RMMLF Mineral Law Newsletter
(By Joseph K. Reinhart, Sean M. McGovern and Casey J. Snyder)
In a June 25, 2020, press release and live press conference, Pennsylvania Attorney General Josh Shapiro announced the findings and recommendations of Pennsylvania’s 43rd Statewide Investigating Grand Jury report on the inquiry into the unconventional oil and gas industry. See Office of Att’y Gen., Commw. of Pa., “Report 1 of the Forty-Third Statewide Investigating Grand Jury.” As a result of the two-year investigation, the grand jury’s report outlined its opinion that the Pennsylvania Department of Environmental Protection (PADEP) and the Pennsylvania Department of Health (PADOH) failed to oversee the hydraulic fracturing industry and fulfill their responsibilities to protect Pennsylvanians from the impact of the industry’s operations.
The opinions in the report relied on testimony from Pennsylvania residents about environmental and health impacts from unconventional operations, in addition to testimony of witnesses who worked for PADEP and PADOH. The grand jury’s supervising judge permitted the report to be shared with the Secretaries of PADEP and PADOH, allowing them, or their designees, to respond to the allegation in the report.
The report concluded that PADEP was unprepared for the introduction and expansion of the unconventional oil and gas industry and failed to adequately regulate the industry, train its staff, communicate information within the agency, adequately test water samples, adequately inspect operators, notify landowners near fracking operations of environmental issues, take adequate enforcement action (including failing to refer cases to the state attorney general), or listen to the public. Despite acknowledging PADOH’s efforts under the current gubernatorial administration, the grand jury found that PADOH failed to sufficiently recognize or respond to the public health consequences of fracking, create a collective public outreach or education response to health complaints, or work with PADEP to gather data about health impacts.
In addition to its conclusions, the report detailed eight recommendations for legislative, executive, and administrative action to protect Pennsylvanians from effects of industry operations:
- expanding no-drill zones from 500 feet to 2,500 feet from a building or water well and 5,000 feet from schools and hospitals;
- requiring hydraulic fracturing companies to publicly disclose all chemicals used in drilling and hydraulic fracturing before they are used on-site;
- regulating gathering lines used to transport unconventional gas;
- aggregating all sources of air pollution in a given area to accurately assess air quality;
- requiring safer transport of the contaminated waste created from hydraulic fracturing sites;
- conducting a comprehensive health response to the effects of living near unconventional drilling sites;
- limiting the ability of PADEP employees to be employed in the private sector immediately after leaving the agency; and
- allowing the attorney general original criminal jurisdiction over unconventional oil and gas operations.
PADEP and PADOH, as well as Michael Krancer (former Secretary of PADEP) and Scott Perry (PADEP Deputy Secretary of the Office of Oil and Gas Management), filed responses to the grand jury’s findings. These responses were accepted by the supervising judge and attached to the report as part of the public record.
No criminal presentments were issued against PADEP, PADOH, or any agency employees as part of this report. Prior to the release of the report, the grand jury issued criminal presentments against two oil and gas companies for alleged violations of Pennsylvania environmental laws. Governor Tom Wolf issued a statement that he shares Attorney General Shapiro’s commitment to upholding Pennsylvania’s constitutional promise of clean air, pure water, and protecting public health. The Governor opined that many of the recommendations in the report either mirror activities that the administration already has in place or it supports as additional actions that would need to be taken by the legislature. See David E. Hess, “Wolf Administration Comments on Grand Jury Report on Regulatory Failures During Natural Gas Fracking Boom,” PA Env’t Digest Blog (June 27, 2020). Many industry groups, such as the Marcellus Shale Coalition (MSC), have also released responses to this report. See Press Release, MSC, “MSC Response to Attorney General Report” (June 25, 2020).
INCREASE TO UNCONVENTIONAL WELL PERMIT APPLICATION FEES GOES INTO EFFECT
On August 1, 2020, the Pennsylvania Environmental Quality Board (EQB) published the final rule, effective immediately, to increase well permit application fees for both vertical and nonvertical unconventional wells to $12,500. See Unconventional Well Permit Application Fee Amendments, 50 Pa. Bull. 3845 (Aug. 1, 2020). Under Pennsylvania’s regulations for unconventional wells, found at 25 Pa. Code ch. 78a, the previous well permit fees were $5,000 and $4,200 for nonvertical unconventional wells and vertical unconventional wells, respectively. See id. § 78a.19. The rule also removes the definitions of “nonvertical unconventional well” and “vertical unconventional well,” leaving only the definition of “unconventional well,” meaning “[a] bore hole drilled or being drilled for the purpose of or to be used for the production of natural gas from an unconventional formation.” Id. § 78a.1.
