The Pittsburgh Business Times reported that Shell has drilled two producing wells in the Utica Shale formation in Tioga County, Pennsylvania. Shell credited its success to “solid technical work in [its] onshore business.” The two wells are many miles away from the majority of existing Utica wells and illustrate the potential of the Appalachian basin. The wells have demonstrated flowback rates of 11.2 million cubic feet per day and 26.5 million cubic feet per day. Shell is currently awaiting production results on four more recently drilled wells in Tioga County.
On August 25th, Rep. White (D-Allegheny, Beaver and Washington) introduced House Bill 2403 (2014) in order to repeal Section 2318 of Title 58 (Oil and Gas) of the Pennsylvania Consolidated Statutes. Section 2318 provides that upon the imposition of a severance tax on unconventional gas wells in the Commonwealth of Pennsylvania, the Secretary of the Commonwealth shall submit for publication a notice of the imposition of the severance tax and that Chapter 23 (Unconventional Gas Well Fee) shall expire upon the publication of the notice. Repealing Section 2318 would allow a severance tax and the impact fee to co-exist.
Thanks in large part to the oil and gas industry, western Pennsylvania is experiencing a boom in job growth which is bringing young and talented individuals to the region. According to the U.S. Bureau of Labor Statistics, Pennsylvania’s oil and natural gas industry employment between 2007 and 2012 increased by 259.3% – accounting for almost 245,000 jobs in Pennsylvania. Of the new hires working in the industry, 96% are from Pennsylvania or an adjacent state. The Young Adults report from PittsburghTODAY notes that roughly 70% of the people moving to Pittsburgh from larger cities are under the age of 35. According to the Department of Labor and Industry, the average wage in the shale industry is nearly $90,000 – almost $41,000 greater than most other industries. A 2014 PNC Financial Services report states that this economic growth can continue to increase in the coming decades.
Pittsburgh Tribune-Review reports that the Kiskiminetas Township supervisors unanimously enacted an ordinance that will allow for oil and natural gas exploration. The ordinance allows for “reasonable development of land for oil and gas drilling while providing adequate health, safety and general welfare protections of the township’s residents.” It includes restrictions for noise, traffic and setbacks, among other things.
As reported in the Pittsburgh Business Times, Pennsylvania’s reported natural gas production in the first six months of 2014 reached 1.9 trillion cubic feet. Production is up from 1.7 trillion cubic feet reported over the second half of 2013 and 1.4 trillion over the first half of 2013. The largest contributors to the gas production increase are wells located in Greene and Washington counties.
The Pennsylvania Public Utility Commission appealed the Commonwealth Court’s July 17, 2014 Opinion and Order in the Act 13 case, which resolved a number of issues remanded by the Supreme Court.
Review Babst Calland’s Administrative Watches for in-depth analyses of the July 17, 2014 Commonwealth Court decision and December 19, 2013 Supreme Court decision.
Two pieces of proposed legislation were introduced to the Pennsylvania Senate on Thursday, July 31. Each has been referred to the Senate Environmental Resources and Energy Committee. Senate Bill 1458, if passed, would amend Title 58 by requiring that steel casings (or other steel safety devices) used in in the drilling of an oil or gas well only use steel products produced in the United States. Senate Bill 1460, provides that products containing both foreign and United States steel shall be determined to be a United States steel product if at least 75% of the cost of the articles, materials and supplies have been mined, produced or manufactured in the United States.
In its far-reaching decision in Robinson v. Commonwealth, which was issued on December 19, 2013, the Pennsylvania Supreme Court invalidated several critical provisions of Act 13. Additionally, the Supreme Court remanded to the Commonwealth Court to address whether the remaining sections of Act 13 can be severed and whether several sections of Act 13 were unconstitutional. Yesterday, the Commonwealth Court reached its decision on the remanded issues.
Regarding severability, the Commonwealth Court held that the last sentence of Section 3302 and all of Sections 3305 to 3309 were not severable and, therefore, invalid. The cumulative effect of this invalidation of all substantive portions of Chapter 33 of Act 13 is that local zoning matters relating to oil and gas will “now be determined by the procedures set forth under the [Municipalities Planning Code] and challenges to local ordinances that carry out a municipality’s constitutional environmental obligations,” and that the Pennsylvania Public Utility Commission no longer has the authority to review local ordinances for compliance with Act 13 and withhold well fees where defects were found.
