Ohio’s biennial budget was signed into law on June 30. The new budget legislation does not include an increase to the oil and gas severance tax, which would have only applied to operators of horizontal wells. The budget also includes several changes to oil and gas industry regulations. The changes include:
- Horizontal well owners must report production on a quarterly basis rather than an annual basis;
- Beginning on March 31, 2015, well owners must disclose the country of origin of all steel pipes used in the drilling process;
- Only synthetically lined pits or impoundments may be used for temporary storage of brine and other fluids;
- The owner or operator of a solid waste facility may accept material containing technologically enhanced naturally occurring radioactive materials (TENORM) if the material contains less than five picocuries per gram above natural background of radium-226 or radium-228; and,
- After January 1, 2014, the storage, recycling, treatment, processing or disposal of brine or other waste substances must be in accordance with a permit issued by the chief of ODNR.
Several other changes oil and gas industry regulations were signed into law in addition to those summarized above.
The Maryland Departments of the Environment (MDE) and Natural Resources (MDNR) recently released a draft report on recommended best practices for Marcellus Shale development in Maryland, pursuant to Maryland’s Marcellus Shale Safe Drilling Initiative. The Initiative, established in accordance with Governor O’Malley’s January 2011 executive order, requires MDE and MDNR to conduct, in consultation with an Advisory Commission, a three-part study and report the findings and recommendations. The Commission is comprised of policymakers, academics, regulators, industry representatives, and environmental group representatives. The three parts of the study are: 1) findings and recommendations regarding sources of revenue and standards of liability for damages caused by gas exploration and production; 2) recommendations for best practices for natural gas exploration and production in the Marcellus Shale; and 3) findings and recommendations regarding the potential impact of Marcellus Shale drilling. (The recently-released joint agency report represents Part II.) The Part II study was based on a survey of exploration, production, and midstream practices from several states by the University of Maryland Center for Environmental Science, Appalachian Laboratory. Part III is expected to be completed in August 2014.
A unique recommendation of the Part II study is that producers would be required to have a “Comprehensive Gas Development Plan” (CGDP) as a prerequisite to a well permit application. The CGDP would need to address comprehensive planning for foreseeable gas development activities in an area including pipelines, pads, roads, and other ancillary activities, rather than considering each well individually. The CGDP would be subject to public comment and submitted to the State for approval.
MDE is accepting public comment on the draft Part II report until August 9, 2013.
The West Virginia Supreme Court of Appeals, West Virginia’s highest court, recently overruled a point in the 1923 case of Ramage v. South Penn Oil Co. (W. Va.), which established that the term “surface” was presumptively ambiguous and always subject to interpretation. On June 13, 2013 in the case of Faith United Methodist Church & Cemetery of Terra Alta v. Morgan, the Court determined that the term “surface,” when used in an instrument of conveyance, has a “definite and certain meaning,” and “generally means the exposed area of land, improvements on the land, and any part of the underground actually used by a surface owner as an adjunct to surface use (for example, medium for the roots of growing plants, groundwater, water wells, roads, basements, basements, or footings).”
In response to President Obama’s “Climate Action Plan,” which was announced on Tuesday, Kathryn Klaber, CEO of the Marcellus Shale Coalation, stated:
“We are pleased that President Obama once again underscored the clear environmental and economic benefits tied to the safe development of clean-burning natural gas.”
“And while the President’s broader energy and climate strategy will be further framed in the weeks and months to come, we remain focused as an industry on protecting and enhancing our environment through the responsible development of job-creating American natural gas, which is reinvigorating our manufacturing base and creating enormous benefits for the entire Commonwealth and beyond.”
On Tuesday, President Obama announced his long-awaited “Climate Action Plan,” which focuses largely on restricting carbon emissions from power plants. Demand for natural gas is expected to increase as a result.
A bill was recently introduced in the Pennsylvania House of Representatives that would require use of closed containment or loop systems for all non-freshwater associated with drilling and hydraulic fracturing. Introduced by Representative Karen Boback, who represents parts of Luzerne, Wyoming, and Columbia counties, House Bill 1546 would prohibit the use of open impoundments to store “any produced liquids, treated water, hydraulic fracturing fluid or industrial wastes,” and would mandate the use of “closed containment system” or “closed loop system,” as defined in the bill. “Closed containment system” is defined as “closed noncorrosive tanks or containers” for storing the fluids described above, while “closed loop system” means “a series of interconnected, enclosed noncorrosive storage tanks or containers” that can help maximize the amount of drilling fluid that can be reused and recycled in the hydraulic fracturing process. Rep. Boback acknowledged that the bill is aimed at a minority of operators who still use open impoundments to store the described fluids.
The Ohio Supreme Court accepted jurisdiction over the closely watched “home rule” case State ex rel. Morrison v. Beck Energy Corp. At issue are the state laws which give the Ohio Department of Natural Resources sole and exclusive authority to regulate oil and gas permitting, stimulation, production and completion over local ordinances to the contrary. Initially a trial court in Summit County determined that the City of Monroe Falls had the right to enforce its own application and permit requirements for oil and gas wells. The court of appeals disagreed and ruled that only ODNR had such powers. The Ohio Supreme Court is poised to make the final determination in a ruling that can be expected in the next year.
