Oil and Gas

What Oil and Gas Companies need to know about State and Local Jurisdictional Conflicts in Oil and Gas Regulation

Oil and gas producers should be aware of new regulatory developments in both the Eastern Marcellus and Utica Shales states as well as the Western states with development in the Niobrara and Bakken.

In Colorado, public concern over environmental impacts of drilling and hydraulic fracturing, as well as concerns about set backs from homes and schools in urban areas are prompting jurisdictional challenges from county and local governments to statewide regulations.  The law permits local governments to promulgate additional zoning regulations and other requirements, so long as they do not result in “operational conflicts” with regulations of the Colorado Oil and Gas Conservation Commission.  Some counties have long-standing zoning and permitting regulations; other counties and municipalities overlying the Niobrara play are responding to concerns with new regulations and moratoriums.   The Colorado General Assembly is attempting to prevent a “patchwork” of regulations encumbering oil and gas production by clarifying the preemptive effect of the COGCC statewide regulations with proposed legislation, Senate Bill 88.  Companies doing business in Colorado are advised to be alert to the outcome of this legislation, and to seek counsel for strategic and legal responses to proposed regulations and moratoriums proposed by local governments. 

By contrast, in Pennsylvania, the permissible reach of municipal ordinances relating to oil and gas operations is covered by sweeping legislation recently adopted by its Legislature and signed by Governor Corbett (HB1950).    The legislation supersedes local ordinances purporting to regulate oil and gas operations, except with respect to zoning ordinances adopted pursuant to the Municipalities Planning Code and the Flood Plain Management Act, and preempts local ordinances from regulating environmental or technical aspects of oil and gas operations.  It requires that all local ordinances “allow for the reasonable development of oil and gas resources.”  Well sites can be prohibited or limited in residential districts if the wellhead cannot be placed at least 500 feet from a building where individuals live or customarily work. 

Of particular interest is a fee-shifting provision.   A party aggrieved by the enactment of a violating local ordinance may either proceed before the PA Utilities Commission or go straight to Commonwealth Court (typically the intermediate appellate court that hears appeals involving government entities but in this case is given trial court responsibilities.  The Commonwealth Court can order attorneys’ fees and costs to the prevailing party if the local government enacted or enforced a local ordinance with “willful or reckless disregard” of the law, or conversely the plaintiff’s action was frivolous or without substantial justification.  Local governments with existing ordinances relating to oil and gas operations have 120 days from the effective date to review and amend their ordinance in order to comply. 

In West Virginia, we successfully represented a landowner on a challenge to a municipal ordinance of the City of Morgantown that prohibited the use of horizontal drilling with fracking methods within the city or within one mile of the city limits.  The Circuit Court of Monongalia County recently found that the West Virginia Oil and Gas Act provided the “exclusive control of this area of law” and preempted any local ban on fracking or attempt to regulate oil and gas development or production.  No appeal was taken from this decision.  Since this decision, no West Virginia municipality has enacted any ordinance attempting to regulate oil and gas development.  

Ohio has statewide legislation that largely preempts additional local government control.  However, companies drilling in those states should be aware of proposed regulations for hydraulic fracturing and other statewide permitting and monitoring requirements.

Reminder: Oil & Gas Production Facilities Must Submit Annual Tier II Report and Fees Before March 1, 2012

Requirement:

Pursuant to SARA (Superfund Amendments and Reauthorization Act), all oil/gas production facilities in West Virginia that stored more than 10,000 pounds (roughly 33 barrels) of crude oil or other liquid hydrocarbons at any one time last year must submit a Tier II report for that facility.  An oil/gas production facility is defined as:

A storage tank and its well or wells, all of which are located on the same site or an adjacent site through direct conveyance of piping or tubing.  A storage facility may also be the site of several wells and a single storage tank or multiple storage tanks.  Each storage facility will be considered a separate facility if they are not connected to one another by piping or tubing.

Location of Tier II Report Forms:

Facility owners and operators can find detailed instructions for completing Tier II reports, as well as forms and fee worksheets, at www.dhsem.wv.gov.   In the past, WVSERC mailed Tier II report packets to all known facility owners and operators.  This year, to reduce costs, WVSERC will be mailing fewer packets.  Therefore, it is advisable not to depend on WVSERC for your Tier II packet this year.

Reports for Multiple Facilities:

An owner or operator of multiple facilities can file a single Tier II report (generic) for similar multiple facilities as long as the maximum and daily amounts of the crude oil at the facilities are within the same range.  The required information for ALL facilities can be attached to one completed Tier II report and submitted as required.

How to Submit Forms:

WVSERC is requesting that facilities submit their Tier II reports electronically by CD or email.  The program for doing so may be downloaded at www.dhsem.wv.govor www.epa.gov. It is important to note that electronic submissions must contain a letter with an original signature and certification statement.  For non-electronic submission, all reports and fees must be submitted simultaneously or they will be returned by WVSERC. 

Tier II forms must be submitted to three (3) different locations:

1) West Virginia State Emergency Response Commission (WVSERC)
2) Local Emergency Planning Committee (LEPC) in which the facility is located
3) Local fire department with jurisdiction over the facility

Further Questions:

For questions or assistance filling out the Tier II reports, Laverne Stout can be reached at (304)-558-5380.

