The Colorado General Assembly wrapped up its 2022 legislative session on May 11, 2022. In our February newsletter, we provided an overview of energy-related bills as of February 8, 2022. At that time, only a handful of energy-related bills had been proposed. But by the end of the session, the legislature considered almost 20 bills related to energy, environmental protection, and air quality. This update highlights some of the final bills that were passed and some that were not.

Energy-Related Bills That Passed

Many of the bills passed this session are aimed at furthering clean energy development in Colorado. Here are some of the highlights:

• House Bill 22-1381, Colorado Energy Office Geothermal Energy Grant Program: This bill creates a geothermal energy grant program to facilitate the development of geothermal heating systems and geothermal electricity generation.
• Senate Bill 22-118, Encourage Geothermal Energy Use: This bipartisan bill seeks to encourage the use of geothermal energy by providing regulatory treatment similar to that afforded solar energy. Among other provisions, the bill requires the Colorado energy office to develop basic consumer education and guidance about leased or purchased geothermal installation, in consultation with industries that offer these options to consumers.
• Senate Bill 22-110, Equip Wind Turbine Aircraft Detection Lighting System: This bill requires an owner or operator of certain wind-powered energy generation facilities to equip them with an aircraft detection lighting system.
• House Bill 22-1362, Building Greenhouse Gas Emissions: This bill updates the state’s minimum energy code requirements. Among other things, the bill requires the creation of the building electrification for public buildings grant program, creating the high-efficiency electric heating and appliances grant program, and establishing the clean air building investments fund.
• House Bill 22-1355, Producer Responsibility Program For Recycling: This bill requires companies that sell consumer-facing packaging to join a producer responsibility organization, which in turn would charge fees to fund a statewide recycling system.

Energy-Related Bills That Failed

One of the more prominent energy-related bills to fail in the 2022 legislative session was Senate Bill 22-138, titled Reduce Greenhouse Gas Emissions In Colorado. This bill concerned measures to promote reductions in greenhouse gas emissions by, among other things, incentivizing people to buy electric lawn equipment. It also included measures directed at streamlining carbon capture and sequestration projects in Colorado, including giving the Colorado Oil and Gas Conservation Commission authority to issue and enforce Class VI injection wells used for sequestration of greenhouse gases.

In addition, two of the bills mentioned in our February 2022 newsletter were ultimately rejected by the legislature. Senate Bill 22-073, titled Alternative Energy Sources, would have directed the state to investigate the feasibility of using small modular nuclear reactors as a carbon-free energy source for Colorado. That bill was sent to the State, Veterans, and Military Affairs Committee, where it ultimately died. House Bill 1140, titled Green Hydrogen To Meet Pollution Reduction Goals, would have directed the state to recognize green hydrogen as a renewable energy source that certain retail electric service providers could use to meet statewide greenhouse gas pollution reduction goals. That bill was ultimately killed in the House Energy and Environment Committee.

What Should We Expect from the 2023 Legislative Session?

It’s too soon to say. But at the end of this session, none of the bills proposed addressed pore space ownership. As we noted in our February 2022 newsletter, ownership of the pore space remains unresolved in Colorado, and obtaining certainty about who owns the pore space is critical to encouraging investment in carbon capture, use, and sequestration projects. Given this uncertainty, we might expect to see the Colorado legislature pick up that issue during the 2023 legislative session.

On December 17, the Fifth Circuit’s stay of the Occupational Safety and Health Administration (OSHA) COVID-19 rule for employers with 100 or more employees was dissolved. While it is likely there will be petitions for the Sixth Circuit to rehear the case en banc, and there have been appeals filed in the U.S. Supreme Court, there is no stay currently in place.

OSHA had previously announced that it would “stand down” during the Fifth Circuit’s stay. The rule’s December 5th deadline to put a written vaccination or “mask and test” policy in place has already passed. The December 17th announcement read:

OSHA is gratified the U.S. Court of Appeals for the Sixth Circuit dissolved the Fifth Circuit’s stay of the Vaccination and Testing Emergency Temporary Standard. OSHA can now once again implement this vital workplace health standard, which will protect the health of workers by mitigating the spread of the unprecedented virus in the workplace.

To account for any uncertainty created by the stay, OSHA is exercising enforcement discretion with respect to the compliance dates of the Emergency Temporary Standard (ETS). To provide employers with sufficient time to come into compliance, OSHA will not issue citations for noncompliance with any requirements of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard. OSHA will work closely with the regulated community to provide compliance assistance.

OSHA is currently intending to enforce this standard commencing on January 10, 2022, barring another stay. In order to be in compliance with the standard on January 10th, some work toward developing a written policy will be needed to move forward.

Please contact Laura Riese or a Davis Graham Partner if you have any questions or if we can assist you with any legal needs.

On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act, Public Law No: 117-58, a piece of bipartisan legislation known for months as the “Infrastructure Bill” (“Infrastructure Act”). The Infrastructure Act appropriates $1 trillion to improve and modernize the United States’ infrastructure. Among its many legislative priorities, the Infrastructure Act contains provisions relating to carbon capture, utilization, storage, and transportation infrastructure, conventional oil and gas development, critical minerals, and existing mining communities.

Carbon Capture, Utilization, Storage, and Transportation Infrastructure – Division D, Title III, Subtitle A

The Infrastructure Act includes numerous provisions related to carbon capture, utilization, storage, and transportation infrastructure; Division D, Title III, Subtitle A is entirely devoted to these issues.

In the Infrastructure Act, Congress makes several policy findings to support funding for carbon capture projects, including:

• “carbon capture and storage technologies are necessary to reduce hard-to-abate emissions from the industrial sector,” § 40301(2);
• “carbon removal and storage technologies, including direct air capture, must be deployed at large-scale in the coming decades to remove carbon dioxide directly from the atmosphere,” § 40301(3); and
• “carbon dioxide transport infrastructure and permanent geological storage are proven and safe technologies with existing Federal and State regulatory frameworks,” § 40301(6).

