Monday, July 22, 2019

DEP, Marcellus Shale Coalition Win Some, Lose Some In Preliminary Commonwealth Court Decision On Drilling Regs

On July 22, Commonwealth Court issued an opinion on several Marcellus Shale Coalition challenges to DEP’s regulations covering unconventional oil and gas drilling operations.  
Although it upholds almost all of DEP’s rules, provisions requiring the identification of old wells near new gas wells in order to evaluate the potential pathways for contamination and requiring post-drilling site restoration within 9 months were struck down.
Other provisions related to the processing of residual waste on drilling sites, repermitting water impoundments used in the drilling operation, monthly waste reporting and on spill remediation were upheld.
Procedurally, this was a pre-enforcement challenge of DEP’s regulations by the Marcellus Shale Coalition before they were applied in specific cases.  The decision deals with summary judgment motions submitted by both sides, but the real merits of the regulations still have to be litigated.
You can expect further legal maneuvering by both sides in this case.
Plugging Nearby Wells
DEP regulations required the operator to identify all active, inactive, orphan, abandoned, and plugged and abandoned wells that have a wellbore path within 1,000 feet of the operator’s well and submit a report to DEP for evaluation for the potential of any communication between those wells and the new well.
The Coalition contended the monitoring and remediation provisions of the regulation would require a well operator to enter illegally onto property owned and controlled by others to identify wells they did not own or control.  
In discovery, the Coalition found DEP documented 9 cases of communication between new wells and surrounding wells related to unconventional drilling and 3 for conventional wells through the course of developing 10,000 unconventional wells.
The Coalition also noted the requirement to review wells within 1,000 feet will not prevent communication incidents which they said are few and with “no verified environmental impact.”
The Court found, “the Agencies have failed to establish a clear right to relief with respect to the Coalition’s legal challenge to Sections 78a.52a(c)(3) and 78a.73(c) and (d) of the Unconventional Well Regulations, which require well operators to monitor all wells identified in the area of review survey, regardless of whether those wells are accessible to the well operator, and require well operators to plug any well within the survey area that becomes impacted by the well operator’s stimulation activities, again regardless of whether the affected well is accessible to the well operator and whether the impact results in actual or threatened pollution of the waters of the Commonwealth.”
Site Restoration
DEP’s regulations required drilling operators to restore the drilling site within 9 months of completing drilling operations and “remove all drilling supplies, equipment, primary containment and secondary containment not necessary for production or needed to safely operate the well.”
The Coalition contends that Section 3216 of Act 13, which addresses well site restoration, requires removal of supplies and equipment not “needed for production.”  It does not impose any obligation to reduce the footprint of a well site based on safety.
Agencies pointed to language in Act 13 that says “Within nine months after plugging a well, the owner or operator shall remove all production or storage facilities, supplies and equipment and restore the well site.”
The Court found,“We have no difficulty concluding that the Agencies possess the
statutory authority to promulgate regulations to implement the site restoration requirements of Section 3216 of Act 13. That authority exists generally under Section 3274 of Act 13, and is expressly recognized in Section 3216(e) of Act 13.
“We also agree with the Agencies that Section 3216, as adopted by the General Assembly, reflects a two-step restoration of the disturbed areas associated with a well site—(1) post-drilling, and (2) post-plugging. 
“The question that remains, however, is whether the site restoration regulation is consistent with the site restoration mandates of Section 3216 of Act 13. 
“Turning to the portion of the regulation requiring well operators to restore areas to AOC [approximate original contours] within 9 months after completion of drilling, we find that this requirement conflicts with the site restoration scheme set forth in Section 3216 of Act 13.
“This requirement is inconsistent with the statute, which requires post-drilling restoration to AOC only where the well operator seeks an extension of the 9-month restoration period.”
Other Provisions
The Marcellus Shale Coalition challenged the other provisions of DEP’s regulations largely on whether they had statutory authority to enact them, on vagness or on procedural grounds based on the way the regulations were adopted.
The Court sided with the agencies, as noted, in those other provisions related to the processing of residual waste on drilling sites, repermitting water impoundments used in the drilling operation, monthly waste reporting and on spill remediation were upheld.

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