American Oil and Gas Reporter - February 2015 - 113

regulations are likely. "I suspect the new
administration will rethink everything,
and frankly, is likely to make it tighter
for the industry," he says. "Act 13's lack
of protections from local ordinances has
been a huge disappointment. That is a
serious problem in Pennsylvania, and
will continue to be for the foreseeable
future."
Act 13 may prove to have some longterm benefits for natural gas demand,
D'Amico points out. In early January,
then-Governor Corbett awarded $7.3 million in Act 13 funds to 18 companies and
organizations converting their heavy-duty
fleets to run on natural gas. Eligible vehicles for purchase or conversion in the
Natural Gas Energy Development program
include those that are fueled with compressed or liquefied natural gas, or bifuel
vehicles weighing 14,000 pounds or more,
media sources say.
Act 13
As shale gas development ramped up
several years ago, as required by Act 13,
the Pennsylvania Department of Environmental Protection moved to revise its
rules for the sector, Slagel says. By the
end of 2013, the department had issued
draft rules for comments. He reports the
response has been so massive that DEP
does not expect to release final rules until
late this year or early in 2016.
The legislature's instructions to DEP
on how to spend its appropriations for Act
13 rule making were included in Act 126
of 2014 (HB 278), the fiscal code legislation
that implements the commonwealth's general budget. Slagel says the legislation,
sponsored by Representative Matthew
Baker, R-Wellsboro, contains requirements
that DEP's revised regulations recognize
the significant operational differences between conventional and unconventional
gas activities. To satisfy that requirement,
he says, DEP in September advised the
Oil & Gas Technical Advisory Board that
it was splitting Chapter 78 into two sections,
with Chapter 78 covering only conventional
operations and Chapter 78a restricted to
unconventional wells. Among the revised
requirements, Slagel points out:
* Temporary pipeline and gathering
line rules, and site security requirements
will not apply to conventional operations.
* Inside pit slope requirements will
be steepened on conventional sites.
* Buried tank requirements will be
lessened on conventional sites.
PIOGA shares the belief that DEP's
process for implementing Act 126 is not
what the legislation intended or the regulatory review process requires, Moody
says.

"DEP hasn't yet provided justification
for the proposed changes to regulations
for conventional operations on many significant subjects, such as public resource
protections, security measures, diligence
for abandoned and orphaned wells, and
water replacement standards," Moody describes. "Since all of the proposed changes
were driven by concerns with unconventional operations, simply splitting the initially proposed regulations isn't legally
sufficient because the relevant comparison
for evaluation is to the existing regulations,
not between the conventional/unconventional proposals," Moody says.
"We believe the promulgation of Chapter 78 regulations for conventional operations should stop now and conventional
operations should continue to be governed
by existing regulations, and that any
changes considered for conventional operations must go through the regulatory
review process," Moody says.
SB 279, sponsored by Senator Scott
Hutchinson, R-Venango, would create
the Penn Grade Crude Development Advisory Council to make recommendations
to DEP concerning the impact that DEP's
regulations and policies have on Pennsylvania's conventional oil and natural
gas industry, Moody reports. Under the
proposal, the 17-member council would
include eight representatives from the
conventional oil and gas industry, including
two from PIOGA. "This bill supports
our view that regulatory changes for conventional operations should be driven by
concerns specific to conventional operations and initiated under the regulatory
review process," Moody says.
Pooling
A yearlong conflict about pooling ended in August when Hilcorp Energy Co.
withdrew its application to DEP to integrate its interests in the Utica formation
under provisions in the state's Oil and
Gas Conservation Act. The company had
reached agreement with almost all of the
landowners on its proposed 3,200-acre
drill site in northwestern Pennsylvania,
D'Amico says, but five refused to sign.
The company turned to DEP for an integration order in August 2013, and three
of the five landowners eventually filed a
legal challenge to the application.
D'Amico says he sees no sign that
Pennsylvania's leaders will support any
expansion of pooling for the shallower
Marcellus formation, which is not covered
by the Conservation Act. "It continues to
be very unpopular on both sides of the
aisle in Harrisburg," he characterizes.
"Republicans see it as a taking and some
Democrats see it as something that might

help the oil and gas industry, and they
cannot let that happen."
Under its original plans, Hilcorp proposed a 7,400-foot Utica Shale well. A
test well averaged 1.8 million cubic feet
of gas and 33 barrels of oil a day, the
company says, and leases had been negotiated on all but 35 acres.
In a statement, Hilcorp says it will
continue oil and gas activities on its
leased acreage in Pennsylvania's Lawrence
and Mercer counties, and adds it plans to
reorganize its production units to exclude
unleased tracts.
Terry Engelder, a Pennsylvania State
University geologist and professor, and
one of the two men who first publicized
the significant potential of shale gas development, was a member of the Marcellus
Shale Advisory Commission. Moody says
his workgroup recommendation proposed:
* The pooling law should be modernized to include the Marcellus Shale
and other deep unconventional geologic
formations excluded from the 1961 law.
* Surface impacts should be minimized through the proper placement and
spacing of well pads.
* The waste or stranding of natural
gas should be prevented to maximize job
and revenue-generating opportunities for
the commonwealth and its citizens.
"Amazing to me, this recommendation
was opposed by two members of conservancy organizations. It was adopted anyway, and although no legislation has been
enacted to implement it, we are hopeful
that this will change in this new legislative
session," Moody says.
Dealing With Washington
Federal regulations will be another
topic discussed at the winter meeting,
D'Amico says, with presentations covering
the Environmental Protection Agency's
changes to the Clean Air Act's New
Source Performance Standard Subpart
OOOO regulations and new requirements
governing methane emissions.
D'Amico warns that EPA efforts to
expand the definition of waters of the
United States under the Clean Water Act
also constitute a significant threat to
Pennsylvania operators. "Under EPA's
description, I think the swimming pool
in my backyard probably is part of the
waters of the United States," he quips.
"If that is enacted as planned, it will be
one of 1,000 cuts that potentially will
destroy the industry in Pennsylvania as
well as nationwide."
According to EPA, 60 percent of the
nation's streams and millions of acres of
wetlands lack CWA protection. The agency
says it and the U.S. Army Corps of Engineers are proposing new rules to provide
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American Oil and Gas Reporter - February 2015

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