Congress also suggests that, with respect to new carbon dioxide transportation infrastructure, each state should consider treating the infrastructure as pollution control devices under state law and establishing a waiver of ad valorem and property taxes for the infrastructure for at least 10 years. §40301(8).

Class VI Permitting

Section 40306(b) authorizes appropriations of $5,000,000 per year from 2022-2026 for permitting of Class VI wells for the injection of carbon dioxide for the purpose of geologic sequestration in accordance with the requirements of the Safe Drinking Water Act. This section also establishes State permitting program grants to grant funding to States to “defray the expenses of the State related to the establishment and operation of a State underground injection control program.” § 40306(c)(2). A total of $50,000,000 per year from 2022-2026 is appropriated for the State grant program.

Geologic Carbon Sequestration on the Outer Continental Shelf

Section 40307 amends the Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1337(p)(1), to authorize the Secretary of the Interior to grant a lease, easement, or right-of-way on the outer Continental Shelf for activities that “provide for, support, or are directly related to the injection of a carbon dioxide stream into sub-seabed geologic formations for the purpose of long-term carbon sequestration.” Section 40307 also amends OCSLA, 43 U.S.C. § 1331, to incorporate definitions of “carbon dioxide stream” and “carbon sequestration.”

Elsewhere in the Infrastructure Act, Section 40343 amends OCSLA, 43 U.S.C. 1337(p)(1)(C), to authorize the Secretary of the Interior to grant a lease, easement, or right-of-way on the Outer Continental Shelf for activities that produce or support “storage” of energy from sources other than oil and gas.

Section 40307(d) directs the Secretary of the Interior to develop regulations to implement the amendments to the OCSLA related to carbon sequestration.

Carbon Utilization Program

Section 40302 amends Section 969A of the Energy Policy Act of 2005 (“EPAct”), 42 U.S.C. § 16298a, and directs the Secretary of Energy to develop a program to provide grants to states, local governments, and public utilities and agencies to procure and use commercial or industrial products that (i) use or are derived from anthropogenic carbon oxides; and (ii) demonstrate significant net reductions in lifecycle greenhouse gas emissions compared to incumbent technologies, processes, and products.

Carbon Storage Validation and Testing

Section 40305 amends EPAct, 42 U.S.C. § 16293, to direct the Secretary of Energy to establish a large-scale carbon storage commercialization program. Under this program, the Secretary would provide funding for the development of new or expanded commercial large-scale carbon sequestration projects and associated carbon dioxide transport infrastructure, including funding for the feasibility, site characterization, permitting, and construction stages of project development.

The Secretary must establish an application process for projects at any stage of development to receive funding. In selecting projects for funding, the Secretary must give priority to projects with substantial carbon dioxide storage capacity or projects that will store carbon dioxide from multiple carbon capture facilities. Section 40305 appropriates $2.5 billion for this program.

Carbon Dioxide Transportation Infrastructure Finance and Innovation Program

Section 40304 amends EPAct, 42 U.S.C. § 16181 et seq., to establish the Carbon Dioxide Transportation Infrastructure Finance and Innovation program or “CIFIA program” under EPAct. § 40304(a). The Infrastructure Act directs the Secretary of Energy to establish a transportation infrastructure finance and innovation program to provide grants or federal credit instruments to private entities for pipelines, shipping, rail, or other infrastructure to transport carbon dioxide captured from anthropogenic sources or air.

Projects are eligible for financing under the CIFIA program if: (1) the entity planning a project submits a letter of interest prior to submission of its application; and (2) the project meets the statute’s criteria. § 40304 (§ 999B). The project proponent must be creditworthy and have a reasonable prospect of repaying any Federal credit instrument. § 40304 (§ 999B(b)(1)). A project is eligible to seek funding under this program if the eligible project costs are reasonably anticipated to equal or exceed $100 million. § 40304 (§ 999B(b)(4)). In addition, to be eligible under the CIFIA program, an applicant must show a “reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which the Federal credit instrument or grant is obligated for the project under the CIFIA program.” § 40304 (§ 999B(b)(8)). Further, financing is available only for projects that exclusively use iron, steel, and manufactured goods produced in the United States. § 40304 (§ 999B(e)).

The Secretary is directed to give priority in selecting projects to receive credit assistance to projects that: (A) are large-capacity, common carrier infrastructure, (B) have demonstrated demand for use of the infrastructure by associated projects that capture carbon dioxide; (C) enable geographic diversity in associated projects that capture carbon dioxide; and (D) are sited within, or are adjacent to, existing pipeline or other linear infrastructure corridors to minimize environmental disturbance and other siting concerns. § 40304 (§ 999B(c)(2)).

Federal credit assistance under the CIFIA program is only available for projects that received a decision or categorical exclusion under the National Environmental Policy Act (NEPA). § 40304 (§ 999B(d)(2)). Provision of credit assistance under the CIFIA program also does not relieve an applicant of any state and local legal requirements. § 40304 (§ 999F).

Carbon Removal

Section 40308 amends EPAct, 42 U.S.C. § 16298d, to direct the Secretary of Energy to establish a program to fund direct air capture projects that will contribute to the development of four “regional direct air capture hubs.” Such hubs will be networks of direct air capture projects, potential carbon dioxide utilization off-takers, connective carbon dioxide transport infrastructure, subsurface resources, and sequestration infrastructure located within a region, which have capacity to capture and sequester, utilize, or sequester and utilize at least 1 million metric tons of carbon dioxide from the atmosphere annually.

The Secretary will select projects in regions with existing or recently retired “carbon-intensive fuel production or industrial capacity.” Two regional direct air capture hubs must be located in “economically distressed communities in the regions of the United States with high levels of coal, oil, or natural gas resources.” Priority will be given to projects that are likely to create opportunities for skilled training and long-term employment to the greatest number of residents of the region.

