NiSource Midstream Services expects that the first oil and gas well servicing its Hickory Bend gas gathering and processing facility will be in production in the next few weeks. NiSource is also accellerating the construction of their gathering system’s cryogenic plant in southern Mahoning County. The area being developed will allow for multiple plants to be sited so that future expansion can be accomplished with very little impact. According to its COO, NiSource’s initial investment of $300 million could grow to $1 billion in the next few years.
The Pennsylvania Department of Environmental Protection (DEP) has reportedly concluded that high levels of methane found in three private water wells in Franklin Forks (Susquehanna County) are not attributable to the nearby gas drilling operations of WPX Energy. DEP conducted an extensive 16-month investigation which included isotopic testing to determine the origin of methane found in the private water wells. Meanwhile, WPX voluntarily provided residents with replacement water supplies. Based on the agency’s own investigation, DEP determined that the elevated methane in the private water wells can be attributed to naturally-occurring methane in the area. The Franklin Forks case has drawn significant media attention partly because the town is located just 10 miles from the border of New York State, where the fracking debate continues at full steam.
Today the U.S. Environmental Protection Agency announced that it is extending by more than six months the deadline for the public to submit scientific data and literature to inform EPA’s study of the potential impacts of hydraulic fracturing on drinking water sources. The new deadline is November 15, 2013. Last week, the U.S. House Science, Space and Technology Committee convened a hearing to examine hydraulic fracturing research efforts by the Federal Government. Members of Congress reportedly criticized the slow pace at which EPA is approaching the study. EPA has stated in the past that it intends to issue draft results of the study by 2014.
The West Virginia Department of Environmental Protection, Division of Air Quality (DAQ) recently extended the public comment period for the draft Class II General Permit G70-A for the Prevention and Control of Air Pollution in regard to the Construction, Modification, Relocation, Administrative Update and Operation of Natural Gas Production Facilities Located at the Well Site. All written comments or requests for a public meeting must now be received by the DAQ before 5:00pm on May 17, 2013. (The original deadline was April 29, 2013, as discussed in a prior blog post.)
In a press release issued earlier today, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) stated that a recent federal court decision confirms its authority to inspect natural gas liquids (NGL) plants for compliance with the minimum federal safety standards in 49 C.F.R. Part 195. The decision, issued by the U.S. District Court for the Northern District of Oklahoma, dismissed a lawsuit filed against PHMSA by the operator of an NGL plant. The district court concluded that the Pipeline Safety Act’s new judicial review provision provides the federal courts of appeal with exclusive jurisdiction over the plaintiff’s claim that PHMSA does not have the authority to inspect the piping and equipment located inside the plant’s boundaries.
In its decision, the district court explained that judicial review of a “regulation or order” issued by PHMSA must be initiated within 89 days by filing a petition for review in the U.S. Court of Appeal for the District of Columbia Circuit or in the court of appeals where a person resides or has its principal place of business. The district court reasoned that, as with other similar statutes, the term “order” should be interpreted broadly for purposes of the Pipeline Safety Act’s judicial review provision to encompass any PHMSA decision that has sufficient finality, i.e., that imposes an obligation, denies a right, or fixes some legal relationship. The district court found that the agency action being challenged in the case—PHMSA’s decision to inspect the NGL plant—was an order that could only be reviewed in the federal courts of appeal. Accordingly, the district court dismissed the matter for lack of subject matter jurisdiction.
It should be noted that on February 25, 2013, the plaintiff company filed a separate petition for review of PHMSA’s action in the U.S. Court of Appeals for the District of Columbia Circuit, and that the D.C. Circuit has yet to issue a ruling on the petition.
Three transactions involving Pennsylvania’s Marcellus Shale have reportedly totaled $882 million in the first quarter of 2013, the second-most for any formation in the country. Ohio’s Utica Shale formation was the subject of two deals worth $283 million, making it the third-most popular. PwC tracked energy deals worth more than $50 million and included acquisitions, investments or partnerships allowing companies to split the costs associated with oil and gas development. The first quarter results represent a significant drop for Marcellus Shale transactions from the first quarter of 2012, where three transactions were reportedly worth about $3 billion.
This week the National Energy Technology Laboratory (NETL) of the U.S. Department of Energy announced that it has entered into a memorandum of understanding with the Centers for Disease Control and Prevention’s National Institute for Occupational Safety and Health (NIOSH) to research air quality and emissions at natural gas drilling sites. In its press release, NETL explained that, “The research will enable the development of modeling tools to predict and quantify potential risks associated with shale gas reserves that require hydraulic fracturing and assist researchers in analyzing greenhouse gas lifecycle emissions.” According to the NIOSH press release, the research will also be used address worker health and safety concerns in the oil and gas industry.
On April 24, 2013, the Supreme Court of Pennsylvania issued an opinion in the case of Butler v. Powers, addressing the distinction between the words “gas” and “minerals” in private conveyances of land in Pennsylvania. The case began as a quiet title action in Susquehanna County, and the issue was whether an 1881 reservation of “One-half the minerals and Petroleum Oils” in a parcel of land would also include a right to the natural gas. The appellees argued that gas from shale formations should be classified under the term “minerals” in land conveyances, similar to the manner in which coalbed methane gas is considered a part of the coal estate in Pennsylvania. The appellees’ argument was contrary to the long-standing rule stated in an 1882 decision of the Supreme Court of Pennsylvania, Dunham & Shortt v. Kirkpatrick, which created a rebuttable presumption that a reservation of “minerals” did not include “oil” or “gas” unless the term was specifically recited in the reservation.
