current legal issues in marcellus shale development, september 2011

8/3/2019 Current Legal Issues in Marcellus Shale Development, September 2011

1/33

Current Legal Issuesin Marcellus Shale

Development

Penn State Extension

Marcellus Shale Webinar Series

September 15, 2011

Agricultural Law Resource and Reference Center

Professor Ross H. Pifer


2/33

Overview of Presentation

Legislation

Regulations

Municipal Regulation

Case Law



2


3/33


Legislation Enacted Legislation Pending Pennsylvania Legislation Pending Federal Legislation

Regulations Municipal Regulation Case Law



3


4/33

Enacted Legislation

2009-2010 Session Production Reporting Requirements

(SB 297 / Act 15)

Clean and Green Amendment

(SB 298 / Act 88) Coal Bed Methane Review Board

(HB 1847 / Act 4)



4


5/33

Enacted Legislation

2011-2012 Session Coal and Gas Resource Coordination Act

Amendment (SB 265 / Act 2)

Clean and Green Amendment (HB 144 / Act 35)



5


6/33

Pending PA Legislation

Pipeline Safety and Oversight HB 344 / SB 325

911 Emergency Response Information SB 995

Royalty Statement Information SB 460

Leasing of State Land SB 367

Impact Fee SB 1100



6


7/33

Senate Bill 1100 Impact Fee

Annual fee for first ten years of production

Exclusion for traditional wells and marginalwells Distribution of funds:

Conservation Districts State Fire Commissioner

Local Governments Environmental initiatives

Development of Model Ordinance



7


8/33

Pending Federal Legislation

FRAC Act HB 1084 / SB 587

Marcellus Shale On-the-Job Training Act SB 588 / HB 1396



8


9/33


Legislation

Regulations Pennsylvania DEP Susquehanna River Basin Commission Delaware River Basin Commission U.S. Environmental Protection Agency Pennsylvania Public Utility Commission

New York / New Jersey Municipal Regulation

Case Law



9


10/33

Department of Environmental Protection

Well casing standards

Heightened standards promulgated on Feb. 5, 2011. Implemented to minimize incidents of methane migration.

Air quality studies

SW PA Nov. 1, 2010

NE PA Jan. 31, 2011 NC PA May 19, 2011



10


11/33

Susquehanna River Basin Commission

Proposed Rulemaking published in Federal

Register on July 13, 2011. Changes approval process for interbasin transfers of

flowback and production fluids

Public comment period ended on Aug. 23, 2011.

On Sept. 15, 2011, SRBC will consider extensionof comment period to Nov. 1, 2011.



11


12/33

Delaware River Basin Commission

Draft Regulation published on Dec. 9, 2010.

Addresses water sourcing, well pad siting, and wastewaterdisposal

Public comment period ended on April 15, 2011.

Special meeting will be held on Oct. 21, 2011 toconsider adoption of regulation.

Two lawsuits have been filed alleging that DRBC failedto conduct an appropriate environmental assessment.



12


13/33

U.S. Environmental Protection Agency

Hydraulic Fracturing Study Timeline:

Summer 2010 EPA conducted four public meetingsnationally.

Feb. 7, 2011 EPA published draft plan for study.

June 23, 2011 EPA announced seven study sites:

Prospective case study Washington County

Retrospective case studies Washington County / Bradford and

Susquehanna Counties

Aug. 4, 2011 EPA Science Advisory Board providedcomments to EPA.

End of 2012 First report of results



13


14/33

Pennsylvania Public Utility Commission

Laser Northeast Gathering Co., LLC Jan. 19, 2010 Application filed for public utility status

Nov. 22, 2010 Administrative Law Judge recommendationto deny petition

June 14, 2011 PUC refused to adopt ALJ recommendation;remanded case for determination of whether grantingapplication is necessary or proper for the service,

accommodation, convenience, or safety of the public. Aug. 25, 2011 - PUC issues clarification of public utility

standard.



14


15/33

Pennsylvania Public Utility Commission

Pentex Pipeline Co. Mar. 8, 2011 application filed

Sept. 13, 2011 public hearings conducted



15


16/33

Marcellus Shale Advisory Commission

July 22, 2011 Final report issued Contained 96 policy recommendations

May serve as the basis for future regulatory or

legislative actions



16


17/33

NY Dept. of Environmental Conservation

Supplemental Generic Environmental Impact Statement

Revised draft SGEIS / recommendations issued on July 1, 2011.

Would authorize activities on private land under rigorous

controls

Would prohibit activities in NYC and Syracuse watersheds

Public comment period opened on Sept. 7, 2011 and will close onDec. 12, 2011.

