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Pennsylvania Says Hands Off in South Newark Basin

Pennsylvania's General Assembly moved with amazing speed in the closing days of June to install a drilling moratorium on upscale, ex-urban Philadelphia counties, attaching the provision in a must-pass budget measure (SB 1263) that Gov. Tom Corbett signed July 2.

The oil and gas moratorium legislation appeared to come out of nowhere just after the U.S. Geological Survey (USGS) identified the South Newark Basin in southeastern Pennsylvania as an area that is likely to hold 363 Bcf or more of undiscovered natural gas (see NGI, June 25). On June 30 the House passed the bill by a 123-74 vote; the Senate concurred on the amended bill by a 43-6 vote the same day.

According to the amendment, "the unique geologic and geochemical characteristics of the South Newark Basin...have not been adequately evaluated by the commonwealth and are deserving of further study."

The legislation forbids the state's Department of Environmental Protection from issuing well permits in the basin until the Department of Conservation and Natural Resources completes a study of "the practical resource recovery implications" of the USGS report and the fiscal impact of oil and gas operations in the basin. And drilling would not be allowed in the basin until "legislation authorizes the governing body of a county situated in whole or in part within the South Newark Basin that has spud a gas well located within its borders to elect whether to impose a fee on gas wells."

"There will be probably some interpretation on what that means," Corbett energy advisor Patrick Henderson told NGI. Earlier this year Corbett signed legislation which authorizes impact fees for unconventional gas wells (see NGI, Feb. 20). That bill was more than three years in the making. "So there will have to be an interpretation at some point in the future whether or not that is sufficient under that second prong, or if additional legislation is necessary in the future," according to Henderson.

The moratorium amendment was attached to the state's fiscal bill in the closing hours of the legislature's spring session by a group of five Republican legislators from southeastern Pennsylvania following the release of a USGS abstract which estimated that five Mesozoic shale basins along the East Coast -- including the South Newark Basin in New Jersey and Pennsylvania -- collectively hold a mean of nearly 3.9 Tcf in undiscovered natural gas and 135 million bbl of undiscovered natural gas liquids (NGLs). The agency said there is a 95% change that at least 363 Bcf of undiscovered natural gas is locked in the South Newark Basin, along with 1 million bbl of undiscovered NGLs. The agency added that there is a 50% chance the basin holds at least 785 Bcf and 4 million bbl, and a 5% chance the basin holds at least 1.7 Tcf and 10 million bbl.

Oil and gas operations in the South Newark Basin are already restricted by the Delaware River Basin Commission's (DRBC) de facto moratorium on exploration and development (see NGI, June 21, 2010).

"Drilling for natural gas in Bucks County is prohibited now because of the moratorium in place under the DRBC regulations," said Rep. Marguerite Quinn, a Republican whose district includes a portion of the South Newark Basin and one the authors of the new moratorium language. "Given the pressure from other parts of the state to lift this moratorium, it's important that we prioritize our water resources until we assess the impact of drilling in the South Newark Basin. Our constituents want to ensure that drilling is safe before it occurs here."

A large portion of Buck's County is a countrified area of rolling hills populated with very large homes and estates.

According to Rep. Kathy Watson, another of the amendment's sponsors, the concept of a moratorium for the basin "is entirely appropriate at this point in time because it gives all of the interested stakeholders in the process -- local residents, scientists and governments -- the ability to study the formation in depth and to determine the next appropriate steps on whether or not drilling is even possible or desirable. The involvement of our area is key to ensuring that any development in this formation is in the best interests of our citizens and our environment."

Earlier this year Chuck McIlhinney (R-Montgomery), another of the amendment's authors, proposed exempting counties without unconventional wells from statutes in Act 13, Pennsylvania's new omnibus Marcellus Shale law (see NGI, May 7). That proposal was meant to keep his home turf of Bucks County -- where an operator wanted to drill a non-Marcellus test well -- from being restricted by zoning provisions in the law.

"This legislation makes good on my promise that Act 13 was not intended to apply to Bucks County," McIlhinney said. "My colleagues in Harrisburg never intended for the Marcellus Shale law to affect our region, and now that a newly discovered formation exists, they agree that a moratorium on drilling is appropriate to give us the same time to study and debate the issue for our local area."

Pennsylvania officials recently renewed their effort to get fellow DRBC members to agree to revised water quality regulations that could ultimately open the basin to expanded Marcellus Shale gas drilling. The DRBC was set to vote on a proposal to revise its regulations last November, but the meeting was canceled and the proposal postponed indefinitely after Delaware Gov. Jack Markell said he opposed it (see NGI, Nov. 21, 2011).

Two Bucks County municipalities -- Nockamixon Township and Yardley Borough -- are among the plaintiffs in a lawsuit that claim parts of Act 13 are unconstitutional (see NGI, June 11). The plaintiffs last month argued before a panel of seven Commonwealth Court judges that the provisions should be struck down because they allow the state to preempt local ordinances and open areas previously off limits to gas drilling, a move they allege could harm the public's health and safety.

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