The Pennsylvania Department of Environmental Protection on Saturday issued notices in the Pennsylvania Bulletin announcing (1) that the DEP has finalized revisions to its GP-5, a general permit that pertains to emission limits at natural gas-fired engines and equipment at compressor stations and/or processing facilities; and (2) the DEP has proposed revisions to its “Plant Approval and Operating Permit Exemptions” for air emission sources, which includes a proposed exemption from the air quality plan approval process for air emission sources at well drilling sites. According to the DEP’s press release, the revisions to the GP-5 will “impose emissions limits that are 75 to 90 percent stricter than current limits for the largest, most common types of engines used at compressor stations.” The DEP will accept comments from the public regarding its proposed revisions to its “Plant Approval and Operating Permit Exemptions” through March 19, 2013.
Pennsylvania state Senator Gene Yaw (R-Lycoming County) has introduced legislation that would effectively add a Pugh clause to leases being unitized for development of shale gas. Senate Bill 356, which was introduced by Senator Yaw and several others on January 31, has been referred to the Senate Committee on Environmental Resources & Energy for consideration. A Pugh clause releases the portion of leased acreage that is not included within a production unit. Senate Bill 356 would apply only to units formed after the effective date if the bill were passed and to development of unconventional reservoirs, as defined in the bill.
In a case with significant implications for oil and gas operators in Ohio, two landowners have asked the U.S. District Court for the Southern District of Ohio to rule that their leases, signed with Mason Dixon Corporation and now held by Hess Energy Corporation, are invalid due to irregularities in signing and the failure of the gas company to drill wells during the primary term. The landowners, David Cameron and Stephen and Melissa Griffith, have moved for summary judgment in the case.
Three issues were presented to the court, including two signing irregularities. Mr. Cameron claims his signature was not notarized, and Mr. Griffith claims he signed his wife’s name on her behalf, without her being present. Further, the landowners are refusing to cash their delay rental checks. Delay rentals are paid to extend the primary term of the lease, thereby allowing the gas company to delay drilling a well. Payment of delay rentals may extend the leases for as long as ten years before a well must be drilled. The landowners have asked the court to declare this time period to be unreasonable, despite the terms of the lease.
This case illustrates the importance of having each lease validly signed and notarized by all interested parties. Any irregularity can be used by landowners to contest a lease they are no longer satisfied with, even if the landowner may not ultimately prevail. Further, oil and gas operators should make sure that landowners understand the binding nature of a lease, and the full term thereof.
The Charleston Gazette recently reported that two of the West Virginia Department of Environmental Protection studies addressing natural gas drilling concerns will not be released by the deadline established in the Horizontal Well Act of 2011. DEP Secretary Randy Huffman said work on the wastewater impoundment study, scheduled to be released by January 1, 2013, is complete but there were problems with formatting and revisions. Huffman also said that the second study on noise, light and dust, scheduled to be released by December 31, 2012, is not close to being completed because there is still data to be collected. Huffman hopes to have a report completed by mid-February for the wastewater impoundment study, but offered no estimated completion date for the noise, light and dust study. A third study, examining air pollution from oil and gas operations, is not required to be released until July 1, 2013.
On January 30, 2013, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published an advisory bulletin urging pipeline operators to report pipeline incidents to the National Response Center (NRC) within one hour of discovery. PHMSA also announced its intent to issue a proposed rule setting specific time limits for notifying the NRC. Current regulations require operators to notify the NRC at the earliest practicable moment following discovery. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 requires PHMSA to issue a regulation imposing a more specific time limit.