On appeal of the Butler trial court decision, the Superior Court of Pennsylvania remanded the case in order for the parties to obtain expert testimony explaining whether gas from the Marcellus Shale is “conventional gas” and could be considered a “mineral.” The Supreme Court of Pennsylvania ultimately rejected the Superior Court’s analysis and appellees’ arguments, and held that the rebuttable presumption in Dunham applies the same to shale gas as it would to gas recovered from shallow formations. Thus, the Supreme Court of Pennsylvania upheld the “Dunham Rule” in its April 24, 2013 opinion. According to the Supreme Court, the Dunham Rule (and subsequent case law) remains “viable,” “controlling,” and “unwavering in clarity.” The majority opinion can be found here and concurring opinion here.
The Ohio Department of Natural Resources (ODNR) recently issued two new unitization or “forced pooling” orders for the Utica Shale in Trumbull County, Ohio. The units included land already leased by other operators who were deemed “uncommitted working interest owners.” The orders provided for a 300% penalty to BP, the unitization applicant, should the uncommitted working interest owners fail to pay their share of charges, credit and expenses for the wells drilled therein, and also provided for a 15% royalty and $2,000 per acre payment to any unleased mineral owners within the unitized acreage.
On April 23, 2013, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) published a notice in the Federal Register requesting comments on its proposal to collect additional data on hazardous liquid pipeline accidents. Under the current regime, operators are required to provide less data when submitting an accident report for certain small volume releases (i.e., at least 5 gallons but less than 5 barrels) that do not result in additional environmental consequences, significant property damage, or personal injuries or fatalities. PHMSA estimates that approximately half of the accident reports submitted in 2011 and 2012 involved these kinds of low consequence releases. PHMSA uses the information collected from these reports to identify short- and long-term trends in the pipeline industry and for inspection planning and risk assessment, and the agency has determined that the same information should be collected for both low consequence and more significant releases. PHMSA is also proposing to revise its instructions for determining the amount of volume spilled and recovered as a result of a hazardous liquid pipeline accident. Citing concern with the data obtained since the agency revised those instructions three years ago, PHMSA is proposing to require that the reported volume spilled include all product exiting the pipeline system, and that the reported volume recovered include all product collected during the spill response. PHSMA is also proposing to incorporate its information collection for hazardous liquid pipeline leak detection systems into its recordkeeping and accident reporting information collection for hazardous liquid pipeline operators.
A fight is brewing in State College, PA over the proposed installation of a two-mile, 12-inch natural gas distribution pipeline through the borough’s Highlands neighborhood to Penn State’s West Campus steam plant. The proposal riled community activists and the Borough Council, resulting in the Borough Council passing a resolution on April 1, 2013 directing the Borough Manager to not issue a street opening permit, or any other permits related to the proposed pipeline, to the gas distribution company.
An additional complicating factor is that the Borough adopted a charter amendment in 2011 based upon a model drafted by the Community Environmental Legal defense Fund (CELDF). CELDF model based enactments contain controversial provisions, including a “bill of rights” protecting “natural communities and ecosystems” for borough citizens and a provision stripping corporations of all rights granted under the Pennsylvania and United States Constitutions. The charter amendment also prohibits the construction of new infrastructure, including pipelines, for non-sustainable energy sources and purports to override state and federal government preemption of local ordinances and prohibits corporations from challenging the validity of ordinances or the charter amendment. According to the borough’s solicitor, challenges to the permit denial and the charter amendment appear to be imminent.
Environmental groups recently announced that they are dropping a First Amendment lawsuit filed against the Town of Sanford, New York, because earlier this month the town repealed a September 2012 resolution that banned the public discussion of natural gas drilling during monthly board meetings. The environmental groups filed their lawsuit in U.S. District Court in February 2013, alleging that the town’s resolution amounted to a “gag order” which violated the free speech rights of the town residents. The town board established the ban because the extensive public debate over natural gas drilling during meetings was preventing the board from accomplishing its business. In repealing the ban, the town board reserved the right to limit comments of any future speaker to three minutes.
The Muskingum Watershed Conservancy District approved the sale of water from Seneca Lake and Clendening Reservoir for use in Utica shale oil and gas wells. Antero resources will have the right to draw up to 184 million gallons of water from Seneca Lake in Guernsey and Noble Counties. Gulfport Energy Corporation received rights to draw up to 25 million gallons from Clendening Reservoir in Harrison County. Both deals limit the amount of water that can be drawn in case lake levels become low.
The West Virginia legislature has passed Senate Bill 243, the legislation which authorizes the Department of Environmental Protection, Office of Oil and Gas (OOG), to promulgate the pending Horizontal Well Act regulations. According to the West Virginia Legislature’s bill tracking tool, Senate Bill 243 currently awaits Governor Tomblin’s signature. Notably, this bill includes a measure that would allow an operator to designate certain information regarding hydraulic fracturing chemicals as trade secret when filling out a well completion report. The trade secret measure compels the operator to share the information designated as trade secret with health professionals or the OOG in the event of a medical emergency or an investigation by the OOG.
The House Natural Resources Committee recently heard testimony from representatives of Ohio, Texas and Utah on the necessity of federal regulation of hydraulic fracturing. Richard Simmons, Chief of the Ohio Department of Natural Resources, testified that Ohio is capable of regulating oil and gas production within its boundaries, and has been doing so effectively. He cited two recent examples of the department’s rapid response to illegal dumping and to earthquakes related to brine injection wells. Simmons believes that state regulation is more effective, efficient and economical than federal regulation. Representatives of various interest groups also testified in favor of strict federal regulation.