Pennsylvania DEP Issues Revised Erosion and Sediment Control General Permit – Accepting Comments

In response to a settlement reached nearly two years ago between the Pennsylvania DEP and the Chesapeake Bay Foundation, Talisman Energy USA Inc., and Ultra Resources Inc., the DEP issued a revised version of its erosion and sediment control general permit for earth disturbance associated with oil and gas activities.  The DEP also issued supporting documents, including a draft permit application and policy explaining the permit requirements.

Some of the changes that will affect the permitting process and the industry include:

• Mandated protection of waterways and watersheds from sediment runoff during construction which disturbs more than five (5) acres over the life of an oil or gas project.
• Agency authority to revoke an applicant’s request for expedited permit review if the applicant routinely submits applications under the general permit that contain administrative and technical problems.
• No expedited review of applications for projects that (1) may discharge sediment and runoff to exceptional-value or high-quality watersheds, (2) have well pads that lie within the floodplains, would be located on contaminated lands.
• Expedited review process for complete and accurate applications will be decided within 14 days from submission.  Otherwise, the review will be completed within 60 days and the agency has the right to hold an application if it has administrative and technical problems.
• The draft policy provides operators with guidance for their obligation to implement best management practices for erosion and sediment control to restore and stabilize a well site within nine (9) months of completing a well.
• Upon submission of notice of intent to construct, operators must demonstrate that their post-construction stormwater management plans are consistent with county stormwater management requirements.

The DEP is accepting comments on the draft permit application and supporting documents until March 21, 2012.  To view the draft permit and related documents clink on the following link.

 http://www.elibrary.dep.state.pa.us/dsweb/View/Collection-10904

Governor Tomblin calls special session of the West Virginia Legislature regarding legislation on development of shale gas.

Governor Tomblin called a Special Session of the West Virginia Legislature beginning on December 11, 2011, to consider legislation regarding development of shale gas formations using horizontal wells and hydraulic fracturing techniques.  

Colorado To Adopt Regulations For Disclosure Of Hydraulic Fracturing Fluids And Chemicals

The Colorado Oil and Gas Conservation Commission (COGCC) will hold a rulemaking hearing in December to adopt state regulations for disclosure of hydraulic fracturing fluids and chemicals.  The Commission voted 5-3 to keep the hearing limited to proposed disclosure regulations, denying a request by representatives of the environmental community to open the rulemaking hearing to a broader array of revisions to the permitting regulations.  To date, disclosure of hydraulic fracturing fluid chemicals has been on a voluntary basis, with approximately 35% of the operators in Colorado participating in the FracFocus reporting system developed by the Interstate Oil and Gas Compact Commission (IOGCC) and the Ground Water Protection Council (GWPC).  In August, Governor Hickenlooper requested that the COGCC adopt a regulation making public disclosure of hydraulic fracturing chemicals mandatory.  The proposed regulation is likely to continue utilizing the FracFocus data base for reporting, along with reporting to the COGCC and incorporation of the data base into the COGCC website materials.  The proposed regulation is expected to also be consistent with the recent preliminary report of the Department of Energy Advisory Board which contains recommendations for “best  practices.”  Companies or industry groups are expected to raise concerns about protection of trade secrets and request revisions in the proposed regulations to ensure maintenance of confidentiality as to protected proprietary information.

This e-alert was prepared by Jackson Kelly Denver attorney, Martha “Marti” Phillips Whitmore. You may feel free to contact her at 303-390-0033 or mpwhitmore@jacksonkelly.comif you have any questions.

U.S. Army Corps of Engineers Issues Notice on Its Role in Oil & Gas Drilling Activities

The U.S. Army Corps of Engineers (the Corps) issued a public notice on October 5, 2011, regarding its regulatory role in oil and gas drilling activities.  The Corps advises that its Huntington District and Pittsburgh District offices have reviewed available information for oil and gas well permits issued by the West Virginia Department of Environmental Protection.  The Corps cautions that:  “many of these projects could include impacts to aquatic resources that would require authorization from the [Corps] prior to initiating work.”  In the notice, the Corps identifies the following examples of impacts to aquatic resources associated with oil and gas drilling activities that could require authorization from the Corps before initiating work:  utility line crossings; roadways construction; construction of new well pads; and/or water intakes in navigable waters.  The Corps encourages applicants for oil and gas well permits to contact the appropriate District office to discuss proposals for oil and gas drilling activities and potential permit requirements.  The notice identifies the counties and partial counties in West Virginia within the regulatory jurisdiction of each of the Huntington and Pittsburgh Districts and provides contact information for each.  For the text of the October 5, 2011, notice, click here.

This e-alert was authored by Gale Lea Rubrecht.  For more information on the author, click here.

