The U.S. Department of Energy (DOE) recently released its 2013 annual report to Congress entitled, “2013 Annual Plan: Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research and Development Program.” This seventh annual report issued pursuant to the 2005 Energy Policy Act lays out the DOE’s research focus and activities for the coming fiscal year. Acknowledging the national strategic interest in domestic oil and gas production, DOE proposes to continue its research regarding the extraction of onshore shale gas and other petroleum products from deep-water production. Regarding its research on unconventional shale gas resources, the focus will be on protecting groundwater and air quality, including water treatment technologies and water management. Regarding offshore production, the focus will be on improving understanding of systems risk and reducing risk through real-time information and development of advanced technologies. The research activities will be administered by the Research Partnership to Secure Energy for America, which is a consortium comprising representatives from industry, academia, and research institutions.
In tomorrow’s Pennsylvania Bulletin, the Pennsylvania Department of Environmental Protection (PADEP) will issue a notice regarding the establishment of subcommittees by the Oil and Gas Technical Advisory Board (OGTAB) to discuss specific provisions at public meetings concerning “public resource protection, prehydraulic fracturing assessment, waste management at well sites and water supply restoration standards,” which are part of the PADEP’s draft proposed rulemaking under 25 Pa. Code Chapter 78, Subchapter C (“Environmental Protection Performance Standards”). These public meetings are scheduled for July 17-18 in Greensburg, August 14-15 in State College, and September 18-19 in Harrisburg.
The Corning Leader reports that, in response to Governor Corbett’s recent letter to the Delaware River Basin Commission, a 1,300 member landowner group has threatened to sue the DRBC. The Northern Wayne Property Owners Alliance sent a letter to the executive director of the DRBC threatening a lawsuit unless the Commission schedules a vote on regulations that would allow drilling to begin. The DRBC imposed a moratorium on Marcellus Shale drilling in 2010.
Responding to Governor Corbett’s recent letter urging the Delaware River Basin Commission (DRBC) to take action to end its moratorium on gas development, the Delaware Riverkeeper Network sent DRBC a memorandum defending the moratorium and responding to leaseholder claims that DRBC’s inaction constitutes an uncompensated regulatory taking. Delaware Riverkeeper emphasized that the moratorium does not deprive landowners of all economically beneficial use of their land, and that economic loss resulting from the moratorium is mitigated by the ability to use the land for other reasonable purposes. DRBC is scheduled to hold its next public hearing on Tuesday, July 16, followed by a business meeting on Wednesday, July 17.
Reuters.com reports that there was a recent explosion and fire at a well site in Doddridge County, West Virginia. Kathy Cosco, a spokeswoman for the West Virginia DEP, indicated that the containment system around the well site properly prevented storage tank fluids from escaping the well site. The West Virginia DEP and the federal Occupational Safety and Health Administration are investigating the incident.
West Virginia natural gas operators saw a shift in the permitting and regulation process as new rules governing horizontal drilling went into effect on July 1, 2013. Authorized by the West Virginia Legislature with its passage of the Horizontal Well Act in 2011, the West Virginia Department of Environmental Protection submitted the new regulations to the Legislature for approval after a year of work. The result is a comprehensive and somewhat technical set of regulations that will govern horizontal drilling in West Virginia. While some of the regulations merely recite requirements that are in the Horizontal Well Act, below are some of the new and noteworthy regulations in the newly-effective set:
- Provides for an expedited review process for regulatory approval of replacement bore holes (35-8-5.l.1)
- Supplemental requirements for well site safety plans (35-8-15)
- Increased recordkeeping requirements for water used in the hydraulic fracking process (35-8-9.1.b.3) and
- Additional certifications may be required on plats and plans submitted for permitting review.
A copy of the new horizontal drilling regulations can be found here.
The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) announced in today’s Federal Register that a Technical Advisory Committee (TAC) meeting will be held on August 8 to 9, 2013, in Arlington, Virginia. The TAC is composed of two committees, the Gas Pipeline Advisory Committee (GPAC), also known as the Technical Pipeline Safety Standards Committee, and the Liquid Pipeline Advisory Committee (LPAC), also known as the Technical Hazardous Liquid Pipeline Safety Standards Committee. The GPAC and LPAC advise PHMSA on the technical feasibility, practicability, and cost-effectiveness of proposed safety standards for gas and hazardous liquid pipelines. According to the announcement, PHMSA plans to release a detailed agenda for the meeting on its website in the near future.
The Scranton Times-Tribune reports that UGI Penn Natural Gas customers continue to pay one-third less to heat their homes than they paid five years ago. According to the Marcellus Shale Coalition, this is a nationwide trend. The lower rates are a direct result of the natural gas production from the Marcellus and Utica shales.