On January 30, 2013, the Federal Energy Regulatory Commission (FERC) published a notice in the Federal Register of the availability of a report prepared by the Office of Energy Projects, “Recommended Parameters for Solid Flame Models for Land Based Liquefied Natural Gas Spills.” In the report, FERC evaluates the suitability of using LNGFIRE3 in siting onshore liquefied natural gas (LNG) facilities, as is currently required under the minimum federal safety standards administered by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). After comparing with recommendations and parameters from a May 2012 report prepared by Sandia National Laboratories for the U.S. Department of Energy, “Liquefied Natural Gas Safety Research Report to Congress,” FERC concludes that LNGFIRE3 is suitable for such use. In a prior report , FERC evaluated the suitability of using another model, DEGADIS, to determine the vapor-gas-dispersion exclusion zones for onshore LNG facilities under PHMSA’s siting requirements.
As indicated in this article from January 29th, Andy Dinniman, state senator for Pennsylvania’s 19th Senatorial District, planned to introduce the Public Notification and Access to Information Act this week. Reportedly, the Act would require the posting of additional information about proposed gas pipeline projects on the Department of Environmental Protection’s website.
On January 30, 2013, the Ohio Supreme Court ruled that the issuance of a permit to drill a new well, deepen a well, reopen, convert, or plug a well is not considered to be an “order of the chief.” As such, the Ohio Oil and Gas Commission has no jurisdiction to hear an appeal of such permit under Ohio’s oil and gas law. The Court’s decision reconciled one provision of the statute authorizing the Commission to hear appeals of any “order” of the chief of the Ohio Department of Natural Resources’ Division of Oil and Gas Resources Management with another provision of the statute stating that the issuance of a permit to drill “shall not be considered an order of the chief.” The Court did not address whether a permit to drill could be appealed to a state court.
The Pennsylvania Game Commission board yesterday approved two leases and amended one lease which cover game lands throughout Pennsylvania. The Pittsburgh Tribune-Review reports that the Pennsylvania Game Commission entered a lease with Chesapeake Appalachia covering 1,201 acres in Donegal and Independence townships, Washington County, and will receive a bonus of more than $3 million plus a 23.25% royalty interest. The Commission also entered a lease with Hilcorp Energy Co. covering 586 acres in Pulaski, Lawrence County, and will receive a bonus payment of $1.9 million plus a 20% royalty interest. Finally, the Game Commission agreed to add 34 acres in Dunkard, Greene Count,y to an existing lease with Chevron Appalachia in exchange for a $51,000 bonus payment. The bonus money received from the agreements will be deposited in a fund for future purchases for wildlife management and maintenance.
INNOVA Commercialization Group, a West Virginia early-stage investment program, has announced that it will provide financing to Alternative Fuel Solutions of West Virginia, LLC for the construction of a facility in Morgantown that will convert aftermarket vehicles to operate on compressed natural gas (CNG), propane, and other alternative fuels which have been made abundant by shale gas development, reports The State Journal. West Virginia’s 2011 Marcellus Gas Manufacturing and Development Act has made aftermarket conversion, which can require a substantial investment, a more attractive option: West Virginians who convert vehicles to operate on certain alternative fuels, such as CNG and propane, may qualify for state tax credits of 50% of the cost of conversion up to $7,500 for conventional vehicles, or up to $25,000 for large industrial vehicles. At current prices, fleet owners may save an average 35 percent on fuel costs after switching to CNG, before accounting for state tax credits like those available in West Virginia.
Following a speech at the Marcellus Utica Midstream Conference in Pittsburgh this morning, Pennsylvania Governor Tom Corbett said that Royal Dutch Shell’s recent decision to delay a final commitment to building an ethane cracker plant in Beaver County does not mean that Shell is considering alternate locations for the plant. The Pittsburgh Post-Gazette reports that Gov. Corbett said “[i]f they’re going to build it, they’re going to build it here,” and that the extension can be attributed to “dotting I’s and crossing T’s.”
