Drilling Permit Upheld by Commonwealth Court

By: Michael K. Reer

On June 12, 2017, the Pennsylvania Commonwealth Court affirmed an Environmental Hearing Board decision that upheld the issuance of a drilling permit to an operator in Warren, Pennsylvania. The operator received a drilling permit for an unconventional slant well that would bottom-hole underneath a petroleum refinery. The refinery expressed concern that hydraulic fracturing activities could impact a 3.6 million gallon gasoline tank on the surface. In response, the operator agreed to not fracture into certain formations near the tank, to utilize conductivity and video logs when drilling, to avoid the vicinity of zones indicated by logs as having excessive water, and to cease operations if pressure gauges indicated communication with another well. Nonetheless, the refinery appealed the Pennsylvania Department of Environmental Protection’s grant of a permit.

In upholding the EHB’s confirmation of the permit, the Commonwealth Court expressly rejected the refinery’s argument that PADEP may not grant drilling permits that conflict with the “purposes” of the Commonwealth’s Oil and Gas Act. Rather, the Commonwealth Court found that the Department may only reject a drilling permit for one of the six enumerated reasons in the Act and that “if none of the six statutory reasons for denial exist, then the Department is required to issue the permit within 45 days.” The Commonwealth Court also rejected the refinery’s assertion that the Department is required to apply “strict scrutiny” to permit applications with “unique characteristics” that make fracturing an “abnormally dangerous activity.” Notably, the Commonwealth Court found that “while not binding on this Court, the United States District Court for the Middle District of Pennsylvania has held that hydraulic fracturing is not an abnormally dangerous activity under Pennsylvania law.”

The case is United Refining Co. v. Dep’t of Envtl. Prot., No. 1321 C.D. 2016 (Pa. Commw. Ct. June 12, 2016).
Tuesday, June 13, 2017

PADEP Penalty Updates

By: Michael K. Reer

In April 2017, the Pennsylvania Department of Environmental Protection reached three penalty settlements with operators, which totaled nearly $1 million in penalty collections.

On April 10, 2017, PADEP announced a $400,000 settlement with an operator for air quality violations at a facility in Delaware County. According to PADEP, emissions reports submitted by the operator showed that the facility exceeded several permit limits for pollutants such as hydrogen sulfide, carbon monoxide, sulfur dioxide, and nitrogen oxide. Moreover, the reports failed to satisfy the Commonwealth’s data availability requirements. In addition to the civil penalty, the operator has since installed a flare gas recovery system to recover flare gas and reduce emissions.

On April 11, 2017, PADEP announced a $185,000 settlement with an operator related to violations of the Clean Streams Law, Dam Safety and Encroachment Act, and Oil and Gas Act. According to PADEP, inspections of the operator’s pipeline revealed several erosion and sediment control violations, including: (1) failure to comply with the conditions of the Erosion Control Permit and maintain best management practices during earth moving activities; (2) failure to prevent accelerated erosion and sedimentation; (3) discharge of sediment into the waters of the Commonwealth; and (4) constructing an encroachment or water obstruction without a permit.

On April 24, 2017, PADEP announced a $375,000 settlement with an operator related to violations of the Clean Streams Law, Dam Safety and Encroachment Act, Oil and Gas Act; and Solid Waste Management Act in Forest, McKean, and Elk Counties. The violations included: (1) failure to comply with the conditions of the Erosion Control Permit and maintain best management practices during earth moving activities; (2) discharge of an estimated 70 to 100 barrels of crude oil which flowed across land then into a tributary of Windfall Run, a High Quality Cold Water Fishery in McKean County; (3) discharge of an estimated 500 barrels of flowback fluid generated from a valve failure to the ground and surrounding wetlands in Forest County; and (4) failure to follow the approved water management plan for 105 days in McKean County when the operator withdrew water during a drought watch.

Monday, May 08, 2017

PADEP Launches eSubmission Public Search

By: Michael K. Reer

On March 21, 2017, the Pennsylvania Department of Environmental Protection announced the launch of eSubmission Public Search, an online tool that allows the public to view and download PADEP documents submitted by oil and natural gas operators. The public may now search for and view documents related to:
  •  Area of Review Summaries;
  •  Borrow Pit Registrations;
  •  Completion Reports;
  •  Due Diligence Extension Requests;
  •  Post-Drilling Restoration Reports and Extension Requests;
  •  Post-Plugging Restoration Reports and Extension Requests;
  •  Alternative Waste Management Requests;
  •  Underground Storage Tank Registrations;
  •  Well Development Impoundment Registration and Transfer Requests;
  •  Well Logs; and
  •  Well Records.
Over 1,000 operator documents are already loaded onto the website. PADEP stated in the press release announcing the website launch that “electronic oil and gas document submission is a critical step in making DEP permitting and monitoring more efficient and transparent.”
Thursday, March 23, 2017

