EPA Inspector General Reports on Hydraulic Fracturing Regulators

The U.S. Environmental Protection Agency (EPA) Office of Inspector General (OIG) recently released a report entitled, “Enhanced EPA Oversight and Action Can Further Protect Water Resources From the Potential Impacts of Hydraulic Fracturing.”  The report evaluates how EPA and state agencies have used existing authorities to address the potential impacts of hydraulic fracturing on water resources, and also recommends two areas for EPA improvement.  First, the OIG recommends that EPA improve its oversight of Underground Injection Control (UIC) permit issuance for the use of diesel fuels in hydraulic fracturing.  Second, the report recommends that EPA develop an action plan to address public comments submitted in response to the agency’s May 2014 advance notice of proposed rulemaking (ANPR) related to possible federal chemical disclosure requirements.  The OIG found that EPA does not have a plan for responding to the comments submitted in response to the 2014 ANPR, nor for making a final determination on whether to proceed with a formal rulemaking.

Ohio Adopts Horizontal Well Site Construction Rules

The Ohio Department of Natural Resources (ODNR), Division of Oil and Gas Resources Management has adopted rules requiring the approval of plans for horizontal well sites prior to the construction or material modification of the sites.  The rules, codified at OAC 1501:9-2-01, 1501:9-2-02, and 1501:9-12-01, became effective on July 16, 2015.

The rules require the electronic submission of an application for approval of the well site (consisting of the well pad, access roads, areas altered to install ponds and other water control components, storage facilities, and other areas altered for drilling and production operations), and provide that construction or material modification of the site may not commence without first obtaining a permit from the Chief of the Division.  The rules prescribe the information to be provided in the application, including detailed drawings of all features within the well site boundary prepared and certified by a professional engineer, a sediment and erosion control plan, a dust control plan, a geotechnical report, and a stormwater hydraulic report.

The applicant and a representative of the Chief must meet at the site within 15 days of notification by the Chief that the application is complete.  The applicant must submit certification by a professional engineer after completion of the well site that the site has been constructed in conformity with the approved application.  The text of the rules, a discussion of the rules’ contents, and forms prescribed by the Chief are available on the Division’s website.

Gov. Tomblin Forms the WV Commission on Oil and Natural Gas Industry Safety

On July 9, 2015, Governor Tomblin announced the formation and appointment of members to the West Virginia Commission on Oil and Natural Gas Industry Safety.  Publicized during Governor Tomblin’s State of the State address in early 2015, the Commission is charged with “reviewing current federal and state oil and natural gas workplace safety regulations and provid[ing] recommendations for improving workplace safety” according to the State Journal.  The Commission is comprised of secretaries of the DEP, Dept. of Commerce, Dept. of Transportation, and Public Safety, among others, as well as members of the natural gas industry and labor representatives.  The Commission is to issue its first report on or about November 16, 2015.

Ohio Adopts Oil And Gas Regulatory Changes In Its Biennial Budget Legislation

Ohio’s biennial budget legislation, House Bill 64, signed by the Governor on June 30, 2015, includes changes and additions to Ohio’s oil and gas regulatory program appearing in Chapter 1509 of the Revised Code.  The changes and additions take effect on September 29, 2015.  The more significant enactments are the following:

  • A new section requiring the Chief of the Division of Oil and Gas Resources Management to create a program for the electronic submission of EPCRA reports to the Chief; state and local agencies required by EPCRA to receive the reports will have access to that database (Section 1509.231);
  • A new section requiring the reporting of fires and explosions and certain releases of oil, gas, brine, or other substances to the Chief by telephone within thirty minutes of the event, unless such reporting is “impractical” (Section 1509.232);
  • New language authorizing the Chief to include land owned by the Ohio Department of Transportation in drilling units approved by the Chief under Section 1509.28;
  • An increase in the maximum civil penalty that may be imposed for certain regulatory violations from $4000 per day of violation to $10,000 per day of violation (Section 1509.33(A)); and,
  • A significant expansion in the scope of regulatory violations for which the violator is liable to persons affected by the violation for the payment of damages and “the actual cost of rectifying the violation and conditions caused by the violation” (Section 1509.33(G)).

