Pittsburgh, PA and Washington, DC

The Foundation Mineral and Energy Law Newsletter

Pennsylvania – Oil & Gas

(Joseph K. ReinhartSean M. McGovern, Gina F. Buchman, Matthew C. Wood)

On January 26, 2024, the Pennsylvania Department of Environmental Protection (PADEP) announced that it would implement a policy requiring natural gas well operators to disclose chemicals they use in drilling and hydraulic fracturing operations before the chemicals are used on-site. See Press Release, PADEP, “Shapiro Administration, DEP Requires All Fracking Companies to Be More Transparent About Chemicals Used in Drilling” (Jan. 26, 2024). To accomplish this, PADEP said it would revise the process by which an operator submits its site-specific preparedness, prevention, and contingency plan (PPC Plan). Regulations require that an operator prepare a PPC Plan before it stores, uses, or generates regulated substances on-site, but until this change, an operator was only required to submit its PPC Plan to PADEP upon request.

Now, PADEP’s policy is that operators must submit PPC Plans to the agency prior to conducting drilling operations so PADEP can post them online on its PA Oil and Gas Mapping website. PADEP has informed operators and industry groups of the change, and since January 3, 2024, has included the policy in cover letters attached to issued unconventional well permits. This change appears to respond to one of eight recommendations summarized in the report prepared by Pennsylvania’s 43rd Statewide Investigating Grand Jury on the unconventional oil and gas industry. See Office of the Att’y Gen., Commw. of Pa., Report 1 of the Forty-Third Statewide Investigating Grand Jury (June 2020). The grand jury was convened, and the PPC Plan policy subsequently implemented, under then-Attorney General and current Governor Josh Shapiro.

Specifically, the grand jury recommended “that all chemicals employed in any stage of the unconventional oil and gas process must be publicly disclosed before they can be used.” Id. at 95. Among other things, the grand jury also recommended expanding no-drill zones, aggregating smaller sources together for the purpose of assessing air pollution, and implementing a “cooling off” period during which former PADEP employees are restricted from being employed by oil and gas operators. Id. at 10–11.

At the moment, PADEP’s change to the PPC Plan submission process appears to be strictly policy-based and unconnected to existing or proposed regulations. However, the change follows the Shapiro administration’s voluntary agreement with CNX Resources Corp. (CNX), whereby CNX announced its intention to publicly disclose chemicals and additives used in drilling operations at two of its wells, real-time air monitoring data, and other information. See Press Release, Gov’r Josh Shapiro, “Shapiro Administration and Leading Natural Gas Company CNX Resources Announce First-of-Its-Kind Collaboration on Environmental Monitoring and Chemical Disclosures” (Nov. 2, 2023); “Statement of Mutual Interests” (Nov. 2, 2023). These actions broadly mirror many of the grand jury’s recommendations.

In the announcements for both the CNX collaboration and the PPC Plan change, the Shapiro administration said that it has directed PADEP to implement formal rulemaking and policy changes mirroring the collaboration, including improved control of methane emissions to align with federal standards for oil and gas emissions sources, stronger drilling waste protections, and protections for gathering lines that transport natural gas. As such, new or revised regulations to respond to the recommendations summarized in the grand jury report and applicable to the oil and gas industry may be forthcoming.

Pennsylvania PUC Adopts Final Regulations for Intrastate Hazardous Liquid Pipelines

On February 22, 2024, the Pennsylvania Public Utility Commission (PUC) issued a Final Form Rulemaking Order (Order) that would set public utility safety standards for the transportation of hazardous liquids by pipeline in intrastate commerce. See Rulemaking Regarding Hazardous Liquid Public Utility Safety Standards at 52 Pa. Code Chapter 59, No. L-2019-3010267. In the Order, the PUC states that the goal of the safety standards is “to deter inadvertent returns, leaks, subsidence events, and water supply contamination events related to the construction, operation, and maintenance of [highly volatile liquids (HVL)] pipelines by hazardous liquid public utilities within Pennsylvania.” Id. at 2. In addition to already applicable federal standards, the rule establishes state-specific standards for hazardous liquid public utilities for the design, construction, operation, and maintenance of pipelines transporting hazardous liquids within Pennsylvania.

These include, but are not limited to:

  • requirements regarding the timing and content of submitting failure analysis reports, root cause analysis reports, and accident reports;
  • notifying the Pipeline Safety Section of certain activities within specified timeframes, e.g., proposed major construction, major reconstruction, or major maintenance;
  • submit annually to the Pipeline Safety Division an annual report for each type of hazardous liquid pipeline facility operated at the end of the previous year;
  • develop a written preparedness, prevention, and contingency plan that addresses, among other things, potential environmental impacts from drilling fluid discharges; and
  • provide the Pipeline Safety Section with design plans, project costs, geotechnical reports, proof of notifications, estimated start, and completion dates.

