American Oil and Gas Reporter - June 2014 - 162

ConventionSection: Pennsylvania Independent Oil & Gas Association
amend its Chapter 78 requirements for
surface activities associated with oil and
gas development, and to establish new
requirements for permitting, wastewater
processing and storage, site containment,
and other issues in light of the Marcellus
Shale natural gas boom.
But the contentious process could be
further complicated by the outcome of
this November's elections and questions
over how proposed changes will affect
the conventional operators who make up
much of PIOGA's membership, says association Chairman Gary Slagel.
"A lot of this is predicated on the existing administration being there throughout this process next year," says Slagel, a
government affairs specialist with Steptoe
& Johnson PLLC. "That very easily could
not be the case. We could have a new
governor. We could have a new DEP secretary who turns around and says it is
going to forge ahead-damn the torpedoes-and attempt to expedite this again
because the agency believes it needs more
control over the oil and gas industry."
The end result could be a litany of
lawsuits brought by industry, local governments, or environmentalists who feel
shortchanged by the process, he adds.
"This whole thing is likely going to
end up in court, even if it is finally promulgated," Slagel predicts.

PIOGA Concerns
In its comments submitted to DEP,
PIOGA raises concerns about the proposal
being incomplete when the first draft was
forwarded to the state Environmental
Quality Board in March. The association
also questions the impact of the proposed
rules on conventional operators, and expresses concerns about the lack of accurate
cost impact estimates for small businesses
(a category that PIOGA notes includes
nearly every Pennsylvania operator), requirements for identifying orphaned or
abandoned wells, and ambiguity over
how DEP will impose well permit conditions to protect so-called special concern
species-which the DEP defines as species
that are not listed as endangered or threatened, but simply appear in a database
that is populated by various commonwealth agencies, such as the Pennsylvania
Fish and Boat Commission.
PIOGA continues to insist that an updated draft regulation needs to be clear
on its application to unconventional operators and on exceptions for conventional
operators, Slagel says.
"We have seen a lot of statements by
the governor's office as well as the DEP
that this is not intended to apply to conventional operators the way it is being
read to apply," he says.
"DEP is making changes," Slagel ac-

More than 24,000 individual comments have been filed with the Pennsylvania Department
of Environmental Protection, reports DEP Deputy Secretary Scott Perry during the EOGCTS
panel discussion on the department's proposed amendments to Chapter 78, the state's oil
and gas regulatory framework. Participating in the panel that was held on the second day
of the conference, May 12-14 in Pittsburgh, were, from left, Ken Fleeman, ABARTA Oil &
Gas Co. Inc.; Jeff Walentosky, Moody & Associates Inc.; Jean Mosites, Babst Calland; DEP
Deputy Secretary Perry; and moderator PIOGA Chairman Gary Slagel, Steptoe & Johnson.

162 THE AMERICAN OIL & GAS REPORTER

knowledges. "We haven't seen those in
print yet. We are taking (DEP officials)
at their word that they understand the
critical concerns conventional operators
have, and are, in fact, going to make sure
these rules don't impact conventional operators. But at this point, we don't know
how far reaching these changes are going
to be."
IRRC Input
In an initial review, Pennsylvania's
Independent Regulatory Review Commission questioned whether the DEP
proposal should be applied equally to
conventional and unconventional operators, and recommended the DEP consider
different levels of treatment, PIOGA lobbyist Richard Gmerek, president of
Gmerek Government Relations, told association members at PIOGA's Eastern
Oil & Gas Conference and Trade Show,
held May 13-14 at Heinz Field in Pittsburgh.
There is also talk of introducing legislation to mandate different treatment
for conventional and unconventional wells,
he says.
Slagel notes that Pennsylvania law requires regulations to consider exceptions
and accommodations for small businesses,
explaining that the state defines small
businesses as companies with fewer than
500 employees. As PIOGA's comments
note, the proposed changes to Chapter
78 will affect not only mom-and-pop
companies, but larger, publicly held independents active in the Marcellus Shale
as well, he reflects.
"It's an issue all the way across,"
Slagel says. "In its regulatory impact
analysis, DEP failed to consider a number
of the issues it should have addressed in
terms of real impacts on businesses. And
it underestimates many of the issues it
did address."
The proposal includes many new obligations that increase operating and compliance costs without any clear justification
or environmental necessity, he insists. In
a number of areas, the DEP has failed to
adequately consider additional costs and
has not produced an analysis supporting
compelling environmental considerations,
Slagel adds.
If IRRC eventually rejects the agency's
final-form regulations for failing to consider its findings and recommendations,
the DEP can pursue legislative approval,
Slagel continues.
"The bottom line is this could become
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