Regarding the other issues, the Commonwealth Court dismissed claims that providing notice only to public drinking water systems following a spill from drilling operations and that prohibiting health professionals from disclosing the identity and amount of hydraulic fracturing additives were unconstitutional special legislation. The Court also dismissed the claim that Act 13 conferred the power of eminent domain to illegally permit taking private property for use by a private enterprise.
Review our recent Administrative Watch for more in-depth analysis.
For more background, review our blog post on the Supreme Court Decision.
As reported by the Wilkes Barre Times-Leader, the Pennsylvania Department of Environmental Protection (“DEP”) recently approved a solid waste disposal permit modification to allow Keystone Sanitary Landfill (“Keystone”), located in Lackawanna County, to process water-based drilling fluid waste. Keystone will separate the solids from the incoming fluid waste. According to DEP’s approval letter, the separated liquid will be returned to oil and gas industry operators for reuse, while the solid waste will be processed on site and deposited in the landfill. The approved permit modification does not increase Keystone’s 2,000-ton daily limit on the disposal of drilling-related materials.
In a recent opinion, the Pennsylvania Superior Court addressed whether Pennsylvania’s Landlord and Tenant Act of 1951 (the “Act”), and the applicable statute of frauds contained therein, applies to oil and gas leases. In Nolt v. TS Calkins & Associates, LP, a landowner executed an oil and gas lease to lease the oil and gas rights in a 98-acre parcel of land. The landowner thereafter agreed to sell a portion of his property to the plaintiffs. The plaintiffs subsequently filed a quiet title action arguing that the oil and gas lease is invalid and created a cloud on the title on their property. More specifically, the plaintiffs argued that the oil and gas lease was subject to the Act, and that the statute of frauds contained in the Act requires a lease to be signed by both the lessor and the lessee to be valid. Because the lessee did not sign the lease, the plaintiffs argued that only a year-to-year lease was created and that it had expired. In response, the defendants argued that an oil and gas lease is not a lease governed by the Act, but instead is a transfer of realty subject to the more general statute of frauds, which requires only the signature of the grantor. The Pennsylvania Superior Court agreed with the defendants and held that the transaction did not create a lease, but rather a transfer of a property right in the oil and gas. Accordingly, the conveyance was subject to the general statute of frauds, not the statute of frauds contained in the Act, and the plaintiffs’ argument fails.
The Pittsburgh Business Times reports that Rice Energy Inc. is acquiring 12 wells and 22,000 net acres in Greene County, Pennsylvania from Chesapeake Energy Inc. Seven of the wells are currently producing and the five other wells are being developed, according to a statement by Rice.
Warren Resources has executed a purchase and sale agreement to acquire Marcellus shale assets from Citrus Energy Corporation and two other working interest owners, reports Shale Energy Insider. The acquired assets, located in Wyoming County, Pennsylvania, are all held by production, and provide Warren with a new core area in addition to its oil assets in California and natural gas assets in Wyoming.
Marcellus Drilling News reports that the Pennsylvania House and Senate passed a budget that did not include a Marcellus Shale severance tax. Governor Tom Corbett withheld his signature while he continues to work with lawmakers on pension reform.
On Friday, June 13, 2014, the Pennsylvania Department of Environmental Protection (“DEP”) adopted a final rulemaking that increased well permit fees for unconventional wells in Pennsylvania for the first time since October 24, 2009. The new rule, which took effect on June 14, 2014, fixes the permit fees for non-vertical natural gas wells at $5,000 and for vertical natural gas wells at $4,200. Prior to the new rule, permit fees for unconventional wells were calculated on a sliding scale basis as determined by the length of the wellbore. As reported by PR Newswire, the result of the DEP’s new rule will be to increase the permit fee for an average unconventional well by about $1,800 and $1,300 for horizontal and vertical gas wells, respectively, while the permit fees for conventional wells will remain the same. The DEP projects that this change will result in an additional $4.7 million in annual revenue, which will be used to support new information technology projects related to oil and gas and to hire additional staff for the DEP’s entirely self-funded Office of Oil and Gas Management.
The Jefferson Hills (PA) Borough Council recently voted to adopt an ordinance which establishes zoning districts for oil and gas drilling. The Pittsburgh Tribune-Review reported that the Council wants to have more control over the location of drilling activities. Seismic testing is already being conducted in the area and Council members stated that they wanted to be prepared for upcoming oil and gas activities.