Specifically, the rule will apply to two existing PUC certificated hazardous liquid public utilities involved in intrastate service in Pennsylvania—Sunoco Pipeline, L.P. (including the Mariner East Pipelines) and Laurel Pipe Line Company, L.P.—and to other intrastate HVL pipelines constructed in the future. The rule will not apply retroactively to existing facilities with respect to design and construction regulations (when the rule becomes effective). However, operations and maintenance, accident reporting, and public awareness requirements will apply to existing hazardous liquid pipeline facilities. The Order amends 52 Pa. Code ch. 59, but does not apply to pipelines regulated by Act 127 of 2011 (the Gas and Hazardous Liquid Pipeline Act) or interstate hazardous liquid pipelines.

After the PUC adopted and entered the Order, the Independent Regulatory Review Commission (IRRC) added the Order to its April 18, 2024, public agenda. In response to public comments submitted to the IRRC, the PUC withdrew the Order for further review. See Withdrawal Letter (Apr. 16, 2024). On April 25, 2024, the PUC entered a Revised Final Form Rulemaking Order (Revised Order), with clarifying revisions to the preamble and regulatory language, which it delivered to applicable legislative committees and the IRRC the following day. See Regulatory Analysis Form and Revised Final Form Rulemaking Order (Apr. 25, 2024). The IRRC has scheduled a public meeting on the Revised Order on June 20, 2024. If the rule proceeds further, it will be reviewed by the Office of Attorney General (for form and legality) and by the Office of Budget (to assess its fiscal impact), followed by its delivery to the Legislative Reference Bureau for publication in the Pennsylvania Bulletin. The rule’s effective date is 60 days after publication in the Pennsylvania Bulletin.

Pennsylvania County Sues Oil Companies over Climate Change

On March 25, 2024, Bucks County, Pennsylvania, filed a complaint in the Bucks County Court of Common Pleas against BP, Chevron, ConocoPhillips, Phillips 66, ExxonMobil, Shell, and the American Petroleum Institute, alleging that the companies deceived the public about the dangers of fossil fuel pollution and the role it has played in increasingly severe, damaging weather. Bucks Cnty. v. BP P.L.C., No. 2024-01836-0000 (Pa. Ct. Common Pleas filed Mar. 25, 2024).

Bucks County Commissioner Vice Chair, Bob Harvie, said in a press release that the complaint, the first of its kind in Pennsylvania, “seeks to shift the financial burden of the climate crisis from the taxpayers of Bucks County to the companies responsible for creating the crisis.” See Press Release, Bucks Cnty., “Bucks County Takes on Big Oil in Climate Crisis Lawsuit” (Mar. 25, 2024). The complaint makes many allegations against the defendants, including a claim that the companies knew about the harmful effects of fossil fuels, but did nothing to mitigate the danger, comparing them to tobacco companies that advertised low-tar and light cigarettes as healthy alternatives to regular cigarettes. The County claims that the companies affirmatively concealed those harms by engaging in a campaign of deception to increase the use of those products.

The County also claims that the companies could have chosen to facilitate a lower-carbon future, but chose corporate profits and continued deceit. The complaint also includes claims regarding misleading advertisements that portrayed the defendants as climate-friendly energy companies and accuses the companies of exacerbating the cost of adapting to and mitigating the effects of the climate crisis. As of the time of this report, the defendant companies have not filed a response.

Shapiro Administration and CNX Resources Corp. Collaborate to Implement Public Information-Sharing Agreement and Other Actions

On November 2, 2023, Pennsylvania Governor Josh Shapiro and CNX Resources Corp. (CNX) announced a voluntary agreement between Shapiro’s administration and CNX, under which CNX agreed to take certain actions regarding its unconventional oil and gas operations in Pennsylvania. See Press Release, Gov’r Josh Shapiro, “Shapiro Administration and Leading Natural Gas Company CNX Resources Announce First-of-Its-Kind Collaboration on Environmental Monitoring and Chemical Disclosures” (Nov. 2, 2023); see also Statement of Mutual Interests (Nov. 2, 2023). Specifically, CNX agreed to the following:

  • “intensive” air and water quality monitoring to assess environmental impacts—data and facts that the Shapiro administration will use (with other applicable facts and data) “to inform the necessity of any additional setbacks or other future policy changes”;
  • expand its no-drill zones from 500 feet to 600 feet for all sites and to 2,500 feet for sensitive sites, e.g., schools and hospitals while it is collecting data;
  • publicly disclose all chemicals intended for use in drilling and hydraulic fracturing prior to use on-site;
  • support regulation of gathering lines to inspect for corrosion;
  • support additional safety measures applicable to transporting waste from unconventional well sites; and
  • provide open-sourced, real-time emissions information to stakeholders and interested parties.

