Environment is Key Element in New Report About Drilling

Pittsburgh Post-Gazette
24 July 2011
By Sean D. Hamill

At 137 pages and 96 separate recommendations, the governor's Marcellus Shale Advisory Commission report released Friday after four months of work has no single main point.

Though the disputatious proposals that came from the commission on impact fees and forced pooling grabbed most of the initial attention, to the industry and environmental groups, it was clear where the emphasis lies.

"The meat of that report focuses on the environment and safety recommendations," said Matt Pitzarella, spokesman for Range Resources, the dominant Marcellus Shale driller in southwestern Pennsylvania and a member of the commission.

Of the 96 recommendations in the report, 43 of them were in the section titled Public Health, Safety & Environmental Protection.

The reasons for that are clear to both sides: While financial issues like forced pooling and impact fees have been the hot potato for state politicians, down in the townships and boroughs where drillers and residents come into direct contact, it is the environmental and health issues that dominate the conversation.

So, while there are some broad environmental-related recommendations such as allowing drillers to "adopt" orphan gas wells, giving drillers good Samaritan protections if they use acid mine drainage water in fracking, and give the Pennsylvania Department of Environmental Protection the power to impose civil fines on drillers, the majority of those 43 recommendations deal with on-the-ground issues, including proposals to:

• Require well operators to track and report on the transportation, processing and treatment or disposal of their frack water -- the water, chemical and sand mixture used to fracture and hold open the shale and release the natural gas held within the rock;

• Expand a well operator's presumed liability for tainting drinking water at a neighbor's well, from within 1,000 feet to within 2,500 feet, and the time that it can detected from six months of completion of a well to one year;

• Increase the setback standard for wells that now says a driller can place a wellbore a minimum of 100 feet from a stream, spring or body of water, to 300 feet away, and require that there can be no "disturbance," like a well pad, within 100 feet of a stream or body of water.

It is no mistake that half of the recommendations were environmentally related, said John Walliser, vice president for legal and governmental affairs for the Pennsylvania Environmental Council, which was also part of the commission's environmental working group.

"It's obviously to us the most pressing issue. And, in terms of policy, it's where you can accomplish the most," he said.

More practically, said Jeffrey Kupfer, a senior adviser for government affairs for Chevron, who was on the environmental working group: "Part of what we were doing was looking at an Oil & Gas Act passed in 1984 (before the Marcellus Shale was tapped) and not altered much since. So we thought there were a decent amount of provisions in the law that were ripe for reworking."

It's not clear how many of the 43 recommendations could eventually be proposed as updated or new additions to the Oil & Gas Act, though some of them clearly can only work as a new part of the act, not as DEP-issued rules or regulations, which do not take an act of the state Legislature.

Some of the proposals that require a vote by the Legislature include increasing the setbacks, increasing bond requirements for drillers (from $2,500 per well and a $25,000 blanket bond for each driller to $10,000 per well and a blanket bond up to $250,000), and increasing the possible civil penalties (from a general fine of $25,000 to $50,000, and a daily penalty of $1,000 per day to $2,000).

Jan Jarrett, CEO and president of PennFuture, which was not a member of the commission, said the bond requirement recommendation, in particular, "is wholly inadequate."

The blanket bond amount is supposed to be money the state could use to, for example, plug wells if a company walked away from them and didn't do it itself.

"It costs up to $60,000 to plug a well," Ms. Jarrett pointed out. "The $250,000 blanket bond would only cover the cost of about four wells."

John Hanger, the state's former DEP secretary who oversaw creation of most of the rules and regulations that now govern the Marcellus Shale industry, said beyond shortcomings like the too-low bond recommendations, he noticed some glaring omissions in the report.

The report "doesn't seem to say anything about air quality emissions," he said. "Nitrous oxide emissions [that come from Marcellus production] is a major issue that the state and federal governments need to come to grips with."

The report is silent on proposing, for example, that the industry adopt some existing technology that could prevent nitrous oxide emissions, he said.

Despite some omissions, members of the working group that recommended the proposals to the full advisory commission said the list was drawn up by consensus at five official meetings and hundreds of hours of discussions in person, via phone calls and emails outside of those formal sitdowns.

"It was the exact policy discussion you hoped would happen, where at the end of the day no one was perfectly happy with the result," said Matthew J. Erhart, Pennsylvania executive director for the Chesapeake Bay Foundation, and a member of the working group.

He said most of the environmental recommendations in the report began with a proposal from one of the four environmental organizations involved in the working group -- which the industry "let us throw out as a first marker and then they'd respond," he said.

Still, Mr. Erhart said, "there are also pieces in there that didn't have the outcomes we wanted."

Some of the provisions that irked environmentalists included:

• A provision in a different part of the report that the state's oil and gas fund -- which takes in revenue from mineral leases and royalty payments on state-owned land -- could be tapped for non-environmental or conservation-related state projects;

• Instead of a prohibition on further disturbances and leases in state forests, the final report includes a mere suggestion that the state should try to "minimize" impacts there;

• A hope to direct some of the impact fee money to the state's Growing Greener Fund and Environmental Stewardship Fund went nowhere.

Industry representatives would not cite specific provisions they wanted but that did not get into the report.

But Mr. Kupfer said: "I wouldn't look at this report and say, 'Industry provided a wish list and they all got into the document.' A lot of things in here got in because of the environmental groups."

That shouldn't be too surprising, said Mr. Erhart, because "the industry guys want to have a more defensible position" and so they found a lot of common ground in environmental areas.

If all the recommendations were to become law, or at least become a new state regulation or rule that doesn't require legislative approval, would they help? The consensus is that they would.

"If a lot of these were adopted, it would improve regulation of the industry," said Ms. Jarrett.

But will they be adopted?

That answer is less clear.

Mr. Walliser's organization, PEC, is hoping they will and has called for Gov. Tom Corbett to call for a special legislative session to bring legislators back early to rewrite the Oil & Gas act.

He believes about 30 of the environmental-related provisions could become changes to the Oil & Gas Act, so, "let's get those done and let's get them implemented and start enforcing them."

Mr. Kupfer wasn't sure a special legislative session was necessary.

Ms. Jarrett believes many of the recommendations will result in change, but, "we'll see what comes out in the end."

Sean D. Hamill: shamill@post-gazette.com or 412-263-2579.