Proposes Changes to the Multisector General Permit That Will Affect Oil and Gas Extraction Permittees

The Environmental Protection Agency (EPA) has proposed a draft Multisector General Permit (MSGP) under the National Pollutant Discharge Elimination System (NPDES) program for stormwater discharges related to industrial activity. In Alaska, EPA has jurisdiction over NPDES permitting on federal property within Denali National Park, in federal waters (three miles or more offshore), and on certain Indian Country lands. In California, EPA has jurisdiction over NPDES permitting under the MSGP on Indian Country lands.

EPA’s draft MSGP proposes several notable changes for oil and gas extraction permittees, referred to as “Sector I” permittees in the MSGP. The most notable is that oil and gas extraction permittees must now sample their discharges for pH, total suspended solids (TSS), chemical oxygen demand (COD), ammonia, nickel, total recoverable lead, nitrate-nitrogen, total recoverable zinc, and hardness. The samples must then be compared to benchmark values. For facilities that exceed a benchmark value, the permittee will be required to follow a set of “additional implementation measures,” which are progressive improvements that include, potentially, stormwater treatment. While benchmark exceedances are not permit violations, failing to follow an additional implementation measure would be a permit violation subject to EPA enforcement and citizen suits. Adding benchmark sampling to the MSGP substantially increases the regulatory burden and cost for oil and gas extraction permittees and creates new risk for permit violations. The draft MSGP also proposes other changes, including posting a sign regarding permit coverage, allowing composite sampling, and addressing major storm events and extreme flooding. Comments on the draft MSGP are due to EPA by May 1, 2020.

Coming Attractions: Section 45Q Carbon Sequestration Guidance, Part II

The IRS’s much anticipated new guidance (here and here) for Section 45Q carbon sequestration tax credits was rather anticlimactic in that it focused on just two of the many issues for which the IRS had solicited comments in May 2019.  Largely patterned after existing IRS guidance for renewable energy tax credits, the new guidance addressed (1) Section 45Q’s requirement that facility construction commence before January 1, 2024, and (2) tax credit allocation within partnerships.

While the new guidance is certainly useful, it unfortunately did not address some of the larger issues, such as whether the IRS would change its approach to Section 45Q’s “secure geological storage” requirement.  For example, carbon sequestration under a Class VI underground injection control (UIC) permit is currently eligible for Section 45Q tax credits, and 50 years is the default post-injection time horizon for the UIC Class VI program.  However, a minimum 100-year time horizon is now required under the carbon sequestration protocol for California’s low carbon fuel standard program.

Another key outstanding issue concerns recapture of Section 45Q tax credits should some leakage occur over time.  For example, how should leakage be measured and at what point would recapture be triggered?  Answers to these sort of questions are critical for project developers and investors.  The IRS’s press release indicates that guidance on at least some of the other issues, including geologic storage security and recapture, is in the works.

Alaska Oil and Gas Conservation Commission Proposes Repeal of Certain Alaska Administrative Code Regulations

The Alaska Oil and Gas Conservation Commission (AOGCC) has proposed a repeal of regulation changes in 20 AAC 25. of the Alaska Administrative Code. Specific regulations proposed for repeal are as follows: 20 AAC 25.037 well control requirements for other drilling and completion operations; 20 AAC 25.047 reserve pits and tankage; 20 AAC 25.225 potential of gas wells; 20 AAC 25.245 common production facilities; 20 AAC 25.260 illegal production; 20 AAC 25.528 open pit storage of oil; and 20 AAC 25.320 filing of forms.

AAOGC intends for the repeal to eliminate outdated or duplicative regulations.

Public comments regarding the proposed regulation changes must be submitted by 4:30 pm on December 10, 2019. Written comments may be submitted to the following address:

Jody Colombie
333 West 7th Avenue
Anchorage, Alaska  99501

Comments may also be submitted by fax (to (907) 276-7542) or email (to aogcc.customer.svc@alaska.gov).

Written comments may also be submitted at a hearing on December 10, 2019, at the above address, which will be held from 10:00 a.m. – 2:00 p.m.

Additional details regarding comment submission, along with directions for requesting a copy of the proposed regulation changes, may be viewed here.

Upon closure of the public comment period, AOGCC may either adopt the repeal or other provisions relating to the same subject, without further notice, or they may decide to take no action.

Federal Mine Safety and Health Review Commission Withdraws Simplified Procedures

The Federal Mine Safety and Health Review Commission (“Commission”) announced that it intends to withdraw its simplified proceedings rule effective November 25, 2019. The Commission’s Federal Register announcement is found here.

The simplified proceedings were originally published in a final rule by the Commission on December 28, 2010. The Commission’s intention was to streamline its increasing caseload by making the administrative process more efficient for the simplest cases, sharply limiting discovery and implementing compressed timeframes for proceedings. The Commission also expected that the simplified proceedings would better support settlement efforts by the Mine Safety and Health Administration and mine operators.

The Commission has since determined that simplified proceedings settle at approximately the same rate as those governed by conventional procedures. In addition, the Commission had given simplified proceedings priority over more complex cases, which resulted in disproportionate Commission attention to the simplest cases.

Given the Commission’s return to conventional procedures, we urge mine operators to exercise discretion in how they choose to handle their cases. While they often can continue to represent themselves before the Commission, they may be more comfortable consulting with experienced counsel before proceeding too deeply into formal litigation.

If you have any questions about the content of this post or about Commission proceedings generally, please reach out to Stoel Rives attorney Willa B. Perlmutter.

