RMMLF Mineral Law Newsletter – Pennsylvania – Oil & Gas

RMMLF Mineral Law Newsletter

(by Joe Reinhart, Sean McGovern and Casey Snyder)

Governor Wolf Vetoes Conventional Oil and Gas Wells Act

On November 18, 2020, Senate Bill 790 (SB 790), the Conventional Oil and Gas Wells Act, sponsored by Sen. Scarnati (R-Jefferson), was presented to Governor Tom Wolf for signature. Governor Wolf vetoed the bill on November 25, 2020. See Governor Wolf’s Veto Letter for SB 790 (Nov. 25, 2020). SB 790 would have set a legislative framework for regulations for the conventional oil and gas industry in Pennsylvania. See Memorandum from Sen. Scarnati to All Senate Members, “Conventional Oil and Gas Wells Act” (June 6, 2019). In his veto letter, Governor Wolf acknowledged the difficulty in regulating conventional and unconventional operations under Pennsylvania’s current program, which was updated by law in 2012 and by regulations for the unconventional industry in 2016. These updates were tailored to the new unconventional industry developing in the state, and placed new requirements on the conventional industry. Proposed regulations for the conventional industry were not promulgated in 2016 after the state legislature passed legislation requiring rules for the conventional industry to be promulgated separately from the unconventional rulemaking. See Pennsylvania Grade Crude Development Act, 58 Pa. Stat. §§ 1201–1208.

Governor Wolf cited several reasons for vetoing the bill and why he believed it posed a risk to the public health and environment. He characterized the bill as including “roll backs,” stating that protections for drinking water, public resources, spills, and erosion and sediment control are weakened for the conventional industry, which he alleged violates regulations at a rate “three to four times” higher than the unconventional industry. Additionally, he stated that several parts of the bill were “likely” unconstitutional under the Pennsylvania Constitution.

Introduced in June 2019, SB 790 would create environmental rules and reporting requirements specific to the conventional oil and gas industry, which differs in many respects from the size and operations of the unconventional industry. While SB 790 was not enacted into law, the Pennsylvania Department of Environmental Protection (PADEP) is working on a new set of regulations for the conventional industry, independent of SB 790. As mentioned in PADEP’s “2019 Oil and Gas Annual Report,” it seeks to promulgate new regulations in several rulemaking packages amending the conventional regulations at 25 Pa. Code ch. 78. PADEP and the Pennsylvania Grade Crude Development Advisory Council (CDAC) had been working on legislative language to address the regulation of conventional well sites, and created a scoping document in 2018 on the potential for agreement on legislative or regulatory language. Over the past two years, discussions centered mostly on legislative language. However, PADEP developed the forthcoming rulemaking packages after it determined that the legislative discussions had not resulted in viable legislative language. PADEP recently discussed the draft conventional oil and gas rulemaking packages amending waste management and environmental protection performance standards with the Oil and Gas Technical Advisory Board at its September 17, 2020, meeting. See PADEP Regulatory Update (Oct. 7, 2020). The CDAC reviewed these draft rulemaking packages at its December 3, 2020, meeting, and will be generating comments on the draft rulemakings. Pennsylvania Grade Crude Oil Coalition president David Clark criticized moving forward with the proposed rulemaking packages so quickly. See Pa. Indep. Oil & Gas Ass’n, “DEP Advancing New Rules for Conventional Wells After Veto of Industry-Backed Bill,” link here. Several other conventional industry representatives pointed out issues with the draft rulemaking packages in public comments at the December 3 CDAC meeting. See CDAC Public Comments (Dec. 3, 2020), link here. CDAC declined to hold another meeting in February 2021 to speed up review of the draft rulemakings, and will hold its next meeting in April 2021. See CDAC Agenda (Dec. 3, 2020), link here.

The Governor’s regulatory agenda from October 3, 2020, provides the latest update on the rulemaking time frame, estimating that the proposed rules could be presented to the Environmental Hearing Board in the second quarter of 2021. See 50 Pa. Bull. 5568 (Oct. 3, 2020).

Governor Wolf Approves Bill on Pipeline Emergency Response Plans

On November 25, 2020, Governor Tom Wolf signed into law House Bill 2293 (HB 2293), sponsored by Rep. Quinn (R-Delaware). See 66 Pa. Cons. Stat. Ann. § 1512 (effective Jan. 25, 2021). The new law requires public utilities operating pipelines to provide emergency response plans upon written request to the Secretary of the Pennsylvania Public Utility Commission, the Pennsylvania Emergency Management Agency, and the emergency management director for each county where the pipeline runs through a densely populated area. The law tasks the Public Utility Commission with enforcing its requirements, and violations of the law could result in an enforcement.