CNX also agreed not to hire Pennsylvania Department of Environmental Protection (PADEP) employees from regional offices covering CNX operations until two years after such employees leave PADEP. The actions address several recommendations from a 2020 Grand Jury Report on the unconventional oil and gas industry. See Report 1 of the Forty-Third Statewide Investigating Grand Jury (June 2020).

On December 18, 2023, Governor Shapiro announced that CNX had begun publishing real-time air monitoring data at two well sites in Washington and Greene Counties, including chemicals and additives used in drilling operations at the two sites. See Press Release, Gov’r Josh Shapiro, “As Part of Collaboration with Shapiro Administration, CNX Resources Begins Disclosing Names of All Chemicals & Posting Air Monitoring Results Online in Real-Time” (Dec. 18, 2023); see also CNX’s real-time air monitoring data here. CNX plans to expand the program across its operations in Pennsylvania, but has not established a timeframe for doing so.

Per the December Press Release, Governor Shapiro directed PADEP to begin the formal rulemaking process and implement policy changes to match the CNX collaboration, including disclosing drilling chemicals and improved control of methane emissions to align with the U.S. Environmental Protection Agency’s Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review. See 89 Fed. Reg. 16,820 (Mar. 8, 2024) (to be codified at 40 C.F.R. pt. 60). The Shapiro administration stated that its collaboration with CNX is one step in its broader goal to address climate change and protect the right to clean air and pure water “while maintaining our Commonwealth’s legacy as a national energy leader.” December Press Release, supra.

Shapiro Administration Announces 100th Abandoned Well Plugged Since Taking Office

On October 18, 2023, Pennsylvania Governor Josh Shapiro’s office announced that the Pennsylvania Department of Environmental Protection (PADEP) and the Shapiro administration had capped and plugged 100 orphaned and abandoned wells since Shapiro took office in January 2023, which surpasses the total number of wells plugged in the previous six years combined. See Press Release, Gov’r Josh Shapiro, “Shapiro Administration Has Plugged 100 Orphaned & Abandoned Wells in Just 10 Months, Surpassing Total Over Previous 6 Years Combined” (Oct. 18, 2023).

In addition to state resources, significant funding to address these wells comes from allocations to Pennsylvania from the federal Infrastructure Investment and Jobs Act (IIJA), Pub. L. No. 117-58, 135 Stat. 429 (2021). Pennsylvania received initial IIJA grant funding totaling $25 million and is eligible for an additional $300+ million in the coming years. See Press Release, U.S. Dep’t of the Interior, “Biden Administration Announces $1.15 Billion for States to Create Jobs Cleaning Up Orphaned Oil and Gas Wells” (Jan. 31, 2022, updated June 5, 2023). According to the Shapiro administration, the IIJA funds are not only being used to cap and plug wells—PADEP has awarded contracts for 224 wells to date—but are also directed toward identifying and inventorying wells, as well as taking enforcement actions against applicable operators.

Approximately 45% of the wells are in environmental justice areas, which is consistent with the Biden administration’s Justice40 Initiative. The goal of the Justice40 Initiative is to direct 40% of the benefits of certain federal investments to disadvantaged communities across one or more of seven areas: climate change, clean energy and energy efficiency, clean transit, affordable and sustainable housing, training and workforce development, remediation and reduction of legacy pollution, and the development of critical clean water and wastewater infrastructure. See White House, “Justice40, A Whole of Government Initiative” here.

As of May 16, 2024, 175 wells have been plugged, with 51 remaining wells in progress. More information about this program and PADEP’s progress can be found on the Oil & Gas IIJA Project Tracker website.

Commonwealth Implements “PAyback” Website to Check Status and Refund Eligibility for Permit Applications

On November 1, 2023, Pennsylvania Governor Josh Shapiro announced the release of “PAyback,” an online tool for Pennsylvania permit, license, and certification applicants. See Press Release, Gov’r Josh Shapiro, “Governor Shapiro Launches First-in-the-Nation Online Money-Back Guarantee System to Bring Increased Accountability & Transparency to Commonwealth Permitting, Licensing, and Certification Processes” (Nov. 1, 2023). Specifically, PAyback allows an applicant to confirm the processing time of its application and request a refund if the application is not processed within the appropriate timeline. Refund eligibility applies to approximately 70% of applications, excluding those that, e.g., do not have an application fee. The refund policy is not retroactive and only applies to applications completed on or after November 1, 2023.

