Marcellus Shale Impact Fee to Support Certain Projects for Governmental Entities, Councils of Government, Not-For-Profit Entities, For-Profit Businesses and Institutions of Higher Education

On February 25, 2013, Governor Corbett announced that the Commonwealth Financing Authority (“CFA”) has begun accepting applications for five programs established by the Act 13 Marcellus Legacy Fund to support conservation projects and environmental protection measures. The new CFA programs will provide $14 million in funding available for abandoned mine drainage abatement and treatment; watershed restoration and protection; water quality data; greenways, trails and recreation; and orphan and abandoned well plugging programs (the “Programs”) in the Commonwealth of Pennsylvania. Eligible applicants include municipalities, councils of government, not-for-profit entities, for-profit businesses and institutions of higher education.
The Programs are administered jointly by the Department of Community and Economic Development, the Department of Conservation and Natural Resources (“DCNR”) and the Department of Environmental Protection, under the direction of the CFA and DCNR. Applications are currently being accepted through July 31, 2013 for consideration at the Nov. 13, 2013 CFA meeting.
For more information on the Programs, please contact George T. Magnatta (215 972 7126, gmagnatta@nullsaul.com), Chair of Saul Ewing’s Public Finance Practice, or any other member of the Public Finance Practice.

Commonwealth Court Rules In Bradford Township Case by George Asimos, Esq

The Commonwealth Court ruled on Wednesday that a compressor station that also strips butane and propane in preparation for delivery into the pipeline system is a permitted use in a zoning district that allows “oil and gas production” and “equipment necessary to drilling and pumping operations”. The compressor was located “adjacent to the actual pump” [Note that this was a shallow well, not Marcellus]. The Township had denied the producer approval because it contended the stripping activity was not part of oil and gas production and therefore not permitted in that zoning district. The producer, its counsel and witnesses apparently established a convincing record that the combined compressor/stripper was essential to the production of the gas and was not a distinct process that could be separated from the well. This is a pre-Act 13 case, but insofar as it is interpreting a zoning ordinance, it will still be useful. The case can be found at 2012 WL 1622495.

ShaleComm 2012 – George Asimos, Esq.

I attended last week the first ShaleComm conference in Pittsburgh, devoted to companies providing state of the art communications to the gas fields and the pipeline system. This was of particular interest in Pennsylvania because of the remoteness of the Marcellus Shale gas fields. As I listened to attendees, panelists and exhibitors, it seemed that the shale gas industry may have an opportunity to solve its communications issues and provide much-needed services to rural Pennsylvanians. 

Pennsylvania’s Broadband Plan shows how rural areas in Pennsylvania are generally lacking ubiquitous broadband communications, wired and wireless.  One industry insider noted that only 3 to 4% of his companies gas field operations are covered by broadband wireless communications.  And this is unlikely to change soon.  The major wireless service providers are occupied with expensive 4G upgrades, not extending new service to Pennsylvania’s rural population. 

 

Meanwhile, the gas production and pipeline industry can’t wait.  Pressing operational and security requirements demand improvements in field communications.  Satellite provides a quick solution.  But issues of latency, reliability, bandwidth, and cost suggest it is not a permanent solution.

 

Fortunately, on the heels of extensive build out of cellular and PCS networks there is considerable expertise in Pennsylvania; and due to the aggregation of private and even Commonwealth tower assets there are significant vertical resources that could be used or improved.  This could contribute to a rapid deployment of dedicated communications systems to serve the gas fields.  There are interested stakeholders in the public and private sectors.  It would be interesting if the inevitable gas industry communications build out incorporated a design that would also benefit the communications needs of the rural communities in which they are situated.  A possible win-win.

Governor Corbett Signs Marcellus Shale Bill Into Law – by Joel R. Burcat, Esq.

On February 14, 2012, Governor Tom Corbett signed into law H.B. 1950, the new Marcellus Shale law. The new law, Act 13 of 2012, will completely update the regulatory system associated with oil and gas drilling, establish a drilling impact fee and will largely supersede and preempt local regulation of oil and gas drilling and related activities. For Saul Ewing’s analysis of the new law, click here.

In a news release from Governor Corbett’s Office, the Governor was quoted as saying:

“This growing industry will provide new career opportunities that will give our children a reason to stay here in Pennsylvania. Thanks to this legislation, this natural resource will safely and fairly fuel our generating plants and heat our homes while creating jobs and powering our state’s economic engine for generations to come.”