The accompanying memorandum on HB 2293 recognizes that highly confidential information exists in pipeline operators’ emergency response plans. See Memorandum from Reps. Quinn & Comitta to All House Members, “Public Utilities Emergency Response Plan” (Jan. 16, 2020). If information contained in the response plan is confidential security information as defined under section 2 of the Public Utility Confidential Security Information Disclosure Protection Act, 35 Pa. Stat. § 2141.2, the law protects such information from disclosure to the public. However, for these protections to apply, the public utility must properly designate the confidential security information in the emergency response plan.

This bipartisan legislation is regarded as the first pipeline safety law, of approximately two dozen other proposed laws, to be enacted over the past three years.

Delaware River Basin Commission Approves Gibbstown LNG Terminal

On December 9, 2020, the Delaware River Basin Commission (DRBC), a federal agency created in 1961 by an interstate compact between Pennsylvania, Delaware, New Jersey, and New York, voted 4-0-1, with one abstention from New York, to approve a liquefied natural gas (LNG) terminal project by Delaware River Partners, a subsidiary of New Fortress Energy, in Gibbstown, New Jersey, along the Delaware River. See DRBC, Resolution for the Minutes and Accompanying Opinion (Dec. 9, 2020). The dock will permit liquefied hazardous gas and LNG from Pennsylvania to be loaded directly from truck or railcar to a marine vessel for overseas delivery. This site is reportedly the first in the nation that would allow delivery of LNG by rail.

The DRBC originally approved this project on June 12, 2019. See DRBC Docket D-2017-009-2 (June 12, 2019). However, the Delaware Riverkeeper and the Delaware Riverkeeper Network requested an administrative hearing after submitting comments arguing against approval of the project. The approval was affirmed by a hearing officer with the Pennsylvania Department of State on July 21, 2020, who found that the approval of the dock would not substantially impair or conflict with the DRBC’s Comprehensive Plan, a document guiding the agency to consider the immediate and long-range development and use of the water resources of the Delaware River Basin. See Report of Findings and Recommendations, In re DRBC Docket D-2017-009-2 Gibbstown Logistics Center Dock 2 (DRBC July 21, 2020). As part of the hearing, over a dozen expert and fact witnesses testified on topics involving the project and a lengthy administrative record was established. The DRBC next had to vote on the findings and recommendation of the hearing officer’s report from July 21, 2020. Given the time required to review the report, the DRBC passed a motion moving the vote from September 10, 2020, to December 9, 2020. The approval was again affirmed by a vote of 4-0-1, with one abstention from New York.

Pennsylvania Supreme Court to Answer Questions on Legal Standards Applying to Zoning Objections to Unconventional Natural Gas Projects

On January 5, 2021, the Pennsylvania Supreme Court agreed to consider the role that courts should play and the standards that should apply when courts hear a zoning appeal over unconventional oil and gas operations. See Order Granting Appeal in Part, Protect PT v. Penn Twp. Zoning Hearing Bd., Nos. 247 WAL 2020, 248 WAL 2020 (Pa. Jan. 5, 2021).

In this case, an energy company filed two applications for a special exception to develop unconventional gas wells on its property. These were approved by the zoning hearing board over Protect PT’s objections regarding alleged concerns about public health and environmental issues presented through layperson and expert testimony. The zoning board found that the objectors did not establish that the proposed use would “create a high probability that an adverse, abnormal or detrimental effect will occur to public health, safety and welfare,” which was a finding upheld by both the Westmoreland County Court of Common Pleas and the Commonwealth Court of Pennsylvania. Protect PT v. Penn Twp. Zoning Hearing Bd., 238 A.3d 530 (Table), 2020 WL 3640001 (Pa. Commw. Ct. July 6, 2020). In upholding the finding of the board approving the special exceptions, the commonwealth court held that the evidence submitted by the objectors was not a basis to overrule the board. Some evidence dealt with particulars of construction and development, not the use of the land at issue, the latter being the proper inquiry according to the commonwealth court. Id. at *8. Further, the commonwealth court held that other evidence did not rise to the standard of showing a high probability that adverse effects to public health, safety, and welfare would occur. Id. In sum, the objectors failed to produce “sufficient, credible evidence” that if the ordinance requirements and conditions in the special exceptions are met, the use would still create a high probability of negative effects. Id. at *10. In a concurrence to the commonwealth court’s affirmation, Judge McCullough noted his “concern” with the “legal framework employed to address, analyze, and dispose of the issues” concerning the evidence submitted by the objectors and other issues discussed by the court. Id. at *15 (McCullough, J., concurring).

