Environmental Law ReSource : Environmental Lawyer & Attorney : Reed Smith Law Firm : Climate Change, Sustainability

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Two new Marcellus Shale laws are currently in the works in Pennsylvania. The first, known as the Mineral Rights Act (House Bill No. 1436), which passed "first consideration" muster in the Pennsylvania House of Representatives earlier this summer, provides for the reassignment of abandoned mineral rights on privately owned lands. According to State Representative Jesse White (D-46), one of the bill's proponents, the law would promote Marcellus Shale activity in the state by providing procedural guidelines for resolving legal disputes over title to subsurface property.  Any mineral interests that have not been utilized, transferred, sold, leased or mortgaged for a period of ten years would be subject to a claim by the surface owner to have the property declared abandoned. The rightful owners of any mineral interest deemed abandoned would then have three years to file a claim of interest to preserve their rights for an additional ten years, after which time the mineral rights would be declared abandoned if left unused.  The goal of the proposed bill is to fill in gaps in ownership of subsurface mineral rights while ensuring that the rights of current mineral owners are protected.

The second Marcellus Shale-related law, for which House Representatives Gergely (D-35) and Everett (R-84) are currently seeking co-sponsorship, is entitled the "Conservation Pooling Act." This legislation seeks to enhance conservation efforts while simultaneously protecting landowners impacted by natural gas drilling. Some of the most important features of the law include limiting the number of well pads allowed to be constructed on drilling units, enhancing royalty owners' ability to maximize the economic benefit of their Marcellus Shale leases, and providing for no surface trespass rules and fair compensation for non-mineral interest owners who are pooled into a unit.
 

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Reed Smith joined an audience of 1,200 attendees at last night's "Opportunity for Stakeholder Input on Criteria for Selecting Case Studies for Consideration in USEPA's Hydraulic Fracturing Research Study" meeting in Southpointe, PA, just outside of Pittsburgh. The standing-room only event marked the largest turnout yet in this series of public hearings sponsored by the U.S. Environmental Protection Agency (USEPA). Approximately 600 people attended the first hearing in Fort Worth, Texas on July 8, while nearly 350 attended in Denver, CO on July 13. The last hearing in the series of four will take place in Binghamton, NY on August 12.

USEPA has explained that the purpose of the hearings is to solicit input from community and industry stakeholders on the design of USEPA's upcoming study of the potential impact of hydraulic fracturing ("hydro-fracking")­—which involves pumping large volumes of water mixed with frac fluid and sand into geologic formations to extract natural gas—on groundwater and drinking water. To facilitate this goal, USEPA welcomed members of the community to register for two-minute slots of speaking time during which they could address their thoughts on the scope and design of the study, as well as on the potential costs and benefits posed by Marcellus Shale natural gas production in Pennsylvania.

It became clear from the comments of the 130 or so speakers that public concern over the potential adverse environmental and health impacts of hydro-fracking has reached fever pitch. Some concerned community members advocated for a moratorium to be placed on all Pennsylvania natural gas drilling, similar to the one currently in effect in New York state, until USEPA completes its hydro-fracking study (expected sometime in late 2012). Industry supporters expressed fears that over-regulation could chill the significant increases in job opportunities and government revenue expected in Pennsylvania as a result of Marcellus Shale natural gas development and production.

According to USEPA, the study is scheduled to begin in early 2011, with preliminary study results expected in 2012. In addition to conducting the series of four public hearings, USEPA is also soliciting comments from the public via email at hydraulic.fracturing@epa.gov on the following inquiries: (1) where should USEPA prioritize its efforts?; (2) where are gaps in current knowledge?; (3) is there data and information already in existence that USEPA should be aware of?; and (4) are there potential candidate sites or case studies that would be useful for the study?

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

On July 21, 2010, Pennsylvania's Environmental Quality Board (EQB) amended the public meeting schedule for proposed regulations that aim to improve the safety of state oil and gas wells and protect the state’s water resources from contamination. According to the EQB's press release, the public meeting schedule is as follows:

• July 21, 2010 - 7:00 p.m. - Lycoming College, Helm Science Center Bldg., Rm G-11, 700 College Place, Williamsport
• July 22, 2010 - 7:00 p.m. - DEP Northwest Regional Office, 1st Floor Conference Rm, 230 Chestnut Street, Meadville
• July 22, 2010 - 7:00 p.m. - DEP Southwest Regional Office, Waterfront Conf. Rm A & B, 400 Waterfront Dr., Pittsburgh
• July 26, 2010 - 7:00 p.m. - DEP Southwest Regional Office, Waterfront Conf. Rm A & B, 400 Waterfront Dr., Pittsburgh

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

On July 10, 2010, the Pennsylvania Environmental Quality Board (EQB) published its proposed rulemaking measures to update existing state requirements for drilling, casing, cementing, testing, monitoring and plugging of oil and gas wells. The proposed rulemaking, originally adopted by the EQB in May, is now open for public comment until August 9, 2010. Once the period for public comment is over, the proposal will go before the Pennsylvania Independent Regulatory Review Commission for review and final publication.

