A Pennsylvania appeals court has finally weighed in on the remaining aspects of a lawsuit filed by the Marcellus Shale Coalition (MSC) nearly three years ago that challenged the state’s regulatory overhaul for unconventional natural gas producers, issuing a mixed opinion that still leaves the industry in search of answers.
In a split decision, the Commonwealth Court’s seven-judge panel cleared the way for additional legal challenges after it issued a 91-page opinion on Monday. The opinion addressed six remaining counts of the MSC’s 2016 lawsuit dealing with rules governing area of review, onsite processing, impoundments, site restoration, spill remediation and waste reporting.
The MSC has argued that those sections of the regulatory package are unlawful and hurt its members, which have transformed Pennsylvania into the nation’s second largest natural gas producer, with more than 6 Tcf reported last year driven by Marcellus, Utica and Upper Devonian shale development.
MSC President David Spigelmyer said the court’s opinion provides “necessary clarity” on some aspects of its challenges. However, “several questions remain open in light of the partial nature of these summary judgment proceedings — questions for which the industry continues to seek resolution.”
New well development and centralized impoundment rules developed by the state Department of Environmental Protection (DEP) as part of the new regulations were targeted by the MSC. The rules would establish registration, construction and restoration standards for impoundments and require existing ones to be compliant or closed. MSC claimed that the rule is void and unenforceable because the DEP lacks authority under Act 13 of 2012, the omnibus energy bill drafted to govern unconventional development.
The court disagreed, indicating DEP has authority to promulgate the rule, and it refused to declare it invalid. The court also said, however, it did not have enough information to resolve the coalition’s claim that the impoundment regulation is an unconstitutional special law that wrongfully singles out impoundments and subjects them to different standards than those operated by other industries.
Writing for the court, Judge Kevin Brobson said MSC must provide further evidence to show how the impoundment regulations violate the state constitution.
Another aspect of the regulatory package requires operators to restore pad sites within nine months after all drilling is completed by removing unnecessary supplies and equipment, among other things. The MSC contended that state regulators exceeded their authority by imposing requirements that go beyond those set forth in Act 13 and said the agency violated the state’s Regulatory Review Act by failing to estimate the cost of compliance.
While the court did not invalidate the entire site restoration section as the MSC requested, it granted the coalition’s application for summary relief by declaring void and unenforceable the stipulation that sites be restored within the nine-month period.
The DEP’s area of review requirements were partly tossed as well.
Under that section, the agency required a well operator to identify active, orphan and abandoned wells within 1,000 feet of a wellbore’s path and then submit a report summarizing its findings with a monitoring plan. The coalition argued that the requirements are unreasonable and impose excessive monitoring obligations, particularly the requirement that a well operator notify DEP immediately and cease stimulating a well in the event of a communication incident or alteration, when few of those incidents have occurred in the state.
While the court found that the agency has authority to promulgate such rules, it said DEP and the state’s Environmental Quality Board failed to persuade the panel on certain requirements included in the area of review regulations.
“We conclude that the agencies have failed to identify any statutory authority to justify regulations that impose entry, inspection and monitoring obligations with respect to wells on the lands of others and over which the stimulating well operator has no control, particularly in the absence of any actual pollution or threatened pollution on those lands attributable to the stimulating well operator’s activities,” Brobson wrote.
The court also ruled that the MSC failed to demonstrate a hardship in its challenge of spill remediation rules, which would require operators to better address areas polluted by spills, rejecting the coalition’s challenge to that aspect of the rulemaking. Additionally, the court found that more stringent waste reporting, which requires operators to submit the amount and type of well-site waste produced on a monthly basis, was not in conflict with various state laws. The court rejected the coalition’s challenge.
Similarly, the court found no need to further review stronger standards for processing residual waste generated by wells and denied the MSC’s challenge.
DEP spokesperson Elizabeth Rementer said regulators were still reviewing the full decision, but said they were encouraged that the court largely upheld the “common sense regulations.” Spigelmeyer added that the MSC supports “fair, consistent and clear regulations,” something he said the group is willing to continue working on with DEP.
Monday’s opinion is the latest development in the industry’s fight against the regulatory package. MSC filed its lawsuit in 2016 shortly after the rules took effect. The Commonwealth Court stayed parts of the regulations to decide on the lawsuit, which has prevented DEP from enforcing them.
While part of the regulations, which took years for the DEP to develop, have been implemented, MSC has challenged what the agency has identified as the rulemaking’s core provisions.
Last year, the Commonwealth Court favored the industry in its challenge against another part of the regulations related to a rule governing hydraulic fracturing near playgrounds and similar properties, finding them too restrictive and declaring them void and unenforceable. The DEP appealed that decision to the state Supreme Court, which refused to hear it until the Commonwealth Court issued this week’s opinion on the other six counts.
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