On appeal to the Pennsylvania Supreme Court, the issues to be answered by the court are:

(1)   Whether the Commonwealth Court’s opinion conflicts with the Court’s previous application of the capricious disregard of evidence standard and creates an issue of such substantial public importance as to require prompt and definitive resolution by this Honorable Court?

(2)   Whether the Commonwealth Court’s failure to meaningfully evaluate the cumulative impacts of developing multiple unconventional natural gas wells in close proximity to residential neighborhoods creating high probability of adverse, abnormal or detrimental effects on public health, safety and welfare and significantly altering the character of the community was an abuse of discretion which creates a question of first impression of such public importance which requires this Honorable Court’s prompt and definitive resolution?

Order Granting Appeal in Part, at 1–2. Based on the briefing schedule, there is a chance oral arguments could be held as early as April 2021, but they are more likely to be held in October 2021, due to restrictions related to COVID-19 and remote hearing requirements.

PADEP Publishes Final Unconventional Guidance on Water Supply Impacts

On August 8, 2020, the Pennsylvania Department of Environmental Protection (PADEP) published notice in the Pennsylvania Bulletin of a final technical guidance document titled “Policy for the Replacement or Restoration of Private Water Supplies Impacted by Unconventional Oil and Gas Operations,” No. 800-0810-002 (Aug. 8, 2020) (Final TGD), and the related comment and response document, outlining its policy and interpretation of the legal requirements to replace or restore private water supplies affected by unconventional oil and gas operations. See 50 Pa. Bull. 4091 (Aug. 8, 2020). The Final TGD replaced a previous interim final version in effect since October 2016 (Interim TGD). The Final TGD and the comment and response document can be viewed here.

Section 3218 of Pennsylvania’s Oil and Act of 2012 contains provisions relating to water supply impacts from unconventional oil and gas operations. 58 Pa. Cons. Stat. Ann. § 3218. Specifically, § 3218(a) requires an unconventional well operator to restore or replace water supplies affected by their operations. PADEP promulgated regulations implementing this provision at 25 Pa. Code § 78a.51. While it does not carry the force of law, the Final TGD provides operators and affected parties guidance on how PADEP implements the legal requirements when water supplies are affected by unconventional oil and gas operations. The Final TGD contains several substantive amendments from the Interim TGD.

Some changes in the Final TGD from the Interim TGD version include, but are not limited to:

  • allows treatment of the impacted water supply as a temporary water supply;
  • allows an operator to submit a request to PADEP for additional time to evaluate an impacted water supply to demonstrate that the impact may be temporary or may be corrected by remedial action at a location other than the water supply in “a short amount of time”;
  • states PADEP can require sampling for methane, ethane, and propane if it determines an operator is responsible for introducing those contaminants into the local aquifer or there is a concern they may be present in the new water supply source;
  • specifies that the operator must report receipt of notice electronically to PADEP within 24 hours of receiving notice from a landowner, water purveyor, or affected person that a water supply has been affected by pollution or diminution, and that water supply replacement plans should be shared among any affected persons and their consultants;
  • adds a requirement that operators must comply with certain industry standards when utilizing plumbing accessories and equipment associated with the implementation of temporary water supplies or permanent restoration or replacement of private water supplies; and
  • includes new references and citations to PADEP’s broad authority under the Clean Streams Law (35 Pa. Stat. §§ 691.1–.1001) to issue orders, inspect private and public property, and otherwise investigate “all facts” relating to pollution of waters of the Commonwealth, including private water supply complaints. See 35 Pa. Stat. § 691.305.