Update on Alaska’s Efforts to Finance Oil and Gas Tax Credit Purchases

tax creditIn my most recent column for State Tax Notes, I provide an update on H.B. 331, which was passed by the State Legislature in 2018 to create a mechanism for the issuance of up to $1 billion in bonds to finance oil and gas tax credit purchases. I also look at budget tensions created by the impasse over H.B. 331 as well as a push by some state legislators for additional changes to the structure of the production tax.

A lawsuit was filed challenging in two respects the constitutionality of H.B. 331 – that it might violate the requirement to not dedicate future revenue for a specific purpose or violate limitations on contracting for state debt. In January 2019, a judge of the Juneau Superior Court dismissed the complaint based on a failure to state a claim on which relief can be granted. The plaintiff filed an appeal to the Alaska Supreme Court, and oral arguments before the court were scheduled for September, with the court promising to “decide the case expeditiously.”

With state budget tensions running high, the legislature made no appropriation to the oil and gas tax credit fund this year for the purchase of tax credits, but added a placeholder appropriation of an estimated $700 million for the H.B. 331 bond program to the operating budget, which was signed by the governor.

My next column will include an update on the constitutional challenge to H.B. 331 as well as further discussion about Alaska’s revenue outlook and legislative activity.

Read the article here.

Originally published as “Alaska Taxpayers Feel the Heat” on August 19, 2019, by State Tax Notes.

Alaska DNR Issues Notice of Public Scoping for Possible Appeal Regulations Revisions

The Alaska Department of Natural Resources (DNR) is soliciting public comment regarding potential regulation revisions involving the process for filing and handling appeals and requests for reconsideration under 11 AAC 02.

No specific regulations are being proposed at this time. Rather, DNR is seeking public input and suggestions before the department begins drafting proposed regulations. DNR is seeking feedback on whether and how the department could revise the current regulatory framework related to providing public notices for certain land management issues, with the goal of clarifying and improving the appeal process, and to address existing ambiguities.

The regulations under review were last significantly revised in 2001. Since that time, DNR has handled a substantial volume of appeals and requests for reconsideration. By soliciting feedback on this process, DNR hopes to craft revised regulations that best serve the public and parties affected by DNR decisions.

Comments should specify the regulation or provision of a regulation to which the feedback applies. All submitted feedback will be reviewed by DNR, and any subsequent proposed regulatory developments will be released for public review and comment under the Administrative Procedures Act found in AS 44.62.

Written feedback must be received by DNR no later than 5:00 p.m. on Friday, November 15, 2019. All submissions must be sent by mail or email to the DNR contact below:

Joseph Joyner
Alaska Department of Natural Resources
550 West 7th Avenue, Suite 1070
Anchorage, Alaska 99501-3577
dnr.appeal.regulation@alaska.gov

MSHA Announces Reinstatement of 2017 Obama-Era Rule on Workforce Examinations

On Monday, September 30, the Mine Safety and Health Administration (MSHA) reinstated an Obama-era rule imposing heightened requirements for health and safety workplace examinations in surface metal and nonmetal mines. The reinstatement represents yet another volley in an already protracted regulatory process spanning two presidential administrations and multiple lawsuits.

The 2017 Obama-era rule, marking one of the administration’s final acts, required that:

  1. workplace exams had to be completed before miners begin work in the area examined;
  2. operators had to notify miners in the affected areas of conditions that might adversely affect health and safety;
  3. operators had to promptly initiate action to correct those adverse conditions;
  4. the workplace exam records had to include specific information, including, among other things, a description of all conditions found that might adversely affect health or safety and a notation as to when the corrective actions were complete; and
  5. records of the workplace exams had to be made available to MSHA and miner representatives upon request.

The rule initially went into effect on October 2, 2017. Just three days later, however, MSHA withdrew the rule, delaying the effective date to June 2018.

Following the 2017 election, the Trump administration published a revised rule that featured two key changes. First, examinations could be carried out either before work starts or as work was getting underway. Second, exam records no longer had to document adverse conditions, so long as the conditions were promptly corrected.

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Rental Rate Increases Go into Effect for State of Alaska Mining Claims, Leasehold Locations, Prospecting Sites, and Mining Leases

New rental rates are now in effect for state mining claims, leasehold locations, prospecting sites, and mining leases in Alaska. The new rental rates became effective on August 30, 2019, and thus are applicable to the rental year that commenced on September 1, 2019.

These increases were made by the State of Alaska Department of Natural Resources (DNR) under Alaska Statute 38.05.211, which requires DNR to adjust the rental rates every 10 years based on the change in the Bureau of Labor Statistics Consumer Price Index (CPI) for Alaska. The last adjustment was completed in 2009.

The new rental rate schedule may be viewed here.

Rent for the rental year commencing on September 1, 2019, must be paid in accordance with the new rates at the DNR office in Anchorage or Fairbanks no later than Monday, December 2, 2019. The regular due date of November 30 falls on a Saturday, so under 11 AAC 88.130(d) the due date is extended “to the next day the office is open to the public.” Note that last year DNR unexpectedly closed its Anchorage office on November 30, and many state computer systems were offline on that date and for several days thereafter, due to the earthquake that struck at 8:29 a.m. that morning. To avoid such unforeseen circumstances affecting either your ability to pay or DNR’s ability to accept payment, we recommend that you make your payment well before the deadline.

Claimants who make a partial payment based on the old rates should receive notice and an opportunity to cure under 11 AAC 86.221(e).

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