The Pittsburgh Post-Gazette reports that Pennsylvania Governor Tom Corbett has requested that oil and gas operators continue to help protect the rivers, streams and wetlands by adhering to environmental standards, including setback provisions, that were recently struck down by the Pennsylvania Supreme Court. According to Governor Corbett’s press release, the setback provisions had required a minimum of 300 feet between an unconventional oil or gas well bore and a stream, spring, body of water or wetland (or 100 feet for a conventional well). The distance provisions could only be waived by the Department of Environmental Protection upon satisfactory demonstration of additional protective measures taken by an operator to ensure that water quality was fully protected. The Marcellus Shale Coalition, the Associated Petroleum Industries of Pennsylvania and the Pennsylvania Independent Oil and Gas Association have indicated that they will comply with Governor Corbett’s request.
As reported in December, the Pennsylvania Supreme Court on December 19, 2013 invalidated portions of Act 13, including provisions limiting local government control and provisions regarding setbacks from the waters of the Commonwealth, pursuant to Article 1, Section 27 of the Pennsylvania Constitution.
However, the Pennsylvania Office of General Counsel (OGC) today filed an Application for Reconsideration requesting that the Pennsylvania Supreme Court remand the case to the Commonwealth Court so that a hearing can be held to create a factual record because the Supreme Court’s decision relied upon broad factual findings that were not of record before any court. Second, the OGC requested that the Supreme Court remand to the Commonwealth Court the issues related to setbacks from waters of the Commonwealth.
The Pennsylvania Supreme Court has ruled that several critical provisions of Act 13, the General Assembly’s 2012 comprehensive update to the former Oil and Gas Act, are unconstitutional. In addition to invalidating a key section of Act 13 placing limits on the regulatory authority of local governments, the Court’s ruling also struck down a number of the legislation’s well location restrictions administered by the Department of Environmental Protection (DEP).
The Commonwealth Court, in a 4-3 decision, had declared the limits on the authority of local governments in Section 3304 unconstitutional on the grounds that they violated substantive due process, holding that it allowed incompatible uses in zoning districts, was inconsistent with municipal comprehensive plans, did not protect the interests of neighboring property owners, altered the character of the neighborhood, and made irrational classifications. The Supreme Court affirmed, albeit on different grounds. The majority opinion held that the limits on local governments violated Article 1, Section 27 of the Pennsylvania Constitution, commonly known as the “Environmental Rights Amendment.” The Supreme Court also invalidated Section 3303 of Act 13, which provided that “environmental acts” are of statewide concern and preempt local regulation of oil and gas operations regulated by such acts. Sections 3305 through 3309 were enjoined to the extent that they enforced any section of Act 13 found to be invalid.
Additionally, the Commonwealth Court held Section 3215(b)(4) to be null and void because it gave the DEP insufficient guidance to waive setback requirements and allowed the DEP to make legislative policy judgment. Upon review, the Supreme Court affirmed. However, the Supreme Court held that all of Section 3215(b), including the setbacks from waters of the Commonwealth, is invalid because the waiver provision was not severable from the remainder of that section. The implications of this are unclear, as the DEP and well permit applicants now have no defined setbacks from surface waters or wetlands under Act 13 or any other statute. The Supreme Court also found that Section 3215(d), which allowed the DEP to consider comments from municipalities in its permitting decisions, were invalid and that Sections 3215(c) and (d) are invalid to the extent that they enforce Sections 3215(b) and (d).
For a more in-depth analysis, see Babst Calland’s recent Administrative Watch.
On December 12, 2013, several Pennsylvania state representatives announced their plan to introduce a bill creating a severance tax on unconventional natural gas extraction. The proposed tax, which would replace Act 13’s existing impact fee, would be 4.9% of the value of natural gas sold from an unconventional well. Of the proceeds, 40% would be distributed to the impacted municipalities, and the remaining 60% would fund various statewide programs such as basic education (40%), the Growing Greener environmental stewardship fund (10%), investment in public lands (10%), programs for adults with special needs (8%), drug and alcohol programs (8%), the human services development fund (5%), behavioral health programs (5%), solar energy-Pennsylvania Sunshine Program (4%), the Homeowner’s Emergency Mortgage Assistance Program (3%), rape and domestic violence programs (2%), industry partnerships (3%), and veterans’ homes (2%). The sponsors of the proposal include Representatives DiGirolamo, Murt, DeLissio, and Readshaw.