PADEP Publishes Draft Guidance on Spill Policy Under Pennsylvania’s Clean Streams Law and NPDES Regulations

On August 8, 2020, the Pennsylvania Department of Environmental Protection (PADEP) published notice in the Pennsylvania Bulletin of a new draft technical guidance document entitled “Guidance on Notification Requirements for Spills, Discharges, and Other Incidents of a Substance Causing or Threatening Pollution to Waters of the Commonwealth Under Pennsylvania’s Clean Streams Law,” No. 383-4200-003 (Aug. 8, 2020) (Draft TGD), outlining its spill policy interpreting legal requirements under the Clean Streams Law (35 Pa. Stat. §§ 691.1–.1001 and implementing regulations at 25 Pa. Code ch. 91) and Pennsylvania’s National Pollutant Discharge Elimination System (NPDES) regulations (25 Pa. Code ch. 92a). See 50 Pa. Bull. 4091 (Aug. 8, 2020). The Draft TGD and associated public comments are available here.

Pennsylvania has broad notification requirements for spills, releases, discharges, or other incidents that cause or threaten pollution of “waters of the Commonwealth,” defined to include groundwater. 35 Pa. Stat. § 691.1. Generally, a person must notify PADEP if, by accident or other activity, a toxic or other substance that would endanger downstream users of waters of the Commonwealth results in pollution, creates the danger of pollution, or damages property, enters, or is placed so that it might enter waters of the Commonwealth. 25 Pa. Code § 91.33(a). This regulation does not provide objective or quantifiable thresholds for determining what spills, releases, discharges, or other events require reporting. Additionally, it is not limited to certain industries or permitted facilities, but rather applies any time there is an incident like a discharge or threat of discharge into waters of the Commonwealth.

This regulation is incorporated by reference in several regulatory programs, including Pennsylvania’s NPDES program. NPDES permit holders must comply with the spill reporting requirements under 25 Pa. Code ch. 92a. Specifically, § 92a.41(b) requires that NPDES permittees comply with the immediate oral notification requirements of § 91.33. In addition, § 92a.41(b) interprets that immediate oral notification requirement to mean as soon as possible, but not later than four hours after the NPDES permittee becomes aware of the incident causing or threatening pollution, and requires a written submission to PADEP within five days of becoming aware of the incident.

The purpose of the Draft TGD is to provide guidance on the immediate notification requirements for compliance under these programs. The Draft TGD applies to all persons and operations subject to reporting requirements under § 91.33, including the oil and gas industry, which has its own spill reporting requirements in separate regulations. See 25 Pa. Code §§ 78.66, 78a.66; PADEP, “Addressing Spills and Releases at Oil & Gas Well Sites or Access Roads,” No. 800-5000-001 (Sept. 21, 2013).

PADEP’s position in the Draft TGD is that there are no objective threshold requirements for what incidents need to be reported under § 91.33(a), which tracks the regulatory language. The Draft TGD recommends erring on the side of notification when there is some question as to whether reporting is required, and it states that PADEP may consider the decision to notify when exercising its enforcement discretion. The Draft TGD also uses language slightly broader than the language of § 91.33(a). Under this provision, notification is triggered if an incident “would” endanger downstream users, result in pollution, create a danger of pollution, or damage property. The Draft TGD replaces “would” with the term “may,” arguably expanding the scope. Other information in the Draft TGD defines who the “responsible parties” required to notify are and provides examples of how responsible parties respond to spills, releases, discharges, and other incidents. The Draft TGD does not clarify its interaction with requirements for reporting spills under the oil and gas regulations or policy. As noted by the Marcellus Shale Coalition in its comments on the Draft TGD, some of the oil and gas notification requirements and PADEP’s other programs have notification time frames and applicability thresholds inconsistent with what is required under § 91.33(a) and the Draft TGD. See, e.g., 25 Pa. Code §§ 78.66, 78a.66a.

PADEP Publishes Unconventional Pressure Barrier Guidance for Comment

On August 29, 2020, the Pennsylvania Department of Environmental Protection (PADEP) published notice in the Pennsylvania Bulletin of a new draft technical guidance document entitled “Guidelines for Development of Operator Pressure Barrier Policy for Unconventional Wells,” No. 800-0810-003 (Aug. 29, 2020) (Draft TGD). See 50 Pa. Bull. 4459 (Aug. 29, 2020). The Draft TGD underwent public comment from August 29 to September 28, 2020. The Draft TGD and associated comments can be found at https://www.ahs.dep.pa.gov/eComment/. PADEP has been developing this long-awaited guidance for several years. PADEP previously stated that it was developing pressure barrier policy guidance as part of Pennsylvania’s unconventional oil and gas regulations to assist unconventional operators in complying with pressure barrier policy requirements. See PADEP, Chapter 78/78a Comment Response Document, Part 1 of 2, “Environmental Protection Performance Standards at Oil and Gas Well Sites,” Comment No. 764 (2016). The unconventional oil and gas regulations went into effect in 2016. See 46 Pa. Bull. 6431 (Oct. 8, 2016). It is unclear why the guidance has taken years to develop. Given the recent comment period, the Draft TGD could be approaching finalization; however, there are no deadlines by which PADEP must finalize the Draft TGD.

