Wednesday, March 11, 2015

Budget Hearing: DEP Forming Task Force To Look At Natural Gas Pipeline Issues

Acting DEP Secretary John Quigley said Wednesday DEP is forming a task force to look at ways of promoting cooperation and reducing the environmental impacts of the 25,000 to 30,000 miles of natural gas pipelines expected to be developed in Pennsylvania over the next few years.  But, he was not interested in expanding DEP regulations over pipelines.
The announcement was made in response to questions from members of the House Appropriations Committee at a hearing on DEP’s budget request for FY 2015-16.
Quigley also said Gov. Wolf wants to maintain the existing Act 13 drilling impact fee at its “highest level,” and the environmental programs it funds, including grants to local governments.
In written remarks prepared for the Committee, Acting Secretary Quigley said, “The budget proposal before you will allow the Department to focus on its core mission and values: cleaner air, cleaner water, safer waste disposal. It will ensure that our mines are safe, our mine-scarred lands are restored, and our oil and gas wells are properly developed.
“It will provide us the necessary boots on the ground to protect our public resources. And most importantly, it delivers on the Governor's promise to provide schools that teach, jobs that pay and a government that works.
“As part of the proposed Pennsylvania Education Reinvestment Act, Pennsylvania would join every other major oil and gas producing state by levying a severance tax.  The Governor’s proposal is a competitive rate of 5 percent, placing Pennsylvania in the midrange of taxation rates imposed by other natural gas producing states.
“In addition to maintaining the existing impact fee distribution to local communities and providing an historic reinvestment in our schools, a small but critical component of the tax revenues will support DEP's oversight of the industry. Ten million dollars will support additional inspection and enforcement staff to ensure that we are appropriately regulating the activities of the industry.
“Gov. Tom Wolf’s proposed budget will make Pennsylvania an energy leader through new investments that take full and responsible advantage of our rich natural resources, including natural gas, coal, wind, solar, and timber. To take the reins as the nation's energy leader, we must expand and develop new markets for Pennsylvania's energy technologies, services and fuels, and this budget makes historic investments to bolster and transform our energy economy.
“The Governor's budget attests to his commitment to create new jobs and protect public health and our environment, all of which strengthens Pennsylvania's economy. In addition, the plan also invests millions more to protect, clean and conserve the Commonwealth’s land, air and water.”
Here are some key issues that came up during the House hearing on DEP’s budget.
-- Review Of Chapter 78 Drilling Regulations: Rep. John Maher (R-Allegheny), Majority Chair of the House Environmental Resources and Energy Committee, asked if having just the Oil and Gas Technical Advisory Board review the final revised Chapter 78 drilling regulations on March 20 is adequate before it is released for comment, noting there were 24,000 comments in the first round of public comments.  
Acting DEP Secretary Quigley said there will be an additional 30 day comment period.
In a follow-up question, Rep. Maher asked whether members of the TAB have been replaced.  Quigley said they are being replaced and DEP expects to announce the new members ahead of the March 20 meeting.  [Late Wednesday, DEP announced members of TAB.]
Asked about TAB’s involvement in developing the final regulation, Quigley said members of the TAB, as it was constituted, were not involved in developing the final revised Chapter 78 regulations.
Rep. Maher said he is a “fan” of transparency, but in this case DEP does not yet have the members of the TAB named who will review the regulations and published a draft of Chapter 78 on its website Monday dated February 13, which he noted might not be the most recent draft.  He encouraged Quigley to do a better job of making information available to the public.
-- Natural Gas Pipelines: Rep. Greg Vitali (D-Delaware), Minority Chair of the House Environmental Resources and Energy Committee, asked how DEP plans to address concerns about pipelines.
Acting Secretary Quigley said only about one-third of the existing natural gas wells are connected to pipelines to deliver natural gas to market.  He said over the next few years there will be 25,000 to 30,000 miles of pipelines built to make those connections.
DEP is in the process of developing a task force to see if the state can plan smarter, reduce impacts and capture the economic benefits of pipeline expansions.  Quigley compared this process to one he guided when he was Secretary of DCNR in the Rendell Administration with the wind energy industry on the location and impacts of those facilities.
Quigley said he is not interested in adding new regulations, but approaches this issue as a collaboration.  He said the state has limited ability to regulate pipeline construction.
After the hearing, Quigley told StateImpact Denise Brinley, Executive Deputy Secretary for Programs, will lead the project.
