Flying into the Yellowstone Regional Airport in Cody, Wyoming, last week gave me a much-needed dose of the Cowboy State. Cody, a quiet and welcoming cowboy town named after Colonel “Buffalo Bill” Cody, is an amazing gem of the West.

I had a little free time so I stopped into the Buffalo Bill Center of the West for the first time and toured the Whitney Western Art Museum, the Buffalo Bill Museum, the Plains Indian Museum and the Draper Natural History Museum. If you haven’t already been – trust me, it is worth the trip! It is a truly amazing place to get a one of a kind glimpse into the American West.

I haven’t provided you with an update in a while. The trip got me thinking – what is new in the Cowboy State?

Wyoming Rig Count

WOGCC Creates New APD Approval Policy

  • The Wyoming Oil & Gas Conservation Commission (“WOGCC”) recently came out with a new policy for the approval of Applications for Permits to Drill (“APDs”). The WOGCC press release on the new APD policy can be found here. The official WOGCC Memo on Application for Permit to Drill Processing can be found here.
  • This new policy sparked my interest because we have been dealing with the exact same kind of issues here in Colorado when it comes to competing APDs and determining which is first in line. The commissions are being bombarded with APDs – the WOGCC Memo provides that “an unprecedented number of applications for permit to drill” are being received; “the monthly average for APDs received for 2017 was 1,050, which is an increase of 83% compared to the average for 2015.”
  • The new WOGCC policy provides that a basic completeness check will be conducted in order to prioritize the approval process. Simply put, the WOGCC will make sure submitted APDs are complete and contain all required information prior to processing for final approval. Operators cannot file an incomplete APD and expect to have the effective APD just because it was filed first– completeness of the APD is required for priority.

Demand for Energy Jobs Increasing

Emissions Rule Stayed

In sum, there is a lot going on in the Cowboy State!

water sign

Could Colorado be liable for costs the State of New Mexico incurred in responding to the Gold King Mine wastewater release?

It could be…it remains to be seen.

The case is State of New Mexico v. State of Colorado, case number 220147-ORG, in the Supreme Court of the United States. An outline of the seven (7) issues pending in the case can be found here.

  • What are the basics of the case?

In general, the case asks whether Colorado is responsible, at least in part, for the Gold King Mine wastewater release that happened in August of last year. Although the EPA accepted responsibility for the wastewater release, New Mexico alleges that Colorado’s environmental planning and decision-making were flawed and contributed to the 3 million-gallon wastewater release.

According to The Denver Post, “New Mexico contends Colorado is partly responsible for water pollution from the Gold King and other leaking inactive mines that drain hundreds of gallons of acidic metals-laced muck every minute into waterways. New Mexico Attorney General Hector Balderas called Colorado’s conduct before the spill reckless and argued that New Mexico residents are suffering as a result.”

  • Case status

In June, the State of New Mexico filed its Bill of Complaint, which can be found here in its entirety, and alleges that Colorado played a direct role in the wastewater release and is “directly responsible for the hazardous conditions that preceded the catastrophe.”

Yesterday, the Office of the U.S. Solicitor General was invited to file a brief expressing the views of the United States on the lawsuit. In particular, and according to Colorado Public Radio, the views of the Department of Justice and the Obama administration on the lawsuit were sought by the Supreme Court. The Department of Justice provides that “the task of the Office of the Solicitor General is to supervise and conduct government litigation in the United States Supreme Court.”

See my prior posts about the Gold King Mine wastewater release here.

Stay tuned for the developments in this case – we will continue to monitor it and provide you with updates.

You may be thinking that the discussions centering on sage grouse have ended since it was determined that the greater sage grouse does not require protection under the Endangered Species Act (“ESA”), as we previously discussed here.

Well, you’d be mistaken…the sage grouse is not old news.  The greater sage grouse has again been ruffling feathers in the energy industry. However, this time it is not the oil and gas industry being impacted by the greater sage grouse, it is wind energy.

Wind turbine

A recent case involved the Echanis Wind Energy Project and greater sage grouse habitat – the 9th U.S. Circuit Court of Appeals reportedly “has effectively reversed the approval of a large wind energy project in southeast Oregon, citing the U.S. Bureau of Land Management’s inaccurate environmental review and possible impacts to the greater sage grouse.”  The full text of Judge Berzon’s opinion can be found here.

What is the Echanis Wind Energy Project?

Columbia Energy Partners proposed the project on private land in a remote area of Harney County, Oregon on Steens Mountain, according to their website, for a 104-megawatt wind facility supporting 40 to 60 wind turbines and a reported 230-kilovolt transmission line to bring the energy to the electrical grid.

