Wednesday, September 20, 2017

Shale Law in the Spotlight: UPDATE - The Delaware River Basin Commission’s Regulatory Actions on Natural Gas Development

Written by Chloe Marie – Research Fellow

In this article, the Center for Agricultural and Shale law presents an update of an initial article published on August 23, 2017, addressing the Delaware River Basin Commission’s regulatory action and inaction on natural gas development. Based upon action taken by DRBC on September 13, 2017, an update of our prior article was necessary.

The Delaware River Basin Commission (DRBC) is a federal interstate agency comprised of the states of Delaware, New Jersey, New York, Pennsylvania and the U.S. Army Corps of Engineers working together on the management of water resources in the Delaware River Basin. In the past decade, DRBC has proposed regulatory actions to address the impacts of natural gas development using hydraulic fracturing on waters within the Basin. To date, however, DRBC has not finalized any regulations. Without regulation in place, no shale development has taken place within the Basin. Based on recent actions, DRBC appears to be moving towards formalizing this ban on shale development within the Basin. This article will address the actions proposed and undertaken by DRBC to regulate natural gas development projects in the Basin as well as litigation challenging DRBC action and inaction on this topic.

In June 2008, DRBC imposed upon energy companies the obligation to apply for and receive approval from the Commission for any projects requiring water withdrawals, well drilling, construction of water impoundment, and waste disposal into the waters of the Basin. The Commission later issued a determination, dated May 2009, mandating that all natural gas extraction projects located in shale formations within the drainage area of the Basin’s Special Protection Waters must obtain approval from the Commission.

In May 2010, DRBC commissioners passed a resolution directing DRBC staff to develop new natural gas development regulations prior to considering any applications for natural gas wells. DRBC staff published the draft regulations (Article 7 of Part III) for public review on December 9, 2010. In a Press Release of the same date, former DRBC Executive Director Carol R. Collier declared that “the purpose of the proposed regulations is to protect the water resources of the Delaware River Basin during the construction and operation of natural gas development projects. The draft regulations establish requirements to prevent, reduce, or mitigate depletion and degradation of surface and groundwater resources and to promote sound practices of watershed management.”

On May 31, 2011, New York Attorney General Eric Schneiderman filed a lawsuit in the U.S. District Court for the Eastern District of New York against the U.S. Army Corps of Engineers and other federal agencies for failing to conduct a full environmental review of the draft regulation pursuant to the requirements of the National Environmental Policy Act (NEPA). The New York Attorney General stated that “the welfare of those living near the Delaware River Basin, as well as the millions of New Yorkers who rely on its pure drinking water each day, will not be ignored.” A coalition of non-profit environmental groups filed a similar lawsuit in the same court on August 4, 2011 alleging that “absent [an environmental] review, there is no assurance that the regulations the DRBC is poised to finalize will be adequate to control a risky industrial activity that has already caused documented environmental and human health impacts in other states, including Pennsylvania.” The U.S. District Court dismissed both lawsuits contending that “this dispute [was] not currently fit for judicial review.”

The public comment period for the draft regulations ended on April 25, 2011 and after further discussions, DRBC staff published revised draft regulations on November 8, 2011. The draft regulations were to apply to “all natural gas development projects as defined in Section 7.2 including the construction or use of production, exploratory or other natural gas wells in the Basin regardless of the target geologic formation, and to water withdrawals, well pads and related activities, and wastewater management activities comprising part of, associated with or serving such projects.” DRBC staff was to provide the commissioners with an administrative and operational assessment of the regulations within 18 months following the date on which those regulations entered into force. The commissioners would in turn review this assessment within 6 months of its receipt and would recommend some regulatory adjustments if needed. These draft regulations would allow the impacts of such projects on the water.

A special meeting was scheduled originally on November 21, 2011, for the five Commission members, including the governors of the states of Delaware, New Jersey, New York, and Pennsylvania, and the federal representative of the U.S. Army Corps of Engineers, to vote on passing the draft regulations. The meeting, however, was cancelled until the Commission members could complete further review of the regulations, which had not been rescheduled. As a result, no natural gas development projects have taken place within the Delaware River Basin.

Interestingly, in May 2016, Wayne Land and Mineral Group, LLC (WLMG) brought an action before the U.S. District Court for the Middle District of Pennsylvania against DRBC challenging the Commission’s jurisdiction to review and approve natural gas projects located in the Delaware River Basin (see Wayne Land and Mineral Group, LL v. Delaware River Basin Commission, docket no. 3:16-cv-00897). Owners of land overlaying shale gas resources located in the Basin, WLMG claimed that its rights to develop such resources were infringed upon by the Commission and alleged that “natural gas well pads and related facilities targeting shale formations” in the Basin are not “projects” to reviewed by the Commission under Section 3.8 of the Delaware River Basin Compact. WLMG also explained that the Commission is blocking any prospect of development as it announced in 2010 that it would not review applications for natural gas projects until it adopts specific natural gas development regulations.

In early July 2016, the Commission filed a motion to dismiss the complaint, which was granted by the court on March 23, 2017. The court concluded that “on the face of Plaintiff’s Complaint, it is apparent that its proposed activities within the Delaware River Basin constitute a ‘project’ within the meaning of that term as defined in Sections 1.2(g) and 1.2(i) of the Delaware River Basin Compact.” On April 11, 2017, WLMG filed an appeal in the U.S. Court of Appeals for the Third Circuit (docket no. 17-1800), which is still pending at the time of this article.

Six years after cancelling the November 2011 meeting to consider the draft regulations, DRBC approved a procedural resolution on September 13, 2017, to prepare and publish revised draft regulations addressing natural gas development by November 30, 2017. The revised draft regulations will pursue a different regulatory approach than the draft regulations as DRBC now proposes to implement a ban on hydraulic fracturing. In the resolution, DRBC stated that “the revised draft rules to be published … will include prohibitions related to the production of natural gas utilizing horizontal drilling and hydraulic fracturing within the Delaware River Basin” before adding that “the revised draft regulations will also include provisions to ensure the safe and protective storage, treatment, disposal or discharge of hydraulic fracturing-related wastewater where permitted and provide for the regulation of inter-basin transfers of water and wastewater for purposes of natural gas development where permitted.”

Stay tuned for additional legal developments as DRBC moves forward in the regulatory process!


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