The PAyback tool is one component, and a result of Shapiro’s stated goal of increasing transparency, efficiency, and certainty for Pennsylvanians subject to these processes and requirements. Its development followed Shapiro’s issuance of Executive Order 2023-07, “Building Efficiency in the Commonwealth’s Permitting, Licensing, and Certification Processes” (Jan. 31, 2023), which directed each applicable Executive Agency to “compile a catalog of the types of permits, licenses, or certifications it issues and submit that catalog to the Governor’s Office” within 90 days. Id. Relevant Executive Agencies were tasked with compiling the following information for each permit, license, or certification:

  • type, term, and basis (e.g., statutory, regulatory, or other);
  • method for receiving applications and when the method was last updated;
  • legal authority governing the length of application processing times;
  • applicable fees and the underlying authority for same;
  • analysis and recommendation of the appropriate length of time to promptly process completed applications; and
  • any other relevant information as requested.

In subsequent announcements, Governor Shapiro reported that (1) the Executive Agencies had completed their cataloging efforts, totaling more than 750 licenses, 800 permits, and 360 certifications, and that his office would review and establish efficient application processing times based on agency recommendations; and (2) from related efforts, many state agencies had reduced application backlogs or processing times for their respective applications. See Press Release, Gov’r Josh Shapiro, “Shapiro Administration Announces All Commonwealth Agencies Take Critical Step in Improving Licensing, Permitting, and Certification Processes” (May 5, 2023); Press Release, Gov’r Josh Shapiro, “Governor Shapiro Keeps Commitment to Improve Commonwealth’s Permitting, Licensing, and Certification Processes and Make Government Work Faster for Pennsylvanians” (Oct. 26, 2023). With the PAyback announcement, the Shapiro administration said that future goals include “filling key vacancies, updating the Commonwealth’s IT and technological assets, improving the application processes, and more.” November Press Release, supra. The PAyback tool and more information about it can be found on its website.

DOE Announces Negotiations for Seven Regional Hydrogen Hubs, Including Two in Pennsylvania

On October 13, 2023, the U.S. Department of Energy (DOE) announced that it had selected seven Regional Clean Hydrogen Hubs (H2Hubs) to negotiate awards for $7 billion in funding allocated under the Biden administration’s Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021). According to DOE, the H2Hubs will “accelerate the commercial-scale deployment of low-cost, clean hydrogen—a valuable energy product that can be produced with zero or near-zero carbon emissions . . . .” Press Release, DOE, “Biden-Harris Administration Announces $7 Billion For America’s First Clean Hydrogen Hubs, Driving Clean Manufacturing and Delivering New Economic Opportunities Nationwide” (Oct. 13, 2023). Two of the H2Hubs are located in Pennsylvania and surrounding states, and other Hub projects are located in California; Texas; Minnesota, North Dakota, and South Dakota; Illinois, Indiana, and Michigan; and Washington, Oregon, and Montana.

The Mid-Atlantic Hydrogen Hub (Selectee: Mid-Atlantic Clean Hydrogen Hub (MACH2)) is located in Pennsylvania, Delaware, and New Jersey. Per DOE, it will repurpose historical oil infrastructure and use existing rights-of-way “to develop renewable hydrogen production facilities from renewables and nuclear electricity using both established and innovative electrolyzer technologies” to reduce energy costs and carbon emissions. Office of Clean Energy Demonstrations, DOE, “Regional Clean Hydrogen Hubs Selections for Award Negotiations,” available here. This Hub anticipates supporting apprenticeship programs, certifications, and other employment support, and creating more than 20,000 jobs (including more than 6,000 permanent jobs). This Hub’s federal cost share is up to $750 million.

The Appalachian Hydrogen Hub (Selectee: Appalachian Regional Clean Hydrogen Hub (ARCH2)) is located in West Virginia, Ohio, and Pennsylvania and will “leverage the region’s ample access to low-cost natural gas to produce low-cost clean hydrogen and permanently store the associated carbon emissions.” Id. This Hub anticipates bringing more than 21,000 jobs (3,000+ permanent) to the Appalachian region, creating equitable workforce opportunities, and creating a Community Benefits Advisory Board, a Community Benefits Plan, and a Community Commitment Fund “to ensure the Hub reenergizes the Appalachian region economically, socially, and environmentally.” Id. This Hub’s federal cost share is up to $925 million.

DOE’s selection of the seven H2Hubs for project negotiation is the first step in a years-long process toward completing the Hubs. Next steps include negotiations, project awards, and implementation, which is divided into four phases: (1) project planning; (2) project development; (3) installation, integration, and construction; and (4) ramping-up and operations. See Office of Clean Energy Demonstrations, DOE, “H2Hubs Local Engagement Opportunities,” available here. During the negotiations phase, reviewers and applicants will review the project organization, management, and budget, and evaluate risk, among other things. After completion of these steps, the reviewers will finalize documents, form awards packages, and review, approve, and issue funding awards. See Office of Clean Energy Demonstrations, DOE, “Award Negotiations.”

Copyright © 2024, The Foundation for Natural Resources and Energy Law, Westminster, Colorado