According to the EQB, a large portion of the updates contained in the proposal are already employed as part of best management practices among operators. However, the new regulations are said to further decrease any risk of gas migration from well sites to neighboring water supplies. The proposed rulemaking was prompted, in part, by public concern over the potential impact that the increasing number of Marcellus Shale wells could have on groundwater and drinking water supplies. Although the Pennsylvania Department of Environmental Protection's review of current well site construction and operation practices revealed that "many, if not all, Marcellus well operators met or exceeded the current well casing and cementing regulations[,] . . . the current regulations were not specific enough" in detailing guidelines for proper well construction or requirements for operators to respond to complaints over gas migration. The current updates would provide for more specificity in these areas, as well as establish a requirement that well operators conduct quarterly inspections of the structural integrity of all wells in operation. 

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

According to a press release this week by the Pennsylvania Department of Environmental Protection, the "Pennsylvania State Police placed 250 commercial vehicles out of service" earlier this month as part of an effort to enforce various environmental and traffic safety laws in areas that have seen an increase in heavy truck traffic as a result of Marcellus Shale drilling operations. Of the 1,137 trucks inspected, waste water trucks received the highest proportion of citations and written warnings. Commissioner Frank E. Pawlowski explained in a June 23 announcement that because hydro-fracking requires substantial volumes of water to be delivered to and from well sites, the number of waste water trucks, in particular, on Pennsylvania roads has increased significantly.

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

The Pennsylvania Environmental Quality Board approved two regulations this week to address concerns over the potential for Marcellus Shale fracking operations to lead to groundwater and drinking water contamination. The first measure aims to limit the amount of "total dissolved solid," a measure of combined chemical substances dissolved in water, allowed to reenter streams and other bodies of water by requiring operators to treat all "frac water" containing over a certain amount of the pollutant before releasing it. The second measure would impose a requirement on all new Marcellus Shale developments to have 150-foot "buffer zones" separating them from high-quality streams. These new measures are now en route to the environmental committees of the Pennsylvania House and Senate for further review. The Independent Regulatory Review Commission, along with environmental and gas industry officials will also have an opportunity to provide comments.

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

According to an announcement this week by John Hanger, Secretary of the Pennsylvania Department of Environmental Protection (DEP), the DEP plans to hold a meeting on May 13, 2010 with oil and gas companies who have drilling permits in the Marcellus Shale to discuss preventive measures for protecting against gas migration from wells. The DEP is concerned that gas migration from wells can lead to groundwater and drinking water contamination. In addition to facilitating discussion about the issue among the various stakeholders, Mr. Hanger stated that the DEP is also proposing an increase in oversight, as well as "tougher regulations to meet the growing demand and new drilling technologies including improving well construction standards to protect from gas migration.”

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

In a statement released yesterday, John Hanger, Secretary of the Pennsylvania Department of Environmental Protection, championed the proposal of new rules aimed at keeping Pennsylvania streams, drinking water, and rivers free from a pollutant known as "total dissolved solid" (TDS), which is a measure of chemical substances dissolved in water. In addition to natural gas drilling, sources of TDS include abandoned mine drainage, agricultural runoff, and discharges from industrial or sewage treatment plants. Mr. Hanger's hope is to establish the necessary regulations now that will prevent TDS from becoming a source of contamination later. In the press release, Mr. Hanger focused on the high TDS concentrations related to natural gas drilling, stating that “Marcellus drilling is growing rapidly and our rules must be strengthened now to prevent our waterways from being seriously harmed in the future.”

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This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

During a Marcellus Shale public forum meeting held last week near Scranton, Pennsylvania, the Pennsylvania Department of Environmental Protection (DEP) proposed a new regulation to be added to the most recent draft of proposed legislation regulating well construction. Under the proposed regulation, gas drilling companies would have to provide information about chemical usage on a well-by-well basis. This new proposal would require each company, upon completion of well construction, to disclose in a report a list containing all the names and total volume of chemicals used in the hydraulic fracturing process. The new proposal will be presented at a Pennsylvania Environmental Quality Board meeting for discussion on May 19, 2010. Scott Perry, director of DEP's Bureau of Oil and Gas Management, explained that this proposed regulation was drafted in response to a growing desire by the public for increased transparency with respect to well site development.

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This post was written by Ariel Nieland.