On January 25, 2013, the Pennsylvania Department of Environmental Protection issued a notice in the Pennsylvania Bulletin acknowledging that its general permit number WMGR128 had been rescinded on January 8, 2013. As first issued to Integrated Water Technologies, Inc,. on September 1, 2012, the WMGR128 general permit was titled (and intended to cover activities involving) the “Beneficial Use of Crystallized Sodium Chloride and Liquid Calcium Chloride from the Processing of Oil and Gas Liquid Waste”. According to the January 25, 2013 notice, DEP “determined that the notice provided to the public on April 9, 2011, advising the public of the Department’s receipt of the permit application and soliciting public comments, was not sufficiently detailed to provide the category of proposed beneficial use.” The DEP also stated in that notice that it intends to republish the WMGR128 application for public comment in the near future. Citizens for Pennsylvania’s Future, an environmental advocacy group, appealed the public notice regarding WMGR128 to the Pennsylvania Environmental Hearing Board last fall.
Ohio law currently authorizes two options for the disposal of the wastewater generated from natural gas production operations – injection into a Class II underground injection control (UIC) well or spreading on roads as a deicer. However, with the development of the Utica Shale in Ohio on the rise, and a significant percentage of the wastewater already being disposed in Ohio’s 179 operating UIC wells coming from out of state, alternative means for the transportation, temporary management, and disposal of the wastewater are being considered.
Industry is advocating the transportation of brine and other liquid wastes by river barge as more efficient, economical, and environmentally sound than transportation by tanker trucks. The U.S. Coast Guard, the agency authorized to regulate the nation’s waterways, plans to issue a decision on the permissibility of wastewater transport via barge in the near future. With respect to the temporary management of wastewater prior to disposal, the Ohio Department of Natural Resources (ODNR) is expected to initiate rulemakings addressing storage in pits and impoundments. ODNR currently requires wastewater to be stored in steel tanks.
The disposal capacity of Ohio’s UIC wells has also been an issue of concern. While no permits for new UIC wells were issued for nearly 11 months after seismic events in Youngstown, Ohio were connected to a nearby UIC well, ODNR has issued 10 permits for new UIC wells since November 2012 with another 30 permit applications pending. ODNR also encourages the recycling and re-use of wastewater from one well site for drilling and production operations at other well sites. Another recent development with the potential to alleviate the burden on UIC wells is the disposal of solidified brine in Ohio’s solid waste landfills. Interest in the process of accepting brine for solidification and, ultimately, disposal at solid waste landfills has increased since an Advisory contemplating the practice was issued by Ohio EPA in September 2012. Currently, one landfill in Stark County, one in Mahoning County, and two in Fairfield County have permitted solidification facilities.
Yesterday, the U.S. Senate Committee on Commerce, Science, and Transportation held a field hearing in Charleston, West Virginia, to discuss pipeline safety issues in the wake of the December 2012 gas pipeline incident in Sissonville, West Virginia. The Committee heard testimony from Ms. Sue Bonham, a resident of Sissonville; Ms. Deborah Hersman, Chairman of the National Transportation Safety Board (the independent federal agency investigating the Sissonville incident); Ms. Cynthia Quarterman, Administrator of the Pipeline and Hazardous Materials Safety Agency (the federal agency responsible for ensuring the safety of gas and hazardous liquid pipelines); Ms. Sue Fleming, Director of Physical Infrastructure Issues for the U.S. Government Accountability Office (an independent agency that performs audits, investigations, and studies for the U.S. Congress); Mr. Jimmy Staton, a senior executive for NiSource Gas Transmission and Storage; and Rick Kessler, President of the Board of the Pipeline Safety Trust (a nonprofit group dedicated to pipeline safety). The witness’ written testimony and an archived webcast of the field hearing can be found on the Committee’s website.
As we anticipated in a previous post, the U.S. Department of the Interior, Bureau of Land Management (BLM), has reportedly submitted to the White House Office of Management and Budget its revised proposal for regulation of hydraulic fracturing on federal lands. The original proposal released in May 2012 prompted significant criticism from industry representatives, state regulators, and environmental groups alike. BLM expects to release its new proposal sometime in the first quarter of 2013.