PA Wells, Gas Production Increase

By: Michael K. Reer

On March 2, 2017, the Pennsylvania Independent Fiscal Office released its 2016 4th Quarter Natural Gas Production Report. The IFO found that production of natural gas increased 6.8% in Pennsylvania in 2016. Pennsylvania operators drilled just 504 horizontal wells in 2016, the lowest number since IFO tracking began in 2011. Despite the low number of spud wells, IFO found significant signs of an industry rebound. For example, the number of wells spud by quarter reached a low point in the second quarter of 2016 (72) before noticeably rebounding in the third (146) and fourth (176) quarters. Moreover, the number of spud but not completed wells fell 5.1% in 2016 as operators completed wells drilled in prior years. Also, production from wells spud in 2014 began declining in 2016, by nearly 2%, which may incentivize operators to drill additional wells.

Susquehanna and Washington counties were the top producing counties in 2016, followed by Bradford, Greene, Lycoming, Wyoming, Tioga, Butler, Sullivan, and Fayette. The Commonwealth currently trails only Texas in domestic natural gas production.

The Pennsylvania Department of Environmental Protection announced March 3, 2017 that the Department has launched an iPad app for electronic field inspections at oil and natural gas production sites. The app will replace paper and clipboard inspections and allow operators to receive inspection results concerning erosion and sedimentation, waterways encroachment, waste management, and spill cleanup in a more timely fashion.
Wednesday, March 08, 2017

PADEP Assesses Operator $1.2 Million Penalty

By:  Michael K. Reer 

On February 27, 2017, the Pennsylvania Department of Environmental Protection announced that it agreed to a $1.2 million civil penalty with an operator to settle violations related to a 2012 impoundment leak. According to the PADEP news release, in September 2012, testing of five private water supplies indicated that local groundwater was affected by a leak from an on-site oil and natural gas development impoundment. The impoundment was located in Donegal Township, Westmoreland County and was drained within one week of PADEP’s discovery of the leak. 

After notification, the operator provided effected households with bottled water and has since installed treatment systems. The operator has also agreed to remediate the site in accordance with the Pennsylvania Land Recycling and Environmental Remediation Standards Act, which will require remediation of the soil, groundwater, and surface waters impacted by the leak.

PADEP stated that the penalty amount will be paid to the Commonwealth’s Well Plugging Fund.

Monday, February 27, 2017

PADEP Alleges Correlation Between Development and Seismic Event

By:  Michael K. Reer 

On February 17, 2017, the Pennsylvania Department of Environmental Protection held a press conference to announce its finding that Utica shale hydraulic fracturing activities conducted on April 25, 2016 correlated to microseismic, or unfelt seismic events. According to PADEP, hydraulic fracturing activities conducted in Lawrence County correlated to seismic events of 1.8-2.3 magnitude on the Richter Scale. Natural seismic activity has occurred since at least the 1700s in the northwest and southeast corners of the Commonwealth. Lawrence County is at the southwest corner of the seismic activity zone in the northwest part of Pennsylvania.

PADEP noted in its press conference that Lawrence County has several contributing factors that makes induced seismicity more likely during the stimulation of the Utica shale, including brittle rock fracture, increase or change in pressure regimes proximal to active faults, fault plane orientation, and minimal separation of basement rock and the area of concern. PADEP stated that during the seismic event, real-time data was provided by the Commonwealth’s seismic monitoring network to PADEP’s oil and gas department. PADEP notified the operator of the proximity of the seismic events, and the operator voluntarily ceased stimulation activities and demobilized from the well pad within hours.

PADEP has recommended that the operator undertake the following actions:

1. Continued operation of the operator’s own seismic network within the monitoring area.
2. If a potentially induced seismic event occurs within the monitoring area, the operator must submit the seismic data received from its network electronically via e-mail to PADEP within 10 minutes.
3. If a potentially induced seismic event occurs within the monitoring area, the operator must call PADEP within one hour of the event.
4. Upon occurrence of an event:
a. The operator will safely shut down stimulation operations on the well;
b. The operator may flow back the well to reduce pressure;
c. The operator may resume operations if it demonstrates that the event was not correlated to development activities; and
d. The operator may resume operations if it demonstrates that modifications to operations allow for the safe resumption of stimulation activities.
5. The operator will cease zipper fracturing activities.