On March 31, 2010, the Pennsylvania Department of Environmental Protection (DEP) held a Marcellus Shale regulatory requirements training seminar in Harrisburg, PA, and Reed Smith was there. The general message of the DEP seemed to be that conscientious well site planning and operation at the outset on the part of operators will be met with a willingness on the part of regulatory authorities to promote development and production of the resource.

The seminar covered a range of environmental topics associated with Marcellus Shale development. The segment on protecting streams and wetlands addressed the general permitting requirements for well sites located within 100 feet of streams, springs, or other bodies of water. The next segment, covering spill reporting requirements, underscored the importance of establishing a "Preparedness, Prevention and Contingency" plan, a requirement for well operators under the Clean Streams Law, that sets forth guidelines for waste disposal and emergency response measures. The session on water management plans provided an overview of the requirements for identifying water sources -- including public water supplies, surface or groundwater, wastewater, and frac flowback -- to be used in Marcellus Shale development as well as best management practices for water use. The seminar next focused on dam safety permit requirements for centralized impoundment areas in Marcellus Shale gas well sites, including the best management practices for the construction of impoundment areas, use of synthetic liners, and impoundment site management. The segment on chemical analysis of residual waste addressed submission requirements for identifying specific chemicals contained in well site waste (including flowback water, brines, muds, and cuttings), the reporting, monitoring, and recordkeeping requirements for that residual waste, and waste transportation guidelines. Finally, the session on erosion and sediment control provided an overview of best management practices for constructing site access roadways, waterbars, sediment barriers and channels, and culverts in order to meet the DEP's general permitting requirements.

The program was an abridged version of a two-day comprehensive training program on Marcellus Shale regulatory requirements offered at Pennsylania State University in January 2010.

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This post was written by Ariel Nieland.

On March 22, 2010, Governor Rendell signed Senate Bill 297 into law in the Commonwealth of Pennsylvania. This bill, originally proposed by Senator Yaw in February of 2009, provides for increased record-keeping and reporting requirements including requiring Marcellus Shale well operators to submit annual and semi-annual reports specifying, among other things, "the amount of production on the most well-specific basis available" and the status of each well. The bill also requires the DEP to post Marcellus Shale well data online. This new requirement will significantly impact the availability of natural gas producers' production information, which was previously kept confidential for five years.
 

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This post was written by Kevin Abbott and Nicolle Snyder Bagnell.

The Pennsylvania Supreme Court issued a much-anticipated opinion interpreting Pennsylvania's Minimum Royalty Act, 58 P.S. 33, today, holding that royalties should be calculated "at the wellhead, as provided by the net-back method in the Lease…" The case, as well as 70 others filed in Pennsylvania, were brought by lessors unhappy with their leases because the recent interest in natural gas in the Marcellus Shale resulted in some of their neighbors getting better lease terms. The Plaintiffs argued that the Act requires a guaranteed minimum royalty on the gross proceeds of the sale of the natural gas and, as a result, any contractual agreement to share in post-production costs necessarily reduces the royalty that the lessor receives. They sought an interpretation of the Act which would result in the invalidation of tens of thousands of leases entered into since 1979. Such a result would have crippled the revival of the natural gas exploration industry in the Commonwealth. The defendants and the industry argued that the plain language of the Act does not prohibit lessors and lessees from agreeing to share in post-production costs. The sole purpose of the Act, as evidenced by its companion provision in 58 P.S. § 34, was to prohibit lessees from paying a flat rate for production -- a common practice prior to the Act’s passage in 1979 -- and to instead require a minimum royalty of one-eighth of the gas produced. The Court's opinion today resolves that issue squarely in favor of the oil and gas industry. Not only did the Court decline to invalidate the leases at issue, but also determined that post production expenses could be permissibly deducted under the Act.

Kevin Abbott and Nicolle Bagnell of Reed Smith represented the Industry Amicus, the Pennsylvania Oil and Gas Association, the Independent Oil and Gas Association and Chesapeake Appalachia LLC.

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This post was written by Nicolle Snyder Bagnell.

The U.S. Environmental Protection Agency (USEPA) officially announced its plans today to initiate a study of hydraulic fracturing and its potential impact on water quality and public health. USEPA is re-allocating $1.9 million for this comprehensive study in 2010 and seeks additional funding for 2011. Hydraulic fracturing has gained the attention of Congress this year in large part due to the increased scrutiny of its use in the development of the Marcellus Shale in Pennsylvania, New York, West Virginia and other Appalachian states. USEPA is still in the early stages of designing the study and is seeking input from its Science Advisory Board. Click here for more information.

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This post was written by Nicolle Snyder Bagnell.

