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Long-Awaited Oil, NatGas Regulations One Step Closer in Pennsylvania

The Pennsylvania Department of Environmental Protection (DEP) said Wednesday it has sent a package of new rules for oil and natural gas producers to the state's Environmental Quality Board (EQB) for a long-awaited review, with the possibility of enactment this summer.

Since work began more than four years ago on the rulemaking package, which includes separate regulations for the conventional and unconventional industries, the agency has had two public comment periods, 12 public hearings and received nearly 28,000 public comments. DEP Secretary John Quigley noted Wednesday during a press conference that it typically takes two years to complete regulations in the state.

"These regulatory changes are balanced, incremental and appropriate, protecting public health while enabling responsible drilling to proceed," he said. "These rules are a long time coming -- more than four years -- and were written with an unprecedented amount of public participation and transparency."

Quigley, who was appointed last year by Democratic Gov. Tom Wolf, said in March that under his leadership the agency would take the rulemaking process fuirther, with more public input and stronger regulations to modernize and strengthen the environmental controls employed by legacy and unconventional producers (see Shale Daily, March 9, 2015). Since then, trade organizations, operators and industry supporters have charged that the DEP was going too far with the revisions (see Shale DailyApril 30, 2015).

The Marcellus Shale Coalition (MSC) on Wednesday pointed to a 172-page document it filed with the DEP last May during the public comment period to show that its position on the new regulations has not changed.

“We believe that the DEP significantly underestimated both the operational and economic burden that the [proposed] regulations would impose on the unconventional gas industry,” the MSC said in comments at the time. “That burden has been multiplied several times by the additions and changes” included in the final rulemaking.

The state's omnibus oil and gas law, Act 13, required DEP to update environmental protection standards for producers. The rule changes deal with reducing impacts on public resources, preventing spills, waste management and restoring well sites after drilling, among other things.

DEP said the final package focuses on "five core" areas: water resources, public resources, public health/safety, landowner concerns, and transparency and data management.

Conventional and unconventional producers would be required to adhere to some of the same rules. Oil and gas wells near scenic river corridors, parks, forests, schools and playgrounds would receive closer regulatory scrutiny, along with other areas deemed resource protection zones. All operators would also be required to conduct reviews of abandoned and active wells near their pads prior to drilling. They would be required to develop a monitoring plan to address any such risks, too.

The rules also establish stronger water supply restoration standards and enhanced spill reporting and cleanup requirements for both industries.

The rulemaking was primarily crafted in response to the sharp increase in Marcellus Shale drilling. As a result, unconventional producers are facing more scrutiny under the new rules.

Conventional operators would still be allowed to use the temporary storage pits, but shale drillers would no longer be able to use smaller, temporary storage pits for drill cuttings and waste. Instead, they would be required to obtain permits if they plan to dispose of drill cuttings on site. Further, an unconventional operators would be required to obtain a residual waste permit for larger centralized impoundments.

Unconventional storage tanks also has to now be vandal-proof, and secondary containment has to be installed at all storage sites.

Shale gas gathering lines would face tighter regulatory standards designed to better protect wetlands and the new rules would require greater site restoration efforts after construction. The unconventional industry would also be required to report its waste volumes on a monthly, rather than six-month basis, and develop improved water management plans to better protect against excessive withdrawals.

In all, the DEP said it sent more than 2,800 pages of material to the EQB for review, including the rulemaking language and a regulatory cost analysis, among other things.

Over the last seven years, the DEP has lost 671 positions, 411 of which were inspectors and permit writers. Quigley said the agency would likely need more personnel to fully enforce the new rules, despite a state budget impasse that has lasted for more than six months.

"While we're in a bit of a slowdown in terms of natural gas production, this low-price regime will pass, and it's our expectation that the pace of drilling will pick up," he said. "We need to be prepared for it...At the end of the day, we need a combination of investments, certainly additional staffing and in modern technology that will enable us to meet the challenge of adequately regulating and monitoring the industry."

The agency is set to meet Feb. 3 with the EQB. If the board adopts the package, the Independent Regulatory Review Commission could discuss the regulations this spring ahead of implementation this summer.

The Pennsylvania Independent Oil and Gas Association has challenged the rules’ public resource protection provisions in court. Deputy Secretary for Oil and Gas Management Scott Perry said the DEP would comply with any ruling in that case and meet any other industry challenges to the rules as they are presented.

Quigley reminded reporters Wednesday that the latest regulations are not likely to be the last.

"We are roughly a decade into what could be a 100-year phase of natural gas extraction...it is essential...that we continuously improve," he said. "We have got to respond to changing technologies; this industry is incredibly productive and their ability to adapt and introduce new technologies continues to amaze. As a regulatory agency, we need to keep pace with that.”

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