RMMLF Mineral and Energy Law Newsletter

(By Joseph K. Reinhart, Sean M. McGovern & Matthew C. Wood)

On September 4, 2021, the Pennsylvania Department of Environmental Protection (PADEP) published notice of its final technical guidance titled “Guidelines for Implementing Area of Review (AOR) Regulatory Requirement for Unconventional Wells,” No. 800-0810-001 (Sept. 4, 2021) (AOR Guidance). See 51 Pa. Bull. 5757 (Sept. 4, 2021). The AOR Guidance clarifies the AOR as “1,000 feet in all directions” from the plan view projections for horizontal and vertical unconventional wells. See 25 Pa. Code § 78a.52a(a). Vertical buffer distance for offset wells located within the AOR is 1,500 feet for all unconventional wells. See 25 Pa. Code § 78a.73(c). The final guidance document was effective upon date of publication, replacing PADEP’s 2016 guidance. Operators should reference the AOR Guidance regarding well placement and offset wells, for evaluating and monitoring nearby wells to prevent communication between wells, and for reporting and resolving incidents. The AOR Guidance also serves as an overview of PADEP’s well adoption permitting process.

Final issuance of the AOR Guidance followed a 60-day public comment period during which PADEP received approximately 55 comments from 10 commenters and made several changes to the draft version. Key changes to the AOR Guidance, as identified in the Pennsylvania Bulletin, include:

  • clarifying the ability of operators to survey an area that extends beyond the prescriptive AOR regulatory language;
  • removing language assigning responsibility for recently plugged offset wells to the operator who had completed the plugging;
  • relocating language pertaining to briefing the hydraulic fracturing operations team about adjacent operator coordination;
  • updating incident reporting language; and
  • modifying operator coordination with PADEP field inspection staff ahead of hydraulic fracturing.

The AOR Guidance and related materials are available in PADEP’s eLibrary, “Oil and Gas (550-) (800-)” folder. See http://www.depgreenport.state.pa.us/elibrary/GetFolder?Folder ID=4613.

Office of Environmental Justice Includes Oil and Gas Public Engagement Section in Revised Environmental Justice Public Participation Policy and Governor Wolf Issues Executive Order Regarding Environmental Justice

On August 19, 2021, the Pennsylvania Department of Environmental Protection (PADEP), Office of Environmental Justice (OEJ), released a working draft of the Environmental Justice Public Participation Policy (EJ Policy Working Draft) to the Environmental Justice Advisory Board (EJAB). See Environmental Justice Policy, No. 012-0501-002 (Aug. 19, 2021). Unlike PADEP’s 2004 EJ Policy, currently in effect, the EJ Policy Working Draft considers oil and gas drilling and operating permits as trigger permits. Id. § II(A)(1) & app. A. Trigger permits are identified as permits for regulated activities that traditionally lead to significant public concern due to potential environmental, hu-man health, and community impacts. Id. § II(A)(1).

Section IV of the EJ Policy Working Draft includes provisions for public engagement specific to unconventional oil and gas drilling and operations. These provisions are limited only to unconventional oil and gas drilling operations due to the 45-day permit review period specified by the Pennsylvania legislature pursuant to Act 13 of 2012. See 58 Pa. Cons. Stat. § 3211(e). The EJ Policy Working Draft states that the PADEP oil and gas program in collaboration with OEJ should conduct an annual assessment of operators with anticipated or actual drilling operations in EJ areas, as defined within the policy. EJ Policy Working Draft § IV(A)(1). Operators must create a summary of their projects identified in the annual assessment and submit the summary to PADEP for review. Id. § IV(A)(2). Additionally, operators are encouraged to attend community meetings to discuss planned activities as identified in the annual assessment. Id. § IV(B)(1).

