StateImpact | 22 November 2016

New Methane Rules Coming for Pennsylvania’s Oil and Gas Industry

Pennsylvania regulators are soon planning to introduce new regulations to reduce methane emissions from the oil and gas industry, despite expectations President-Elect Donald Trump may seek to roll back new federal rules.

Credit: Joe Ulrich/WITF.

Credit: Joe Ulrich/WITF.

Methane is the main component of natural gas and a potent greenhouse gas that contributes to global climate change.

The state Department of Environmental Protection is expected to unveil new general permit requirements for Marcellus Shale well pads at a meeting of its Air Quality Technical Advisory Committee on 8 December. A broader regulatory package, designed to curb methane leaks from existing sources, is expected in early 2017.

“A lot of these issues now revert to the states to take action,” said Matthew Stepp, policy director for the environmental advocacy group PennFuture. “The environmental community is rightly concerned at the federal government reversing course.”

Jones Day via Mondaq | 4 November 2016

EPA Issues Guidelines Addressing VOC Emissions From Oil and Gas Sector

The US Environmental Protection Agency (EPA) is adopting guidelines that will ultimately require oil and gas sources in certain areas with elevated ozone concentrations to implement emissions controls for volatile organic compounds (VOCs). Some of the areas subject to the new guidance are in states with significant oil and gas activity, such as California, Colorado, Pennsylvania, and Texas.

The EPA links elevated ambient ozone concentrations with human health impacts, and the federal Clean Air Act therefore requires the imposition of reasonable control measures. The guidelines will have the additional effect of reducing greenhouse gas emissions, as many of the VOCs that will be controlled are also greenhouse gases.

The Associated Press | 4 November 2016

Oklahoma Regulators Close Wells, Reduce Volumes After Quake

Oil and natural gas regulators in Oklahoma are ordering the operators of 70 disposal wells to either shut them down or reduce disposal volumes after a 4.5 magnitude earthquake shook northern Oklahoma.

The Oklahoma Corporation Commission said on 3 November that the new guidelines affect 38 disposal wells within 15 miles of the quake’s epicenter that are under its jurisdiction and another 32 wells under the sole jurisdiction of the Environmental Protection Agency.

Akin Gump Strauss Hauer and Feld via Mondaq | 25 October 2016

EPA to the Oil and Gas Industry: The Request Is in the Mail

It looks like the Environmental Protection Agency (EPA) will have its own scary treat for the oil and gas industry this Halloween—an information request under Section 114 of the Clean Air Act designed to help the EPA regulate methane emissions from those facilities. The EPA submitted the request for the Office of Management and Budget’s approval on 29 September 2016, starting a 30-day clock for interested parties to comment. That means the request could go out to the more than 18,000 affected facilities as early as November 2016.

The request will require a typical recipient, within 30 days, to report the number and location of each oil- or gas-production facility; whether flare or thermal combustors are used; and the number and types of atmospheric tanks, separators, dehydrators, reciprocating processors, and dry- or wet-seal centrifugal compressors used at the facility. In addition, a limited number of respondents within each industry segment will be required to complete a much more detailed Part 2 Facility Survey, requiring detailed design, operational, and regulatory information regarding a diverse range of facility equipment, including emission-control devices, production well injection storage wells, tanks, separators, pneumatics, acid gas removal units, dehydrators, equipment leaks, compressors, blowdown events, and acid gas removal units. Companies selected for the more detailed survey would have 120 days to submit their reports.

Philadelphia Inquirer | 17 October 2016

Shale Industry Sues To Block New Pennsylvania Drilling Rules

The shale-gas industry on 13 October filed a legal challenge to block controversial new rules intended to reduce the surface effects of oil and gas drilling in Pennsylvania.

Aerial view in 2014 of a Marcellus Shale drilling operation near Waynesburg, Pennsylvania. Credit: Michael Bryant/Philadelphia Inquirer.

Aerial view in 2014 of a Marcellus Shale drilling operation near Waynesburg, Pennsylvania. Credit: Michael Bryant/Philadelphia Inquirer.

The Marcellus Shale Coalition, the trade group representing unconventional-gas producers, on 13 October asked the Commonwealth Court to delay implementation of the new drilling regulations until its appeal can be decided. The new rules went into effect on 15 October.

The legal action is the latest skirmish over regulation of the shale-gas industry, which critics say was able to grow rapidly in Pennsylvania under old rules designed for less-intensive drilling. The industry says that the state’s laws already are among the nation’s most stringent and that the new rules add more burdens without improving environmental protection.

