Wednesday, October 18, 2017

Shale Law in the Spotlight: Recent Litigation Relating to Wastewater Injection Well Prohibition in Highland Township

Written by Chloe Marie – Research Fellow

In March 2017, Pennsylvania DEP approved permits for Class II Oil and Gas Related Injection Wells in Highland Township, Elk County, and Grant Township, Indiana County, Pennsylvania. The grant of these permits followed many years of legal proceedings resulting from opposition to the application filed by Seneca Resources Corporation in Highland Township and the application filed by Pennsylvania General Energy in Grant Township. In both instances, local ordinances were enacted to prohibit the wastewater injection wells.

This article will address the litigation pertaining to the Highland Township ordinance while a future article will discuss the litigation relating to the Grant Township ordinance.

First lawsuit timeline (Seneca Resources Corp. v. Highland Township, et al., docket no. 1:15-cv-00060)

On January 9, 2013, Highland Township adopted a Home Rule Charter Ordinance No. 1-9 prohibiting the permanent disposal of waste from oil and gas extraction within the Township’s boundaries.  This Ordinance was enacted nearly seven months after Seneca Resources Corporation (“Seneca’) filed a UIC permit application on June 15, 2012, with the U.S. EPA Region 3 Office to convert an existing natural gas well into a Class II injection well.

The Ordinance took effect on January 14, 2013, and expressly stated that “it shall be unlawful for any individual or corporation, or any director, officer, owner, or manager of a corporation to use a corporation, to deposit, store, ‘treat,’ inject or process waste water, ‘produced’ water, ‘frack’ water, brine or other materials, chemicals or by-products that have been used in the extraction of shale gas onto or into the land, air, or waters within Highland Township.” The Ordinance also stipulated specifically that it applied to disposal injection wells.

On January 28, 2014, EPA Region 3 Office granted said UIC permit allowing Seneca to construct and operate the Class II injection well. Quickly thereafter, the Environmental Appeals Board (EAB) received three petitions for review of the UIC permit (UIC Appeal No. 14-01; 14-02; 14-03), which EAB denied on May 29, 2014, based on procedural grounds. Pursuant to 40 C.F.R. § 124.19(1)(2)(i), EPA Region 3 Office then issued a favorable final permit decision regarding the UIC permit on June 17, 2014.

Seneca initiated a lawsuit on February 18, 2015, against Highland Township and its Board of Supervisors before the U.S. District Court for the Western District of Pennsylvania challenging the Ordinance. Seneca sought a court order preventing the Township from enforcing portions of the Ordinance relating to the prohibition of brine-injection wells within the Township’s boundaries. The complaint stated that “the Ordinance is unduly oppressive, arbitrarily interferes with private business, and imposes unnecessary restrictions upon lawful business activities based on the mere allegation and speculation that all disposal and storage of brine adversely affects the health, safety, and welfare of the residents of the Township.” Seneca requested the U.S. District Court to declare that the Ordinance was preempted by the Federal Safe Drinking Water Act and the Pennsylvania Oil and Gas Act and that the Ordinance adoption reflected an impermissible exercise of police power.

On March 24, 2015, Highland Township amended and revised Ordinance No. 1-9 in response to Seneca’s Motion for Preliminary Injunction filed twelve days before. Seneca then filed an Amended Complaint on April 6, 2015, declaring that “rather than eliminating the patently objectionable deprivations of Seneca’s constitutional rights, the Amended Ordinance merely masks those deprivations by not referring specifically to certain Constitutional Amendments” before adding that “the Amended Ordinance continues to ban the disposal and storage of Brines within the Township and purports to invalidate state and federal permits which authorize the disposal and storage of Brines within the Township.”

On April 21, 2015, Highland Township filed a motion to dismiss the lawsuit alleging a lack of standing. Highland Township pointed out that Seneca had not yet received the required DEP permit to pursue its project and also had failed to perform the mechanical integrity test for UIC wells set forth in the EPA permit. Furthermore, the motion stated that the Amended Ordinance “solely affects Seneca’s ability to create and operate an injection well within Highland Township, and does not affect any other aspect of Seneca’s operations within Highland Township.” The U.S. District Court denied said motion on March 29, 2016.

On April 21, 2016, Seneca filed a motion for judgment on the pleadings highlighting that “there is no question that Seneca is entitled to judgment on the pleadings as the Amended Ordinance preempts various Pennsylvania statutes and impermissibly divests Seneca of fundamental rights under the Supremacy Clause and the First, Fifth and Fourteenth Amendments of the United States Constitution.”

On August 11, 2016, Highland Township and Seneca entered into a Consent Decree and agreed to resolve Seneca’s claims that portions of the Amended Ordinance were unconstitutional under both the U.S. and Pennsylvania Constitutions and constituted an impermissible exercise of Highland Township’s legislative authority. The Consent Decree clarified that “nothing … shall preclude Seneca from challenging any future ordinance or charter by Highland, whether adopted by a new Board of Supervisors again seeking to assert those powers claimed in the [Amended] Ordinance … or otherwise.” On the next day, the U.S. District Court approved and adopted said Consent Decree as constituting a final judgment of the court.

Second lawsuit timeline (Seneca Resources Corp. v. Highland Township et al., docket no. 1:16-cv-00289)

On November 8, 2016, Highland Township adopted a new Home Rule Charter Ordinance, which again permanently banned the deposition of waste associated with oil and gas extraction activities. The new Ordinance also specified that “no permit, license, privilege, charter, or other authorization, issued by any state or federal government entity, that would enable any corporation or person to violate the rights or prohibitions of this Charter, shall be lawful within Highland Township.”

As a result, Seneca filed another lawsuit on November 30, 2016, against Highland Township challenging the new Ordinance before the U.S. District Court for the Western District of Pennsylvania. Seneca asserted that portions of the new Ordinance are “substantially identical” to the prior Amended Ordinance, which was found to be unconstitutional in an earlier ruling.

On February 9, 2017, Seneca requested the U.S. District Court to enter a judgment on the pleadings, again alleging that the new Ordinance was unconstitutional pursuant to the First, Fifth and Fourteenth Amendments and the Supremacy Clause of the U.S. Constitution. Recently, on September 29, 2017, the U.S. District Court granted such motion in part and invalidated several provisions of the new Ordinance. 

DEP process timeline

During the pendency of the litigation described above, the Pennsylvania Department of Environmental Protection (DEP) review process was underway. In a letter dated January 2015, the Highland Township Board of Supervisors advised DEP that the UIC permit delivered to Seneca by U.S. EPA was invalid based on the Amended Ordinance and thus future permits issued by DEP also would be considered as invalid. In the meantime, Seneca notified Pennsylvania DEP of the pending litigation between the company and Highland Township.

On August 12, 2015, Pennsylvania DEP decided to suspend its review of the UIC permit pending a court decision and emphasized its “obligation to consider applicable local ordinance related to environmental protection and the Commonwealth’s public natural resources” even though it expressed doubts about the validity of the Township Ordinance.

Following the Consent Decree approved by the court on August 12, 2016, Pennsylvania DEP approved the UIC permit application filed by Seneca on March 27, 2017. Interestingly, on the same date, Pennsylvania DEP also initiated a lawsuit against Highland Township seeking to invalidate the provisions set out in the new Ordinance (Pennsylvania DEP v. Highland Township of Elk County, Commonwealth Court of Pennsylvania, docket no. 123 MD 2017).