Within 180 days of enactment of the Infrastructure Act, the Secretary of Energy must solicit applications for funding of eligible direct air capture projects and must make selections based on these applications within three years. The Secretary may make grants, or enter into cooperative agreements or contracts, with selected projects to accelerate commercialization of, and demonstrate the removal, processing, transport, sequestration, and utilization of, carbon dioxide captured from the atmosphere.

Carbon Capture Technology Program

Section 40303 amends Section 962 of EPAct, 42 U.S.C. § 16292, to expand a carbon capture technology program to include a “front-end engineering and design program for carbon dioxide transport infrastructure necessary to enable deployment of carbon capture, utilization, and storage technologies.” Congress allocated $100,000,000 for 2022-2026 to fund this program.

Conventional Oil and Gas Development

The Infrastructure Act establishes a categorical exclusion under NEPA for gathering lines on federal and Indian lands. The Infrastructure Act also prioritizes the plugging and abandonment of orphaned oil and gas wells on both federal and nonfederal lands. Further, it calls for a study of the impacts on President Biden’s decision to revoke the permit for the Keystone XL Pipeline.

Statutory Categorical Exclusion for Gathering Lines on Federal and Indian Lands – Division A, Title I, Subtitle C

Section 11318 creates a categorical exclusion under NEPA for certain gathering lines on federal or Indian land. This categorical exclusion is aimed at reducing flaring of natural gas from oil and gas wells on federal and Indian lands resulting from lack of infrastructure.

Section 11318 provides that issuance of a sundry notice or right-of-way for a gathering line located on federal or Indian land and services oil or gas wells may be considered “to be an action that is categorically excluded . . . for the purposes of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).” § 11318(b)(1). Notably, Section 11318 defines “federal land” as any land owned by the United States but that is not part of the National Park System, the National Wildlife Refuge System, the National Wilderness Preservation System, or a wilderness study area within the National Forest System or Indian land. § 11318(1).

A gathering line must meet certain criteria to be eligible for the categorical exclusion. First, the gathering line and associated field compression or pumping unit must be located within federal or Indian land for which an approved land us plan or environmental document prepared pursuant to NEPA “analyzed transportation of oil, natural gas, or produced water from 1 or more oil or gas wells” in that land as a reasonably foreseeable activity. § 11318(b)(1)(A). Second, the gathering line must be located near or within an existing corridor for a right-of-way or existing disturbed area. § 11318(b)(1)(B). Finally, the gathering line must reduce the amount of methane flared, vented, or unintentionally emitted from the land or reduce the vehicle traffic that would otherwise service the land. § 11318(b)(1)(C).

Orphaned and Idled Wells on Federal, Tribal, State, and Private Lands – Division D, Title VI

The Infrastructure Act amends the current program for orphaned well site plugging, remediation, and restoration in Section 349 of EPAct, 42 U.S.C. § 15907. Compared to EPAct, Section 40601 expands this program’s responsibilities and addresses environmental and public health concerns related to orphaned wells. Congress views this program as part of methane reduction efforts.

Section 40601 defines an “orphaned well” on federal or Tribal land as a well (1) “that is not used for an authorized purpose, such as production, injection, or monitoring” and (2) for which an operator cannot be located, the operator is unable to plug the well and to remediate and reclaim the well site, or that is within the National Petroleum Reserve—Alaska. On state or private lands, an “orphaned well” has the meaning defined by the particular state or whatever term the state uses to describe a well eligible for plugging, remediation, and reclamation.

Section 40601 calls for the establishment of a federal program to address orphaned wells on lands managed by the Department of the Interior and Forest Service. Section 40601 directs the Secretary of the Interior to establish a program to plug, remediate and reclaim orphaned wells on federal lands within 60 days of the Infrastructure Act’s enactment date. The program must:

• Institute a method for identifying orphaned wells and associated pipelines, facilities, and infrastructure on federal land, § 40601(b)(2)(A)(i);
• Rank those wells for priority based on public health and safety, potential environmental harm, and other subsurface impacts, § 40601(b)(2)(A)(ii);
• Distribute funding for plugging, remediating, and reclaiming the orphaned wells, associated facilities, and surrounding environment, § 40601(b)(2)(B);
• Attempt to identify persons responsible for the orphaned well and obtain reimbursement for the associated remediation and reclamation, § 40601(b)(2)(D);
• Measure, estimate, and track the emissions of methane and contamination of groundwater or surface water associated with the orphaned wells, § 40601(b)(2)(E); and
• Address the disproportionate burden of adverse health or environmental effects of orphaned wells on communities of color, low-income communities, and Tribal and indigenous communities, § 40601 (b)(2)(F).

Similarly, Section 40601 requires the Secretary of Interior to establish a program to allocate grants to Indian Tribes for plugging, remediating, and reclaiming orphaned wells on Tribal land. § 40601(d)(1). Alternatively, a Tribe may request that the Secretary administer and carry out plugging, remediation, and reclamation activities in lieu of a grant. § 40601(d)(1).

With respect to orphaned wells on state and private lands, Section 40601 directs the Secretary of Interior to offer states grants as large as $5 million to fund plugging, remediation, and reclamation of orphaned wells. § 40601(c)(1) and (c)(3). These grants may be used to track methane emissions and contaminated ground or surface water associated with the orphaned wells, remediate and restore the surrounding habitat, address any adverse health or environmental effects of orphaned wells, and publish information related to the state’s use of the funds on a public website. § 40601(c)(2)(A). States have one year from the date of receipt to use such funds. § 40601(c)(3)(C).

Importantly, Section 40601 does not absolve the owner or operator of an orphaned well of any potential liability. Sec. 40601(g)(3).

Finally, Section 40601 directs the Secretary of Interior to submit a report annually to select Committees at the Senate and the House of Representatives describing the inventory of orphaned wells and wells at risk of being orphaned on Federal, Tribal, and State land, the methane and other gasses emitted from orphaned wells, and the emissions reduced as a result of plugging and reclaiming the wells. § 40601(f). The report shall include the number of jobs created and saved due to this Section and the acreage of land restored. § 40601(f).