Inclusion of oil and gas drilling and operating permits as trigger permits in the EJ Policy Working Draft could affect the oil and gas industry. First, the EJ Policy Working Draft would require unconventional drilling and operating permit applicants in EJ areas to undergo EJ analysis and enhanced public participation and engagement. Id. § II(B). Second, unconventional operators will need to report active and anticipated drilling operations at existing unconventional well pads on an annual basis. Id. § IV(A)(1). In other words, the EJ Policy Working Draft would apply to already permitted and active drilling operations that continue following the policy’s scheduled summer 2022 implementation date. While the intent of section IV is to align EJ analysis with the statutory limitations of the 45-day unconventional well permit review time frame in Act 13 of 2012, the inclusion of oil and gas drilling and operating permits in the EJ Policy Working Draft would create additional public participation requirements for the industry.

On October 28, 2021, Governor Tom Wolf issued Executive Order 2021-7 (EO 2021-7), permanently establishing both OEJ and EJAB, and creating the Environmental Justice Interagency Council (EJIC). The EJIC would, among other responsibilities, be charged to “[i]dentify and make recommendations to the Governor’s Office to address potential disproportionate environmental impacts that state laws, regulations, policies, and activities may have on Pennsylvania residents in Environmental Justice Are-as.” Id. § 4(c). The executive order also cites federal EJ initiatives and Executive Order No. 14,008, “Tackling the Climate Crisis at Home and Abroad,” 86 Fed. Reg. 7619 (Jan. 27, 2021), issued by the Biden administration earlier this year, and directs OEJ to develop and publish an EJ strategic plan every five years. EO 2021-7, § 2(b)(5).

In concert with the executive order, two proposals were introduced to the Pennsylvania legislature. On October 26, 2021, Representative Donna Bullock (D-Phila.) proposed House Resolution 151, recognizing the thirtieth anniversary of the adoption of the 17 principles of EJ that were presented to delegates at the First National People of Color Environmental Leadership Summit. Senator Vincent J. Hughes (D-Phila.) proposed Senate Bill 189, which closely resembles EO 2021-7 and amends the Administrative Code of 1929 (P.L. 177, No. 175) to establish an EJ task force and regional EJ committees.

As directed by EO 2021-7, PADEP is expected to further revise its EJ Policy Working Draft, which was scheduled to be discussed at the November 16, 2021, EJAB meeting. Both legislative proposals have been respectively referred to the House and Senate Environmental Resources and Energy Committees. If the Senate bill makes it through the legislature, it will go into effect 60 days after passage.

PADEP Expresses Willingness for Program Allowing Road Application of Conventional Drilling Wastewater If Data Supports 

The Pennsylvania Grade Crude Development Advisory Council (CDAC) is mandated to examine and make recommendations about existing technical regulations and policies implemented by the Pennsylvania Department of Environmental Protection (PADEP). At CDAC’s most recent meeting on August 19, 2021, PADEP representatives discussed potentially developing new regulations to allow the spreading of conventional oil and gas produced water (COGPW) as dust suppressant on un-paved roadways. This practice had been authorized for decades by PADEP and was largely used by local municipalities in northwest Pennsylvania via a PADEP approval process. See Fact Sheet, PADEP, “Roadspreading of Brine for Dust Control and Road Stabilization” (July 2011). PADEP previously attempted to amend 25 Pa. Code ch. 78 to include provisions governing road spreading of COGPW, but those revisions were never finalized. In 2018, in response to the Environmental Hearing Board’s (EHB) decision in Lawson v. PADEP, No. 2017-051-B (EHB May 17, 2018), PADEP implemented a moratorium on such road spreading. At the August meeting, attendees discussed reports of a Pennsylvania State University study in which researchers evaluated the efficacy of COGPW against commercially available alternatives. Among other things, the study found that dust suppression efficacy of all formulations of tested COGPW was less than the commercial alternatives. See Audrey M. Stallworth et al., “Efficacy of Oil and Gas Produced Water as a Dust Suppressant,” 799 Sci. of the Total Env’t 149347 (2021).

