New guidance for unconventional natural gas operators following settlement relating to Chapter 78a

This article appears in the February 2021 issue of The PIOGA Press.

By Benedict J. Kirchner and Braden L. Christopher
Steptoe & Johnson, PLLC

By order entered on January 6, the Commonwealth Court of Pennsylvania approved a partial settlement by and between the Marcellus Shale Coalition (MSC), as the underlying petitioner, and the Commonwealth’s Department of Environmental Protection (DEP) and Environmental Quality Board (EQB), the underlying respondents, which will result in clarification surrounding the regulation of unconventional wells under 25 Pa. Code Chapter 78a. Order Granting Application for Relief, The Marcellus Shale Coal. v. Dep’t of Envtl. Prot., 573 MD 2016 (Pa. Commw. Ct., Jan. 6, 2021).

Specifically, there was agreement to make program improvements regarding onsite processing of waste, well development impoundments, centralized impoundments, well site restoration, spill remediation and waste reporting. The timeline for implementation of these program improvements is generally between “as soon as possible” and 12 months from the date the court dismissed certain counts in the lawsuit (i.e., January 6, 2021). Specifically, the parties submitted the proposed partial settlement on December 8, 2020, which relates to Counts III – VIII of MSC’s petition. Stipulation for Settlement, MSC. v. DEP., 573 MD 2016 (Pa. Commw. Ct., Dec. 8, 2020). The entirety of Count I, pertaining to public resources, and portions of Count II, pertaining to the area of review, survive the partial settlement and will continue to work through the litigation process. See Petition for Review, MSC. v. DEP., 573 MD 2016 (Pa. Commw. Ct., Oct. 13, 2016).

DEP started the process of updating its oil and gas regulations in 2011. In 2014, the regulations known as 25 Pa. Code Chapter 78 were split into two sections with Chapter 78 addressing conventional oil and gas drilling operations and Chapter 78a pertaining to unconventional oil and gas drilling, particularly drilling in the Marcellus Shale formation. The legislature and Governor Wolf eliminated the proposed rule changes to Chapter 78 for conventional well drilling in June of 2016. On October 8, 2016, the EQB promulgated the regulations relating to unconventional drilling operations under 25 Pa. Code Chapter 78a by publication in the Pennsylvania Bulletin. 46 Pa.B. 6431.

The MSC immediately commenced the current litigation against DEP and EQB filing its petition on October 13, 2016, under the Commonwealth Court’s original jurisdiction in the nature of a complaint seeking declaratory and injunctive relief challenging the validity and enforcement of the new regulations for unconventional drilling operations under Chapter 78a. See Petition. The Commonwealth Court, with subsequent affirmation from the Pennsylvania Supreme Court, granted the request for injunctive relief regarding centralized impoundments, public resources, and well operators’ area of review obligations. MSC. v. DEP., 646 Pa. 482, 185 A.3d 985 (2018).

Settlement

The partial settlement focuses on program enhancements in the areas of onsite processing, well development impoundments, centralized impoundments, well site restoration, spill remediation and waste reporting. Partial Settlement at 5 – 15. Over the course of the next 12 months, DEP is required to update its forms and FAQs with regard to these areas. Id. The Partial Settlement details the specific forms and FAQs that are required to be updated. Id. For example, DEP will be required to include the following FAQ which would be applicable in the event of a spill, subsequent remediation by the operator within 90 days, and submission of an appropriate final report demonstrating attainment of the applicable standard:

Question: Will public notice be required?

Answer: Public notification to the municipality and the public via the newspaper notice, and publication in the Pennsylvania Bulletin are not required for background or Statewide health standard remediations if the final report demonstrating attainment of the standard is submitted within 90 days of the release.

Id. at 13 – 14. Further, the interpretations expressed within the updated forms and FAQs will “provide a framework within which the [DEP] will exercise administrative discretion in the future,” although DEP “reserves the discretion to deviate from the interpretations if circumstances warrant.” Id. at 5. DEP must also provide industry training relating to the updated forms and FAQs. In order to promote an orderly transition, certain compliance deadlines relating to centralized impoundments were also extended by six months and three years. Specifically, the regulation with the extended deadlines would read:

(a) An operator using a centralized impoundment as of October 8, 2016, shall close the centralized impoundment in accordance with this section or obtain a permit in accordance with Subpart D, Article IX (relating to residual waste management). The closure plan shall be submitted electronically to the Department through its web site for review and approval no later than [April 8, 2017 now extended six months to June 7, 2021]. The operator shall properly close the centralized impoundment in accordance with the approved plan or obtain a permit in accordance with Subpart D, Article IX no later than [October 8, 2019 now extended 3 years to January 8, 2024]. 25 Pa. Code § 78a.59c.

Finally, with regard to spill remediation, DEP will update its compliance database to show when multiple citations are the result of one incident.

Conclusion

By entering into the partial settlement, DEP and EQB sought to “clarify existing statutory regulatory requirements in its forms and other documents as well as to review its efficiency and consistency in implementing these existing statutory and regulatory requirements.” Id. at 2. The MSC entered into the partial settlement in order to provide “clarity and consistency” and ensure “the development of natural gas resources in the Commonwealth provides effective protection of the environment, health, safety and well-being of the communities in which its members operate.” Id. at 2-3. Operators of unconventional wells may wish to closely monitor these regulatory changes to determine the impact on their operations.

These materials are public information and have been prepared solely for educational purposes. These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the authors and Steptoe & Johnson PLLC cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or Steptoe & Johnson PLLC. While every attempt was made to ensure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.

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