On March 28, 2013, the U.S. Environmental Protection Agency (EPA) released a pre-publication version of proposed amendments to the Oil and Natural Gas Sector New Source Performance Standards (NSPS). EPA published the final oil and gas NSPS in August 2012, and is now proposing changes to the rule in response to petitions filed by industry and environmental groups. The proposed amendments would affect a variety of storage tanks associated with the oil and natural gas production process.
The West Virginia Senate is reportedly considering legislation, Senate Bill No. 616, that would allow un-leased land to be included in drilling units. This bill would not force an unwilling landowner into a unit, but rather would provide a mechanism for land with unknown owners to be included in a pool. Any royalties resulting from drilling on those lands would be paid into an escrow account until the owner could be found.
The Winter 2013 edition of Chesapeake Energy Corporation’s quarterly newsletter, “The Play,” introduces a new technology to readers. Chesapeake subsidiary Nomac Drilling is using a new type of rig called a PeakeRig, which is able to “walk” on a multiwall padsite. This new capability increases efficiency, and reduces the cost of drilling multiple wells from a single site. Thanks to the PeakeRig, and other techniques and equipment, Chesapeake hopes the Utica play will achieve profitability faster than any other play.
According to StateImpact and the Pike County Courier, on March 22, 2013, the U.S. Army Corps of Engineers issued a permit to Tennessee Gas Pipeline Company (TGPC) for wetland, stream, and river crossings associated with its Northeast Upgrade Project. Despite opposition from environmental groups and local citizens, regulators at the Army Corps’ Philadelphia District determined that the proposed work is not contrary to the public interest.
The Project aims to increase the capacity on TGPC’s Line 300 by constructing 40 miles of new pipeline in Pennsylvania and New Jersey and modifying four compressor stations. As indicated in a March 2011 Economic Report by Rutgers University, the Project will create 1,100 job years, $37.8M in income for local labor, and $51.4M in GDP in Pennsylvania, as well as $12.2M in federal tax revenues, $1.9M in state tax revenues, and $2.1M in local tax revenues. The Federal Energy Regulatory Commission issued a certificate of public convenience and necessity for the Project in May 2012. FERC is the lead federal agency for the Project.
The University of Pittsburgh’s Institute on Politics has reportedly assembled a group of natural gas industry representatives, public interest organizations, and regulators under the name “Shale Gas Roundtable.” Members of the Roundtable have been quietly meeting for over a year to develop recommendations addressing various aspects of shale development. One of the Roundtable’s chief goals is to prompt a long-term study of shale gas development and its effect on the environment. The Roundtable expects to publicly release its recommendations in June.
On March 15, 2013, the Town of Avon reportedly became the third upstate New York municipality to prevail in a court challenge of a local zoning ordinance banning gas drilling. The trial court rejected the argument that New York’s Oil, Gas and Solution Mining Law preempted the town’s moratorium on gas drilling. In its decision, the court cited two previous decisions that upheld local bans in the towns of Dryden and Middlefield, which are both currently on appeal before the New York Appellate Division.
On March 31st, energy companies must report data showing well production for 2012. Industry watchers say that the annual production report will provide the most insight yet about whether the Utica is the next big oil and gas play in North America. Some 50 to 60 new wells were drilled in Ohio in 2012. Unlike other states, Ohio publishes well data only once a year. The reports should be available to the public on April 2nd or 3rd.
The Pittsburgh Post-Gazette provides coverage today on the race to ship natural gas liquids (NGLs) from Pennsylvania to the Gulf Coast. As indicated in the story, several companies have announced plans to build or convert pipelines to transport NGLs from the Marcellus and Utica to facilities in Beaumont and Mount Belvieu, Texas. The story also discusses the potential impact of the petrochemical facility that Royal Dutch Shell may build in Beaver County, Pennsylvania.