-- Proposed Severance Tax/Impact Fee: Rep. Jeff Pyle (R-Armstrong) asked the Acting Secretary to clarify the status of the Act 13 drilling impact fee, in particular for grants to local governments, and the proposed severance tax.
Quigley said Gov. Wolf wants to maintain the existing Act 13 drilling impact fee at its “highest level,” and the programs it funds, including grants to local governments.
Rep. Madeleine Dean (D-Montgomery) asked about the severance tax and what it means to DEP.
Quigley said Gov. Wolf’s proposal is reasonable at 5 percent [plus a production-based fee], given Pennsylvania is the only state without a severance tax, noting Ohio is proposing to increase its severance tax to 8 percent.
He said Utica Shales, which are now just now starting to be developed, will probably yield more natural gas than Marcellus Shale.
Rep. Jim Christiana (R-Beaver) asked if we are talking about a natural gas severance tax, wouldn’t we also want to look at taxing other natural resources like coal, other minerals and forest resources?
Quigley said Gov. Wolf has not proposed to extend a severance tax to other resources.
Rep. Christiana asked what DEP’s projections are for natural gas used to calculate the severance tax.
Quigley said DEP does not project natural gas production, it compiles reports on production it receives from operators, noting the severance tax is based on reported production.  He added natural gas production over the last four years has been “off the charts.”
-- DRBC Drilling Regulations: Rep. Michael Peifer (R-Pike) said he would like the Delaware River Basin Commission to bring up natural gas drilling regulations up for a vote because his constituents would like to see drilling in their area.  If Pennsylvania is funding DRBC, then there should be a voted on the regulations, he said.
Quigley said Gov. Wolf supports the current DRBC moratorium on drilling, until the DRBC Commissioners are satisfied with the content of new drilling regulations.
-- More Sustainable Gas Development: Rep. Garth Everett (R-Lycoming) asked if DEP has plans to use independent research groups to promote more sustainable natural gas development.
Quigley said his objective is develop a lot of “big tables” to gather people around to come up with innovative solutions.  He said advisory committees are a big part of that effort.
-- Marcellus Health Impacts: Rep. Karen Boback (R-Lackawanna) expressed concerns about the need for gathering information on the health impacts of Marcellus Shale drilling.
Quigley said he plans to work with other agencies to see how they could go about gathering health impact information.
[Gov. Wolf’s budget includes $100,000 for the Department of Health to create  a Marcellus Health Registry.]
-- Chesapeake Bay Watershed Cleanup: Rep. Garth Everett (R-Lycoming) asked what the Wolf Administration’s strategy is to meet Chesapeake Bay cleanup milestones.  Rep. Everett is a member of the interstate Chesapeake Bay Commission.
Quigley said Pennsylvania is not meeting our cleanup targets for the Bay, other than wastewater treatment plants.  He said in meetings with the departments of Agriculture and Conservation and Natural Resources everyone is clear we need to “reboot” the Chesapeake Bay effort.
He said additional resources are needed as incentives for installing additional best management practices on farms, DEP needs to do a better way of counting what we are putting on the ground and do a better job of targeting the resources DEP has.
In a follow-up, Rep. Everett said Pennsylvania should use Gov. Wolf’s proposed $675 million bond issue for water quality cleanup, instead of for alternative energy and other uses.
“A much wiser use of that money, should we go to borrow money, would go to cleaning up the streams rather than searching for alternative energies that may or not be efficient because they need subsidies and can’t stand on their own,” suggested Rep. Everett.
Quigley said $20 million of the initiative is devoted green agriculture and supporting digesters on farms and would translate into some water quality improvement.
Rep. Everett said “that’s nice,” but it’s really inadequate.  He said at a recent Chesapeake Bay Commission meeting the U.S. Environmental Protection Agency outlined what the consequences were for missing the milestones and “it isn’t pretty.”
-- Stormwater Management: Rep. Kevin Schreiber (D-York) asked for an updated on the stormwater program.
There is a federal mandate to more appropriately handle stormwater, Quigley said, and DEP is doing its best to provide communities assistance, but it still represents an unfunded mandate.  He pointed to York County as an example of how stormwater issues are being handled effectively through local partnerships and planning.
-- Stream Clearance: Rep. David Millard (R-Columbia) asked if DEP has funding for stream debris removal.
