The Foundation Mineral and Energy Law Newsletter
Pennsylvania- Oil & Gas
(By Joseph K. Reinhart, Sean M. McGovern, Matthew C. Wood and Gina N. Falaschi)
On February 23, 2022, the Murrysville Watch Committee (MWC) petitioned the Supreme Court of Pennsylvania to allow an appeal of its unsuccessful challenge of the Municipality of Murrysville’s Oil and Gas Ordinance (Ordinance), which authorized oil and gas wells as a conditional use in Murrysville’s Oil and Gas Recovery Overlay District (Overlay District), including parts of the rural residential zoning district. As adopted, the Ordinance’s geographic and other limitations (e.g., required setbacks from well pads) restricted unconventional oil and gas development to only 5% of Murrysville’s land mass. MWC originally filed a validity challenge to the Ordinance in October 2018 before the Murrysville Zoning Hearing Board (Board), claiming, among other things, violations of due process, equal protection, and the Environmental Rights Amendment (ERA) to the Pennsylvania Constitution, Pa. Const. art. I, § 27. Broadly, MWC contended that unconventional oil and gas drilling is an industrial activity incompatible with residential zoning districts. The Board held multiple hearings, denied MWC’s challenge, and issued 167 findings of fact related to its decision. Without presenting any additional evidence, MWC appealed the Board’s decision to the Westmoreland County Court of Common Pleas, which affirmed the Board’s decision, noting that the record showed that MWC provided no evidence to differentiate the Ordinance from other, similar ordinances upheld on appeal, the precedential application of which foreclosed MWC’s challenges. MWC subsequently appealed that decision to the Commonwealth Court of Pennsylvania.
On January 24, 2022, the commonwealth court affirmed the trial court’s and Board’s decisions. Murrysville Watch Comm. v. Municipality of Murrysville Zoning Hearing Bd., No. 579 C.D. 2020 (Pa. Commw. Ct. Jan. 24, 2022). In doing so, the court relied on its prior decisions Frederick v. Allegheny Township Zoning Hearing Board, 196 A.3d 677 (Pa. Commw. Ct. 2018), and Protect PT v. Penn Township Zoning Hearing Board, 220 A.3d 1174 (Pa. Commw. Ct. 2019). In Frederick, the appellees claimed that an Allegheny Township, Westmoreland County, zoning ordinance that allowed oil and gas wells as a use by right in all zoning districts, subject to additional limitations, violated the ERA. The local zoning board and trial court both rejected these challenges and the commonwealth court affirmed, defining the appropriate standard for determining an ERA violation as whether (1) the values in the first clause of the ERA are implicated and (2) the governmental action unreasonably impairs those values. Murrysville, slip op. at 23–24; see Vol. XXXV, No. 4 (2018) of this Newsletter. Likewise, in Protect PT, the commonwealth court affirmed the validity of the Penn Township, Westmoreland County, zoning ordinance, which also faced claims of ERA violations. That ordinance created an overlay district authorizing natural gas operations by special exception, subject to certain limitations. The court rejected the challengers’ arguments of actual risk to the environment or health of township residents and found that the ordinance did not violate the ERA or due process. Murrysville, slip op. at 27–28.
Applying its analysis of these cases, the commonwealth court also found that the appellants failed to provide any evidence that unconventional oil and gas development, as contemplated under the Ordinance, was incompatible in the authorized residential zoning districts. On the contrary, the court concluded that the municipality had appropriately balanced protecting property owners in the Overlay District with economic development considerations and rejected the appellants’ claims that the Ordinance violated citizens’ due process rights. Id. at 21. For similar reasons, the court found that MWC had not shown that the Ordinance “unreasonably impaired” citizens’ rights under the ERA. Id. at 28. Finally, the court rejected the appellants’ claim that the Overlay District violated citizens’ equal protection rights under article III, section 32 of the Pennsylvania Constitution because it treated rural residential districts unequally. Id. at 35. The court reasoned that by their nature, overlay districts are subject to available land and population density, which municipalities can account for in their development. Id. The court also rejected MWC’s remaining claims, as further detailed in the opinion.
On February 23, 2022, MWC filed its petition to the Supreme Court of Pennsylvania to allow it to appeal the commonwealth court’s decision. At the time of this report, the respondents had filed their answers to MWC’s petition. See Murrysville Watch Comm. v. Municipality of Murrysville Zoning Hearing Bd., No. 56 WAL 2022 (Pa. filed Feb. 23, 2022).
Editor’s Note: The reporters’ law firm represents Olympus Energy LLC, an intervenor in the litigation with a pending unconventional gas well in Murrysville.