A mid-level New York State appellate court recently heard oral arguments in reviewing two trial court decisions which upheld municipal zoning laws that ban oil and gas drilling within the upstate towns of Dryden and Middlefield. The appeals focus on whether New York’s oil and gas law preempts a local government’s authority to prohibit gas drilling within its borders through zoning laws. More than 50 New York municipalities have banned gas drilling in anticipation that the state will lift its five-year moratorium on high-volume hydraulic fracturing. To date, three trial courts have rejected challenges to local ordinances that prohibit gas drilling. The Dryden and Middlefield decisions are the first to undergo appellate review, and the court is expected to issue a decision in approximately six weeks.
The Center for Sustainable Shale Development (“CSSD”), a newly formed independent organization supporting best practices, announced 15 new performance standards for operators in the oil and gas industry. The CSSD will offer an independent, third-party evaluation process to certify companies that achieve and maintain these standards. The Post-Gazette reports that the standards address the protection of air, water and climate by implementing: (i) limitations on gas well flaring; (ii) requirements to use “green completion” activities; (iii) storage tank emission controls; (iv) development of groundwater protection plans; (v) reduction of toxicity of fracking fluids; and (vi) improvement of water recycling to at least 90 percent. The certification process, including a plan for comprehensive third-party auditing, is currently in development, and the CSSD anticipated accepting applications for certification later this year.
Pennsylvania Governor Tom Corbett announced today that Pennsylvania DEP Secretary Michael Krancer will resign from the DEP effective April 15. Mr. Krancer will return to private law practice at his former law firm, Blank Rome, LLP. No successor has been named, but the deputy chief of staff for the governor, E. Christopher Abruzzo, will serve as acting secretary after Mr. Krancer’s departure. In a press release from the DEP, Governor Corbett stated, “Secretary Krancer has been an invaluable member of our team and I am grateful for his service. His impressive efforts at DEP have taken the agency back to basics, protecting the environment and making the permitting process more efficient.”
As we previously reported in a mid-February post, a bill has been proposed “that would limit the treatment liability of entities that choose to utilize acid mine water (AMD) for hydraulic fracturing of oil/gas wells, or other industrial uses.” Senate Bill 411, sponsored by Senator Kasunic, has generated significant discussion in recent weeks by industry, the Commonwealth, and environmental activists. On March 13, 2013, the bill was tabled by the Senate for further review. Note that the Pennsylvania DEP issued a white paper in January of this year regarding the use of mine influenced water in drilling operations.
PDC Energy Inc. will be sending its Utica production to MarkWest Utica EMG for processing. Under the terms of a new agreement, liquids-rich gas from Guernsey county will be processed in the Seneca complex in Noble County. PDC joins Antero Resources Corp., Rex Energy Corp. and Gulfport Energy Corp. as partners of MarkWest.
On February 8, 2013, federal District Court Judge John Preston Bailey struck down a lawsuit attempting to void an oil and gas lease agreement. The lessors argued that the lease should be voided based upon an inconsistency in the “commencement” date in the lease document according to the West Virginia Record. Judge Bailey refused to void the lease stating “the appropriate remedy in this case is to resolve the discrepancy [of the commencement date] by endorsing the date supplied by Range.” The Lessors have appealed the District Court’s ruling and opening briefs before the Fourth Circuit Court of Appeals are due by April 22.
The Charleston Gazette reports that the pit and impoundment study required by the Horizontal Well Act of 2011, and conducted by West Virginia University, identified problems with how pits and impoundments are constructed and with how state officials inspect them. In a recently-released summary of the report, the West Virginia Department of Environmental Protection (DEP) acknowledged that the WVU study identified various construction problems, such as improper compaction, inadequately secured liners, and standing water on berms. Overall, however, DEP concluded that “the current regulatory framework is sufficient to properly regulate the construction, operation, and maintenance of large capacity pits and impoundments.” In response to the study, DEP is training its inspectors in the proper design, construction and maintenance of large capacity pits and impoundments, and has developed a standardized inspection checklist.
The noise, light, and dust study required by the Horizontal Well Act remains delayed, and a third study regarding air pollution is not due until July 2013.