09 May 2017

Sidley Shale and Hydraulic Fracturing Report

Vol. 6, No. 19

Topics discussed in this week’s Report include:

  • Environmental groups sued to block drilling in Ohio national forest.
  • Pipeline companies took on “Buy American” directive.
  • Pennsylvania Supreme Court declined review of homeowner’s groundwater contamination claims.
  • Ohio legislature moved to take over oil and gas commission.
  • Colorado appealed ruling on drilling permit petition.
  • Pennsylvania named environmental prosecutor.

Federal

Environmental groups sue to block drilling in Ohio national forest. Four environmental groups filed a suit to stop oil and gas leasing in Ohio’s Wayne National Forest, the state’s only national forest. The suit claims that the U.S. Bureau of Land Management and the U.S. Forest Service failed to comply with the National Environmental Policy Act and the Endangered Species Act. Specifically, the groups claim that the use of hydraulic fracturing will threaten ground and surface waters used as drinking water supplies and fragment the forest. The agencies issued an Environmental Assessment in support of the leases concluding that there would be no significant environmental impacts. The leases cover 670 forest acres with industry expressing interest in another 18,000 forest acres overlying the Marcellus and Utica shale plays. The groups are asking the U.S. District Court for the Southern District of Ohio to invalidate the leases, vacate the Environmental Assessment and order the agencies to perform an Environmental Impact Statement.

Pipeline companies take on “Buy American” directive. In comments to the Department of Commerce, pipeline companies criticized a proposed rule that would require new pipelines to use steel made in the United States as it would increase costs and sabotage the Trump administration’s promise to promote oil and natural gas projects. A Jan. 24, 2017, Executive Order required the Commerce Department to develop a plan to require all new, expanded, retrofitted, and repaired pipelines to use only U.S.-produced steel “to the maximum extent possible.” Energy companies protested that U.S. steel is significantly more expensive and that U.S. producers lack the capacity to meet industry demands. These constraints, according to the comments, could delay or completely scuttle new pipeline projects. Other companies wanted some type of exemption for planned pipelines that have already purchased pipe from foreign producers. The Trump administration frequently complains of foreign steel price fixing practices and is reviewing whether steel imports could hinder national security under the Trade Expansion Act.

States

Pennsylvania Supreme Court declines review of homeowner’s groundwater contamination claims. The Pennsylvania Supreme Court will not review a Pennsylvania Environmental Hearing Board (EHB) decision denying a homeowner an alternative water supply. The homeowner claimed that a company’s hydraulically fractured gas well caused elevated levels of iron and manganese in his private water supply. He filed an action with the EHB, but the Board concluded that the iron and manganese most likely were naturally occurring. The homeowner appealed to the Commonwealth Court, arguing that the Pennsylvania Department of Environmental Protection fined the company over US$4 million for hydraulic fracturing fluid leaks from impoundments and that the company improperly withheld evidence from him regarding certain chemicals used at the well site. The Commonwealth Court upheld the EHB in October 2016 after an en banc rehearing, finding that the homeowner raised credible evidence of contamination but that the EHB was entitled to rely on evidence showing that any contamination from the well site could not have reached his drinking water well. The homeowner appealed the Commonwealth Court’s decision, but the Pennsylvania Supreme Court denied review without an opinion.

Ohio legislature moves to take over oil and gas commission. An Ohio state budget amendment would give the legislature power to appoint Oil & Gas Commission members, displacing the Governor’s appointment power. The Oil & Gas Commission has the authority to approve drilling and hydraulic fracturing in state parks, and while Gov. John Kasich signed the bill establishing that authority in 2011, he has never appointed any members to the Commission. The absence of members creates a de facto moratorium on hydraulic fracturing in state parks, one that Gov. Kasich has been outspoken about maintaining. The Ohio House of Representatives has frequently fought with Gov. Kasich over the past few years on its attempts to lift the moratorium while blocking the Governor’s plans to raise the state’s oil and gas severance tax.

Colorado appeals ruling on drilling permit petition. The Colorado Oil & Gas Conservation Commission voted unanimously to appeal a Colorado Court of Appeals decision backing an environmental group’s claim that the Commission must consider a petition for a proposed rule that would bar hydraulic fracturing until the Commission completes a safety review of hydraulic fracturing. The Court of Appeals rejected Colorado’s argument that its authorizing statute requires only a balancing of environmental protection and the promotion of oil and gas development, issuing a 2-1 decision holding that the Commission must prioritize public safety and the environment over development. That decision will now be appealed to the Colorado Supreme Court.

Pennsylvania names environmental prosecutor. Pennsylvania Attorney General Josh Shapiro named former state representative Steve Santarsiero to lead the office’s environmental crimes unit, promising a major increase in prosecutions for environmental violations. In his initial statement, Santarsiero called out hydraulic fracturing as his primary target for new criminal cases and claimed that he would rely on the Commonwealth’s Environmental Rights Amendment, a constitutional provision that received new attention in a 2013 Pennsylvania Supreme Court decision striking down portions of Act 13, the state statute that had established the prerogative of the state government to set certain oil and gas drilling requirements. Santarsiero previously represented environmental groups in filing citizen suits against industry, primarily with respect to Clean Water Act matters, and worked with former Gov. Ed Rendell to implement an executive order prohibiting natural gas leases in state forests.

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