Friday, November 3, 2017

Global Shale Law Compendium: Shale Governance in Pennsylvania – Legislation from 2010 to 2012

Written by Chloe Marie – Research Fellow

The Global Shale Law Compendium series addresses legal developments and other issues related to the governance of shale oil and gas activities in various countries and regions of the world. In this article, we will focus on the legal, policy, and governance issues related to shale gas development in the United States, and more specifically in the state of Pennsylvania.

Shale gas resources located in the Marcellus and Utica Shale formations beneath Pennsylvania have contributed significantly to the shale gas revolution in the United States. The U.S. EIA has declared that “Pennsylvania is second only to Texas in estimated proved natural gas reserves, which quadrupled from 2010 to 2015 because of development in the Marcellus Shale.” In the 2016 Oil and Gas Annual Report, the Pennsylvania Department of Environmental Protection stated that “in 2016, about 5.1 [Tcf] of natural gas was produced from unconventional gas wells in Pennsylvania.”

Given the long history of oil and gas development in Pennsylvania, the state already had extensive legislation in place governing oil and gas exploration and production prior to the onset of shale development. As this type of unconventional development became of great significance for Pennsylvania, the state General Assembly passed several laws to address issues that had arisen. In this regard, this article will set out all statutes applicable to unconventional oil and gas development that were enacted in Pennsylvania during the time period from 2010 through 2012. Following articles will address those statutes enacted after 2012 as well as the regulations applicable to shale gas development in the state.  

Statutes enacted during the 2009-2010 legislative session:

·         Act 4 of Feb. 1, 2010 – Amendments to the Coal Refuse Disposal Control Act (H.B. 1847)

The Pennsylvania General Assembly amended the Coal Refuse Disposal Control Act by establishing, among other things, the Coal Bed Methane Review Board, whose purpose is to provide a process to address disagreements concerning coal bed methane well location or access road location. The General Assembly amended the procedure for reviewing well permit applications in order to include a provision whereby the surface owner was given the right to participate in alternative dispute resolution concerning the well location or access road location associated with the well. The surface owner must file his objections in writing with the Coal Bed Methane Review Board through the Pennsylvania DEP.

·         Act 15 of March 22, 2010 – Amendments to the Oil and Gas Act (S.B. 297)

The Pennsylvania General Assembly amended the Oil and Gas Act of 1984 to include further well reporting requirements. The Amendments provided that Marcellus Shale well operators were required to report unconventional well production data to the Pennsylvania DEP on a semi-annual basis. [The production reporting requirements were updated again in 2014.] The 2010 Amendments also required that such reports are made available on DEP’s publicly accessible Internet website. 

·         Act 88 of Oct. 27, 2010 – Amendments to the PA Farmland and Forest Land Assessment Act (S.B. 298)

The Pennsylvania Farmland and Forest Land Assessment Act of 1974 was amended by adding further definitions and providing further information related to the imposition of rollback taxes. The Amendments provide that clean and green properties may be leased or used for oil and gas development. Where development occurs, a limited rollback tax penalty will be imposed. Rollback taxes will be imposed only upon areas of the property devoted to oil and gas activities. 

Statutes enacted during the 2011-2012 legislative session:

·         Act 2 of May 13, 2011 – Omnibus Amendments to the Coal and Gas Resource Coordination Act (S.B. 265)

The Coal and Gas Resource Coordination Act of 1984 was amended by adding further definitions and provisions relating to spacing between gas well clusters and workable coal seams. Furthermore, the Amendments authorize the Environmental Quality Board to change the maximum distance of well clusters and require the Pennsylvania DEP to commission an independent study, whose purpose is to provide a comprehensive evaluation and update of the Joint Coal and Gas Committee Gas Well Pillar Study commissioned in 1956.

·         Act 35 of July 7, 2011 – Amendments to the PA Farmland and Forest Land Assessment Act (H.B. 144)

The Pennsylvania General Assembly once again amended the Pennsylvania Farmland and Forest Land Assessment Act of 1974 to clarify that rollback taxes imposed on portions of land subject oil and gas development “shall be due and payable in the tax year immediately following the year in which a well production report is provided to the county assessor.”

·         Act 127 of Dec. 22, 2011 – Gas and Hazardous Liquids Pipelines Act (H.B. 344)

The Pennsylvania General Assembly enacted the Gas and Hazardous Liquids Pipelines Act requiring the Public Utilities Commission (PUC) to establish and maintain a registry of all pipeline operators. In addition, the PUC must develop an application for registration and charge a registration fee as well as annual renewal fee. The Act provides an exemption from applying and paying registration fee to petroleum gas distributors who are registered under the Propane and Liquefied Petroleum Gas Act.  The Gas and Hazardous Liquids Pipelines Act also authorizes, among other things, the PUC to supervise and regulate pipeline operators in accordance with federal pipeline safety laws.

·         Act 9 of Feb. 2, 2012 – Amendments to Title 35 Pa. C.S. (Health and Safety) (S.B. 995)

The Amendments to Title 35 of the Pennsylvania Consolidated Statutes added a new provision related to emergency response requirements for unconventional wells. Precisely, the amendments require both the Pennsylvania Emergency Management Agency (PEMA) and the Pennsylvania DEP to develop and adopt emergency regulations for unconventional well operators that will require the registration of a unique GPS address for all unconventional wells at a single well pad site and the development of an emergency response plan to be submitted to the PEMA and Pennsylvania DEP.

·         Act 13 of Feb. 14, 2012 – Amendments to Title 58 Pa. C.S. (relating to Oil and Gas) (H.B. 1950)

Act 13 amended Title 58 of the Pennsylvania Consolidated Statutes in a number of manners. It established an unconventional gas well fee – also called impact fee – with a cost and fee schedule, and distribution and allocation requirements to state and local governments. Act 13 also created the Natural Gas Energy Development Program, whose purpose is to fund natural gas projects. Moreover, the Act repealed and replaced the Oil and Gas Act. Act 13 restated a number of the provisions that had previously been contained within the Oil and Gas Act, but also updated many of the environmental standards addressing setback requirements, protection of water supplies, well permitting requirements, etc.

·         Act 147 of Oct. 8, 2012 – Indigenous Mineral Resources Development Act (S.B. 367)

The Indigenous Mineral Resources Development Act gives authority to the Department of General Services to enter into contracts or leases in the name of the Commonwealth and to grant rights-of-way through state-owned land for oil and gas development. The Act also provides advertising, bidding and bond requirements as well as instructions related to the deposit of revenue.


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