The shale coalition says it is not challenging the entire package of Department of Environmental Protection regulations, known as Chapter 78a of the Pennsylvania Code. The lawsuit, assembled by the Pittsburgh law firm Babst Calland, takes narrow aim at specific provisions that the industry says are vague or are unsupported by authorizing legislation.

“These shortcomings are immediately harmful to our industry because they affect our ability to conduct business and remain competitive,” said David J. Spigelmyer, the president of the shale coalition.

PowerSource | 11 October 2016

Pennsylvania Publishes New Rules for Shale Drillers

An array of stricter environmental regulations for Pennsylvania shale gas drilling took effect on 8 October, opening a new phase of legal challenges to the rules after a punishing 5-year effort to get them published.

A Consol Energy horizontal gas drilling rig near Waynesburg, Greene County, Pennsylvania. Credit: Mladen Antonov/AFP/Getty Images.

A Consol Energy horizontal gas drilling rig near Waynesburg, Greene County, Pennsylvania. Credit: Mladen Antonov/AFP/Getty Images.

The state Department of Environmental Protection’s (DEP’s) new regulations update requirements for aboveground operations at oil and gas well sites for the first time since 2001 and reflect heightened scrutiny of the industry since Marcellus Shale drilling revolutionized natural gas production in Pennsylvania.

In a statement, Acting DEP Secretary Patrick McDonnell said the rules “create some of the most protective regulations in the nation and ensure safe development of this important resource.”

Oil and gas trade groups have already signaled that they plan to file lawsuits to challenge some of the standards, which they consider excessively burdensome and expensive without substantially improving environmental protection.

Pennsylvania Independent Oil and Gas Association executive director Dan Weaver said the industry “has been consistent in identifying significant legal problems with these regulations, yet the department has refused to change even the most glaring and obvious errors and overreaches.”

Major changes include new procedures for shale gas companies to screen for protected public resources and underground hazards around their proposed wellsites before drilling; new waste handling and spill cleanup standards; the elimination of most pits; and new construction standards for large fluid holding ponds.

Argus | 11 October 2016

EPA Commits To Review Emissions From Drilling Sites

The US Environmental Protection Agency (EPA) on 7 October committed to take a closer look at the decades-old formulas it uses to estimate the volume of smog-forming emissions from flares at natural gas production sites.

That review, which EPA plans to finish in 2018, could lead to tougher air emissions regulations for the industry if the agency finds the flares emit significantly more volatile organic compounds than it thought. Those compounds can create smog when they react in the atmosphere with light and nitrogen oxides.

Emission factors provide a way for regulators to estimate air emissions from industrial facilities without having to install costly air monitors on every piece of equipment. But environmentalists say those EPA-approved formulas frequently underestimate emissions. This can translate into weaker rules when states write plans, called state implementation plans (SIPs), for complying with the Clean Air Act.

“We have got to get a proper accounting of flares to do things like plan our next ozone SIPs or make sure that hazardous air pollutants are not impacting nearby communities,” Air Alliance Houston executive director Adrian Shelley said.

Reuters | 8 September 2016

US Judge Halts Hydraulic Fracturing Plan for Federal Lands in California

A US judge on 7 September halted a plan to allow hydraulic fracturing on public lands in central California, saying a federal agency’s environmental plan should have taken a “hard look” at the potential effects of the process.

A pumpjack brings oil to the surface in the Monterey Shale, California, in this file photo dated 29 April 2013. Credit: Reuters/Lucy Nicholson.

The ruling, by US District Judge Michael Fitzgerald, was at least the second setback in 3 years for fracturing in California and came as the Obama administration’s rules for hydraulic fracturing on federal lands have been tied up in another court.

The US Department of the Interior’s Bureau of Land Management (BLM), which periodically leases out land to private producers, offered a plan that would have allowed hydraulic fracturing on about a quarter of new wells drilled on some 1 million acres across central California.

The final outcome is not clear as Judge Fitzgerald asked both sides for a further briefing on 21 September as the case enters its remedy phase.

But, it could be similar to that a 2013 case in which a federal judge ruled that the BLM violated the National Environmental Policy Act when it issued oil leases in California’s Monterey County without considering the environmental dangers of hydraulic fracturing.