An Oregon Bend-based environmental group, Oregon Natural Desert Association, and the Audubon Society of Portland (collectively “ONDA”) brought the suit, specifically challenging the wind energy development at the Echanis site on the ground that the BLM’s environmental review of the project did not adequately address impacts to the greater sage grouse – namely, that the BLM’s review of the project did not comply with NEPA requirements.  The project was to take place on sagebrush landscape. The opinion noted that the greater sage grouse relies on sagebrush for its survival year-round.

The federal court of appeals concluded “that the BLM’s review did not adequately assess baseline sage grouse numbers during winter at the Echanis site, where the wind turbines are to be installed.”

Financial restructuring
Copyright: kentoh / 123RF Stock Photo

In an article published today, Raymond M. Patella and Michael Viscount write:

The oil and gas industry has seen unprecedented levels of volatility in pricing and sustainability over the past year. Since 2015, more than 50 oil and gas exploration and production companies have filed for bankruptcy. While some of these firms will emerge from a Chapter 11 as healthy companies, the negative consequences for their creditors can be substantial.

Bankruptcies will always reverberate throughout the business community, but companies that take a thoughtful approach can go a long way toward ameliorating the uncertainty and the costs that often come along with the news that a major customer is in bankruptcy.

In an earlier three-part series, we examined in-depth the usefulness of letters of credit in commercial transactions. In this article, we outline a handful of popular credit enhancements companies may use to minimize their risk or exposure to a counterparty that they believe may be having financial difficulties. There are many different types of credit enhancements depending on the parties’ leverages, cash flow, size and risk. All of these factors should be considered to arrive at an enhancement best tailored to address the concerns of specific circumstances.

To continue reading this piece, please visit the Fox Rothschild website.

Raymond Patella and Michael Viscount are partners in the Financial Restructuring & Bankruptcy Practice, resident in Fox’s Atlantic City, NJ office.

We previously discussed the U.S. Fish & Wildlife Service determination that the Greater Sage-Grouse does not require protection under the Endangered Species Act (“ESA”).  Many thought that the species was out of the headlines at that point.  We were mistaken – the Greater Sage-Grouse continues to ruffle feathers.

Reportedly on the heels of the Fish & Wildlife decision, the State of Nevada, several Nevada counties and a few mining companies have sued the U.S. Department of the Interior in connection with a Bureau of Land Management (“BLM”) and U.S. Forest Service (“USFS”) decision for Land Use Plan Amendments impacting 23 million acres with Greater Sage-grouse habitat.  The case is styled Western Exploration LLC, et al. v. U.S. Department of Interior, Case No. 3:15-cv-00491 filed in the U.S. District Court for the District of Nevada.

The Plaintiffs are alleging that the BLM violated the National Environmental Policy Act (“NEPA”) in several ways. For example, by inadequately disclosed its scientific methodologies, failing to complete a proper economic impact analysis regarding mining activities and disregarding public involvement in comments.  The process the BLM took in this situation has been referred to as “lawless” – and according to Law360, reportedly included “preparing form responses to reviews from state governors before even receiving the reviews themselves, and making cookie-cutter responses to public and county protests that were identical regardless of the issues raised, the plaintiffs said.”

According to Law360, “Elko County estimated that the government’s plan for sage-grouse habitat will result in a yearly loss of $31 million in agricultural productivity and substantial losses from severely restricted exploration and development for minerals, oil and gas, as well as development for wind energy and other natural resources.” Eureka County is reported to have expressed similar concerns.

The Plaintiffs are seeking that the Records of Decisions (“RODs”) be vacated and remanded to the agencies to prepare a Supplemental Environmental Impact Statement (“SEIS”) and mineral potential report (“MPR”) for use in the NEPA process.

We will keep you posted as to the outcome of this case.

Yesterday, the United States Supreme Court issued its ruling in the case of State of Montana v. State of Wyoming and North Dakota.  A copy of the Order and Judgment can be found here.

The case is a water-rights dispute concerning the Tongue River, which starts in Wyoming’s Big Horn National Forest and flows north into the Yellowstone River.  Montana reportedly brought suit in 2007, arguing that Wyoming had broken the Yellowstone River Compact between the states by allowing too much water to be taken from the Tongue.

The Yellowstone River Compact, effective as of 1951, was entered into by Wyoming, Montana and North Dakota to provide for an equitable apportionment of the waters of the Yellowstone River and its tributaries.

The Court granted Wyoming’s Motion for Partial Summary Judgment and found that Wyoming was not liable to Montana for reducing the volume of water available in the Tongue River for the majority of years claimed by Montana.  However, the justices determined that Wyoming is liable to Montana for reducing the volume of water available in the river at the state line by 1,300 acre-feet in 2004 and by 56 acre-feet in 2006 and remanded the case to the Special Master for a determination of damages and other appropriate relief.