The State Journal reports that the West Virginia Department of Transportation, Division of Highways (DOH), recently presented to state lawmakers regarding West Virginia roadway issues. DOH showed pictures of roads in Ohio, Marshall and Ritchie Counties in an effort to demonstrate that problems with some West Virginia roads are attributable to the natural gas industry. DOH indicated that the problems are mostly the result of the utilization of secondary roads that were not constructed to handle the type or amount of vehicles and equipment being transported by the industry. DOH also said West Virginia appears to be the only state with a road maintenance policy. Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, also spoke to the lawmakers. Burd reported that the oil and gas industry began working voluntarily with DOH two or three years ago, and that the organizations often work together to resolve issues regarding West Virginia roads.
As indicated in a recent press release, NiSource Midstream Services has initiated service on the Big Pine Gathering System in Southwestern Pennsylvania. The system, which spans 57 miles in total length, will transport natural gas from Marcellus Shale production to three different transmission lines.
On Thursday, U.S. EPA announced that the State of Wyoming will lead further investigation of drinking water quality in Pavillion, Wyoming. In 2009, EPA began working with the state and local tribes to investigate water quality in the Pavillion area in response to citizen reports of contaminated well water. Sampling results have shown constituents of concern in the domestic water wells, but a source of the constituents has yet to be determined. EPA released a draft report in 2011 indicating that the groundwater contains constituents likely associated with nearby gas production and hydraulic fracturing activity. The agency no longer intends to finalize or rely on the draft report, as indicated in the following statement from EPA:
“While EPA stands behind its work and data, the agency recognizes the State of Wyoming’s commitment for further investigation and efforts to provide clean water and does not plan to finalize or seek peer review of its draft Pavillion groundwater report released in December, 2011. Nor does the agency plan to rely upon the conclusions in the draft report.”
EPA will continue to provide support for the investigation led by Wyoming officials. EPA plans to now focus attention on its major hydraulic fracturing study, for which the agency expects to issue a draft report in late 2014.
A federal district judge recently rejected a request by the New Jersey Sand Hill Band of Lenape and Cherokee Indians for an injunction to stop Kinder Morgan Inc.’s construction of a portion of the Northeast Upgrade Project, a $400 million natural gas pipeline expansion project in Pennsylvania and New Jersey. The tribe sought an injunction and temporary restraining order on the basis that the pipeline would destroy and desecrate sacred land in violation of the Native American Graves Protection and Repatriation Act and the 1778 Treaty of Fort Pitt between the Federal Government and Lenape tribe. Earlier this year, a Pennsylvania county judge granted an injunction to prevent protestors from interfering with the project.
Democrats in the Monroe County Legislature are seeking to permanently ban fracking on county-owned land. If they succeed, Monroe County would join 13 other counties in New York that have enacted similar fracking bans on county land. However, the Democrats have not introduced proposed legislation, and they hope to work with Republicans, who hold a 19 – 10 majority in the Legislature, on developing specific legislative language. Several municipalities in Monroe County, including the towns of Brighton, Rush, Perinton, Mendon, Penfield and the City of Rochester, have banned fracking within their borders. New York’s highest court is currently considering whether to accept a request to review recent state appeals court decisions that upheld local laws banning gas drilling.
The Pittsburgh Tribune-Review reported in a brief editorial that the Pennsylvania Democratic Party voted to pass a resolution supporting a statewide moratorium on hydraulic fracturing. The vote on the non-binding resolution occurred at the Party’s June 15, 2013 meeting in Lancaster, Pennsylvania, and it passed by a margin of 115 to 81. The resolution states, among other things, that “the Democratic Party of Pennsylvania supports a moratorium on the practice of hydraulic fracturing until such time as the practice can be done safely, and further supports requiring full restitution by the natural gas industry for any harm to human life and health, for damage to property, including loss of property value, for harm to water supplies, harm to wildlife, pets and livestock, and harm to the natural environment of the Commonwealth of Pennsylvania.”
The Ohio Department of Natural Resources has published guidelines for the unitization application process. The guidelines clarify the application process that is required before the division chief of ODNR’s Oil and Gas Resources Management can make a ruling on unitization applications. Of note, applicants are required to submit the following:
- An affidavit providing a detailed account of all attempts to lease the unleased properties,
- A copy of a joint operating agreement for working interest partners (if applicable),
- Properly scaled maps and aerial photographs of the proposed unit area, and;
- Large exhibits for use at the hearing on the application.
The new guidelines are intended to clarify and expedite the process due to the large increase in the number of unitization applications.
MarketWatch reports that XTO Energy Inc., a subsidiary of ExxonMobil, announced on June 17th the startup of a natural gas liquids recovery facility in Butler County, Pennsylvania. Located on 340 acres, the facility is the first of its kind for XTO in the Appalachian region. Containing 40 miles of connecting pipeline and 2 gas compressor stations, the facility is designed to treat approximately 125 million cubic feet of natural gas per day. In the past four years, XTO has drilled 50 wells over 46,000 net acres in Butler County.