When it issued proposed rules that would allow natural gas development projects — with conditions — in affected areas of the Marcellus Shale last month, the Delaware River Basin Commission (DRBC) was flexing muscles it hasn’t used before in its 50-year history, according to Philadelphia-based law firm Blank Rome LLP.

In the past, DRBC’s efforts have been focused on water withdrawals and water discharges affecting the basin, Blank Rome partner Lynn McKay said during a conference call Thursday.

“This is really a very new approach that the DRBC is taking with respect to natural gas development that we’re seeing in these proposed regulations,” McKay said. “I think it really caught many of us by surprise because we just haven’t seen the DRBC undertake this type of regulation previously.”

The public has until March 16 to comment on the rules package, and three public hearings have been scheduled across the DRBC’s four-state region.

The DRBC has federal regulatory authority to protect the watershed of the basin, which affects portions of Delaware, Pennsylvania, New Jersey and New York. Its proposed rulemaking would allow water within the basin to be used for gas development if the water is “within the physical boundaries” of a DRBC-approved natural gas development plan (see Shale Daily, Dec. 10, 2010). Developers also would be allowed to reuse flowback and production waters, treated wastewater and mine drainage waters for natural gas development “under specified conditions.”

DRBC approval has been required for projects involving water withdrawals and water use for natural gas development for years, but the regulatory impact included in the proposed rules “is likely to be substantial,” McKay said.

“This is not the DRBC acting with respect to just water withdrawals…This is the DRBC basically stepping into the operator/developer’s business and saying ‘we want to see everything you’re doing with respect to how you’re going to go about developing this natural gas’…The DRBC is really getting involved in project activity in a way that they have never done in the past.”

Commissioners published the draft package without calling for an environmental impact study, which environmental groups and some state officials had requested. Former New York Gov. David Paterson and New Jersey environmental chief Bob Martin had asked the DRBC to delay issuing any rules (see Shale Daily, Dec. 9, 2010).

The natural gas industry has worked for years with the Susquehanna River Basin Commission (SRBC), which manages a watershed immediately west of the Delaware River Basin, according to Marcellus Shale Coalition (MSC) President Kathryn Klaber.

“The SRBC’s mandate is slightly different, but they have also chosen how to implement it in a way that has made it much clearer than what the draft regulations of the DRBC indicate, where they’ve said ‘we are executing on our mandate of quantity, but we are deferring the quality issues to the state agency,’ and that makes it more straight forward for all stakeholders…

“That’s probably one of the biggest issues that will be reflected in our comments…does it make it more difficult, not only for the industry, but for the general public, for enforcement purposes, for just understanding who’s in charge, if you do have that kind of overlap? Clarity in these regulations and where there may be something that the commissioners believe there’s a gap in state regulations, fine, let’s talk about that. But to be duplicating and creating an entire government infrastructure around that…this is unprecedented.”

But while DRBC’s proposed rules need to be reworked, MSC members are not opposed to regulations within the basin, Klaber said.

“By and large the industry…is supportive of getting these regs done and behind us. There’s nothing worse than uncertainty in any type of business, let alone one that needs to deliver this kind of product to the market. The uncertainty is obviously something that is important to get behind us. You won’t see the industry out saying ‘no, we’re not a part of this.'”

The proposed rulemaking would streamline the process to obtain permits for gas development projects “that demonstrate that they satisfy certain criteria.” Existing procedures now take six to nine months; the streamlined permit proposal could allow projects to get under way within 30 days.

The proposed rulemaking, which would add Article 7 Part III to basin regulations, would supersede DRBC’s executive director determinations issued last year and in 2009 that temporarily banned gas development (see Daily GPI, June 16, 2010; May 12, 2010; June 1, 2009).

DRBC’s proposed rules — and a cumulative study of the effects of natural gas drilling in the Marcellus Shale — have the full support of the Obama administration, according to the federal representative on the DRBC (see Shale Daily, Dec. 16, 2010).

Written comments on the rules package will be accepted on the DRBC website and by mail to Commission Secretary, DRBC, P.O. Box 7360, 25 State Police Drive, West Trenton, NJ 08628-0360. Hearings are scheduled to be held Feb. 22 at Honesdale High School in Honesdale, PA; Feb. 22 at Liberty High School in Liberty, NY; and Feb. 24 at Patriots Theater at the War Memorial in Trenton, NJ.