DEC will promulgate regulations on topic beginning in Oct. 2011.



17


18/33

New Jersey Moratorium

June 29, 2011 Senate Bill 2576 passed bylegislature to permanently ban hydraulic

fracturing.

Aug. 25, 2011 Governor Christie issued a

conditional veto and recommended a one-year

moratorium.



18


19/33


Legislation Regulations Municipal Regulation

Court Opinions Recent Litigation

Municipal Bans of Drilling Activities Oil and Gas Act Preemption

Case Law



19


20/33

Huntley & Huntley v. Borough ofOakmont

Zoning restrictions permitted in R-1district.

Range Resources v. Salem Township

Comprehensive regulatory scheme notpermitted.

Supreme Court Case Law



20


21/33

Commonwealth Court opinion Issued on July 22, 2010

Facts: County zoning ordinance allowedwells only by special exception in residential,

industrial, and airport zones.

Penneco Oil Co. v. County of Fayette



21


22/33

Ordinance was reflection of traditionalzoning principles rather than acomprehensive regulatory scheme.

Although there was some overlap with

purposes of Oil and Gas Act, primarypurpose of ordinance was to encouragecompatible land use.

Penneco Oil Co. v. County of Fayette



22


23/33

Range Resources v. South Fayette

Aug. 16, 2011 Complaint filed Allegation that zoning ordinance creates

a constructive ban on drilling throughenforcement of buffer zones

Claim that ordinance is preempted byPennsylvania Oil and Gas Act.



23


24/33

Municipal Bans onDrilling Activities

Nov. 16, 2010 Pittsburgh ordinance Numerous other municipalities have

instituted or are considering bans. Legality of total bans have not yet been

challenged. Municipal ordinances must be analyzed in light of

section 602 of Oil and Gas Act. Likelihood of success???



24


25/33

Except with respect to ordinances adopted

pursuant to the . . . Municipalities Planning Code,and the . . . Flood Plain Management Act, all localordinances and enactments purporting to regulateoil and gas well operations regulated by this act arehereby superseded. No ordinances or enactmentsadopted pursuant to the aforementioned acts shall

contain provisions which impose conditions,requirements or limitations on the same features ofoil and gas well operations regulated by this act orthat accomplish the same purposes as set forth inthis act.

Oil and Gas Act 602



25


26/33

. . . The Commonwealth, by this enactment, hereby

preempts and supersedes the regulation of oil andgas wells as herein defined.

Oil and Gas Act 602



26


27/33


Legislation

Regulations

Municipal Regulation Case Law



27


28/33

Case Law

Berish v. Southwestern Energy, 2011 WL 382420(M.D. Pa. Feb. 3, 2011) Applicability of strict liability for claim of water

contamination

Lauchle v. The Keeton Group, 2011 WL 782024(M.D. Pa. Mar. 8, 2011) Primary lease term not extended due to litigation over

validity of lease

Shafer v. Range Resources

Appalachia, 2011WL 677479 (M.D. Pa. Feb. 16, 2011) Interpretation of management approval clause



28


29/33

Expiration of Secondary Term

T.W. Phillips v. Jedlicka, 964 A.2d 13 (Pa. Super.

Ct. Dec. 29, 2008). Facts:

Lease was executed in 1928.

Lease extended so long as oil or gas is produced in

paying quantities.

Wells were drilled in 1929, 1986, 2004, and 2005.

Jedlicka argued that lease terminated in 1959 becauselease was not profitable in that year.



29


30/33

T.W. Phillips v. Jedlicka

Superior Court opinion Court relied upon Young v. Forest Oil Co. (Pa.

1899) to apply subjective test.

Court ruled that Jedlicka had failed to carry

burden of establishing lack of good faith.



30


31/33

T.W. Phillips v. Jedlicka

Issue before Supreme Court: Did the Superior Court misapply [Young v.

Forest Oil] by holding that Pennsylvaniaemploys a purely subjective test to determinewhether an oil or gas lease has produced in

paying quantities.

Argument held on April 13, 2010.



31


32/33

Web-based Resources

www.law.psu.edu/marcellus

Marcellus Shale Resource Area Penn State Resources Case Law Statutes Regulations

Legal-related links Marcellus Shale Blog

www.pennstatelawmarcellusblog.com



32


33/33

The Agricultural Law Resource and Reference Center

Prof. Ross Pifer, Director

Phone: (814) 865-3723

Email: [email protected]

Web: www.law.psu.edu/aglaw

33

current legal issues in marcellus shale development, september 2011

Documents