The Independent Regulatory Review Commission (IRRC), a state agency responsible for reviewing proposed regulations from most state agencies, held public meetings throughout May and June before it approved the regulation on June 18, 2020. See Approval Order, EQB Regulation No. 7-542 (IRRC June 18, 2020). The Marcellus Shale Coalition (MSC), a trade group composed of most of the unconventional operators in Pennsylvania, submitted a comment during the IRRC’s comment period that raised several issues with the fee increase, including how the fee increase will result in Pennsylvania having the highest unconventional well permit fee in the nation. See Comments of the MSC, IRRC No. 3206: EQB No. 7-542 Unconventional Well Permit Application Fee Amendments (June 15, 2020). The Pennsylvania Department of Environmental Protection (PADEP) characterized the fee increase as necessary to sustain its Office of Oil and Gas Management program. PADEP is required to evaluate its well permit fees every three years, but it had not raised unconventional well permit fees since 2014. See 25 Pa. Code §§ 78.19(e), 78a.19(b).
EQB PUBLISHES PROPOSED RULE REGULATING VOC EMISSIONS FROM EXISTING OIL AND GAS SOURCES
On May 23, 2020, the Pennsylvania Environmental Quality Board (EQB) published a proposed rulemaking titled Control of VOC Emissions from Oil and Natural Gas Sources, 50 Pa. Bull. 2633 (May 23, 2020). This proposed rulemaking would apply reasonably available control technology (RACT) requirements and emission limitations for existing oil and natural gas sources of volatile organic compound (VOC) emissions. The current Pennsylvania Department of Environmental Protection (PADEP) air regulations under 25 Pa. Code ch. 129 do not regulate emissions from these existing oil and gas sources.
The proposed rule, adopted by the EQB at its December 17, 2019, meeting, is based on the U.S. Environmental Protection Agency’s (EPA) October 2016 “Control Techniques Guidelines for the Oil and Natural Gas Industry.” See 81 Fed. Reg. 74,798 (Oct. 27, 2016). These guidelines include RACT requirements for VOC emissions from existing oil and gas sources. In 2018, EPA proposed rolling back the guidelines, but has not yet taken final action. Despite this potential rollback, PADEP moved forward with the rulemaking, citing in the preamble to the proposed rule, among other reasons, the need for consistency among all oil and gas sources in the state for monitoring fugitive emissions components and the potential to reduce VOC emissions by more than 4,000 tons per year. The preamble and other meeting materials are available on the EQB’s website at https://www.dep.pa.gov/PublicParticipation/EnvironmentalQuality/Pages/2019-Meetings.aspx.
The proposed rule would apply to owners and operators of the following oil and gas sources of VOC emissions in existence on or before the effective date of the final rule:
- storage vessels (in all segments except natural gas distribution);
- natural gas-driven pneumatic controllers;
- natural gas-driven diaphragm pumps;
- centrifugal compressors and reciprocating compressors; and
- fugitive emission components.
As part of the rulemaking process, PADEP held three virtual hearings on June 23, June 24, and June 25, 2020, and comments were accepted until July 27, 2020. According to PADEP’s comment database, the comment period for the proposed rule generated approximately 4,500 individual comments. The rule will be submitted to EPA for approval as a revision to the commonwealth’s state implementation plan, following promulgation of the final-form rulemaking.
BILL INTRODUCED BANNING NATURAL GAS HYDRAULIC FRACTURING
A recent bill introduced by Pennsylvania Senator Daylin Leach (D-Delaware, Montgomery) would ban the use of hydraulic fracturing for extracting natural gas. See Senate Bill 1217 (SB 1217), 204th Leg., Reg. Sess. (Pa. 2020).
Introduced in late June 2020, SB 1217 would amend title 58 (Oil and Gas) of the Pennsylvania Consolidated Statutes to ban “natural gas hydraulic fracturing,” defined as “[t]he breaking of rock by fluid for the purposes of stimulating or extracting natural gas as part of a commercial effort to produce and sell energy.” The proposed legislation includes both criminal penalties and administrative sanctions, including civil penalties of up to$500,000. The bill lists six factors to consider when calculating a penalty, including:
- Willfulness of the violation.
- Damage to the air, water, land or other natural resources, or their uses, in this Commonwealth.
- Cost of restoration and abatement.
- Harm caused to the health and safety of affected individuals.
- Aggravation of global climate change.
- Any other relevant factors.
Other key components of the bill pertaining to liability include provisions for individual liability if a corporation violates the prohibition, and provisions providing for a private right of action against a person who violates the prohibition. The bill instructs the Pennsylvania Department of Environmental Protection to issue regulations for implementing the prohibition.
Finally, more expansive requirements in the bill include an explicit repeal of parts of acts that are inconsistent with the bill’s provisions, and a limitation on the bill that would see its prohibition go into effect only upon a constitutional amendment to Pennsylvania’s constitution that would ban hydraulic fracturing. Senator Leach introduced a joint resolution proposing to amend Pennsylvania’s constitution to include such a ban on the same day he introduced SB 1217. See Senate Bill 1218, 204th Leg., Reg. Sess. (Pa. 2020).
The bill is currently in the Senate Environmental Resources and Energy Committee.
Copyright © 2020, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
