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Legacy Producers Sue to Stop New Oil/Gas Regulations in Pennsylvania

A trade group representing Pennsylvania's legacy oil and natural gas producers has filed a lawsuit against the state Department of Environmental Protection (DEP) to stop a package of new regulations that it claims would put many of its members out of business.

The Pennsylvania Independent Petroleum Producers Association (PIPP) filed the complaint last week in the Commonwealth Court. It alleges that the agency violated a state law passed in 2014 by failing to craft regulations for conventional oil and gas wells separately from those governing unconventional gas wells. PIPP's members, the organization said, would be subjected to the same rules as "billion-dollar, multinational corporations engaged in large-scale, unconventional drilling for natural gas."

"The proposed regulations as written are illegal and would spell the end of a 155 year-old legacy in Pennsylvania," said PIPP President Mark Cline. "As a regulated industry, we are required to obey the laws of our commonwealth. The responsibilities of the DEP and other regulating agencies are no different. No one is above the law, nor can [DEP] pick and choose what laws to abide by."

After more than four years of working on the rulemaking package, DEP sent the new regulations to the state's Environmental Quality Board (EQB) in January (see Shale DailyJan. 6). The EQB approved them, and the regulations are scheduled for a hearing before the Independent Regulatory Review Commission next month. The package would provide better protections for and improve water resources, public resources, public health/safety, landowner concerns, and transparency and data management.

The rulemaking includes separate regulations for the conventional and unconventional industries. The DEP hosted 12 public hearings and received 28,000 public comments during the rulemaking process. The agency, which does not comment on litigation, has continued to maintain that the rules were crafted transparently and are fair and balanced.

Throughout the process, however, conventional producers and the trade organizations that represent them have accused the agency of simply layering on ambiguous regulations for both industries. In 2014, the general assembly passed a bill that required the DEP to adopt separate regulations for the conventional and unconventional industries (see Shale DailyJune 27, 2014). Act 126 was aimed at shielding legacy producers from the financial burdens of the regulatory update, which was primarily undertaken in response to shale drillers operating in the state.

The lawsuit seeks a declaration from the court that the new regulations are unlawful and unenforceable and requests that the IRRC hearing be enjoined until the court can issue a ruling. It also requests that the DEP start again with the conventional rulemaking process in accordance with the 2014 law.

Based in Northwest Pennsylvania, PIPP represents more than 350 small producers and supply companies. After the lawsuit was filed, Pennsylvania Independent Oil and Gas Association (PIOGA) President Lou D'Amico said the organization "fully supports every feasible effort to stop the [DEP] from enforcing regulations intended for unconventional oil and natural gas production on small, independent producers drilling conventional wells.

"The association has stated since the enactment of Act 126 that the process of promulgating these regulations was illegal, and that they would be an unnecessary and costly burden on the state's traditional oil and gas producers."

PIOGA also worked with legislators to include a provision in the state's fiscal code that would have required the state to start over on the conventional rules. Gov. Tom Wolf has twice vetoed that amendment, saying it would hurt environmental protections.

While the regulations contain separate rules for both industries, conventional and unconventional producers would still 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 protections zones. All operators would be required to conduct reviews of abandoned and active wells near their pads prior to drilling, and they would be required to develop a monitoring plan to address such risks.

The rules also establish stronger water supply restoration standards and enhanced spill reporting and cleanup requirements for both industries. When the DEP sent the final regulations to the EQB in January, officials said they anticipated legal challenges from the industry.

PIOGA has also filed a lawsuit challenging DEP's requirement that operators identify impacts to public resources and wildlife in their permit applications (see Shale DailyJan. 7).

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