Section 40601 also directs the Secretary of the Interior to periodically review all idled wells on federal land and to reduce the inventory of idled wells on federal land. § 40601(b)(3)(B). Notably, Section 40601 defines “idled well” as a well “that has been nonoperational for not fewer than four years” and “for which there is no anticipated beneficial future use.” With this definition, Congress escalated the timeframe in which a well is considered “idled.” In EPAct, Congress had defined an idled well as one that has been nonoperational for at least seven years. See 42 U.S.C. § 15907(e)(1) (2020).

Keystone XL Pipeline – Division D, Title IV, Subtitle C

Section 40434 addresses the impacts of President Biden’s decision in Executive Order No. 13,990 (Jan. 20, 2021) to revoke the Keystone XL Pipeline permit. Section 40434 directs the Secretary of Energy to conduct a study to review the total number of jobs lost, and the impact on consumer energy costs projected to result, as a direct or indirect result of Executive Order No. 13990 . This study shall address the projected impacts over a ten-year period, beginning on January 20, 2021 (the date the Executive Order was issued). § 40434. The Secretary of Energy is required to submit the results of this study to Congress no later than 90 days after the date of enactment of the Infrastructure Act. § 40434.

Critical Minerals and Mining Community Resilience

The Infrastructure Act includes provisions related to critical minerals and the mining sector in general, as well as the rehabilitation of abandoned mine lands and the use of former mining sites to promote renewable energy development. The Infrastructure Act adds new provisions to various statutes that govern energy and mining, as well as public lands and public lands agencies, reflecting the United States’ growing understanding of the importance and intersectionality of issues related to economic opportunity for historic mining communities, the energy transition and securing critical mineral supply chains, which broadly implicate national security.

The bulk of the provisions of the Infrastructure Act concerning minerals or mining reside in Division D – Energy, with the most notable provisions found in in Title II (Supply Chains for Clean Energy Technologies), Title III (Fuels and Technology Infrastructure Investments), and Title VII (Abandoned Mine Land Reclamation). Corresponding funding appropriations are in Division J – Appropriations.

Critical Minerals and Supply Chains

The Infrastructure Act contains a number of provisions aimed at increasing domestic production of rare earth elements and critical minerals to promote domestic supply chains and to alleviate the economic and national security concerns associated with the United States’ dependence on foreign suppliers.

On the technical side, Section 40201 allocates $320 million to the U.S. Geological Survey (USGS) for the Earth Mapping Resources Initiative (Earth MRI), a program designed to support above- and underground mapping of mineral resources across the United States, including the identification of abandoned mine land and mine waste, which is thought to be an important potential source of critical minerals. The results of Earth MRI will be made available to the public.

Section 40205 allocates an additional $167 million to USGS to establish an Energy and Minerals Research Facility in partnership with an academic institution. Funding of $140 million has been allocated to support the design, construction, and build-out of a Rare Earth Demonstration Facility, which will endeavor to demonstrate the commercial feasibility of extracting rare earth elements from acid mine drainage, mine waste, and “other deleterious material,” which could theoretically include coal ash.

Additionally, Sections 40207 and 40208 contain provisions designed to support the development of a domestic battery supply chain by allocating: $3 billion to fund grants for advanced battery material processing demonstration and production projects; $3 billion to fund grants for advanced battery manufacturing and recycling projects; $125 million to fund federal, state, and retail seller grants to support recycling and critical mineral recovery from smaller rechargeable (less than 5 kg) and non-rechargeable (less than 2 kg) batteries; and $200 million to fund grants related to recycling and finding “second use” applications for electric vehicle batteries. Section 40210 also creates grant programs within the National Science Foundation to support basic research on domestic critical minerals mining and recycling, with an “end to end” life cycle approach, examining the entire production and supply chain for critical minerals.

On the policy side, Section 40210(c) establishes a Critical Minerals Subcommittee of the National Science and Technology Council to advise the federal government on appropriate policies and procedures, and identify opportunities, relating to the exploration for, and production and recycling of, critical minerals, emphasizing solutions that can be implemented domestically or in cooperation with allies and trading partners. The Critical Minerals Subcommittee will also examine workforce issues associated with the critical minerals supply chain.

Other provisions of the Infrastructure Act aim to address obstacles to the development of U.S. critical mineral supply chains by improving the federal permitting process for mining projects on federal public lands. Earlier this year, large scale mining was added as an eligible sector for the FAST-41 permit streamlining program, but given the administration’s policy positions toward major mining projects to date, it is questionable whether any mining projects will actually be granted access to the FAST-41 program. In addition, because most critical minerals are co-located with, or byproducts of, more major mineral commodities, FAST-41 is perhaps too blunt of an instrument to try to prioritize critical minerals projects specifically.

Section 40206 embodies many of the same principles as FAST-41, mandating the Bureau of Land Management (BLM) and the U.S. Forest Service (USFS) to conduct a thorough self-assessment of their minerals permitting procedures; engage in more timely collaboration with government, tribal, and private stakeholders, with concurrent, rather than sequential, consultation processes; develop best practices for communication and dissemination of information to the public; and develop firmer timelines and quantifiable performance metrics to assess adherence to each agency’s performance goals. Within one year of the Infrastructure Act’s passing, the Secretary of the Interior and the Secretary of Agriculture must report to Congress on what additional measures would increase the timeliness of critical minerals project permitting, including, possibly, the institution of cost recovery paid by permit applicants as a means to offset the costs of additional training for personnel involved in the permitting process.

Promoting Renewable Energy Development and Resilient Mining Communities

Other sections of the Infrastructure Act are geared toward revitalizing mining communities and finding new uses for historic mine sites. Section 40701 allocates funding of nearly $11.3 billion for states and Indian tribes to reclaim abandoned coal mines through the Abandoned Mine Reclamation Fund. Priority will be given to programs that employ current and former employees of the coal industry. As a concession to the coal industry, the Abandoned Mine Reclamation Fee payable by miners on tons of coal produced has been reduced by 20%, while the authorization to continue collecting the fee has been extended to 2034. § 40702. Section 40704 establishes a new $3 billion fund to support reclamation of abandoned hardrock mining sites on federal, state, tribal, local, and private land. Funds awarded under the hardrock program cannot be used to satisfy obligations under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).