The guidance is meant to provide unconventional operators guidelines on how to develop a pressure barrier policy prior to drilling a well and in other required circumstances. A pressure barrier policy is a component of a preparedness, prevention, and contingency plan, which is required under the unconventional oil and gas regulations. 25 Pa. Code § 78a.55(a), (d). PADEP asserts operators must consider using pressure barriers during unconventional operations including, but not limited to, drilling, hydraulic fracturing, completion, alteration, plugging, workover activities, and maintenance or repair activities. When identified as necessary, at least two mechanical pressure barriers capable of being tested during well drilling and completion operations are required between the open formation and the atmosphere. Id. § 78a.72(i). An operator is also permitted to determine that a pressure barrier policy is applicable to more than one well based on subsurface conditions. PADEP defines mechanical pressure barriers in the Draft TGD to include well heads, ram-type blow-out preventers, and annual-type blow-out preventers. If an operator notices a well control incident like a loss of control or control emergency, an operator must report this incident to PADEP within two hours. In addition to outlining the requirements of a pressure barrier policy, the Draft TGD includes worksheets developed by PADEP to assist operators with developing a pressure barrier policy.

PADEP Releases 2019 Oil and Gas Annual Report

On September 14, 2020, the Pennsylvania Department of Environmental Protection (PADEP) released the “2019 Oil and Gas Annual Report” (Report). The Report is an annual publication that highlights program initiatives, production and permitting statistics, enforcement data, and other topics of the past year.

The Report provides data collected from the past year and older annual data from previous years. Several highlights of the data include:

  • Inspections. According to PADEP, in 2019, it completed 35,324 compliance inspections at conventional and unconventional well sites, 1,549 fewer than 2018.
  • Enforcement. A total of $4,097,545 in fines and penalties was collected in 2019, pushing the total amount collected to $43.7 million over the past 10 years. This number was slightly down from the 2018 penalty amount, but up from 2017. Additionally, compared to 2018 levels, alleged compliance violations issued to unconventional and conventional operators decreased to 985 from 1,043, and to 1,763 from 3,017, respectively.
  • Production. Natural gas production increased from 6.1 trillion cubic feet in 2018 to 6.8 trillion cubic feet in 2019.
  • Permits and Operations. PADEP issued 1,475 unconventional well permits in 2019, 393 fewer than 2018. A total of 615 unconventional wells were drilled during 2019, around 162 less than 2018. A total of 172 conventional wells were drilling during 2019, an increase of 32 wells from 2018. The average time to process an oil and gas permit improved by several days in 2019 for both the Northwest and Southwest district offices.
  • Produced Fluid Management. As of 2019, operators achieved a 90% reuse or recycle rate of produced fluids. There were 11 active underground injection control (UIC) disposal wells in Pennsylvania. PADEP estimates that 8% of produced fluids from oil and gas sites was disposed of at UIC wells in Pennsylvania, Ohio, or West Virginia, and the remaining 2% was managed by other wastewater treatment options.

In addition to providing statistics, PADEP discussed its efforts and anticipated outlook on projects, initiatives, and regulatory actions currently underway or anticipated in the future. In 2019, working groups met to address topics like natural gas storage, permit processing efforts, and groundwater study issues, among others. PADEP states that it is analyzing alternative methods of funding given the fluctuation of oil and gas permits per year. In the regulatory context, the Report confirms PADEP’s intent to move forward with updating conventional oil and gas regulations on environmental protection performance standards via several rulemakings in late 2020. PADEP is also reviewing its role in issuing UIC permits. Pennsylvania does not have primacy to implement the UIC program. Currently, a UIC permit applicant must first obtain approval from the U.S. Environmental Protection Agency, and then a well permit from PADEP. The agencies are exploring the possibility of transitioning this two-step process to a concurrent review process by both agencies.

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