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Marcellus Shale Coalition Takes On Biggest Challenge Yet to Stop PA Drilling Rules

Less than a week after they were implemented, the Marcellus Shale Coalition (MSC) has filed a lawsuit targeting key provisions of new regulations for shale drillers, representing the first time the organization has taken such a wide-ranging legal action against the state and its Department of Environmental Protection (DEP).

In a 96-page complaint filed in the state Commonwealth Court late Thursday, the MSC is seeking declaratory judgement that sections of the regulatory package are unlawful. It's also filed an application for summary relief and expedited review, asking the court to stay the sections it’s challenging until the legality of the provisions are decided.

The MSC has targeted what the DEP has identified as being the core provisions of the new regulations, which it began drafting about five years ago and was required when lawmakers passed Act 13 in 2012 to update the state's aging oil and gas laws. The DEP split the rulemaking process; Chapter 78 for the conventional industry and Chapter 78a for the unconventional industry. In June, the General Assembly approved legislation to scrap the conventional rules and required the DEP to start those over, paving the way for the shale regulations to take effect on  Oct. 8 (see Shale Daily, Sept. 23; June 15).

"We're not challenging the totality of 78a. Many of the provisions in 78a we've worked closely with and were part of Act 13," said MSC President David Spigelmyer during a conference call with news media on Friday. "In those cases, we're already complying, but there are specific sections of 78a that we feel are onerous, costly, provide little environmental benefit and likely exceed DEP's statutory authority."

MSC's argument is nothing new, legal experts said on Friday. The organization has long maintained that the new regulations could cost the shale industry billions. Another trade group has also been fighting to stop part of the package from going into effect.

"We're concerned about that," Spigelmyer said when asked about the public's concern over trying to strike down stronger environmental regulations. "This industry is certainly not afraid to comply with stringent laws and standards. There's no doubt there's pressure on this industry from a financial perspective today; there are choices people make to invest capital broadly across the country. Our role as a coalition, on behalf of our members, is to stand up and fight to make sure that we're still an attractive place to park capital."

The new rules are designed to reduce impacts on public resources, such as schools and parks, help prevent spills, strengthen waste management and require stronger well site restoration.

Major changes included in the package that the MSC is challenging are the re-permitting of freshwater impoundments and a stipulation that they be closed or upgraded within 12 months; new requirements that operators go further in reviewing abandoned and active wells near their pads; public resource protection standards; monthly waste reporting requirements, and new well site restoration and spill remediation standards.

DEP spokesman Neil Shader said the agency is currently reviewing the lawsuit, adding that "on its face" the filing seeks to have some of the new rules most important aspects stricken or enjoined. DEP hosted several public hearings and reviewed tens of thousands of public comments over the course of five years before implementing the regulations, which were also revised several times. The agency has said that operators are currently in compliance with many of the new requirements.

"The challenged regulations are commonsense protections, necessitated by Pennsylvania law," Shader said. "They are the result of five years of work including an unprecedented amount of public comment and involvement."

MSC charges, however, that there is no basis in state law to require the provisions it's targeting, especially after key parts of Act 13 were struck down in a landmark case in the state Supreme Court in 2013 (see Shale Daily, Dec. 20, 2013). Late last month, even more parts of the law were struck down by the high court (see Shale Daily, Sept. 29).

The Commonwealth Court has already denied the Pennsylvania Independent Oil and Gas Association’s (PIOGA) motion to declare that the DEP has no authority to require operators to identify parks, forests, scenic rivers, national landmarks and other public resources in their well permit applications as the MSC's complaint charges (see Shale Daily, Sept. 2). PIOGA has since filed an appeal to that decision in the state Supreme Court citing the latest Act 13 ruling (see Shale Daily, Oct. 3).

"What's happening is the negotiated deal that was Act 13 -- the negotiated, multifaceted, holistic strategy that we put in place with a lot of stakeholders -- has been so torn apart that now you've got a question of whether any of it makes sense," said Kathryn Klaber of the environmental and energy consulting firm The Klaber Group, who was MSC president at the time Act 13 was passed.

"That's really the big picture," she added. "In terms of the individual elements of Act 13 and Chapter 78a, they are affecting different operators differently. The complexity and scale of that regulation has created a lot of different impacts depending on your history, your current acreage and your strategy to date. That's why you may not be seeing some very precise language on what the impact is; it's very different depending on the operator."

Under the new regulations, drilling near public resources, such as schools and drinking water protection areas, will now require operators to conduct a review of the impacts to those resources, develop mitigation measures and report to an expanded list of state agencies.

Identifying orphaned and abandoned wells -- which the industry already does -- has grown more complex. Landowner questionnaires have been added to the process and more thorough monitoring conditions are required. Spigelmyer said the DEP issued a 48-page technical guidance document because that part of the new regulations is so complex.

The MSC has asked for a hearing on its request to stay the challenged sections so that its members will not need to hire staff or consultants, enter new contracts or buy equipment to comply with the rules. The organization also said it's seeking an expedited review so the industry and the public have certainty on the matter as soon as possible. In the meantime, Spigelmyer said the industry would comply with the new regulations, which he said is creating "harm for our members today."

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