New York Formally Bans High-Volume Hydraulic Fracturing to Develop Marcellus Shale

On June 29, 2015, the New York State Department of Environmental Conservation issued its Findings Statement which officially prohibits high-volume hydraulic fracturing to develop natural gas resources in the Marcellus Shale.  The issuance of the Findings Statement concludes a nearly seven-year endeavor by the Department to evaluate the environmental impacts of hydraulic fracturing under the State Environmental Quality Act.  The Department relied upon information in the Supplemental Generic Environmental Impact Statement, issued by the Department on May 13, 2015, and more than 260,000 public comments in making the determination that hydraulic fracturing should be banned statewide.  Specifically, the Department found that “there are no feasible or prudent alternatives that would adequately avoid or minimize adverse environmental impacts and that address the scientific uncertainties and risks to public health from” hydraulic fracturing.  As a result, the Department concluded that prohibiting high-volume hydraulic fracturing “is the best alternative based on the balance between protection of the environment and public health and economic and social considerations.”

Federal Agencies Publish Final Rule to Redefine Waters of the United States

Today the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers published in the Federal Register a joint final rulemaking to redefine “waters of the United States” and the scope of the federal agencies’ jurisdiction under the Clean Water Act.  This final rule will be effective on August 28, 2015.  For more information, read our Administrative Watch regarding the Clean Water Rule.

OMB Begins Review of EPA Proposals to Curb Methane Emissions, Define Major Source

This week the U.S. Environmental Protection Agency (EPA) sent a highly-anticipated proposed rule to the White House Office of Management and Budget (OMB) for interagency review that would address methane emissions in the oil and natural gas sector.  Earlier this year, EPA announced its plan to initiate such a rulemaking  as part of its methane reduction strategy.  A second proposed rule was also reportedly sent to OMB for review this week – EPA is working on new definitions for certain regulatory terms associated with permitting sources in the oil and gas industry, in order to assist permitting agencies in making major stationary source determinations.  Both of the proposed rules are expected to be published in the Federal Register in August.

Ohio Supreme Court Rules on Dormant Mineral Act Issue

In a unanimous decision, the Ohio Supreme Court held that under the 2006 Dormant Mineral Act (“DMA”), the filing of a claim to preserve a mineral interest from being deemed abandoned is sufficient to preserve the mineral interest if it was recorded within 60 days following the notice of abandonment. Under this guidance, even if there are no otherwise qualifying savings events during the 20-year period preceding the notice of abandonment, the mineral interest can still be preserved by claim the timely filing of the claim to preserve.

The Ohio Supreme Court specifically noted that the parties to the underlying lawsuit did not dispute whether 1989 or 2006 version of the DMA applied so the court applied the 2006 DMA, as amended. The issue of which version applies will be decided in Corban v. Chesapeake Exploration, L.L.C. and Walker v. Shondrick-Nau, which are pending before the Court. Corban v. Chesapeake Exploration, L.L.C. was argued to the Court on May 6, 2015 and Walker v. Shondrick-Nau is scheduled for oral argument on June 23, 2015.

Shell Closes On Purchase Of Proposed Cracker Plant Site

Horsehead Holding Corp. (Horsehead) announced Monday that it closed on the sale of its former zinc smelter to Shell Chemical (Shell), which is the proposed site for an ethane cracker plant in Beaver County. Although Shell has not made a final decision on whether to build the cracker plant, it has been considering the Horsehead property as a site for the plant, which would convert ethane, a component of natural gas, into polyethylene. Shell is moving forward with developing the site, having demolished the smelter plant and relocated power lines. Shell indicated that this is a necessary step in the plans to acquire permits and continue development of the site.

Energy Transfer Partners to Invest $1.5 Billion for Marcellus Shale Midstream Project in Pennsylvania

Energy Transfer Partners LP announced that it will invest $1.5 billion for a new pipeline system and processing facilities to serve the Marcellus Shale in and around Butler County, Pennsylvania.  The new facilities are expected to be operational by mid-2017.  Natural Gas Intelligence reported that the pipeline and facilities are part of a long-term natural gas gathering agreement between ETP and EdgeMarc Energy to serve EdgeMarc’s active wells in the region, but the facilities are also expected to accept third party gas in the future.  The project plans include over 100 miles of high pressure pipeline and a cryogenic gas processing plant that will be located in western Pennsylvania near Butler County, providing an additional 440 MMcf/d of gathering capacity in the area.  The plant will deliver gas to ETP’s Rover pipeline, which is expected to deliver gas to markets in the Midwest, Great Lakes and Gulf Coast regions beginning in 2017.  ETP’s pipeline will also deliver natural gas liquids to the Marcus Hook Industrial Complex on the Delaware River, which is being repurposed for natural gas liquid storage, processing and distribution to foreign and domestic markets.