American Oil and Gas Reporter - January 2017 - 117

gas. People basically got a flat royalty
based on prices that already netted out
gathering, processing and transportation
costs."
Another matter likely to arise this legislative season, Weaver mentions, deals
with the state's call-before-digging program, known as PA One Call. He notes
that the program was given a one-year
extension last year to give legislators
time to consider the best course for its
future. He explains that lawmakers would
like to put the program under the Pennsylvania Public Utility Commission, which
PIOGA does not object to, provided PA
One Call embraces more transparency.
"One of our members who operates
both here and in West Virginia says his
company pays eight times the fees compared with West Virginia for the same
type and approximate number of lines,"
Weaver relates. "The reason is the unfair
manner in which PA One Call allocates
its much higher costs. These are issues
we believe our legislators aren't aware
of and should be."
Downstream Dynamic
In the years since the Marcellus Shale
play took off, support for some industryrelated public policy initiatives has lined
up according to whether office holders
represent areas with production, Slagel
observes. However, he suggests that may
be changing. As to why, he points to
Pennsylvania's new mid- and downstream
projects, such as the ethane cracker Shell
is building in Beaver County, Sunoco
Logistics' Marcus Hook natural gas liquids
industrial complex, and numerous pipelines
in the works.
"We are seeing some change in the
Pennsylvania dynamic," Slagel describes.
"For years, those representing Philadelphia
took impact fee money (paid by operators
of unconventional natural gas wells), but
did not show much support for the shale
gas activity. Now their areas are seeing a
direct benefit from the jobs and economic
drivers."
"Legislators in that area are starting
to get it," Weaver affirms. "The economic
benefits around these facilities are huge
and go beyond the direct jobs of building
and running them. A lot of ancillary and
tertiary jobs are going to come about because of that ethane cracker, just like
there are plenty associated with the Marcus
Hook facility."
Even though Governor Wolf campaigned on a pro-severance tax platform,
Slagel surmises that the governor does
seem to realize that more pipeline infrastructure is critical to making sure Pennsylvania enjoys the full benefit of its
Marcellus and Utica growth, and the gov-

ernor has sought to promote infrastructure
development through moves such as his
pipeline task force.
"If you look at something such as the
Mariner East Two Pipeline, which is
going to move natural gas liquids from
western to eastern Pennsylvania, the governor has been vocally supportive," Slagel
praises. "He recognizes that is part of the
whole plan to take full advantage of the
resource's economic benefit across the
commonwealth."
That shift has been subtle, he assures,
and the Pennsylvania Department of Environmental Protection remains a very
assertive agency with decidedly prescriptive rules. "Nothing comes easy from a
permitting standpoint in Pennsylvania,"
Slagel muses. "Some of the DEP's permit
reviewers go beyond making sure every
requirement is followed and every 'i' is
dotted and every 't' is crossed by challenging the professional judgment of the
engineers and scientists who have assembled the application. Multiple rounds
of technical deficiency letters are the
norm with some DEP offices, while other
offices don't try to redesign the application;
rather they just evaluate it based on
meeting the performance standards in the
rules. Unfortunately, a history of permit
challenges by citizen and environmental
groups adds to the complexity of the
process and has created a fear within
DEP that its decisions will be challenged.
"Look at the technical deficiency letters
DEP put on its website regarding the
Mariner East Two pipeline project," he
says. "DEP really went through those applications with a fine-tooth comb to identify
virtually every little tick and bump. I
believe DEP wants to make sure that these
permit reviews are conducted with full
legal and regulatory compliance in mind
so that the department basically can insulate
its decisions from subsequent challenge."
Regulatory Uncertainty
Along with DEP's pursuit of new
methane rules, the agency continues to
pursue a number of other new regulatory
standards, Slagel observes. In October,
the department's Chapter 78a rules for
surface activities at unconventional oil
and gas production sites finally became
effective. Portions of them have been
stayed for a time by the Pennsylvania
Commonwealth Court as they are litigated,
Slagel observes.
Meanwhile, PIOGA is pressing its
own 78a challenge before the state
Supreme Court regarding the regulations'
public resources provisions, he reports.
"We do not think the statute supports
some of the package's provisions," Slagel
explains.

Weaver notes DEP also is rewriting
its Chapter 78 rules for conventional
wells. "It basically is a do-over," he describes.
But even before the aboveground rules'
fate is known, Slagel says DEP is looking
at its Subchapter D rules, which deal
with everything below the surface. "That
includes casing, cementing, fracturing,
and induced seismicity," he lists. "I heard
a DEP briefing on what it thinks Subchapter D should deal with, and it is
chock-full of issues that we do not think
need to be addressed."
Weaver emphasizes that PIOGA does
not object to rational, necessary rules. To
that end, he notes that a 2012 STRONGER
(State Review of Oil & Natural Gas Environmental Regulations) review of Pennsylvania's oil and gas regulatory regime
revealed it to be among the country's
strictest. "Things have not let up any
since then," he assesses. "They have become stricter and more complicated."
That regulatory regime threatens to
dull the sheen of the drilling prospects
underlying the state, Weaver warns. "I
talked with a company that was looking
at acquiring some wells in Pennsylvania,"
he recounts. "Most of the questions its
representatives asked dealt less with taxes,
and focused more on regulatory matters
and what it took to get a permit. It is extremely telling when a company looking
to make a huge capital investment keeps
asking questions about our regulatory
climate. If we want to compete with other
states, we have to be cautious about overregulating."
❒

Atlantic Coast Prepares
To Start Virginia Pipeline
RICHMOND, VA.-Atlantic Coast
Pipeline LLC, which has proposed a 600mile transmission pipeline to move natural
gas to Virginia and North Carolina, says it
has signed a construction contract with
Spring Ridge Contractors LLC. Spring
Ridge is a joint venture of contractors Price
Gregory International Inc., U.S. Pipeline
Inc., SMPC LLC, and Rockford Corp.
Pending approval by the Federal Energy
Regulatory Commission, the Atlantic Coast
Pipeline would run from Harrison County,
W.V., through Virginia and then south to
Robeson County, in eastern North Carolina.
If approved, the company says construction
will begin in the fall of 2017.
Atlantic Coast Pipeline is composed
of four U.S. energy companies-Dominion,
Duke Energy, Piedmont Natural Gas and
Southern Company Gas. The joint venture
partners plan to build and own the $4.5
billion-$5.0 billion pipeline.
❒
JANUARY 2017 117

American Oil and Gas Reporter - January 2017

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