Since that ruling, the BLM has refrained from holding any lease sales in that area until it completes an environmental review of the risks of hydraulic fracturing, said one of the plaintiffs in the cases, the Center for Biological Diversity.

Reuters | 31 August 2016

Australian Explorer Looking at Grounds for Lawsuit Over Hydraulic Fracturing Ban

Lakes Oil, a junior oil and gas explorer in Australia, is considering the grounds it may have for suing Victoria state, after the government there permanently banned hydraulic fracturing and extended a ban on onshore conventional gas drilling to 2020.

Lakes Oil shares sank as much as 50% on Wednesday in their first trading since the ban was announced, and the stock was the fourth most active on the Australian exchange.

The move by the state in the country’s southeast means Lakes will not be able to go ahead with two tentative deals lined up in 2014 to supply gas from its Wombat onshore conventional gas field to US giant Dow Chemical and Australian food manufacturer Simplot.

“What the government’s done is just unbelievable. It’s unprecedented,” Lakes Oil Chief Executive Roland Sleeman said.

Jones Day via Mondaq | 23 August 2016

US Congress Reauthorizes Pipeline Safety Agency and Mandates New Pipeline Safety Requirements

On 22 June 22 2016, President Obama signed the PIPES Act of 2016 into law. The act reauthorizes the US Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration through fiscal year 2019. The act makes dozens of changes to the federal pipeline safety laws, including:

  • Requiring that DOT adopt, for the first time, federal minimum safety standards for underground natural gas storage facilities
  • Authorizing DOT to issue emergency orders to address imminent hazards posed by gas pipelines or hazardous liquids
  • Allowing a certified state authority to participate in a DOT inspection of an interstate pipeline facility
  • Increasing inspection requirements for certain hazardous liquid pipeline facilities located underwater
  • Imposing on DOT the duty to submit, on an ongoing and periodic basis, reports to Congress addressing the status of DOT’s yet-to-be completed actions implementing the 2011 Pipeline Safety Act

Go Skagit | 16 August 2016

Federal Agency Critical of Oil Refinery Safety Measures

A federal agency issued new oil refinery safety recommendations on 11 August that it says, if not followed, would leave the industry vulnerable to more incidents such as the explosion that killed seven workers in 2010 at Tesoro Anacortes Refinery.

The safety recommendations by the US Chemical Safety Board stem from a board investigation into the Anacortes explosion. In that incident, a device called a heat exchanger cracked and weakened over time even though safety measures aligned with industry standards, according to the board’s report.

The heat exchanger, the agency said, weakened because of what is called high-temperature hydrogen attack, which cracks and damages the equipment.

A statement from Tesoro issued on 12 August stated the refinery would “continue to review and evaluate the recommendations and guidance” in order to have “high safety standards for our employees and the communities in which we operate.”

JPT | 11 August 2016

European Commission Strives Toward Reasonable Shale-Gas Regulation

Following years of deliberation, the European Union (EU) released a recommendation on unconventional hydrocarbons and a related communication in 2014. Although these documents are not legally binding on member states, they are nevertheless of great significance because they indicate, for the first time, the current and likely future stance of EU institutions on the regulation of unconventional hydrocarbons. This paper traces the origins and development of these documents, which provide vital clues for the road ahead in European shale-gas regulation.

The potential threats of groundwater contamination, irresponsible disposal of flowback, the repercussions of significant land use, and increased emission of greenhouse gases have been named in recent scientific studies as main potential threats of shale-gas extraction. The current European law framework on environmental protection, mainly consisting of directives and regulations, entails some gaps and does not cover these issues comprehensively. Thus, the EU took recent action to develop shale-gas-specific regulation in order to close the identified gaps in the existing general framework.

Because the existing secondary law norms were elaborated at a time when shale gas extraction was virtually unknown in Europe, one would suspect that they entail provisions that do not sufficiently cover the specific potential threats of this technique. Indeed, there are a number of issues. Probably the most important one is that environmental impact assessments (EIAs) are not compulsory for shale-gas projects. Although member states have the right to require an EIA for specific, individual shale-gas projects, this discretion does not appropriately match the level of potential environmental hazards of shale-gas extraction.

The paper does not engage in an analy­sis of the pre-existing EU regulatory framework but focuses on the EU’s efforts to close the gaps in the framework that have been discovered previously. The EU introduced nonbinding, soft-law measures in this regard to create a level playing field among all member states in the form of the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication.