The provisions of Act 13, that allow counties to adopt ordinances imposing impact fees go into effect immediately. The remainder of the law, including new regulatory standards and preemption, go into effect 60 days following the signing of the Act into law. For a copy of Act 13, click here.

Pennsylvania General Assembly Passes New Oil and Gas Law

On February 7, 2012 and February 8, 2012 the Pennsylvania Senate and the House of Representatives, respectively, voted in favor of the Conference Committee’s Report of House Bill 1950. H.B. 1950 (Printer’s No. 3048), enacting extensive amendments to the Pennsylvania Oil and Gas Act. H.B. 1950 will bring Pennsylvania’s regulation of oil and gas into the 21st century and will establish for the first time an unconventional gas well “impact” fee.

Governor Tom Corbett is expected to quickly sign the bill into law. The drilling impact fee will go into effect immediately upon being signed into law. All other provisions of the bill will go into effect 60 days after the governor signs it into law.

The bill contains provisions allocating the impact fee proceeds to a variety of local and state uses linked to the impact of widespread drilling activities. A key section of H.B. 1950 rewrites Pennsylvania’s law dealing with the regulation of oil and gas drilling with new mandates for permitting, bonding of well sites, setbacks, water replacement, and other regulatory provisions. H.B. 1950 also limits the ability of municipalities to regulate oil and gas drilling, pipelines, compressors, gas processing facilities, and related equipment by mandating greater uniformity of local zoning regulation.

This new bill will have a wide ranging impact on oil and gas exploration and production companies, pipeline companies, landowners, municipalities, and all others involved in conventional and unconventional oil and gas drilling in Pennsylvania. Since approximately 60 percent of Pennsylvania is underlain by such formations, the bill will have a wide geographic and even social impact.
For a full analysis of H.B. 1950 by Saul Ewing environmental lawyer Joel R. Burcat, click here

Pennsylvania DEP Proposes New General Permit for Earth Disturbance Activities Associated with Oil and Gas and Pipeline Projects By Andrew T. Bockis, Esq.

On Saturday January 21, 2012, the Pennsylvania Department of Environmental Protection will be publishing proposed terms for a new general permit to be used by oil and gas and pipeline companies for earth disturbance activities associated with oil and gas drilling and transmission projects. The Department will also be publishing a draft 17-page policy document regarding the framework within which the Department states it will exercise its administrative discretion under the proposed permit.

The proposed terms, together with the draft policy document, are subject to a 60-day public comment period, which will expire on March 20, 2012. The proposed terms, which may be amended based on public comments submitted to the Department, will ultimately result in the issuance of a new general permit under which oil and gas exploration and production companies, along with pipeline companies, can conduct earth disturbance activities.

The proposed general permit includes a major re-write of the currently existing general permit. Among other things, the proposed general permit:

• Provides for an optional expedited 14-day permit review process for projects, except those located in special protection watersheds.

• Offers an optional phased permit process for operators seeking to conduct earth disturbance activities in phases.

• Provides a process for permittees to make minor modifications to approved plans in the field based on real world conditions.

• Requires a permit application to be submitted by a licensed professional “who has attended up-to-date training provided by the Department’s Office of Oil and Gas Management” on erosion and sediment control and post construction stormwater management for oil and gas activities.

In sum, the proposed revisions would add ten pages to the currently existing general permit.

The proposed general permit, together with the proposed policy document, is available here.

Pipeline Safety Bill Unanimously Passed by Pennsylvania Senate – By Elizabeth Witmer, Esq.

The Pennsylvania Senate unanimously passed an amended version of Rep. Matt Baker’s bill, House Bill 344, on December 13, 2011. The bill now goes back to the Pennsylvania House for concurrence.

The bill as passed by the Senate grants the Pennsylvania Public Utility Commission the power to register, assess and inspect natural gas and hazardous liquids pipelines and facilities, but not those that are under the exclusive jurisdiction of the Federal Energy Regulatory Commission. The Commission may enact regulations, but those regulations “shall not be inconsistent with or greater or more stringent than the minimum standards and regulations adopted under the Federal Pipeline Safety Law.”

The bill does not address the siting of pipelines or pipeline facilities and specifically states that “[n]othing in this Act grants the Commission additional authority to determine or regulate a pipeline operator as a public utility as defined in 66 Pa.C.S. §102 (relating to definitions) or as a natural gas supplier or natural gas supply services as defined in 66 Pa. C.S. §2202 (relating to definitions).” The Commission has decided in at least one case that a midstream natural gas operator who provides services only to natural gas producers is a “public utility.” Although that application was eventually withdrawn by the operator, the Commission refused to rescind its order containing that decision. That question is on appeal to the Pennsylvania Commonwealth Court and is at issue in at least two other cases currently pending before the Commission.