On October 23rd, the Middle District of Pennsylvania dismissed Dr. Alfonso Rodriguez’s complaint challenging Act 13’s so-called “Medical Gag Act.” If, during the course of treating a patient, a health professional deems it necessary for an operator to disclose the exact mixture of hydraulic fracturing fluids, Act 13 requires the operator to disclose the information upon a verbal acknowledgement by the health professional that the information will not be used for purposes other than the health needs asserted and must be maintained confidentially.
Dr. Rodriguez is a nephrologist who allegedly treats patients who have been directly exposed to high volume hydraulic fracturing fluid. In his complaint, he alleged that Act 13 violates the First and Fourteenth Amendments of the United States Constitution, and that it requires him to violate his ethical obligations as a physician. The Court dismissed his complaint on the grounds that Dr. Rodriguez never suffered an actual injury and thus, did not have standing. The Court held that the alleged injury was “too conjectural to satisfy the injury in fact requirement of Article III standing” which requires an alleged injury to be “distinct and palpable” rather than “abstract.” In other words, Dr. Rodriguez does not have standing to sue because he has never been in a position “where he was required to agree to any sort of confidentiality agreement under the act.” His alleged injuries are hypothetical.
The Pennsylvania Public Utility Commission (PUC) filed two applications this week with the Pennsylvania Supreme Court in cases related to Act 13. In the appeal related to the constitutionality of Act 13 the PUC filed an Application to Resubmit Case, which requests that the case be resubmitted, at minimum, on briefs to the full Supreme Court and, if the court chooses, that additional oral argument be held. The PUC stated that the Application is appropriate because the pending issues are of broad concern to the Commonwealth and its municipalities and because Section 3304 of Act 13 was declared unconstitutional by a fiercely divided Commonwealth Court. Justice Correale Stevens was recently sworn in to replace Justice Joan Orie Melvin, who resigned from the Supreme Court in May following criminal convictions. While Justice Stevens brings the Supreme Court up to seven members, the Supreme Court issued a statement that Justice Stevens would not participate in deciding any case on which he had not heard oral argument. This Application is clearly an attempt for the PUC to get the case before the full Supreme Court.
Also of note is an Application for Reconsideration filed by the PUC in an appeal related to an order of the Commonwealth Court enjoining the PUC from reviewing municipal ordinances. On October 25, 2012, Senior Judge Keith B. Quigley issued an order enjoining enforcement of Section 3305 of Act 13 because it “is a vehicle by which Section 3304 is enforced.” The PUC appealed that order to the Supreme Court. On July 25, 2013, the Supreme Court quashed the PUC’s Notice of Appeal. The PUC requests that the Supreme Court grant reconsideration of the July 25th order quashing the Notice of Appeal before the entire Supreme Court for the following reasons: the October 25, 2012 order of Judge Quigley was subject to appeal, and it was incorrect to quash the Notice of Appeal; if the Commonwealth Court’s decision is upheld, it is unclear if that decision would resolve all issues regarding Act 13 because Judge Quigley’s order enjoined enforcement of Act 13 Sections 3301-3301 and 3305, even though Section 3301-3305 were never challenged and Section 3305 was determined to be constitutional; the Supreme Court should clarify explicitly why the Notice of Appeal was quashed; the July 25th order is inconsistent with other Supreme Court decisions; and the pending case regarding the overall constitutionality of Act 13 may not dispose of all issues.
Newly-appointed Pennsylvania Supreme Court Justice Correale Stevens will not participate in ruling on the legality of Act 13 or on any other case that has gone through oral argument. With only six justices participating in the decision, the Act 13 decision could end up in a tie vote that would effectively affirm the Commonwealth Court’s July 2012 opinion.
Natural gas producers will pay $202.47 million in Marcellus Shale impact fees from 2012 activity, according to a June 13, 2013 Pennsylvania PUC press release. The Pittsburgh Post-Gazette reports that the number is down less than 1 percent from the $204.2 million collected from 2011 activity. Bradford County will collect the largest portion of the fees ($7.3 million) and Washington County will collect the second largest ($4.7 million). Chesapeake Appalachia paid the largest portion of the fees ($27.4 million), followed by Range Resources (nearly $24 million). The 2012 fees will be allocated as follows: county and local governments directly affected by drilling will receive $102.68 million, state agencies impacted by drilling will receive $28 million, and the Marcellus Legacy Fund will receive $71.79 million. Following the PUC’s release, Marcellus Shale Coalition CEO Kathryn Z. Klaber issued a press release, stating that the “[w]hile the impact fee represents a new and substantial revenue stream for local and state government agencies, the natural gas industry has also generated more than $1.8 billion in tax revenues since 2006 and has invested more than $500 million in road and infrastructure improvements, while contributing hundreds of thousands of dollars for emergency response training and other community-based programing.”