Adding to efforts to address physical conditions at mine sites, and the impacts on surrounding communities, Section 40342 provides for the establishment of up to five “clean energy” demonstration projects on current and former coal and hardrock mining sites, two of which must be solar projects. “Clean energy” is defined broadly to include the following technologies: solar; micro-grids; geothermal; direct air capture; fossil-fueled electricity generation with carbon capture, utilization, and sequestration; energy storage, including pumped storage hydropower and compressed air storage; and advanced nuclear technologies. The primary factors to be considered in evaluating project candidates: are job creation at the project site (particularly in economically distressed areas and with respect to dislocated workers who were previously employed in manufacturing, coal power plants, or coal mining) and throughout the supply chain, reducing carbon intensity and greenhouse gas emissions, technological innovation and commercial deployment potential, reducing the cost of generated or stored energy, and reducing the project time from permitting to completion. $500 million has been allocated to support the demonstration projects.

On November 2, 2021, the Environmental Protection Agency (“EPA”) proposed a suite of New Source Performance Standard (“NSPS”) program rules that, if adopted, will have a significant impact on the upstream and midstream oil and gas sectors, reversing some Trump administration rules that had reversed Obama administration rules regulating volatile organic compound (“VOC”) and methane emissions from the sector.

EPA’s broad proposal is comprised of three distinct pieces. First, the proposal will update the existing NSPS Subpart OOOOa (“Quad Oa”) rules to address a June 30, 2021 Congressional Joint Resolution adopted under the Congressional Review Act, which disapproving the Trump administration’s 2020 Policy Rule. The Trump-era Policy Rule rescinded VOC and methane emission standards for transmission and storage sectors and rescinded methane emission standards for the production and processing sectors. With passage of the resolution and EPA’s proposed revisions, it is as though the 2020 Policy Rule never took effect. The methane standards adopted prior to the 2020 Policy Rule will be reinstated. Ultimately, the Quad O/Oa proposals are expected to include the original 2016 methane standards for applicable production and processing oil and gas segments.

Second, EPA proposed a new subpart, Subpart OOOOb (“Quad Ob”), that will impact new, modified, and/or reconstructed sources in the oil and natural gas sector. The applicability date of the rules for these sources will be determined by the publication of the final rule in the Federal Register. NSPS Quad Ob will create several new requirements at applicable sites, including:

• Storage Vessels: EPA’s proposal changes the NSPS applicability for a storage vessel to depend on the VOC emissions from the storage tank battery. For new, modified, and reconstructed storage tanks or tank batteries with a PTE of 6 or more tons of VOC per year, owners and operators would be required to reduce VOC and methane emissions by 95 percent. This proposal will likely expand the number of storage vessels subject to NSPS applicability and requirements.
• OGI Inspections: EPA’s proposal would require more frequent optical gas imaging (“OGI”) inspections to find and fix fugitive emissions at applicable facilities. EPA’s proposal would require quarterly OGI inspections at facilities with methane emissions greater than 8 tons per year and semi-annual OGI inspections at facilities with methane emissions greater than 3 tons per year. That said, EPA has requested comment to evaluate whether it should shift from the proposed quarterly OGI monitoring to a monitoring program using alternative measurement technologies.
• Well Liquids Unloading: EPA’s proposal also includes an increase in well liquids unloading control and best management practices. The proposal would require that well liquids unloading activities result in zero emissions, unless technically infeasible or unsafe. If an operator can demonstrate technical infeasibility or safety issues, the well liquids unloading activities would be subject to the use of best management practices. Importantly, although included in Quad Ob (as applicable to new, modified and/or reconstrued facilities), EPA notes that any instance of an existing facility conducting a well unloading activity would be considered a modification. Accordingly, from the date of that unloading activity, an existing facility would be subject to these proposed requirements.
• Pneumatic Controllers: EPA’s proposal also targets pneumatic controllers, requiring new and existing sources to use “zero-emission” pneumatic controllers.
• Flaring Requirements: EPA’s proposal prohibits flaring of natural gas unless the operator shows that a gas sales line is not accessible. EPA does not clearly define what determines whether a sales line is “accessible,” but it solicits comment on this question.

Third, EPA has proposed NSPS Subpart OOOOc (“Quad Oc”), which would create emission guidelines that target existing oil and natural gas sources. These emission guidelines are intended to inform state regulators regarding the development, submittal, and implementation of state specific plans that meet or exceed emission reduction standards for oil and natural gas facilities. The Quad Oc requirements largely mirror the Quad Ob proposal, with different applicability thresholds. EPA’s Quad Oc proposal includes:

• Storage Vessels: For existing storage tanks or tank batteries with a PTE of 20 or more tons of methane per year, owners and operators would be required to reduce VOC and methane emissions by 95 percent.
• OGI Inspections: EPA’s proposal would require more frequent optical gas imaging (“OGI”) inspections to find and fix fugitive emissions at existing facilities. For well sites, EPA creates three tiers of inspection frequencies. For well sites with less than 3 TPY, EPA’s proposal would require verification of the facility’s actual emissions. For well sites greater than 3 TPY, EPA proposed two alternatives. The first would require quarterly inspections at all facilities greater than 3 TPY. Alternatively, EPA proposed semi-annual inspection frequency for facilities with PTE between 3 and 8 TPY, while requiring quarterly inspections at all facilities with PTE greater than 8 TPY. The proposal would also require quarterly inspections at compressor stations.
• Well Liquids Unloading: As noted above, any single instance of a well unload will subject any existing facility to the Quad Ob requirements.
• Pneumatic Controllers: Similar to Quad Ob, Quad Oc also targets pneumatic controllers, requiring the use “zero-emission” pneumatic controllers at existing facilities.
• Flaring Requirements: Once again similar to Quad Ob, QuadOc prohibits flaring of natural gas unless the operator shows that a gas sales line is not accessible.