Senate Bill Number 259, which amends the Guaranteed Minimum Royalty Act by allowing drillers to pool land into gas-drilling units, was signed by Governor Corbett today after fast-track approval by the Senate on June 30th. The bill allows joint development on adjacent land unless expressly prohibited by the applicable leases. Absent any agreement by all affected royalty owners, the production shall be allocated to each royalty owner in a proportion deemed reasonable by the operator. The bill does not permit the forced pooling of unleased oil and gas estates. Additionally, any lease that does not provide for at least one-eighth royalty shall be subject to an escalation equal to one-eighth royalty when the original state of the subject land is altered by any new drilling or any other procedure for increasing production.
The Akron Beacon Journal has profiled the proposed Bluegrass Pipeline, a proposed pipeline that would deliver gas from the Utica and Marcellus gas fields to processing facilities on the gulf coast. The pipeline would be constructed by Williams and Pipeline Partners under a partnership known as Bluegrass Pipeline, LLC. If approved by federal regulators, it would pass through Ohio and Kentucky to reach parts of Pennsylvania and West Virginia. Producers hope the pipeline will help alleviate infrastructure constraints that are limiting production in the Utica and Marcellus gas regions.
The Superior Court of Pennsylvania recently rejected an argument that an oil and gas lease contains an implied duty to develop all strata, and not simply to extract shallow gas. In Caldwell v. Kriebel Resources Co. and Range-Resources-Appalachia, LLC, the plaintiffs sought termination of an eleven-year old oil and gas lease largely because the defendants had not “initiated any drilling activities for natural gas locked in the Marcellus Shale formation” and the drilling activities to date only involved shallow gas drilling. However, the lease agreement contained a clause stating, “[n]o inference or covenant shall be implied as to either party hereto since the full contractual obligations and covenants of each party is [are] herein fully and expressly set forth.” Hence, the Court found it was not authorized to impose an implied duty on the lessee to develop the various strata in light of the language contained in the contract. The plaintiffs also argued that there is an implied duty to develop in paying quantities in “good faith” and that the trial court should not have dismissed their case without affording them an opportunity to present evidence of the defendants’ bad faith. But the Superior Court concluded the defendants had indeed produced a paying quantity, and that the “good faith” standard referred to in T.W. Phillips Gas & Oil Co. v. Jedlicka, did not expand to “all aspects of the [gas] industry that affect production of lessors’ natural gas.”
President Obama recently announced his nomination of Ron Binz to serve as the next Chairman of the Federal Energy Regulatory Commission (FERC). Binz served as the Chairman of the Colorado Public Utility Commission from 2007 to 2011 and has spent the past several years working as principal at Public Policy Consulting, specializing in public utilities issues, and as a Senior Policy Advisor at the Center for the New Energy Economy at Colorado State University, which is headed by former Colorado Governor Bill Ritter. The Washington Post reports that Binz has a track record as a “strong proponent of renewable energy” and deep understanding of the nation’s electricity distribution system. The U.S. Senate must approve Binz’s appointment to replace the current FERC Chairman, John Wellinghoff, who announced his intent to resign from the position in late May 2013.
Pennsylvania Governor Tom Corbett recently sent a letter to the Delaware River Basin Commission urging the Commission to end a three-year moratorium on hydraulically fractured wells. Corbett reportedly wrote that “[o]perators interested in developing natural gas have closed offices and laid off employees, lease payments have been withheld . . . and communities have watched their neighbors outside the basin benefit tremendously.” The Delaware River Basin Commission governs water quality in Pennsylvania, New Jersey, Delaware and New York. The Commission released proposed rules addressing oil and gas activity in the Basin but these have yet to be finalized. A vote on the proposed rules was scheduled in November 2011, but was cancelled when Delaware Governor Jack Markell withdrew his support and New York expressed that it wanted to complete its own environmental and health studies, which are still ongoing.
Despite criticism of FracFocus by several environmental and academic groups, the outgoing Deputy Secretary of the Interior Department recently suggested the FracFocus website may be an appropriate device for the public disclosure of chemicals used in hydraulic fracturing fluids while adequately protecting trade secrets. As reported by BNA’s Daily Environment Report, Deputy Secretary David Hayes, who is stepping down to take a teaching position at Stanford Law School, said that the Department of the Interior endorses the concept of a single registry throughout the country that contains as much information as possible. Hayes noted that although FracFocus is a work in progress, the Department of the Interior has been working closely with the FracFocus team to develop the disclosure platform.
FracFocus recently launched a major upgrade aimed at making the website more user-friendly. Twelve states currently require oil and gas producers to dislcose fracking chemicals on FracFocus. More states are expected to require use of FracFocus in the future.
The West Virginia Department of Environmental Protection (DEP) delivered its report on the air quality impacts occurring from horizontal well drilling and related activities to the West Virginia Legislature on June 28th. The report concluded that no additional legislation is required to minimize the health and environmental impacts of horizontal drilling operations, but noted that data from currently ongoing studies should provide additional information that will help guide future rule development. The report summarized the results of research conducted by West Virginia University, the Environmental Protection Agency, and other states’ environmental studies concerning the impacts of horizontal drilling operations on air quality.
The air quality report is the third in a series of reports required by the Natural Gas Horizontal Well Control Act of 2011 to be prepared by the DEP for the West Virginia Legislature.