Representatives for Wyoming and Montana had reportedly been in talks on how the Yellowstone River Compact will be administered in the future, but negotiations had been placed on hold pending the decision by the Supreme Court.

In an article published today, Fox partners Michael Viscount and Raymond M. Patella examine the marked increase in bankruptcies among oil & gas exploration and production companies:

Oil pumps
Copyright: / 123RF Stock Photo

The continuous and dramatic volatility in prices for oil and natural gas has predictably resulted in financial pressures on oil and gas exploration and production companies (“E&Ps”) leading to a precipitous rise in the incidence of bankruptcy filings by E&Ps across the US and elsewhere. The E&P bankruptcies, like those of companies in other industries, raise a number of interesting legal questions which do not subject themselves to easy and straightforward answers. The issues will be played out in bankruptcy courts where creditors jockey for leverage and position and judges decide which creditors share in the spoils and how much.

This and a series of blog posts to follow by lawyers in the Financial Restructuring and Bankruptcy Department of Fox Rothschild LLP are designed to highlight bankruptcy, insolvency and creditors’ rights issues that should guide creditor and debtor decisions when contemplating and/or working out credit transactions involving E&Ps and their lenders and suppliers. This initial post to the Fox Rothschild E&P blog will identify basic rights in and out of bankruptcy available to those who supply goods and services to exploration and production companies which find themselves in financial distress. Subsequent posts will address other issues and provide guidance on how each will impact creditor recoveries and prospects for E&P company reorganizations.

To read their full primer on supplier rights in E&P bankruptcies, please visit the Fox Rothschild website.

The Colorado Court of Appeals issued its decision in Youngquist Bros. Oil & Gas, Inc. v. Indus. Claim Appeals Office of the State of Colorado and Travis Miner, 2016 COA 31, last week. This decision is important for companies recruiting workers in Colorado to work in another state – the Workers’ Compensation Act of Colorado may apply when you least expect it. The full text of the decision can be found here.

The facts of the case are simple. Youngquist Brothers Oil & Gas, Inc. (“Youngquist”), an oil and gas company with operations in North Dakota, hired its workforce primarily from Texas, Oklahoma, Indiana and Colorado. Youngquist Bros. Oil & Gas, Inc. v. Indus. Claim Appeals Office of the State of Colorado and Travis Miner, 2016 COA 31, ¶ 3. Travis Miner (“Miner”) was one such Colorado-recruited employee.

Youngquist maintained workers’ compensation insurance in North Dakota, but not in Colorado. Id.

While living in Grand Junction, Colorado, Miner submitted his online application for a position with Youngquist. Id. at ¶ 4. At the conclusion of a phone interview with a Youngquist representative, Miner was offered a job, which he accepted. Id. Youngquist flew Miner to North Dakota the following day and arranged and paid for the flight; once there, a Youngquist representative met Miner at the airport and transported him to Youngquist’s offices and after completing paperwork and passing a preliminary drug screen, Miner began his first evening rig shift. Id. at ¶¶ 4-5, 19.

On his second evening shift, Miner slipped and fell down the rig’s stairs, injuring his back. Id. at ¶ 6. Miner did not immediately report the injury to his supervisor; instead, he worked three more shifts before reporting that he was hurt. Id.

Youngquist agreed to allow Miner to seek medical treatment in Colorado. Id. at ¶ 7. His treating physician concluded that although Miner had a pre-existing back injury, the condition was worsened by his work-related fall. Id.

North Dakota Workforce Safety and Insurance denied Miner’s workers’ compensation claim without a hearing, apparently due to his pre-existing back condition. Id. at ¶ 8.

Miner then filed a claim for workers’ compensation benefits in Colorado and after a hearing, it was determined that Miner was hired in Colorado and his claim was therefore subject to the Workers’ Compensation Act of Colorado. Id. at ¶ 9. Miner was found to have suffered a compensable work-related injury and he was awarded benefits. Id.  Further, Youngquist was subject to the statutory 50% penalty for failing to carry workers’ compensation insurance in Colorado. Id.

The Colorado Court of Appeals affirmed the decision, relying on the text of the extraterritorial provision found in C.R.S. § 8-41-204. The court explained that the extraterritorial provision gives Colorado “jurisdiction to award benefits for out-of-state work-related injuries if an employee was (1) hired or regularly employed in Colorado and (2) injured within six months of leaving Colorado.” Id. at ¶ 11 citing C.R.S. § 8-41-204; see also Hathaway Lighting, Inc. v. Indus. Claim Appeals Office, 143 P.3d 1187, 1189 (Colo. App. 2006).

If an employer hires an employee in Colorado and the employee is injured within six months, that is enough to make that employer subject to the requirements of the Workers’ Compensation Act of Colorado.