Quigley said it is appropriate to remove stream debris after a storm if it can be reached from a streambank or a bridge without a permit.  Dana Aunkst, Deputy for Field Operations, said there is no funding for debris removal in DEP, but there is some funding available through the Commonwealth Financing Authority.
-- Delaware River Flooding:  Rep. Michael Peifer (R-Pike) expressed a concern about flooding and the “flexible-flow” approach to managing the Delaware River.  Dana Aunkst, Deputy for Field Operations, said the current agreement on managing the river with New York City and other watershed states will end in December.  They are now working on a new agreement.
-- Hazardous Sites Cleanup Fund: Rep. Greg Vitali (D-Delaware) expressed concerns about providing funding for the program, noting the phase out this year of the Capital Stock and Franchise Tax, which provides $40 million annually to the Hazardous Sites Cleanup Fund.
Quigley said DEP currently spends about $45-$48 million a year on hazardous sites cleanup.  The Act 13 drilling impact fees provides $10 to $15 million to the Fund, but by the end of FY 2016-17 there will be an issue with funding.  Quigley said he looks forward to working with the General Assembly on a solution.
-- Brownfields: Rep. Kevin Schreiber (D-York) asked about the status of the brownfields program.
Quigley said the 20th anniversary of the Land Recycling Program is coming up with over 4,700 sites reclaimed and another 2,200 sites are in process.  He said DEP is committed to continuing it and making it even more successful.
-- Keystone Landfill: Rep. Mike Carroll (D-Monroe) asked about the status of the Keystone Landfill expansion in Lackawanna County.
Quigley said DEP is handling the application according to the 11-step internal and public review permitting process and it is currently at step six.  He said the agency has extended the public review period for the environmental assessment portion of the review recognizing the public interest in the application.  Quigley said DEP is about a year away from a decision, if the process follows its current course.
Dana Aunkst, Deputy for Field Operations, said at the end of the comment period for the environmental assessment DEP will make a decision, which is appealable, on whether to continue to the technical review of the application.
-- Improving DEP Reporting/Efficiencies: Rep. Madeleine Dean (D-Montgomery) asked how DEP is responding to the Auditor General’s report on the Oil and Gas Program.
Quigley said DEP did accept many of the changes recommended by the Auditor General, but there is more work to do.
He  said it is clear the agency has been under-resourced, noting in the last five years DEP staffing was reduced by 14 percent when the average cuts were 6 percent in other agencies.
Dana Aunkst, Deputy for Field Operations, added that while staff has been decreasing by 14 percent, workload has increased by 20 percent.
DEP has a lot of work to do to convert its processes from paper to handling tasks electronically, said Quigley.  One example he pointed to was the Oil and Gas Program which has iPads to capture inspection results, other programs do not and “check boxes on paper forms.”
He said there needs to be a department-wide IT approach to DEP’s processes and data management.
-- Alternative, Energy Efficiency Initiative: Rep. Jeff Pyle (R-Armstrong) asked about the area needed to develop the proposed 100 MW of solar power funded as part of the $20 million solar initiative proposed by the Governor.
Quigley said the first PA Sunshine Program developed about 98 MW of solar energy which creating 2,700 jobs.  He noted the solar industry has contracted in the state, unlike other states that provided better support to the industry.
Rep. Pyle noted the closure of 11 coal-fired power plants in Pennsylvania and asked again how much an area would be taken up by 100 MW.
Quigley said the solar proposal is not meant to replace any closed coal-fired power plants or respond to market conditions.  He said Gov. Wolf wanted to encourage a diverse energy portfolio, adding the Governor wants to protect coal-fired power plants.
-- Climate Change: Rep. Matthew Bradford (D-Montgomery) asked about the status of climate programs in DEP.
Quigley said he plans to reinvigorate the Climate Change Advisory Committee process, expand the number of work plans it is considering and revive the adaptation work begun under the Rendell Administration.
Gov. Wolf, he said, wants Pennsylvania to be an example of smart climate policy and making the connection between green infrastructure and climate adaptation.
-- Personnel: Acting Secretary Quigley said Jeff Logan, Executive Deputy for Administration, is leaving the agency this week.
Click Here for a more detailed summary of the proposed DEP, DCNR budgets.
Written testimony and a video of each hearing will be posed on the Republican House Appropriations Committee webpage.
Testimony Available
Eileen McNulty, Acting Secretary of Revenue
Large Utica Shale Reserve Could House Next Gas Boom

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