Following the finalization of the Quad Oc emission guidelines, each state must create regulations that meet EPA’s proposal. Following the promulgation of the final Quad Oc regulation, states are expected to take several years to develop and submit their plans. Following submittal, EPA will then review and potentially approve the plan. This process will likely extend to 2025 or beyond.

In addition to the sources and regulations described above, EPA is soliciting comment on several other potential emission sources that may be included in a supplemental rule. EPA is evaluating several different emissions sources, including:

• Financial assurance and fugitive emissions monitoring at plugged and abandoned wells.
• Reducing the frequency of pigging events, eliminating or reducing the volume of gas vented during pigging blowdowns, and/or using add-on controls that are applied to blowdown emissions during pigging.
• Require emission controls during truck loadout operations.
• Additional avenues to ensure control devices are operating functionally, including additional flare monitoring or testing.

The precise timing and next steps of Quad Ob and Quad Oc remain unclear. EPA did not propose rule language or create firm deadlines for its requests for additional comments. However, EPA has scheduled training sessions to discuss these proposals in the coming weeks. Stakeholders can reasonably expect that EPA will publish its proposal and rule language in the Federal Register in the first half of 2022. Following that publication, stakeholders will have 60 days to comment on the proposed rule, including specific items for which EPA has requested feedback. After the 60-day comment period, EPA will evaluate these comments before publishing the final rule. Quad Ob will likely be final and effective in late 2022. However, state regulations addressing EPA’s Quad Oc emission guidelines may not be promulgated until 2025 or later.

Lastly, recent developments in the U.S. Supreme Court may have additional implications for the oil and gas sector. On October 29, 2021, the U.S. Supreme Court agreed to review the D.C. Circuit’s decision striking down the Trump administration’s rollback of Obama-era greenhouse gas (“GHG”) emissions standards for existing power plants in four separate cases. In its review of these cases, the Supreme Court will review the scope of EPA’s authority to regulate GHGs under Section 111(d) of the Clean Air Act. And while the Supreme Court’s ruling in these cases will be specific to the power sector, it could also have legal implications for other existing sources of GHGs, like those in the oil and natural gas sector affected by the proposed regulations in Quad Ob and Oc, and EPA’s future development of Control Technique Guidelines following the adoption of those additional NSPS subparts.

If you have any questions regarding the proposed NSPS revisions or would like to discuss whether to prepare comments on the proposed revisions, please contact Randy Dann or John Jacus.

On September 29, 2021, the U.S. Fish and Wildlife Service (USFWS) released a final rule (“Final Rule”) that revoked a prior rule, finalized only in January 2021, that had interpreted the Migratory Bird Treaty Act (MBTA) as not prohibiting incidental take of migratory birds. Incidental take is defined as take that results from, but is not the purpose of, an action.

USFWS also released an advance notice of proposed rulemaking (ANPR) to develop regulations to authorize incidental take of migratory birds under certain circumstances or conditions. These regulatory changes will affect conventional and renewable energy development on federal and nonfederal lands, as well as other land uses that present a risk of incidental take of migratory birds. Presently, the Final Rule and ANPR have not yet been published in the Federal Register.

Final Rule Revoking USFWS’s Prior Interpretation of the MBTA

The Final Rule revoked a January 7, 2021 rule (“January 2021 Rule”) that was released in the waning days of the Trump administration and had taken effect on March 8, 2021. The January 2021 Rule expressly stated that the MBTA does not prohibit incidental take of migratory birds.

USFWS had based the January 2021 Rule on a 2017 legal opinion of the Solicitor of the Department of the Interior, Solicitor’s Opinion M‒37050. A federal court vacated this opinion last year, Natural Res. Defense Council v. U.S. Dep’t of the Interior, 478 F. Supp. 3d 469 (S.D.N.Y. 2020), and the Deputy Solicitor of the Interior withdrew this opinion in March 2021.

By revoking the January 2021 Rule, USFWS reinstates its prior interpretation that the MBTA prohibits incidental take of migratory birds. Notably, USFWS did not replace the January 2021 Rule with an alternative regulation but stated in the preamble to the Final Rule that it plans to introduce “a proposed regulation codifying an interpretation of the MBTA that prohibits incidental take.”

With the Final Rule, USFWS also released Director’s Order No. 225 providing guidance to the agency on how to implement the agency’s current interpretation of the MBTA.

Most significant, the Director’s Order prioritizes enforcement of incidental take in the following circumstances:

• Incidental take that:
  • results from activities by a public- or private-sector entity that are otherwise legal;
  • is foreseeable; and
  • occurs where known general or activity-specific beneficial practices were not implemented; or
• Incidental take that is the result of an otherwise illegal activity.

By contrast, the Director’s Order identifies incidental take resulting from the following activities as not an enforcement priority:

• A member of the general public conducting otherwise legal activities that incidentally take migratory birds;
• A federal agency conducting activities in accordance with a signed memorandum of understanding with the Service developed under Executive Order 13186 for the conservation of migratory birds; or
• A public- or private-sector entity conducting activities in accordance with applicable beneficial practices for avoiding and minimizing incidental take.

The Director’s Order also revokes and replaces an April 11, 2018 Director’s memorandum titled “Guidance on the Recent M-Opinion Affecting the Migratory Bird Treaty Act.”

ANPR for Regulations Authorizing Incidental Take of Migratory Birds

The ANPR announced USFWS’s intent to develop regulations to authorize incidental take of migratory birds under certain circumstances or conditions. USFWS is accepting public comment response to the ANPR for 60 days after its publication in the Federal Register.

USFWS is considering three mechanisms to authorize incidental take: (1) categorical exceptions to the incidental take prohibition; (2) general permits; and (3) specific or incidental permits.

With respect to exceptions, USFWS explained it is considering developing exceptions for two general types of activities: first, noncommercial activities, such as homeowner activities that take migratory birds, and second, “certain activities where activity-specific beneficial practices or technologies sufficiently avoid and minimize incidental take.” USFWS would codify any exceptions in a regulation.

