Friday, February 2, 2018

Global Shale Law Compendium: Shale Governance in Mid-Atlantic states (Virginia, New Jersey, Delaware, Pennsylvania, New York, and Maryland)


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 legal, policy, and governance issues related to shale gas development in the United States, and more specifically in the Mid-Atlantic states.

Virginia

The state of Virginia is not viewed as a significant natural gas-producing state within the United States. Indeed, according to the U.S. EIA, Virginia holds less than 1% of the United States’ total natural gas reserves and said reserves are limited to the southwestern portion of Virginia.

The Virginia Division of Gas and Oil has stated that the only producing oil and gas wells in Virginia are situated in the southwestern portion of Virginia before adding that exploratory well drilling also occurred in other portions of the state. Those exploratory wells, however, were plugged due to insufficient quantities of hydrocarbons for commercial production. Interestingly, the Division of Gas and Oil stated that “the advent of horizontal drilling along with existing hydraulic fracturing technology renewed interest in some of these areas, including areas underlain by the Marcellus Shale in the western mountains and valleys, and the Mesozoic basins of eastern Virginia.” According to the USGS, potential resources may be found in Highland, Rockingham, and Shenandoah Counties, VA.

As of 2014, the Division of Gas and Oil explained that the technique of hydraulic fracturing had been used since the 1950s in approximately 2,100 wells producing from shale, sandstone and limestone formations in Southwest Virginia.

Other information also identified the Upper Devonian and Huron Shale plays as having potential for shale gas resources in Virginia. The Upper Devonian is located in Western New York, Western and Northeast Pennsylvania, Western West Virginia, Eastern Ohio and Eastern Kentucky, but also with a little overlap in Southwest Virginia. As a result, the Virginia Division of Geology and Mineral Resources launched what is called the Resource Assessment and Exploration Potential of the Devonian Gas Play in Virginia project. This project’s purpose is to “develop a geologic model of the Devonian shale gas play in Virginia;” “assess the hydrocarbon resource in area where it is currently productive;” and “evaluate the exploration potential for this gas play in Virginia.” The Division of Geology and Mineral Resources, however, did not provide any information as to the commencement and end dates for the project.

New Jersey

According to the U.S. EIA, natural gas development has never occurred in New Jersey, though “New Jersey has geologic indications of natural gas deposits in its northern half but no proved natural gas reserves.” Despite the lack of historic development, the New Jersey legislature has attempted several times to enact legislation that would ban the use of hydraulic fracturing or related activities in the state.

On June 29, 2011, the New Jersey legislature passed SB 2576 to permanently prohibit the use of the hydraulic fracturing technique for natural gas development in the state. This legislation stated that such technique would create an unacceptable risk to the people of New Jersey specifically identifying an incident that occurred in June 2010 at a natural gas drilling site in Clearfield County, Pennsylvania. Governor Chris Christie then conditionally vetoed this bill on August 25, 2011, declaring that a one-year ban would be more appropriate to the situation “so that the DEP can further evaluate the potential environmental impacts of this practice in New Jersey as well as evaluate the findings of still outstanding and ongoing federal studies.”

Later, respectively on June 21 and 25, 2012, the New Jersey Assembly and Senate passed Assembly Bill 575 to prohibit the treatment, discharge, disposal, or storage of any wastewater resulting from hydraulic fracturing for the purpose of natural gas development. Again, Governor Chris Christie vetoed the bill pointing out that this legislation was unnecessary as the use of hydraulic fracturing was not occurring in the state and was unlikely to occur in the future. 

Delaware

The U.S. EIA has stated that Delaware does not possess any oil or natural gas reserves as of July 2017. The Agency also added that “exploratory drilling in the 1970s and 1980s off the state’s Atlantic Coast found no commercial natural gas or crude oil resources but did discover one noncommercial natural gas deposit.”

Pennsylvania

The Marcellus Shale formation represents one of the largest shale gas plays in the U.S. and underlies over “three-fifths” of Pennsylvania based on the U.S. EIA Pennsylvania’s profile analysis. The state of Pennsylvania is one of the most prolific shale gas producers in the country with 1,321 unconventional well drilling permits issued in 2016 and 5.1 trillion cubic feet of natural gas produced from unconventional wells according to the Pennsylvania DEP’s 2016 Oil and Gas Annual Report. Washington, Greene and Susquehanna Counties recorded the greatest number of unconventional gas wells in 2016.

We have discussed legislative developments related to shale development in Pennsylvania in three prior articles: the first addressing legislation during the time periods from 2010 to 2012; the second addressing legislation during the time period from 2013 to 2016; and the third addressing legislation enacted through the annual fiscal code legislation from 2009 to 2017.  Additional articles are planned to address regulatory developments applicable to shale gas development in Pennsylvania.

New York

Although the first commercial natural gas well was drilled near Fredonia, New York in 1825, the U.S. EIA has stated that “there has been no development of natural gas shale resources in New York, and the total amount of retrievable natural gas under the state is unclear.” The use of hydraulic fracturing for shale gas development has long been a topic of controversy in the state of New York. Governmental concerns about the potential environmental and public health impacts of such technique caused the state to permanently ban high volume hydraulic fracturing, which is essential to shale gas development, in June 2015 after years of public discussion.

In a prior article, we discussed the timeline of regulatory actions leading to the permanent ban of shale gas development in New York.

Maryland

As of October 1, 2017, shale gas development using hydraulic fracturing has been permanently prohibited in the state of Maryland. Prior to the enactment of this ban, no shale development had occurred in Maryland despite some level of interest by the industry in the Marcellus Shale region underlying western Maryland. The U.S. EIA states that Maryland’s natural gas production is very low before adding that “most of the natural gas wells in the state are storage wells, but the few low-producing wells in far western Maryland produce less than 50 million cubic feet of natural gas annually.”

In a previous article, we addressed the timeline of legal actions leading to the permanent ban of shale gas development in the state of Maryland. 

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