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PA Sen. Wants to Redraft 30-Year-Old Oil/Gas Law to Aid Legacy Producers

Pennsylvania Republican state Sen. Scott Hutchinson circulated a memo last week seeking co-sponsors for legislation that would redraft the Oil and Gas Act of 1984 to clarify its language and address the current challenges facing legacy producers that operate under it.  

The memo comes months after the General Assembly passed legislation Hutchinson sponsored that scrapped new regulations for the conventional industry and requires the state Department of Environmental Protection (DEP) to rewrite the package. Those rules were written in tandem with those for shale producers and both took about five years to draft. The new environmental regulations for the unconventional industry were implemented in October, but some are on hold pending a lawsuit filed against them by the Marcellus Shale Coalition.

Hutchinson represents a five-county district in the Northwest part of the state that has long been home to the more than 150-year-old conventional industry. Opponents of the failed regulations argued that they were too burdensome and similar to those drafted for better-financed shale producers. While shale production in the state has continued to increase, conventional production has fallen off, declining with the commodities downturn. Just 94 conventional wells were drilled in 2016, according to DEP data, compared to the 286 that were drilled in the prior year.

"I am introducing a redraft of the Oil and Gas Act with new language designed to update or clarify old provisions where needed," Hutchinson said in the memo. "This will help provide a legislative framework for regulations specific to conventional oil and gas drillers in a way that protects the environment while preserving this valuable industry."

While legacy producers largely operate under the Oil and Gas Act, the state's omnibus energy law, Act 13 of 2012, required the DEP to update environmental protection standards for oil and gas producers. Act 13 was crafted in response to the advent of shale drilling and does not mention conventional producers or the smaller vertical wells they develop. But the law stipulated that new regulations would have to be promulgated to meet its requirements, which indirectly extends to legacy producers.

It remains unclear when the DEP will restart the rulemaking process for the conventional industry or how long that would take. The legislation passed over the summer established the Pennsylvania Grade Crude Development Advisory Council to advise and assist the DEP in crafting those regulations, which can't begin until the council is formed. While conventional producers have pledged to continue fighting new regulations, Pennsylvania Independent Petroleum Producers Association (PIPP) President Mark Cline said legacy operators have been discussing changes to the Oil and Gas Act for "quite a while."

Cline said it would be a good idea to get rid of some "regs that don't work" in the law and "put in some regulations that really do work." PIPP, he said, supports Hutchinson's latest efforts so long as conventional operators get a seat at the table to help draft the law. Cline believes once Hutchinson begins writing the bill that will happen.

It's unclear how Hutchinson's bill could affect Act 13, which stipulates that all aspects of the old legislation remain in "full force and effect" unless otherwise stated, or until they're "revoked, vacated or modified." It's still early in the process, but Hutchinson's office said it doesn't expect that changes to Act 13 will be necessary.

A year-end "workload report" released by the DEP shows conventional industry violations far outpaced those of shale operators last year. The DEP lists 1,800 conventional violations in 2016, compared to 354 at shale sites. That, however, has typically been the case. As of Dec. 30, there were 193,650 conventional wells in the state, where legacy producers hold 103,381 active permits, according to the DEP's report. That's compared to the 10,104 unconventional wells in the state and 10,219 active shale permits.

"When you get as big of a difference in numbers, sure, we're going to have more violations," Cline said. "Sometimes you look at those numbers, and it's not the true total because a lot of it is administrative, paperwork violations.” Conventional operators also face more inspections, and Cline said this is one reason why the law needs to be updated. While legacy producers have more wells in the state, Cline said he feels that his industry has faced undue scrutiny as a result of the sharp spike in unconventional activity in recent years.

Well inspections have steadily increased for both industries since 2008 as the DEP has stepped-up its efforts to improve regional consistency and continuous improvements in its compliance and enforcement programs. From 2010-2015, unconventional well violations dropped 67%, while from 2011 to 2015 conventional well violations dropped 51%, according to the agency's 2015 annual oil and gas report.

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