American Oil and Gas Reporter - September 2019 - 31

Pa. Court Ruling Mixed For Industry
HARRISBURG, PA.-A Pennsylvania
appeals court found in favor of the oil
and gas industry on two points and took
the side of the state's Department of Environmental Protection on two other issues
in a long-running challenge to portions
of regulations aimed at unconventional
operations, the Pennsylvania Independent
Oil & Gas Association reports.
According to PIOGA, the Commonwealth Court's late July decision in Marcellus
Shale Coalition v. DEP addressed sections
of DEP's Chapter 78a regulations that:
· Require an operator to identify and
monitor abandoned wells within a certain
radius of a drilling location;
· Establish new requirements for impoundments used for storing water;
· Set standards for restoring well
sites after drilling; and
· Increase the frequency of reports
operators must submit to DEP.
The court granted summary relief for
the MSC on the first and third of those
matters and partial summary relief for
DEP on the second and last points, PIOGA
details.
"However," cautions PIOGA Vice President and General Counsel Kevin Moody,
"the court's decision must be read and
understood with three points in mind."
First, he says, while DEP sought partial
summary relief on six counts of the
MSC's petition-counts II (area of review),
III (on-site processing), IV (well development impoundments and centralized
impoundments), V (site restoration), VI
(spill remediation) and VII (waste reporting)-MSC sought summary relief
only on counts III, V and VI.
Second, Moody continues, summary
relief is appropriate only in the absence
of disputed issues of material fact and it
is clear that the applicant is entitled to
the requested relief under the law.
Third, Pennsylvania's Supreme Court
has held that a legislative rule regulation,
as distinguished from an interpretive rule
regulation, is "valid and binding upon
courts as a statute so long as it is adopted
within the agency's granted power, issued
pursuant to proper procedure and reasonable," as determined in a 2007 case,
Tire Jockey Service v. DEP, Moody explains. The court addressed and resolved
all three parts of the Tire Jockey test only
with respect to the cross-applications for
relief on Count V. The other applications
for relief either required the court to address only the first part of the test (DEP's
application) or did not require the court
to address the Tire Jockey test at all
because the court concluded there was

no current hardship that justified pre-enforcement judicial intervention.
Background
In October 2016, MSC filed a petition
with the Commonwealth Court seeking
pre-enforcement review of several provisions of then-newly adopted regulations
governing unconventional well operations,
Moody recounts.
In June 2018, the Pennsylvania
Supreme Court affirmed a November
2016 Commonwealth Court preliminary
injunction of three of the challenged regulations concerning public resources, existing centralized impoundments and area
of review (AOGR, July 2018, pg. 16).
The injunction as to the centralized impoundment and areas of review provisions
remains in place, PIOGA indicates.
In August 2018, the Commonwealth
Court invalidated, by summary judgment
in favor of the MSC, the substantive aspects
of the public resources regulations relating
to special concern species, playgrounds,
common areas of school property and new
public resource agencies. (AOGR, September 2018, pg. 18).
The Supreme Court quashed DEP's
subsequent appeal of this ruling as premature, Moody says.
Area of Review
Section 52a of the Chapter 78a regulations
requires an operator to identify and monitor
all active, inactive, orphan, abandoned, and
plugged and abandoned wells that have a
wellbore path within 1,000 feet of both the
vertical and horizontal potions of the operator's wellbore, Moody observes.
Meanwhile, he continues, sections
73(c) and (d) impose advance notice,
visual monitoring and remediation obligations in the event that well stimulation
causes communication with or alteration
of one of the wells identified in the area
of review survey. In the case of an incident
involving communication with an orphan,
abandoned or plugged well, the operator
is obligated to plug the altered well or
adopt it and place it into production.
In its July 22 decision, Moody says,
Commonwealth Court found that DEP
"failed to identify any statutory authority
to justify regulations that impose entry,
inspection and monitoring obligations
with respect to wells on the lands of
others and over which the stimulating
well operator has no control, particularly
in the absence of any actual pollution or
threatened pollution on those lands attributable to the stimulating well operator's activities."

Impoundments
According to Moody, Section 59b establishes new registration, construction,
security and restoration standards for
well-development impoundments. Under
the regulations, pre-existing well-development impoundments must comply with
the new standards or be restored to certain
preconstruction conditions. The MSC argued that Act 13 did not give DEP authority to promulgate regulations applicable to impoundments off well sites.
However, Moody reports, the court
said the DEP had the power to impose
new standards on impoundments at drilling
sites under laws other than Act 13. Nevertheless, he holds, the court's statement
that the MSC's Count IV "seeks a declaration of invalidity based only on its view
that Act 13, in isolation, does not authorize
the department to regulate 'freshwater
impoundments off well sites, including
well development impoundments'" is incorrect, as the MSC's challenge also
seeks relief under the second and third
parts of the Tire Jockey test.
Moody explains that the court's decision under the first part of the Tire Jockey
test leaves undecided MSC's challenge
under the Pennsylvania Constitution's
prohibition on special laws targeting specific entities or industries. The court said
that both DEP and the MSC failed to
present evidence and legal argument that
the oil and gas industry needed its own
regulations regarding impoundments when
compared with other industries that use
similar impoundments.
Section 59c requires a well operator
using a centralized impoundment either to
close the centralized impoundment according to standards in the regulation or to
obtain a permit under the Residual Waste
Management regulations, Moody details.
The court noted that the Solid Waste Management Act (SWMA) generally regulates
the storage, transportation, processing and
disposal of residual waste, and imposes a
permitting requirement on only residual
waste processing or disposal facilities, but
not on storing residual waste, he notes.
However, Moody continues, the court
also noted that the storage of residual
waste is addressed in Chapter 299 of the
Residual Waste Management regulations
and requires impoundments "that seek to
store residual waste in a surface impoundment must hold a valid permit
under The Clean Streams Law, not the
SWMA, and must comply with the Dam
Safety and Encroachments Act regulations." Accordingly, the court held that
the challenged provisions fall within
SEPTEMBER 2019 31
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