EPA Proposes to Extend 2012 GHG Reporting Deadline for Oil & Natural Gas Systems

EPA recently published a proposed rule proposing a one-time extension of the 2012 reporting deadline for Petroleum and Natural Gas Systems (subpart W) and other facilities and suppliers subject to source categories for which data collection began January 1, 2011 (76 Fed. Reg. 47,392; August 4, 2011).   Specifically, EPA is proposing a 6-month extension from March 31, 2012 to September 28, 2012.  The proposed rule would also amend specific provisions in the Mandatory Greenhouse Gas Reporting Rule to correct certain technical and editorial errors that have been identified since promulgation and to clarify or propose amendments to certain provisions that have been the subject of questions from reporting entities.  Comments are due September 19, 2011.  For more information about the technical clarifications and amendments that EPA is proposing for subpart W, continue reading.

EPA Proposes to Extend 2012 GHG Reporting Deadline for Oil & Natural Gas Systems

EPA recently published a proposed rule proposing a one-time extension of the 2012 reporting deadline for Petroleum and Natural Gas Systems (subpart W) and other facilities and suppliers subject to source categories for which data collection began January 1, 2011 (76 Fed. Reg. 47,392; August 4, 2011).   Specifically, EPA is proposing a 6-month extension from March 31, 2012 to September 28, 2012.  The proposed rule would also amend specific provisions in the Mandatory Greenhouse Gas Reporting Rule to correct certain technical and editorial errors that have been identified since promulgation and to clarify or propose amendments to certain provisions that have been the subject of questions from reporting entities.  Comments are due September 19, 2011.  For more information about the technical clarifications and amendments that EPA is proposing for subpart W, continue reading.

• Definition of “Gas Well”:  EPA is proposing to amend the definition for “gas well” in 40 CFR 98.238. The definition of gas well that was finalized in the rule left open the question of whether or not gas wells that included any hydrocarbon condensate are also considered gas wells. The proposed amendment would clarify the definition for “gas well” by stating that it includes gas wells that also produce natural gas including condensate.
• Threshold Clarifications: EPA is proposing to clarify that throughput thresholds for the onshore natural gas processing industry segment, glycol dehydrators, and onshore production storage tanks be based on an annual average throughput. 
• Greenhouse Gases to Report: EPA is proposing to clarify that the greenhouse gases to be reported under the “natural gas processing industry segment” include nitrous oxide (N2O) emissions, and not just carbon dioxide (CO2) and (CH4) emissions. In addition, EPA is proposing to clarify that CO2 and CH4 emissions are to be reported from the natural gas distribution industry segment.
• Calculating Greenhouse Gas Emissions: EPA is proposing several clarifications, corrections, and amendments to the equations, methodological options, and calculation methods throughout 40 CFR 98.233.    While EPA verbally describes these changes in the proposed rule, these and other technical corrections can best be viewed and understood on EPA’s redline of the proposed 2011 Technical Corrections, Clarifying and Other Amendments to the Mandatory Reporting of Greenhouse Gases Rule.
• Emission Factor Tables: EPA is proposing to revise the emission factors for high bleed, low bleed, and intermittent bleed pneumatic devices, which were on a CH4 basis, to account for the total hydrocarbon basis. These proposed revisions would apply to Table W-3 and Table W-4.   
• Other Technical Corrections: EPA is proposing to clarify that only the number of work-overs with hydraulic fracturing that vent gas to the atmosphere or flare gas needs to be reported. EPA is also proposing to correct the density parameter in Equation W-36.

For additional information, see EPA’s Fact Sheet, Information Sheet, and Frequently Asked Questions. 

This e-alert was authored by Gale Lea Rubrecht, Jackson Kelly PLLC. For more information on the author, see here.

Court Overturns Morgantown Fracking Ordinance

On August 12, 2011, the Honorable Susan Tucker of the Circuit Court of Monongalia County entered an order invalidating the City of Morgantown’s municipal ordinance banning hydraulic fracturing within the city’s municipal limits and within an area one mile outside such limits.  In granting the summary judgment motions of Plaintiffs Northeast Natural Energy, LLC and Enrout Properties, LLC, Judge Tucker recognized West Virginia’s interest in oil and gas development and production throughout the State and found that W.Va. Code § 22-6, et seq., “provides for the exclusive control of this area of the law to be within the hands of the WVDEP.”  Furthermore, Judge Tucker found that “these regulations do not provide any exception or latitude to permit the City of Morgantown to impose a complete ban on fracking or to regulate oil and gas development and production.” 

As a result, Judge Tucker concluded that Morgantown’s ordinance was preempted, and therefore, invalid.  Plaintiff Enrout Properties, LLC was represented by Albert Sebok, Dan Stickler, and Parween Mascari of Jackson Kelly PLLC.  

To review a complete copy of Jude Tucker’s Order, please click here.

West Virginia Office of Oil and Gas Issues Memorandum Setting Forth New Obligations

New requirements affect how an operator files a completion report, or WR-35 Form. The revised Form WR-35, available on the agency’s website, must be filed separately with both the Office of Oil and Gas (“OOG”) and the West Virginia Geological and Economic Survey (“GES”).  The new completion report requires that information be reported regarding “[t]he character, depth and thickness of geological formations encountered, including fresh water, coal seams, mineral beds, brine and oil and gas bearing formation[s].”