The paper highlights the main features of the recommendation and the communication and considers whether they are sufficient to close the gaps in the EU secondary law framework. Overall, the ­author concludes that these measures go a long way in addressing the perceived gaps, although they do not succeed in closing all of them.

Despite that rather favorable assessment, the recommendation and the communication have been criticized because of their legal guise as nonbinding soft-law norms. The fear that individual states could simply ignore the recommended measures if they do not fit in with their respective agendas on shale-gas extraction was expressed by some scholars. This peculiarity, they argued, could lead to a “race to the bottom” of environmental standards, as one member state may try to undercut the others  on environmental standards in order to attract investors.

However, this paper concludes that the described race to the bottom would be a rather short one and would not put the environmental standard in the EU into any real danger. The existing environmental directives and regulations of the EU constitute the ultimate bottom line, below which member states are not allowed to operate. Because of the high standard and elaborated nature of this bottom line, there currently is no real danger for environmental standards in Europe to be lowered to any significant extent. Moreover, member states would be ill-advised to take a chance and simply ignore these recommendations. A considerable number of legally binding EU directives started their existence as recommendations in the past. In line with this history, the 2014 Shale Gas Recommendation explicitly threatens member states with the introduction of legally binding norms if the EU is not satisfied with the domestic implementation of the recommendation. Thus, it is not unlikely that the recommendation could turn into an EU directive or regulation.

Although the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication go to some length in addressing current gaps, they do not cover all of them. Even more importantly, the 2014 measures are not legally binding on member states. However, this paper concludes that the nonbinding legal character could be an advantage because it provides member states with the greatest possible leeway to implement shale-gas regulation that is tailored to their individual needs.

Both documents recommend to member states that wish to engage in shale-gas extraction a set of measures and ­operating standards in order to create a level playing field among those states. The measures indeed go some way in closing some of the pre-existing gaps. The framework urges member states to carry out a strategic environmental assessment before issuing licenses that may lead to shale-gas extraction. The 2014 Shale Gas Communication entails a pledge of the EU to look into the issue of a specific best-available-technique reference document for shale-gas extraction under the Mining Waste Directive. This action is designed to ensure that waste is appropriately handled and treated and that the risk of water, air, and soil pollution is minimized.

Moreover, the framework ­reinforces the monitoring requirements under the Water Framework Directive and the Groundwater Directive. Baseline studies of shale-gas sites with regard to water, soil, and air quality, and other issues, should be conducted; their results should be benchmarked against future results of comprehensive monitoring exercises. Furthermore, the framework calls upon member states to apply the provisions on environmental liability to all activities taking place at a shale-gas-extraction site. This request shall be understood explicitly as including strict liability for greenhouse-gas emissions and overbearing use of land, which currently do not fall under the scope of the Environmental Liability Directive.

However, the European Commission failed to close some other gaps. Most notably, it called upon member states to ensure that an EIA is carried out for each shale-gas project but took no action to insert shale-gas projects into Annex I of the EIA Directive. This move would have made EIAs obligatory for all shale-gas projects, already at EU level. By simply passing the ball back to member states, the EU did not adequately address the main gap in EU EIA legislation.

However, the 2014 framework on shale-gas extraction does not actually implement the described measures but merely recommends to member states to take these measures into account. The framework has been molded into a recommendation and a communication, secondary EU law measures with no direct binding force.

The nonbinding nature of these EU regulations on shale-gas extraction became the main point of criticism. It was argued that nonbinding legislation is an ineffective way to create a level playing field for shale-gas extraction for all member states because individual states are allowed to ignore the measures outlined in the recommendation if the measures do not fit in with their respective agendas. This could lead to a race to the bottom of environmental standards, because one member state could try to undercut another on environmental-compliance costs for foreign investors. However, this race to the bottom could not last indefinitely because the existing ­environmental-law framework of the EU constitutes the bottom line for member states.

A review of the effectiveness of the framework shall be conducted within 18 months of its coming into force. Depending on the outcome of this review, the commission is going to determine if further, more-stringent, regulatory action on shale-gas extraction is required. In fact, this is the way in which a considerable number of directives came into force in the past.

Ultimately, the nonbinding character of the 2014 Shale Gas Recommendation is in some respects an advantage. The principle of subsidiarity, under which member states should take responsibility for matters that can be decided at their level, is honored. Subsidiarity must also be viewed in the context of proportionality. The principle of proportionality requires the use of nonbinding instruments (e.g., recommendations) in EU environmental legislation, wherever possible.