Kurt Klapkowski, Director of PADEP’s Bureau of Oil and Gas Management, explained during the meeting that past regulatory attempts to allow the spreading of COGPW as a dust suppressant and for other uses had been challenged in court (e.g., Lawson) and as such, any new regulations would have to be defensible and supported by applicable data. See Audio Recording of August 19, 2021, CDAC Meeting, https://drive. google. com/ file/d/1OJT9q9FlIVmjM1skJKpwWZKzBSQkQpic/ view. Klapkowski said that PADEP had funded and worked with Penn State to produce another study in an attempt to develop such data to support a program of road spreading that PADEP would approve under applicable regulations and would be defensible before the EHB, the courts, and under applicable statutes. Id. That study is forthcoming.

Since the August meeting, parties on both sides of the is-sue have reached out to PADEP. In a September 10, 2021, letter to PADEP Secretary Patrick McDonnell, CDAC chair Dave Hill stated, among other things, that PADEP had prevented CDAC from carrying out its statutory duties to evaluate and make recommendations by failing to inform CDAC of the two Penn State studies, which Hill said were clearly within CDAC’s purview. The letter was published in PIOGA Press Issue 138, at 10 (Oct. 2021). Hill argued that at least one of the studies could have benefited from CDAC’s expertise. On October 8, 2021, in response to Klapkowski’s comments at the August CDAC meeting, an environmental group submitted a letter signed by 80 organizations and businesses and approximately 1,800 individuals requesting, among other things, that PADEP halt any plans to develop regulations that would allow road spreading COGPW. See Letter to PADEP (Oct. 8, 2021), https://drive.google. com/ file/d/1dEziy2H4PCOQS-LcKeqrRuZxxVUE-OND/view. At the time of this report, PADEP had not proposed regulations governing the use of COGPW for road application.

Environmental Groups Submit Rulemaking Petitions to EQB for Full-Cost Bonding for Oil and Gas Well Plugging

On September 14, 2021, several environmental groups, including the Sierra Club and PennFuture, submitted two rulemaking petitions to the Pennsylvania Department of Environmental Protection (PADEP) requesting that the Environmental Quality Board (EQB) require full-cost bonding for conventional and un-conventional wells. The environmental groups contend that the full-cost bonds are necessary to incentivize operators to plug non-producing wells (or ensure that the commonwealth has funds available to do so).

For conventional wells, the petitioners seek to amend 25 Pa. Code § 78.302 in four ways: (1) increase the per-well bond amount from $2,500 to $38,000 (which the petitioners note is in line with PADEP’s estimated average cost to plug an abandoned well); (2) for blanket bonds, which can cover multiple wells, in- crease the amount from $25,000 to the sum of the individual bond amounts for the number of wells (e.g., five wells at $38,000 results in a $190,000 bond); (3) apply the revised bond amounts to all new wells and wells that were in existence as of April 17, 1985; and (4) require PADEP to issue a report to EQB every two years that recommends whether EQB should further adjust bond amounts (or every four years, if two years is not feasible). See generally Conventional Well Bonding Petition (Sept. 14, 2021).

The petitioners are also seeking a new regulation in 25 Pa. Code ch. 78 to govern bonding for unconventional wells, with even larger increases in bond amounts. That is, the petitioners are requesting an increase from the $4,000 starting cost to $83,000 per unconventional well. Likewise, the petitioners are proposing the same approach for blanket bonds (i.e., $83,000 multiplied by the number of wells). The proposed effective date and PADEP-required report are identical to the petition for conventional wells. See generally Unconventional Well Bonding Petition (Sept. 14, 2021). Of note, bonding for unconventional wells is already governed by 25 Pa. Code § 78a.302, which contradicts the petitioners’ proposed new regulation.

Regarding next steps for the rulemaking petitions, PADEP will use EQB’s Petition Policy (25 Pa. Code ch. 23) to determine whether the petitions are complete and whether EQB can take the proposed actions without conflicting with federal law. In the event PADEP determines that one or both of the petitions meet these conditions, it will inform EQB. The petitioners will then have an opportunity to make oral presentations at the next EQB meeting (occurring at least 15 days after PADEP’s determination) and PADEP will recommend to EQB whether it should accept the petitions.

Copyright © 2021, The Foundation for Natural Resources and Energy Law, Westminster, Colorado