Pennsylvania Department of Environmental Protection's Secretary John Hanger announced today that the Department plans to open a new office of its Oil and Gas Management division in Scranton, Lackawanna County, Pennsylvania. Although the exact location has not yet been decided, the purpose of the office will be to decrease travel time and locate regulators closer to the oil and gas wells they regulate, particularly the new Marcellus Shale wells planned in that part of the state. You can find the Department's press release here.

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This post was written by Nicolle Snyder Bagnell.

On January 8, 2010, West Virginia's Department of Environmental Protection (WVDEP) finalized its industry guidance for oil and gas drilling in the Marcellus Shale. The guidance focuses on large water volume fracture treatments and addresses the use and disposal of frac fluids. As discussed in the guidance, horizontal drilling, coupled with large volume hydraulic fracture treatments, is becoming a common exploration technique. Large amounts of water mixed with sand and other additives are pumped into the shale formation under high pressure to fracture the rock around the well to create a permeability conduit to the well bore. Water used in the hydraulic fracturing process, often referred to as “frac fluid,” must be processed in one of three ways. It can be injected in permitted disposal wells, treated to remove generated pollutants then disposed of properly, or reused.

The WVDEP also added a "Well Work Permit Application Addendum" as part of its natural gas drilling permit application requirements.

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This post was written by Nicolle Snyder Bagnell.

Last week the U.S. Environmental Protection Agency (USEPA) launched its new "Eyes on Drilling" tipline. The toll free number and email address were created by USEPA to help address growing public concern about oil and natural gas drilling in the Marcellus Shale. In particular, they are asking citizens to report illegal disposal of wastes or other suspicious activity related to oil and gas drilling. Information about the tipline, as well as what the agency is asking citizens to include in their report, can be found here.

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This post was written by Nicolle Snyder Bagnell.

Pennsylvania's Department of Environmental Protection (DEP) has just made available its proposed draft regulations for public comment. Comments must be received by the DEP by March 2, 2010. A copy of the regulations can be found here.

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This post was written by Nicolle Snyder Bagnell.

In a move described as an "Aggressive Action to Protect Public, Environment as Marcellus Drilling Operations Expands," Pennsylvania's Governor Ed Rendell directed the Pennsylvania Department of Environmental Protection ("DEP") to hire 68 new staff members today to work on natural gas well inspections and related oil and gas regulation. The additions will be made despite a moratorium on hiring at the DEP and will be funded entirely from the higher permit fees instituted last year for oil and gas drilling permits. In addition, Rendell commented on the DEP's proposed amendments to the current oil and gas regulations, which will be available for public comment beginning tomorrow, January 29, 2010, saying that the new regulations will:

• Require the casings of Marcellus Shale and other high-pressure wells to be tested and constructed with specific, oilfield-grade cement;
• Clarify the drilling industry’s responsibility to restore or replace water supplies affected by drilling;
• Establish procedures for operators to identify and correct gas migration problems without waiting for direction from DEP;
• Require drilling operators to notify DEP and local emergency responders immediately of gas migration problems;
• Require well operators to inspect every existing well quarterly to ensure each well is structurally sound, and report the results of those inspections to DEP annually; and
• Require well operators to notify DEP immediately if problems such as over-pressurized wells and defective casings are found during inspections.

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This post was written by Nicolle Bagnell and Stephanie Hadgkiss.

The Pennsylvania Department of Environmental Protection has fined Cabot Oil and Gas Corporation $56,650 following three spills which occurred over the course of one week at Cabot's Marcellus Shale natural gas drilling sites in Susquehanna County, Pennsylvania. The fine was assessed as for violations of the Clean Streams law, Solid Waste Management Act and the Oil and Gas Act.

In addition to the fine, from September 24 to October 16, the DEP imposed a three-week halt of hydraulic fracturing performed by Cabot in Susquehanna County. Hydraulic fracturing is a drilling technique being used to maximize natural gas extraction from the Marcellus Shale. A mixture of water, sand and other substances (sometimes referred to as "frac fluid") is forced into tiny fractures in underground shale rock layers at high pressure in order to release trapped natural gas.

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This post was written by Nicolle Snyder Bagnell and Stephanie Hadgkiss.

Facing a projected budget deficit of $2.3 billion, Pennsylvania Governor Ed Rendell has proposed a "severance" tax on gas extracted from the Marcellus shale formation, the proceeds of which would go to the General Fund in order to offset revenue shortfalls in the state's budget. This proposal was reported in the Feb. 20, 2009 edition of the Oil and Gas Journal.

According to the article, Governor Rendell proposes to tax producers in the state 5% at the wellhead, plus 4.7 cents per thousand cubic feet of production --an approach identical to that of West Virginia. The tax would be paid monthly to the Pennsylvania Department of Revenue beginning Oct. 1, 2009 and has been projected to raise an estimated $1.82 billion over five years.

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