PADEP has stated that it will incorporate these conditions into future well permits near areas of concern and may institute the conditions as field rules in some areas of the Commonwealth.

Friday, February 17, 2017

PADEP to Hold Webinar on Induced Seismicity

Today, the Pennsylvania Department of Environmental Protection announced that it will hold a public webinar tomorrow, February 17, 2017 to discuss its review of seismic events that occurred in Lawrence County on April 25, 2016. According to PADEP, a series of low-magnitude seismic events on April 25, 2016 were temporally and spatially related to natural gas hydraulic fracturing activities. Speaking at the webinar will be PADEP Acting Secretary Patrick McDonnell, PADEP Chief of Well Plugging and Subsurface Activities Seth Pelepko, and bureau geologist Harry Wise.
Thursday, February 16, 2017

PADEP Proposes New and Revised GPs for Methane

On February 4, 2017, the Pennsylvania Department of Environmental Protection opened a 45-day public comment period for two proposed general permits and revisions to an air quality permit exemption. The proposals are designed to reduce methane and other pollutants at well sites and compressor stations associated with natural gas drilling and transport. Specifically, PADEP proposes to revise its list of air quality permit exemptions and to issue GP-5 (Natural Gas Compression Stations, Processing Plants, and Transmission Stations) and GP-5A (Unconventional Natural Gas Well Site Operations and Remote Pigging Stations). PADEP noted in a press release issued on February 6, 2017 that the GP-5 and GP-5A would establish updated Best Available Technology requirements for the industry regarding air emission limits, source testing, leak detection and repair, recordkeeping, and reporting requirements for the applicable air pollution sources.

The comment period closes March 21, 2017.
Tuesday, February 07, 2017

Commonwealth Court Limits Clean Streams Law Penalties

On January 11, 2017, the Pennsylvania Commonwealth Court issued a significant decision granting declaratory relief with respect to the proper interpretation of Section 301 of the Clean Streams Law. Specifically, the Commonwealth Court held that Section 301 of the Clean Stream Law does not authorize the Pennsylvania Department of Environmental Protection to impose ongoing penalties for the continuing presence of an industrial waste in a waterway of the Commonwealth following the initial entry of the pollutants.

The case arose from a dispute between a natural gas operator and PADEP concerning the appropriate penalty amount for an impoundment leak that occurred in 2012. Following the discovery of a leak in the impoundment, the natural gas operator notified PADEP, emptied the impoundment, patched the liner, installed sumps and trenches at five downgradient locations to collect and intercept affected groundwater, and removed all affected soil.

PADEP subsequently proposed a Consent Assessment of Civil Penalty for the leak in the amount of $1,270,871, based, in part, on “new, continuing, and ongoing impacts to the multiple waters of the Commonwealth.”  PADEP interpreted the Clean Streams Law as authorizing a penalty under a continuing violation theory for every day that industrial waste remains in a water of the Commonwealth. The operator disagreed with PADEP’s interpretation, urging the Commonwealth Court to rule that a violation occurs only on the days that the pollution is discharged from an area outside of the waters of the Commonwealth.

In agreeing with the operator’s interpretation, the Commonwealth Court noted that to “rule otherwise would be tantamount to punishing a polluter indefinitely, or at least for as long as the initially-released industrial waste remains in the waters of the Commonwealth, for the same violation—i.e., the initial release.”
Thursday, January 26, 2017

Commonwealth Court to Again Hear Oral Argument on Impact Fees

In December 2016, the Pennsylvania Commonwealth Court agreed to hear additional oral argument in Snyder Brothers, Inc. v. Pa. Public Utility Comm’n. The case concerns the proper interpretation of Pennsylvania’s Act 13 of 2012, which exempts from the Commonwealth’s impact fee those unconventional gas wells “incapable of producing more than 90,000 cubic feet of gas per day during any calendar month . . .” Snyder Brothers argues that Act 13 exempts those marginal wells that are incapable of producing more than 90,000 cubic feet of gas per day during one or more months of the year. The Pennsylvania Public Utility Commission interprets the provision as requiring operators to pay the impact fee on each unconventional well that is capable to producing 90,000 cubic feet of gas per day in one or more months of the year. The PUC has ordered Snyder Brothers to pay $500,000 in impact fees on wells that have produced 90,000 cubic feet of gas per day in some, but not all, calendar months.
Tuesday, January 24, 2017

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