For further information about the regulation of natural gas and hazardous liquids pipelines in Pennsylvania, whether regulated by the Federal Energy Regulatory Commission or the Pennsylvania Public Utility Commission, please contact Elizabeth Witmer.

Pennsylvania DEP to Issue New Guidance Concerning the Discharge of Wastewater from Marcellus Shale Natural Gas Operations – By Andrew T. Bockis

On November 12, 2011, the Pennsylvania Department of Environmental Protection will publish a new technical guidance document regarding the permitting of total dissolved solids (TDS) discharges from wastewater treatment plants. An advance copy of the 31-page guidance document is available here.

The purpose of the new policy is to assist the Department’s permitting staff in implementing the new TDS effluent standard for discharges of treated natural gas wastewater. The Department’s TDS regulations were recently amended to require new or expanded sources of natural gas wastewater to treat the wastewater to less than 500 milligrams per liter of total dissolved solids, which is the federal drinking water standard, prior to discharge. A plain-language summary of the regulatory revisions is available here.

The new policy also highlights existing legal obligations, such as the requirement for certain wastewater treatment plants to develop and implement a Radiation Protection Action Plan to monitor for any radiation associated with wastewater from natural gas operations. The Department addresses the details of this and other aspects of the new policy in its Comment-and-Response Document, available here.

Although the new policy does not have the force of law, it establishes the framework that the Department will likely exercise its administrative discretion moving forward. That said, the new guidance will increase the costs of monitoring and recordkeeping for wastewater treatment plants that do not currently have a Radiation Protection Action plan, radiation monitoring equipment, or properly trained and qualified radiological personnel. For some plants, the cost to implement could be over $100,000 in the first year, along with additional annual operation costs of over $20,000.

The Department’s November 3, 2011 press release announcing the forthcoming guidance is available here.

Pennsylvania Courts Address “Mineral” — Again

Feel that aftershock a few weeks ago? That was the collective shudder of oil and gas lawyers when the Pennsylvania Superior Court remanded a Susquehanna County case for a hearing on whether gas from the Marcellus Shale formation was, or was not, transferred in an 1881 deed that reserved
“[o]ne half the minerals and Petroleum Oils”. See Butler v. Charles Power Estate, 2011 WL 3906897. How can gas be reserved if it is not mentioned? How can gas not be reserved if scientists, and even school children, can agree it is a mineral? The “Rule in Dunhams’ Case” has held since 1882 — in Pennsylvania — that a deed that reserved “minerals” but did not mention gas was bound by a rebuttable presumption that the grantor did not intend to reserve gas. This was not based on the scientific definition of “mineral” but on the common understanding of the term at the time (circa 1882). However, this Rule having been in use by conveyancers for many years, it has been since upheld as a general presumption and rule. After all, if all conveyancers follow a particular rule enunciated by the Supreme Court, wouldn’t a change of that rule also upset the intent of many subsequent conveyances who followed the rule? Among the arguments posed by the challengers to the application of Dunham’s Rule in this case are: (1) this deed was done in 1881 without the benefit of the Rule in Dunham’s Case which was decided a year later and (2) Marcellus Shale is a rock formation and, following the rule for gas embedded in coal, if the rock was reserved then so too was the gas contained in it. The Superior Court stated that it did not have a sufficient understanding of whether “Marcellus shale gas constitutes the type of conventional natural gas contemplated in Dunham and Highland.” Does this statement put “the rabbit in the hat”? Marcellus Shale gas is not conventional gas and could not be removed in 1881. Did Dunham and Highland apply only to conventional gas? It seems we will find out. The Court concluded that “the parties should have the opportunity to obtain appropriate experts on whether Marcellus shale constitutes a type of mineral such that the gas in it falls within the deed’s reservation.” The appellant’s argument has some very profound obstacles to overcome. But, for now, all eyes are on Susquehanna County. George Asimos, Esq.

Pa Public Utility Commission Sets Four-Part Test for Pipeline Public Utility Status

Click here for an Update and analysis by Elizabeth U. Witmer, Esq. of Saul Ewing, LLP on the August 25, 2011 decision by the Pennsylvania Public Utility Commission in the Laser Northeast Gathering Company, LLC case. The PUC clarified its prior decision which found that Laser, as provider of a natural gas gathering/midstream pipeline, is a public utility.