Pennsylvania Drafting Updates to Conventional Oil and Gas Regulations
The Pennsylvania Department of Environmental Protection (PADEP) is proceeding with two updates amending 25 Pa. Code ch. 78 (conventional oil and gas well regulations). See DEP Regulatory Update (Apr. 23, 2022). The final chapter 78 rulemaking approved by the Environmental Quality Board (EQB) and Independent Regulatory Review Commission (IRRC) in 2016 was used as the basis for the proposed updates. See Meeting Minutes, Oil & Gas Technical Advisory Board (TAB) (Sept. 17, 2020).
The first draft update, “Environmental Protection Performance Standards for Conventional Oil and Gas Operators” (#7-539), proposes updates to well reporting requirements and protection and replacement of public or private water supply regulations to reflect Act 13 of 2012, bonding requirements to reflect Act 57 of 1997, and updates to assessment and inactive status designation regulations to reflect current PADEP practice. Other surface and non-surface activity updates address permit issuance, underground injection well permitting, impoundments and borrow pits, erosion and sedimentation and site restoration requirements, and mechanical integrity testing and reporting. See TAB Meeting (Jan. 14, 2022); Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021). This update was most recently presented to the Pennsylvania Grade Crude Development Advisory Council (CDAC) on December 16, 2021, and TAB on May 5, 2021.
The second update, “Waste Management and Related Issues at Conventional Oil and Gas Well Sites” (#7-540), addresses proper handling, storage, processing, and disposal of drill cuttings and waste water generated by conventional oil and gas operations. Area of review requirements pertaining to preparedness, prevention, and contingency plans, along with reporting and remediation of spills and releases at conventional oil and gas well sites, would be significantly updated by this proposed update. This update was last presented to CDAC on August 19, 2021, and to TAB on September 9, 2021. Of note, the practice of spreading brine for dust suppression and deicing roadways, on which PADEP’s Office of Oil and Gas Management imposed a moratorium in 2018 (but is authorized under PADEP’s Waste Management Program in certain situations), is not addressed in this update. See Proposed Chapter 78 Annex A Rulemaking (Aug. 19, 2021); Meeting Minutes, TAB (Sept. 9, 2021). PADEP, however, is currently reviewing a Penn State study on the environmental impact of spreading brine on roadways and advised TAB that the report will be released no later than August 2022, and indicated to TAB that the findings of the Penn State study will likely have a broad impact on the practice of brine spreading on roadways. TAB Meeting (Apr. 25, 2022). PADEP’s review of the study coincides with the Pennsylvania Office of the Attorney General’s apparent investigation of alleged illegal disposal, under the residual waste regulations, of brine produced from conventional oil and gas operations on roadways. See Meeting Comments, CDAC (Apr. 21, 2022).
PADEP advised TAB on April 25, 2022, that it will present the first draft update to the EQB for consideration and public comment during the second quarter of 2022. PADEP anticipates presenting the second update to EQB for consideration and public comment the following quarter. See 52 Pa. Bull. 1930 (Mar. 26, 2022).
Pennsylvania Allocated $104 Million for Orphaned and Abandoned Well Cleanup
On January 31, 2022, Pennsylvania Governor Tom Wolf announced Pennsylvania was allocated a total of $104 million in Phase I funding to support the cleanup of orphaned and abandoned oil and natural gas wells throughout the state. See Press Release, Gov. Tom Wolf, “Gov. Wolf Announces $104 Million from President Biden’s Bipartisan Infrastructure Law to Support Orphaned, Abandoned Well Cleanup in PA” (Jan. 31, 2022). The $104 million allocation is based on Pennsylvania’s notice of intent (NOI) to the U.S. Department of the Interior (DOI) indicating the commonwealth’s interest in applying for federal grant money for plugging orphaned wells and remediating orphaned well sites. See Press Release, DOI, “Biden Administration Announces $1.15 Billion for States to Create Jobs Cleaning Up Orphaned Oil and Gas Wells” (Jan. 31, 2022). The grants are part of $1.15 billion the federal government has allocated to states under the DOI with specific goals of reducing methane emissions and other pollution, and creating jobs. See Fact Sheet, White House, “Biden Administration Tackles Super-Polluting Methane Emissions” (Jan. 31, 2022); Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429 (2021). In the future, formula grants will allow the commonwealth to access more than $330 million in additional funding for the same purposes. See News Release, Senator Bob Casey, “Pennsylvania to Receive $104 Million to Clean Up Orphaned Oil and Gas Wells” (Jan. 31, 2022).