With respect to general permits, USFWS explained that it is considering developing general permit regulations for the following activities that are “common sources of bird mortality”:

• Communication towers,
• Electric transmission and distribution infrastructure,
• Onshore wind power generation facilities,
• Offshore wind power generation facilities,
• Solar power generation facilities,
• Methane and other gas burner pipes,
• Oil, gas, and wastewater disposal pits,
• Marine fishery bycatch,
• Transportation infrastructure construction and maintenance, and
• Government agency activities.

USFWS envisions that general permits would be authorized through a registration system. An entity would register, pay a fee, and agree to adhere to activity-specific conditions and implement beneficial practices. General permits would include reporting requirements.

Finally, USFWS anticipates that activities that do not qualify for an exemption or general permit would be eligible to obtain an individual permit authorizing incidental take. USFWS will develop eligibility criteria and permitting procedures.

Notably, USFWS also explained that it is considering offsets associated with general and/or individual permits. Specifically, USFWS is considering whether to adopt a compensatory mitigation approach, where mitigation is developed and implemented specific to a given project or activity, or a general conservation fee structure, where fees go to a specific, dedicated fund.

USFWS is seeking a wealth of information and data to inform its rulemaking process, including information regarding:

• Human-caused migratory bird death and injury from onshore and offshore wind power generation facilities, solar power generation facilities, methane and other gas burner pipes, and oil, gas, and wastewater disposal pits.
• Beneficial practices to avoid and minimize migratory bird death and injury;
• Activity-specific beneficial practices that should be considered as conditions of the authorization;
• Criteria (such as infrastructure design, beneficial practices, geographic features, etc.) to qualify as excepted from a permit, for general permit registration, or to apply for a specific permit;
• Economic costs and benefits of implementing beneficial practices that require retrofitting existing infrastructure;
• Economic costs and benefits of implementing beneficial practices in new construction instead of current designs;
• Economic costs and benefits of implementing beneficial practices that do not affect infrastructure;
• Other economic information useful for setting required compensatory mitigation or a conservation fee; economic information on the benefits of migratory birds, such as ecosystem services, recreation, and other benefits; and
• Any potential effects on small entities, such as small businesses, small non-profit organizations or small governmental entities with a population under 50,000.

USFWS will release draft regulations for public comment before issuing any final regulations. Additionally, USFWS will prepare environmental analysis under the National Environmental Policy Act before issuing any final regulations.

These regulations are critical to the Biden administration achieving its renewable energy goals. USFWS’s reinstated interpretation of the MBTA presents considerable uncertainty for both renewable and conventional energy projects that carry risk of incidental take of migratory birds. For this reason, the Obama administration had taken initial steps toward a permitting program, which was never finalized.

USFWS explained that it seeks to provide “regulatory clarification and certainty” with permitting regulations. Currently, land users lack formal assurances that they will not be subject to enforcement if their activities cause incidental take. Further, these regulations could produce efficiencies for land users by establishing uniform criteria for projects seeking incidental take authorizations.

These regulations will likely attract considerable attention and public comment. Land users who may utilize this program should submit comments in response to USFWS’s requests for information.

If you have any questions regarding the Migratory Bird Treaty Act, please contact Katie Schroder.

Did You Agree to Share Your Home Wi-Fi Network?

On June 6, 2021, Amazon launched, and automatically enrolled users with compatible devices into, “Sidewalk,” its new internet-sharing wireless mesh network. Sidewalk crowdsources data and bandwidth from home Wi-Fi connections via Amazon Echo smart speakers and smart displays, Ring devices, and Tile trackers. If you have these devices in your home, your internet bandwidth is likely now being shared to help other Sidewalk devices that are in range—like a neighbor’s Echo—connect to the internet.

Amazon is following the path forged by Comcast’s Xfinity unit with “xfinitywifi.” Since 2014, Xfinity customers have had access to a widespread public Wi-Fi SSID outside of their home. This public Wi-Fi network, named “xfinitywifi,” is made possible by customers accessing routers that other Xfinity customers lease from Comcast.

Despite criticism of the potential security and privacy concerns,[1] customers are automatically enrolled in these programs without a separate contract. Most customers don’t realize they are sharing their Wi-Fi, much less of the need to opt out of it.[2]

Automatic Opt-In Contracts

Amazon binds users of Echo, Ring, and other devices to Sidewalk’s terms with a “sign-in-wrap” agreement when they log into their account. That the consent is buried in their device contracts would surprise most users, not to mention their automatic opt-in to Wi-Fi sharing just by continuing to use their device. Similarly, many Xfinity customers are likely unaware they are sharing the Wi-Fi generated by their leased modem via the public “xfinitywifi” channel.

There is widespread concern about, and proposed legislative limitations on, automatic opt-ins that may affect the privacy of consumers’ personal information.[3] However, there is much less discussion about whether automatic opt-in to unrelated terms in connection with an online purchase of goods or services is (or should be) enforceable.

Most online purchases of goods or services are just as legal and enforceable as traditional paper-and-ink contracts, thanks to the federal Electronic Signatures in Global and National Commerce Act (ESIGN). In addition, most states have adopted either the Uniform Electronics Transactions Act (UETA) or their own e-signature laws that confirm the legal validity of electronic signatures and contracts. (see, e.g., Colo. Rev. Stat. § 24-71.3-103). Online consumers nowadays consent to contractual terms with an electronic signature or, most commonly, by clicking an “I accept” button. Neither UETA nor ESIGN, however, provide specific guidance on the limitations of passive consent and automatic opt-ins so it is left to the courts, applying traditional contractual principles, to determine their validity and enforceability in specific situations.

