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Pennsylvania Legislature Advances Separate Oil, Gas Regulations

The Pennsylvania House and Senate energy committees on Wednesday voted in favor of a series of bills that would require the state to adopt separate regulations for the conventional oil and gas industry, aimed at shielding it from the financial burdens of rules crafted primarily for unconventional producers developing the Marcellus Shale.

HB 2350 and SB 1378 would direct the Pennsylvania Environmental Quality Board to separate both existing and proposed regulations for the drilling, operation and plugging of unconventional and conventional oil and gas wells in the state. The House bill cleared committee by a vote of 22-3, and the Senate bill advanced on a vote of 7-4. Both pieces of legislation are now headed to both chambers for full consideration.

"When it comes to regulations, it's very important to recognize the vast differences between conventional drilling and drilling in the Marcellus Shale," said state Republican Rep. Martin Causer, who introduced the legislation in the House. "Conventional wells are shallow and have significantly smaller well pads. Their overall impact on the surrounding environment is far less than that of deep Marcellus wells."

Causer added that HB 2350 should help insulate conventional producers from "overregulation" as the state has stepped-up its regulatory efforts in recent years to better oversee larger independent oil and gas companies that have transformed the Marcellus Shale into one of the nation's leading natural gas fields.

Calls for such legislation intensified earlier this year when Causer and others in the state Senate began searching for co-sponsors after months of lobbying from the conventional industry. Last summer, the Pennsylvania Grade Crude Oil Coalition (PGCC) was formed by 20 traditional producers and refiners to help fight increasing regulations that were being applied to both industries. The PGCC hired Pittsburgh-based law firm Babst Calland to analyze and challenge new rules and also enlisted a lobbyist for its cause.

Larger oil and gas trade groups in the state, such as the Pennsylvania Independent Oil and Gas Association (PIOGA), have also supported the legislation. In 2012, the General Assembly passed Act 13, a sweeping piece of legislation that updated the state's oil and gas laws for the first time in decades (see Shale Daily, Feb. 15, 2012). Most of that law applied to conventional producers as well.

"This goes beyond what came with Act 13," said PIOGA Executive Director Lou D'Amico. "There's been a lot of regulatory action in Harrisburg that's resulted from everything that's happened with the Marcellus Shale."

D'Amico told NGI's Shale Daily that the legislation is not only fair, but overdue.

"This is not the fault of shale operators. The focus of the Department of Environmental Protection has been a one-size fits all approach and it's certainly impacted conventional producers," he said. "The sheer volume of gas over here in Pennsylvania alone is hurting them. We went from providing a quarter of the state's natural gas needs to what we believe will be close to providing a quarter of the entire country's needs by next year. The conventionals are facing stress on pricing, pipeline capacity and other things that aren't helping them at all."

Not everyone greeted the bill with enthusiasm, though. The ranking Democrat on the House Environmental Resources and Energy Committee, Greg Vitali, was quoted by local news media as saying the conventional industry still poses substantial environmental risks, and he said making a blanket regulatory separation is not in the state's interest. Lawmakers on both committees amended the bills to exclude a definition of conventional wells based on their depth and target formation.

In May, the Pennsylvania Environmental Council sent a letter to lawmakers calling the bill flawed due to that definition, saying the legislation lacked adequate distinction between both industries (see Shale DailyMay 29).

The Senate energy committee also advanced SB 1310, which would establish an advisory council to study existing regulations and assist the DEP in making changes that address the differences between conventional and unconventional producers. That bill cleared committee by a vote of 10-1 and is now headed to the full Senate for consideration.

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