The Pennsylvania Oil and Gas Act defines an “abandoned well” as a well that (1) has not been used to produce, extract, or inject any gas, petroleum, or other liquid within the preceding 12 months; (2) for which the equipment necessary for production, extraction, or injection has been removed; or (3) is considered dry and not equipped for production within 60 days after drilling, re-drilling, or deepening. 58 Pa. Cons. Stat. Ann. § 3203. An “orphan well” is a well “abandoned prior to April 18, 1985, that has not been affected or operated by the present owner or operator and from which the present owner, operator or lessee has received no economic benefit other than as a landowner or recipient of a royalty interest from the well.” Id. The Pennsylvania Department of Environmental Protection (PADEP) estimates there are between 100,000 and 560,000 wells unaccounted for in state records, a significant number of which may still pose a threat to human health and the environment. See Fact Sheet, PADEP, “Abandoned and Orphan Oil and Gas Wells and the Well Plugging Program” (rev. Apr. 2021).
The funding is allocated in two parts. Phase I, with an initial grant of $25 million, will be used by PADEP to plug and remediate high-priority wells that pose a threat to health and the environment, and document how many orphaned and abandoned wells exist throughout the commonwealth that need to be plugged. See Meeting, Oil and Gas Technical Advisory Board (TAB) (Jan. 14, 2022). At the April 25, 2022, TAB meeting, PADEP stated that it is developing plugging projects for the most efficient expenditure of funds. For example, PADEP said that it intends to include lower priority orphaned wells in the vicinity of high-priority wells, targeting 8 to 10 wells per contract. Per PADEP, doing so will allow for remediating the largest number of orphaned wells possible in the fewest number of trips. Meeting, TAB (Apr. 25, 2022). The second allocation of Phase I funding to the commonwealth, totaling $79 million, was awarded in accordance with Phase I formula grant eligibility requirements based on job loss in the oil and gas industry during the COVID-19 pandemic, the number of documented orphaned wells, and the estimated cost to plug and remediate orphaned wells. See DOI Press Release, supra.
On April 12, 2022, DOI issued guidance to states outlining, among other things, the grant application process, uses for initial grant funding, and recommended best practices for establishing, conducting, and reporting plugging, remediating, and reclaiming activities. See Fact Sheet, DOI, “Bipartisan Infrastructure Law Sec. 40601 Orphaned Well Program—FY 2022 State Initial Grant Guidance” (Apr. 2022). At the January 14, 2022, and April 25, 2022, TAB meetings, PADEP explained that the commonwealth must submit an application for the previously awarded initial grant funding no later than May 13, 2022. The application must include certification that (1) there are orphaned wells in the commonwealth, (2) the commonwealth is a member of the Interstate Oil and Gas Compact Commission, and (3) 90% of the funds will be allotted to plugging contracts or grants within 90 days of receiving federal funding. See also id. at 9. DOI will disperse funds within 30 days of submission of certification. Any funds that remain “unobligated,” i.e., any funding that, on the date one year from the date of receipt, is not subject to a definite commitment for an immediate or future payment for goods or services ordered or received, must be returned to DOI. Id. at 5–6.
PADEP Withdraws Final Rulemaking for Control of VOC Emissions from Existing Oil and Natural Gas Resources
On March 15, 2022, the Environmental Quality Board approved final regulations establishing reasonably available control technology (RACT) requirements for volatile organic compounds (VOCs) and other pollutants from existing oil and natural gas production facilities, compressor stations, processing plants, and transmission stations. The regulation will be submitted to the U.S. Environmental Protection Agency (EPA) for approval as part of the commonwealth’s state implementation plan under the Clean Air Act. As reported in more detail in Vol. 39, No. 1 (2022) and Vol. XXXVII, No. 3 (2020) of this Newsletter, under the new regulation, oil and natural gas operators with facilities that exceed VOC emission thresholds would be required to do more frequent leak detection and repair monitoring on certain equipment at their facilities.
The rulemaking had advanced to the Pennsylvania House and Senate Environmental Resources and Energy Committees and the Independent Regulatory Review Commission (IRRC) for consideration. After the House Environmental Resources and Energy Committee issued a disapproval letter for the rulemaking on April 26, 2022, however, the Pennsylvania Department of Environmental Protection (PADEP) withdrew the rule from consideration by the IRRC to reevaluate the rulemaking. The Committee’s disapproval letter alleges that PADEP failed to comply with Act 52 of 2016, which requires that any rulemaking concerning conventional oil and gas wells be undertaken separately and independently from those concerning unconventional oil and gas wells or other subjects. PADEP has stated that it needs to finalize the rule by June 16, 2022, to avoid sanctions by the EPA under the Clean Air Act. Documents related to the rule can be found on PADEP’s website at https://www.dep.pa.gov/ Pub-licParticipation/EnvironmentalQuality/Pages/2022-Meetings. aspx.
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