Courts generally focus on whether the user had reasonable notice of the terms, actual or constructive, and the extent to which there was express assent.[5] Some courts put the responsibility on the consumer to read and understand the terms, and accept the notion that clicking “I agree” or continuing to use the platform is binding acceptance of the terms, whether read or not.[6] Other courts have found it unreasonable to bind a consumer to terms they were never prompted to read or, in some cases, required to read.[7]

In Berkson v. Gogo LLC,[8] when the user “signed up,” Gogo automatically enrolled them in a recurring service, rather than for a single month as the plaintiff alleged. The federal district court in Berkson concluded that Gogo’s website and sign-in screen, which requested the user’s username and password, and underneath the text: “By clicking ‘Sign in’ I agree to the terms of use and privacy policy,” did not give the user sufficient notice of the terms. Forced to apply a confusing combination of New York, California, and Illinois contracts law, the Berkson
court used a four-part test (1) Is there “substantial evidence” that a user understood they were agreeing to actual terms and conditions? (2) Does the website’s design make the terms clearly available to the user? (3) Does the website’s design encourage the user to review the binding terms, as opposed to minimizing their importance? (4) Does the contract clearly draw the user’s attention to material terms?

In Kemenosh v. Uber Techs., Inc.,[9] Uber’s rider registration screens, as viewable from the iPhone application, were not “inconspicuous but rather failed to adequately communicate” the website’s terms:

It is generally understood that Uber offers transportation in exchange for money. Therefore, the words “by creating an Uber account you are agreeing to the Terms of Service and Privacy Policy” convey that by creating an Uber account one is agreeing to pay money in exchange for transportation, and to the terms of a privacy policy. They do not convey an offer to arbitrate or notify the user in any way that the offered Terms of Service contain a waiver of jury trial and an arbitration clause.

The Kemenosh court suggested that, if Uber had required the user to check a box, “I read and agree to the Terms of Service,” or even included a pop-up message, “Please read the Terms of Service before continuing,” then that might have been sufficient to form a contract with an iPhone enrollee that included the disputed terms.

Conclusion

Without statutory guidance on the enforceability of passive consent and automatic opt-in terms, courts are left to their own devices (pun intended) in determining whether a buried term causing automatic opt-in to an ancillary service like Sidewalk or xfinitywifi should be enforceable. Companies seeking to create valid and enforceable agreements for meaningful but unnecessary issues or for ancillary services are well advised to require the online consumer to expressly confirm review of such terms, or even to visit the terms page before allowing such consent. Notwithstanding such steps, however, online businesses should not assume the effectiveness of consumer consent to entirely distinct matters from the subject of the contract, like Sidewalk services in a Ring or Echo agreement. An enforceable agreement to such collateral terms may require a specific consent focused on those terms.

By contrast, for important but not necessarily assumed terms, like mandatory arbitration, waiver of jury trial, and limitations on damages, it seems likely that consumer confirmation of having read and accepted the terms will be sufficient in most circumstances. Online businesses should appreciate, however, that evaluating the reasonableness of such consent may consider everything from the hyperlink’s color and placement, the design elements elsewhere on the screen, the size of the print, and the language used to draw the user’s attention. In the absence of federal or uniform legislative action, these subjective standards may continue to foster inconsistency and uncertainty for businesses and consumers as to the binding effect of nonessential contractual terms in online transactions.

[1] Even the Washington Post, owned by Amazon Chairman and Founder Jeff Bezos, has expressed alarm about the privacy and security issues inherent in Sidewalk. https://www.washingtonpost.com/technology/2021/06/07/amazon-sidewalk-network/.

[2] Instructions to disable Sidewalk on Echo devices, https://www.amazon.com/gp/help/customer/display.html?nodeId=GZ4VSNFMBDHLRJUK, and Ring devices, https://support.ring.com/hc/en-us/articles/360032524592-Opting-In-and-Out-of-Sidewalk. Instructions for disabling xfinitywifi sharing, https://www.xfinity.com/support/articles/disable-xfinity-wifi-home-hotspot?view=app.

[3] See, e.g., https://arstechnica.com/tech-policy/2021/05/privacy-bill-would-force-big-tech-to-offer-tracking-opt-out-breach-notices/.

[4] 15 U.S.C.S. § 7001 et seq.

[5] Cullinane v. Uber Techs., Inc., 893 F.3d 53 (1st Cir. 2018) (does the online agreement provide “reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms”); Schnabel v. Trilegiant Corp., 697 F.3d 110, 120 (2d Cir. 2012) (“where the purported assent is largely passive, the contract-formation question will often turn on whether a reasonably prudent offeree would be on notice of the term at issue”); Specht v. Netscape Communs. Corp., 306 F.3d 17, 29-30 (2d Cir. 2002) (“clicking on a download button does not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button would signify assent to those terms”).

[6] See, e.g., Vernon v. Qwest Commc’ns Int’l, Inc., 925 F. Supp. 2d 1185, 1191 (D. Colo. 2013) (users chose to agree to the conditions, even without reading them and must “accept the consequences” of being bound); Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 839-40 (S.D.N.Y. 2012) (user had ample opportunity to review via provided hyperlink and thus assented to terms by clicking “sign in” button); Swift v. Zynga Game Network, Inc., 805 F. Supp. 2d 904, 911-12 (N.D. Cal. 2011) (user with opportunity to review terms, chose not to, and clicked “I agree” anyway had sufficient notice).

[7] See, e.g., Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1179 (9th Cir. 2014) (contract unenforceable because consumers cannot be expected to look for hyperlinks with binding terms and conditions they may never be prompted to review); Specht, 306 F.3d at 20 (screen requiring user to follow links to more than one webpage not reasonable notice of terms to “reasonably prudent Internet user”); Berkson v. Gogo, 97 F. Supp. 3d 359, 399 (the text “By clicking ‘Sign In’ I agree to the terms of use and privacy policy” provided insufficient notice, because website did not draw user’s attention to terms with any signifiers of importance, and did not require user to click on terms).

[8] 97 F. Supp. 3d 359 (E.D.N.Y. 2015).

[9] No. 181102703, 2020 WL 254634 (Pa. Ct. Common Pl. Jan. 3, 2020).