American Oil and Gas Reporter - July 2016 - 30

made it out of committee. That included
IOGA's top priority: HB 6165 and companion SB 5718, which would have reinstated a sales and use tax exemption for
oil field equipment that was repealed in
2003 during former Governor Rod Blagojevich's first term.
He says IOGA knew passing a standalone tax exemption would be a tall order.
"But we felt that if they had gotten further
in negotiating a budget, part of the deal
might have included some business incentives that could have included reinstating our sales tax exemption," Richards
explains. "We wanted to put ourselves in
a position to be part of a package for the
governor's turnaround agenda, but that
bigger compromise never materialized."
On the flip side, a couple anti-industry
bills also died. HB 5718 would have subjected the owner/operator of any pipeline
or facility that discharged oil or other
hazardous substance to fines up to $25,000
a day or $1,000 a barrel, according to an
IOGA summary. HB 6165 would have
mandated that public utility pipelines-
later amended to include petroleum
pipelines-maintain $100 million in general
liability and $25 million in environmental
impairment insurance.
Richards says both bills were part of
a 350.org-directed attack on energy-industry infrastructure that included rumors
of such things as requiring an environmental impact study conducted by a thirdparty with no ties to the industry prior to
laying any pipeline used to transport
fossil fuels.
Although neither bill received serious
consideration, IOGA kept a close watch
on them, Richard says. "We have seen
these things get traction in places you
wouldn't expect them to," he allows.
"Anything is possible in a legislature
such as ours, but we have some strong
allies of our own in the Democratic party.
Our downstate guys in particular get it.
They understand."
Amend Spacing Rules
One IOGA goal that turned out not to
be a legislative issue-a change in the
state's well-spacing rules-Richards mentions, was accomplished through rule
making.
He explains that generally in Illinois,
carbonate wells shallower than 4,000 feet
have been placed on 20-acre spacing
while those below 4,000 feet have required
40-acre spacing. "A peculiarity of our
basin is that a lot of our Middle Mississippian producing horizons, which have
been receiving all the interest of late, are
found right around 4,000 feet," he says,
creating density problems for operators
of wells completed slightly below the
30 THE AMERICAN OIL & GAS REPORTER

cut-off.
IDNR authorized 20-acre spacing for
carbonate wells as deep as 5,000 feet as
part of the high-volume hydraulic fracturing package it completed this spring,
he reports. "It was a simple fix," Richards
suggests. "We were pleased we didn't
have any objections."

He says IOGA continues to review
the state's horizontal drilling unit rules
with mineral law counsel, but acknowledges that the commodity price downturn
has lessened the impetus behind that.
"We continue to work on those things,
which may require legislation to accomplish," he says.
r

Conventional Well Rules Halted,
Unconventional Rules Advance
WEXFORD, PA.-Legislation to thwart
much-criticized regulations that covered
surface activities for conventional oil and
gas operations won the approval of both
chambers of the Pennsylvania General Assembly on June 15. The Pennsylvania Independent Oil & Gas Association reports
the passage of SB 279 is part of a deal between the legislature and Governor Tom
Wolf's administration that will allow the
portion of new regulations affecting unconventional operations to take effect without
any further challenges from lawmakers.
Wolf signed the bill on June 23, making
it Act 52 of 2016, PIOGA notes. It adds
that Act 52 also creates the Pennsylvania
Crude Development Advisory Council,
which the Department of Environmental
Protection must consult as it develops
policies and regulations impacting the
conventional oil and gas industry.
Before Wolf signed SB 279, PIOGA
President and Executive Director Louis
D'Amico noted that the legislation "was
approved by overwhelming majorities in
both the House and the Senate, and begins
an honest discussion about the importance
of Pennsylvania's traditional oil and gas
producers to the economy of many local
communities and whether additional regulation of the activities of conventional
oil and gas producers is necessary."
The rules applying to conventional
operations are designated Chapter 78,
while 78a is the unconventional side. According to PIOGA, a concurrent resolution
of disapproval for the Chapter 78 regulations had been moving through the legislature. Although the conventional portion
of the rule making was the primary source
of PIOGA's opposition, the group explains,
the way the rules were approved by the
state's Environmental Quality Board and
the Independent Regulatory Review Commission meant the disapproval resolution
would have stopped implementation of
the full package.
PIOGA says it and its allies consider
many facets of the regulations inappropriate for conventional operations. DEP
underestimated the regulations' financial

impact at the same time the department
failed to demonstrate the rules' necessity,
the group continues. Moreover, PIOGA
holds, certain provisions were contrary
to a state Supreme Court ruling, and the
agency acted contrary to state law in
promulgating the regulations.
"The process used by the DEP to promulgate the Chapter 78 and 78a regulations
was fatally flawed, and it is rewarding to
see that so many legislators from across
the commonwealth concurred with a plan
to restart that process for our conventional
producers with their votes in favor of this
legislation," D'Amico affirms.
The Chapter 78a rules must be reviewed
by the state attorney general before they
are published as final in the Pennsylvania
Bulletin. PIOGA indicates it will continue
a legal challenge to portions of Chapter
78a that relate to weighing impacts on
public resources as part of the permitting
process. The association explains that the
provisions in question rely on parts of
Act 13 of 2012 that have been rendered
invalid or unenforceable by the Pennsylvania Supreme Court in the 2013 Robinson
Township v. Commonwealth ruling.
PIOGA points to the departure of DEP
Secretary John Quigley as paving the
way for a deal on the Chapter 78 regulations between the leaders of the Republican-led legislature and the Democratic
Wolf administration. Quigley resigned
May 20 after revelations of a profanitylaced private e-mail to environmental
groups in which he chided them for not
doing enough to support the oil and gas
regulations, and strongly criticized Democratic lawmakers who sided with Republicans in opposing the rules for conventional operators.
❒

Coming In August
Cutting-edge developments in hydraulic fracturing techniques, as well
as new methods for managing and
treating water.

American Oil and Gas Reporter - July 2016

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