By April 15th, local governments in Pennsylvania were required to complete paperwork related to how the shale gas well fee money was spent in 2012. However, millions of the money distributed under Act 13 remains unaccounted for because local governments were confused about how the forms were to be completed, NPR reports. A Public Utility Commission (PUC) spokesperson pointed out that it may be hard to track down and verify all the information, because under the law, the PUC does not have the authority to audit local governments. Next year, the PUC plans to switch from paper to electronic reporting to improve the reporting process.
On March 6, 2013, the Allegheny County Health Department unanimously passed a recommendation that would require unconventional shale gas operators to notify the Department 24 hours prior to drilling a well, WTAE-TV reports. As previously reported, the Department has been contemplating the implementation of notification requirements for unconventional shale gas operators for some time. The 24-hour notification requirement is consistent with the many notification requirements for operators to make to the Pennsylvania Department of Environmental Protection in compliance with Act 13 of 2012. The recommendation must still be approved by both the Allegheny County Council and county executive Rich Fitzgerald before becoming effective.
On February 25, 2013, the Commonwealth Financing Authority (CFA) began accepting applications for the following five programs established and supported by the Act 13 Marcellus Legacy Fund:
1. Abandoned Mine Drainage and Abatement and Treatment Program
2. Baseline Water Quality Data Program
3. Greenways, Trails, and Recreation Program
4. Orphan or Abandoned Well Plugging Program
5. Watershed Restoration and Protection Program
These programs are jointly administered by the Department of Community and Economic Development, the Department of Conservation and Natural Resources, and the Department of Environmental Protection. The total funding available for these programs is $14 million dollars, which comes directly from impact fee payments made last year by natural gas operators. Applications are currently being accepted through July 31, 2013, and will be considered at CFA’s Nov. 13, 2013, meeting.
On February 12, 2013, the Pennsylvania Department of Environmental Protection released its 2011 emissions data from the unconventional drilling industry, which accounts for emissions from natural gas production and processing facilities from “57 operators of unconventional wells and 40 mid-stream operators of 150 compressor stations.” In its Fact Sheet, the DEP notes that there were significant reductions for a number of air contaminants from 2008 (the last year that the DEP completed an emissions inventory) to 2011, including nitrogen oxides and sulfur oxides. In a press release, the Marcellus Shale Coalition noted that according to this 2011 air emissions data, “Marcellus Shale development accounts for less than 3 percent of nitrogen oxide (NOx) and 1 percent of the total volatile organic compounds (VOC) emitted each year in the Commonwealth.” Pursuant to the Oil and Gas Act of 2012 (Act 13), owners and operators of these point sources must report these air emissions annually to the DEP by March 1 each year. 2012 air emission data is due to the PADEP on March 1, 2013.
Pennsylvania Department of Environmental Protection Secretary Michael Krancer took issue with a recent claim that the state undercounted unconventional wells for impact-fee purposes in a letter to the author of the study, the Post-Gazette reports. In the letter to Joel Gehman, Secretary Krancer argued that the study’s authors “misunderstood or misrepresented” the provisions of Act 13. The report, published earlier this month, contended that Pennsylvania had undercounted the number of wells subject to impact fees by 15,000 to 25,000.
The Pittsburgh Tribune-Review reports that Allegheny County Health Department Air Quality Program subcommittee may conduct a preliminary vote today on whether to require developers to notify them at certain stages of drilling to allow the county to conduct air monitoring. The Pennsylvania Department of Environmental Protection and the Pennsylvania Independent Oil and Gas Association both submitted comments to the proposal and questioned the Health Department’s plan. Although Allegheny County has special jurisdiction over air quality within its limits, but it is uncertain whether it would allow the county to regulate drilling activities in light of Act 13, which the state enacted last year.
UPDATE: The Tribune-Review reports that the Air Quality Program Regulation subcommittee gave preliminary approval to the proposed rules yesterday.
Pennsylvania state Senator Daylin Leach (D-Montgomery County) recently circulated a memorandum to state senators stating that he would re-introduce legislation in the 2013-2014 Regular Session to amend portions of Act 13 of 2012 that relate to disclosure of confidential hydraulic fracturing constituents to health professionals. Act 13 contains provisions regarding when chemicals used in hydraulic fracturing and considered proprietary by an operator may be disclosed to health professionals and limiting the disclosures. In his memorandum, Senator Leach stated that the provisions of Act 13 on this issue are “poorly drafted” and that his bill would provide “clarifying language” regarding circumstances when such information can be requested and disclosed by a health professional.