Further, the Colorado Court of Appeals disagreed with Youngquist’s argument that it did not have the sufficient minimum contacts with the state to establish personal jurisdiction in Colorado. Id. at ¶ 24. The court applied the jurisdictional analysis from Alaska Packers Ass’n v. Indus. Accident Comm’n, 294 U.S. 532, 542-43 (1935) in making its decision.

In Alaska Packers, a California person was hired in California to work in Alaska during salmon canning season and he was injured in Alaska before returning to California to file a workers’ compensation claim. Id. at ¶ 26 (Internal citations omitted). The Supreme Court upheld California’s extraterritorial provision and the analysis hinged on where the employment relationship was entered into and the state’s legitimate interest in the protection of its residents. Id. at ¶¶ 27, 30 (Internal citations omitted). The Court of Appeals in Youngquist agreed that both of these factors supported Colorado’s jurisdiction because Miner was hired in Colorado. Id. at ¶ 31.

Moreover, Youngquist was subject to the mandatory 50% penalty on employers subject to the Workers’ Compensation Act of Colorado for failing to carry workers’ compensation insurance. Id. at ¶ 36.

The takeaway is this: “If an employer hires a Colorado employee in this state and the employee is injured within six months of leaving Colorado, the employer is subject to the [Workers’ Compensation] Act [of Colorado].” Id. at ¶ 15.

Today, the Wyoming Supreme Court issued its opinion in Merit Energy Company, LLC v. Blake Horr, 2016 WY 3 (Wyo. 2016). The full text of the opinion can be found here.

The case arose from injuries caused to Blake Horr (“Horr”) during the cleaning of high pressure wells in the Lost Soldier Unit near Bairoil, Wyoming. Merit Energy Company, LLC (“Merit”) had hired Basic Energy Services, Inc. (“Basic”) as an independent contractor to perform the work.

Horr, an employee of Basic, was part of the crew performing cleanup operations for Merit. Horr sustained serious injuries to his left hand and arm when a stripping rubber launched out of a wellhead due to a buildup of pressure, following a change in the type of stripper head.[1]

Crucial to the analysis was the level of control Merit exercised over the operations.

After an eight-day jury trial in Sweetwater County, the jury returned a verdict for Horr.[2]  “The district court entered judgment in Horr’s favor for $2,335,923.90 against Merit based upon the fault of all parties.”[3]

Although Basic was an independent contractor, the jury found that Merit retained sufficient control over the portion of Basic’s work that caused Horr’s injuries to owe Horr a duty of care.[4]

The opinion discusses in detail this exception to the general rule governing independent contractors – the exception hinges on the “legal duty created because of the control it [the employer] retains over the independent contractor’s work.”[5]

The Wyoming Supreme Court affirmed.

[1] Merit Energy Company, LLC v. Blake Horr, 2016 WY 3, ¶¶ 7-10 (Wyo. 2016)

[2] Id. at ¶ 11.

[3] Id.

[4] Id. at ¶ 21.

[5] Id. at ¶ 16.

Last week, the Colorado Court of Appeals issued its decision in Gold Hill Development Company, L.P. v. TSG Ski & Golf, LLC, et al., 2015 COA 177.

Gold Hill Development Company (“GHDC”) alleged that access to certain of its mining properties has historically been made by means of a trail known as the Gold Hill Road (“the route”), which traverses portions of TSG’s properties, and GHDC claimed the right to use and maintain the route where it crosses over TSG’s mining lode properties.  Id. at ¶ 2.

While certainly not a sexy or groundbreaking decision, the Gold Hill opinion provides an excellent primer of Colorado law concerning easements.

For example, the trial court found a public prescriptive easement across GHDC’s properties and included a detailed discussion of the legal requirements for the same.  C.R.S. § 43-2-201(1)(c) provides as follows regarding public prescriptive easements: “‘[a]ll roads over private lands that have been used adversely without interruption or objection on the part of the owners of such lands for twenty consecutive years’ are declared to be public highways.”  Id. at ¶ 21.  “To establish a public prescriptive easement under the section, a party must show: (1) a ‘claim of right’; (2) public use adverse to the landowner’s interest; (3) such use continued for the requisite twenty-year period; and (4) actual or implied knowledge of the public use by the landowner and no objection to such use.”  Id. (Internal citations omitted).

Interestingly, although the Court found that the 20-year prescriptive easement began in 1927, the Court considered evidence from as far back as 1879 concerning the public claim of right factor.  Id. at ¶ 31.

In addition, as the trial court’s dismissal of GHDC’s express easement claim was upheld by the Colorado Court of Appeals, express easements were thoroughly discussed in the decision.  See Id.  at   ¶  47-51.

A link to the decision can be found here.