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Ohio Energy Regime Overhaul Begins

When it goes into effect Sept. 10, Ohio's SB 315 will bring regulatory change to the Ohio Department of Natural Resources (DNR) and four other state agencies, but that's just the beginning of the changes the oil and gas industry can expect from the legislation, according to Craig Kasper, CEO of project development and engineering company Hull & Associates Inc.

"If you talk to DNR they'll tell you 'we're going to regulate in the following ways: we're going to use just the law where the law's got a lot of detail, we're going to write rules where we think we need rules, and then we're going to have best management practices," Kasper said last week at the Pennsylvania Independent Oil & Gas Association's 2012 Eastern Oil & Gas Conference and Trade Show in Monroeville, PA. Rules written by DNR and other state agencies will need to pass through some kind of certification process before they go into effect, he said.

There have been concerns that DNR won't have enough inspectors on staff to analyze and process all of the paperwork generated by SB 315-related changes. "I was at DNR the other day and there had to be 40 brand new Ford F-150s without tags on them yet, waiting for the new inspectors that they're hiring, so they're definitely ramping up for this," Kasper said.

Ohio Gov. John Kasich in June signed SB 315, an energy bill that enjoyed bipartisan support in the General Assembly and creates new rules for hydraulic fracturing (fracking), among other things. The law calls for regulatory changes at DNR, the Public Utilities Commission of Ohio (PUCO), the Ohio Environmental Protection Agency (Ohio EPA), the Department of Commerce and the Ohio Department of Transportation (ODOT).

SB 315 strengthens rules for the disposal of wastewater through injection wells and calls for operators that violate safety and environmental laws to face mandatory daily fines. Operators will also be required to share all chemical information on fracking fluids -- including information deemed as trade secrets -- with doctors and medical professionals, who are allowed to share even proprietary information with the patient and other medical professionals directly involved in treating the patient; take water samples within 1,500 feet of a proposed horizontal well and disclose the results in their permit applications; and disclose the proposed source of water used in the well drilling and completion process.

Under SB 315, the Ohio EPA will be tasked with streamlining the permitting process for oil and natural gas drilling, shortening the wait time from months to days. The agency will also look into new technologies for treating and recycling wastewater from drilling operations in an effort to conserve water and reduce the state's reliance on injection wells for disposal.

SB 315 also calls for ODOT to create a new model road use agreement that would serve as a template for counties and townships to use with oil and gas companies. The agreement would spell out what roads will be used, how they will be maintained and who will pay for their maintenance.

The law also directs PUCO's Pipeline Safety Division to update regulations for the construction, inspection and safety of new natural gas pipelines, and the Commerce Department to consolidate and streamline its construction and occupancy review process for natural gas processing facilities.

DNR plans to have its own website for disclosure of fracking chemicals, similar to the national fracfocus.org site, Kasper said. When fracking in Ohio, "if you use any chemical of any sort at the well, you must report it within 60 days," he said. But state regulators give drillers some wiggle room when it comes to enforcement.

"DNR has a lot of enforcement authority, but there's an automatic 60-day extension when you miss something...the idea is not to start putting out notices of violation left and right, but it's also to kind of keep the regs working the way they're supposed to."

Development of Ohio's Utica Shale is four to five years behind Pennsylvania's portion of the Marcellus Shale, Kasper said. "We're extremely underdeveloped compared to Pennsylvania...people appear to be taking their time, maybe proving it a little bit more. It's not so much secrecy, but you don't have 50 rigs all around -- it's actually kind of unusual to see one unless you go to certain counties in eastern Ohio."

The organization of opposition to shale development in Ohio is also a few years behind what drillers have been facing in Pennsylvania, according to Don Zuch, Hull & Associates' shale oil and gas market leader. "There definitely is opposition but to the extent that there have been protestors and people acting out at remote locations up in central Pennsylvania, we haven't really seen that yet in Ohio," Zuch said.

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