American Oil and Gas Reporter - November 2018 - 92

SpecialReport: Northeast Activity Profile

Issues Redeﬁne Regulatory Landscape
By Jean M. Mosites,
Keith J. Coyle
and Krista-Ann M. Staley
PITTSBURGH-The Marcellus and Utica shale plays account for some 30 percent
of total U.S. natural gas output, compared
with only 3 percent a decade ago. The
Appalachian Basin's rapid growth in natural
gas and natural gas liquids production has
occurred despite relatively low natural gas
prices, driven by greater well productivity
from improved drilling and completion
techniques, including longer laterals and
optimized well spacing.
Additionally, infrastructure build-out
in the region, including the development
of significant interstate pipeline projects
featuring large-scale transmission of natural gas and NGLs (such as the Rover,
Nexus and Mariner East 1 projects), has
allowed access to Northeast population
centers to increase demand for Appalachian-derived natural gas resources. Continued innovations in the industry, such
as improvements to water logistics, likely
will be important to reduce operational
costs and further improve efficiency to
maintain growth.
While the industry continues forging
ahead in the Marcellus, Utica and conventional Appalachian plays, the legal
landscape continues to evolve with everchanging federal and state environmental
and safety regulations, along with a variety
of local government requirements across
the basin. The federal and state courts,
legislatures and regulatory agencies continue to address a variety of issues that
affect all facets of oil and gas development
in the multistate region.
These decisions and developments not
only affect drilling and production, but
also the midstream and transportation infrastructure that is so critical to Appalachian producers' ability to market
their production. This article summarizes
developments in the legal and regulatory
landscape facing oil and gas producers
and midstream operators in the Appalachian Basin.
In October 2016, the Marcellus Shale
Coalition filed a petition in the Pennsylvania Commonwealth Court challenging
seven new provisions in 25 Pa. Code
Chapter 78a, a set of regulations applicable
only to the unconventional oil and gas
industry. The challenged provisions include
92 THE AMERICAN OIL & GAS REPORTER

those relating to impoundments, area of
review obligations, public resource considerations in the well permit process,
site restoration, spill remediation, and
waste handling and reporting. The Commonwealth Court preliminarily enjoined
four of seven counts on Nov. 8, 2016, a
decision that the Pennsylvania Department
of Environmental Protection appealed to
the Pennsylvania Supreme Court on June
1, 2018.
The Supreme Court upheld the injunction as to the three most important counts
to the industry-public resources, area of
review obligations, and re-permitting existing centralized impoundments-and reversed it regarding two counts (registration
of existing freshwater impoundments and
post-construction stormwater controls).
On Aug. 23, the Commonwealth Court
decided Count I on the merits, invalidating
provisions related to new "public resources"
and new "public resource agencies," which
would have included private marinas, McDonalds, and homeowners' associations.
The remaining six counts were scheduled
to be argued in the Commonwealth Court
on Oct. 17.
Clean Streams Law
In a case of first impression, the Pennsylvania Supreme Court rejected the
DEP's enforcement theory that penalty
liability under the Clean Streams Law
continues as long as any constituents of
a release remain in waters of the commonwealth, even years after the release
ended. In its March 28 ruling in EQT
Production Company v. DEP, the Supreme
Court held "[t]he mere presence of a
contaminant in a water of the commonwealth" does not violate the Clean Streams
Law since "movement of a contaminant
into water is a predicate to violations."
In other words, a violation of these
sections of the Clean Streams Law is
based on the entry of pollutants into
waters of the commonwealth, not the
presence or movement of constituents
within such waters. The Supreme Court's
opinion provides necessary clarification
concerning the scope of liability for penalties under the Clean Streams Law for all
persons, entities, businesses and industries
that are responsible for remediation, those
who would redevelop brownfield properties for reuse under Act 2, as well as
any property owner with a historic con-

tamination in groundwater that it did not
cause.
The decision affirms that penalty liability is distinct from cleanup liability
and recognizes that penalties are neither
appropriate nor effective in altering the
time that may be necessary for full remediation.
The Delaware River Basin Commission-which includes Pennsylvania,
Delaware, New Jersey and New York-
has published a proposed rule that would
ban high-volume hydraulic fracturing in
the basin and impose new standards for
exporting water from the basin for hydraulic fracturing and importing wastewater from oil and gas operations into
the basin for treatment or discharge. The
public comment period closed on March
30, with more than 8,600 public comments.
There is no schedule for a final rule.
On July 3, a panel of the Third Circuit
Court of Appeals vacated the dismissal
of a complaint that challenged the jurisdiction of the DRBC to regulate oil and
gas operations. The District Court had
denied the request for declaratory relief,
finding that the activities were subject to
oversight by the DRBC. The Third Circuit
remanded the matter for fact-finding to
determine the intent of the drafters of the
1961 compact regarding the scope of
DRBC's authority to review "projects," a
term that the Third Circuit found to be
ambiguous (Wayne Land and Mineral
Group LLC versus DRBC, No. 17-1800).
Pipeline Safety Regulations
The U.S. Department of Transportation's Pipeline and Hazardous Materials
Safety Administration continues to make
progress toward finalizing a rule making
that could reshape the nation's federal
safety standards for natural gas pipelines.
In April 2016, PHMSA issued a notice
of proposed rule making (NPRM) proposing extensive changes to the safety
standards and reporting requirements for
gas transmission and gathering lines. To
address certain mandates in the 2011
reauthorization of the Pipeline Safety Act
and related National Transportation Safety
Board safety recommendations, PHMSA
proposed new requirements, including:
 Verifying the maximum allowable
operating pressure and documenting the
materials in onshore steel gas transmission lines;
American Oil and Gas Reporter - November 2018

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