Panda Power Funds Breaks Ground for Marcellus Shale-Gas Power Plant in Towanda, PA

Today, May 15, 2014, in Towanda, Bradford County, Pennsylvania, Panda Power Funds broke ground for the first new power plant in Pennsylvania that was specifically developed to take advantage of its proximity to the Marcellus Shale gas formation. Governor Tom Corbett and other Pennsylvania officials joined the company in its groundbreaking ceremony.

This plant is expected to contribute an estimated $5.97 billion to the area’s economy during construction and the facility’s first 10 years of operation. The company also reports that approximately 500 jobs will be created during peak construction. Upon completion in 2016, the generating station will create an estimated 27 skilled jobs to operate the facility, as well as creating 45 indirect jobs within the community to support the plant.

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Act 13 Update

Yesterday, May 14, 2014, the Pennsylvania Commonwealth Court heard oral argument regarding select matters that remain unsettled in the wake of the Pennsylvania Supreme Court’s ruling in the Robinson Township v. Commonwealth decision, including: (1) whether Act 13 can prohibit medical professionals from disclosing chemicals associated with gas drilling; (2) whether the Public Utility Commission retains the authority to review local zoning ordinances and withhold impact fee money to municipalities; (3) whether limiting notice by the DEP of spills to public well owners only is constitutional; and (4) whether eminent domain powers are available to those storing, selling, or transporting gas.

A Quick Guide to the Pennsylvania Gubernatorial Candidates’ Stances on Energy and Environmental Issues

In anticipation of Pennsylvania’s gubernatorial primary on May 20, 2014, StateImpact Pennsylvania has provided a guide regarding where the candidates and the governor stand on energy and environmental issues:

StateImpact Pennsylvania is a reporting project of NPR member stations that covers the fiscal and environmental impact of Pennsylvania’s energy economy, with a focus on Marcellus Shale drilling.


Hydraulic Fracturing and Emerging Insurance Issues

As the hydraulic fracturing or “fracking” industry has expanded, the companies involved in this drilling process have become the targets of an increasing number of claims and lawsuits.  With the rising number of fracking claims, insurance coverage becomes vitally important. For example, if a plaintiff or a class of plaintiffs alleges that a water or air supply has been contaminated as the result of drilling-related activity, the defendant will request that its insurer defend and indemnify the company. Questions may arise, however, such as whether the policy indemnifies the insured for unintended consequence resulting from the intended act of fracking or whether the insurer may refuse to indemnify the insured based, for example, on the pollution exclusion contained in most Commercial General Liability (“CGL”) policies.

These types of insurance coverage issues have yet to be fully litigated. To date, only one publicized insurance coverage lawsuit has been filed related to fracking and the pollution exclusion. In Warren Drilling Co., Inc. v. Ace American Ins. Co., No. 2:12-cv-425 (S.D. Ohio, filed Apr. 13, 2012), a drilling company sued its insurer for refusing to defend or indemnify the company after drilling activities allegedly contaminated a nearby homeowner’s water well. The at-issue policy was a standard CGL policy, which excluded coverage for bodily injury or property damage caused by “pollutants,” but it included an Energy Pollution Liability Extension (EPLE) endorsement that reinstated coverage for a pollution incident where certain conditions are met.  Specifically, the EPLE endorsement required the following: the discharge of pollutants being unexpected and unintended; the discharge commencing abruptly and instantaneously and at or from a site owned/occupied by or where the insured was performing operations; the insured knowing within 30 days of the commencement of the discharge; and the insured reporting to the insurer within 60 days of the commencement of the discharge. Citing to this endorsement as well as to an Underground Resources and Equipment Coverage endorsement, the insured argued that the insurer breached its contract and acted in bad faith by denying coverage for the underlying claim.

Although the insurer and insured in Warren ultimately settled their dispute in early 2013, before the parties litigated any coverage issues, this scenario is ripe for similar litigation. It is likely that courts soon will be interpreting these types of policy provisions in connection with fracking claims.  Another area of interest may be D&O insurance coverage.  For example, lawsuits may be filed alleging that directors and officers failed to disclose known environmental effects caused by the fracking process.

Thus, as energy companies continue to increase their fracking activities, the insurance industry may play an important role in establishing the scope of risk for these companies. But environmental risk management is not new to the insurance industry, and the growing fracking industry may require tailored insurance policies.  Ultimately, companies involved in fracking should make sure that their insurance brokers understand the specific risks facing these companies, allowing confidence that the companies’ insurance policies will respond appropriately to fracking-related claims.

Pennsylvania Supreme Court Decision in Barrick v. Holy Spirit Hospital Maintains Protection for Attorney-Expert Communications

Last week, in a per curiam opinion, an evenly divided Pennsylvania Supreme Court affirmed the Order of the Superior Court in Barrick v. Holy Spirit Hospital, creating a bright-line rule denying discovery of communications between attorneys and expert witnesses. 2014 Pa. LEXIS 1111 (Pa. April 29, 2014).

In Barrick, a personal injury lawsuit, the defendants served a subpoena to obtain records from the plaintiff’s orthopedic surgeon, who was expected to testify at trial.  On advice of plaintiffs’ counsel, the doctor withheld records not created for treatment purposes.  The defendants filed a motion to enforce the subpoena, which the plaintiffs contested on the basis that defendants sought privileged communications between counsel and an expert witness. The trial court enforced the subpoena, adopting a rule favoring full discovery. Initially, a panel of three Superior Court judges affirmed the trial court order.

Then, in November 2011, an en banc panel of the Pennsylvania Superior Court issued a 38- page opinion that overturned the trial court’s decision which had allowed one party to review written communications by the opposing party to the opposing party’s expert in the case of Barrick v. Holy Spirit Hospital, 1856 MDA 2009 (Pa. Super. Nov. 23, 2011) (8-1 Opinion by Mundy, J.) (Bowes, J. concurring and dissenting).  The Superior Court concluded, inter alia, that Pennsylvania Rule of Civil Procedure 4003.3 protected such communications from disclosure under the attorney work product doctrine.

On appeal, the Supreme Court affirmed via a three-three split, with Justice Max Baer writing an Opinion in support of affirmance that was joined by Justice Seamus P. McCaffery and Justice Debra M. Todd. Justice Thomas G. Saylor wrote an Opinion in support of reversal that was joined by Chief Justice Ronald D. Castille and Justice J. Michael Eakin.

The opinion in support of affirmance based its holding on Rule 4003.3 in conjunction with Rule 4003.5, which governs discovery of expert testimony and trial preparation material. As noted in the Barrick decision, currently pending before the Supreme Court is a proposal from the Civil Procedural Rules Committee to amend Rule 4003.5 to provide protection for correspondence between counsel and expert witnesses.  Although the Court did not rely on this proposed amendment in reaching its decision, it noted that “it would appear that the Rules Committee believes that adoption of a bright-line test for denying discovery of communications between counsel and expert witnesses would not result in a change in practice in Pennsylvania.”