Recent Developments & Emerging Issues In The Marcellus And Utica Shale Plays

Recent Developments & Emerging Issues In The Marcellus And Utica Shale Plays April 10, 2013 Copyright 2013 by K&L Gates LLP. All rights reserved.

Today s Topics Pennsylvania Regulatory Update Significant Matters Before the Courts and Agencies Local Regulation and Control A Brief Stop in Ohio Developing and Emerging Legal Issues

PENNSYLVANIA REGULATORY UPDATE

Pennsylvania Regulatory Update 25 Pa. Code Chapter 78 (Oil and Gas) Revisions Response to Act 13 of 2012 revisions to surface environmental protections February 20, 2013 PaDEP s draft regulatory language publicly released at Oil and Gas Technical Advisory Board meeting Industry continuing to identify/comment on areas of concern Timeline for adoption

Pennsylvania Regulatory Update (continued) Mechanical Integrity Assessment Guidance PaDEP developing Mechanical Integrity Assessment Flow Chart and Technical Guidance Document to categorize operating oil and gas wells based on risks they pose to human health and environment Interfaces with mechanical integrity monitoring requirements (25 Pa. Code 78.88) and stray gas investigation protocol (25 Pa. Code 78.89) Flow Chart builds upon regulatory requirements by requiring additional testing and remedial action for high risk wells. Industry push back comments by API, MSC and PIOGA Flow Chart on hold additional work group meetings will be convened

Pennsylvania Regulatory Update (continued) Erosion and Sediment Control General Permit 2 (ESCGP-2) Issued Dec. 29, 2012 - Replaces ESCGP-1 60-day application review process; 14-day optional expedited review process, but not available for all projects Defining the project to determine if 5 acre threshold exceeded aggregation Permittee must prepare series of plans E&S plan, post construction stormwater management/site restoration (PCSM/SR) plan, and preparedness, prevent and contingency (PPC) plan PaDEP ESCGP-2 training sessions announced on website Chapter 102 issues with temporary overland lines

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Pennsylvania Regulatory Update (continued) Air Permitting GP-5 Issued Feb. 2, 2013 Combined state-only plan approval and operating permit for midstream facilities May be used for midstream facilities which are not required to obtain permitting under federal programs applicable to major sources Applies state-created best available technology (BAT) requirements Incorporates applicable EPA standards Compliance with BAT compliance with federal standards incorporated have to comply with both Questionnaire and Checklist for Single Source Determination Aggregation

Pennsylvania Regulatory Update (continued) Air Permitting Proposed Exemption No. 38 PaDEP issued proposed revisions to Exemption No. 38 on Feb. 2, 2013, along with GP-5 Proposed Exemption No. 38 would provide state permitting exemptions to: Conventional wells, wellheads and associated equipment Non-conventional wells, wellheads and associated equipment Non-road engines defined in 40 C.F.R. Part 89 Non-conventional well exemption is conditional Comment period closed on March 19, 2013 Bottom line: If your well doesn t qualify for Exemption 38, then individual plan approval likely required

Pennsylvania Regulatory Update (continued) Draft Policy for Pennsylvania Natural Diversity Inventory PNDI Review database review done to determine if a project requiring PaDEP permits impacts threatened or endangered species Potential impact identified = need PNDI clearance letter from agency The PNDI Policy was released as a draft technical guidance document on November 10, 2012 comment period closed A key problem - extension of legal protections not authorized by statute to Special Concern Species

Pennsylvania Regulatory Update (continued) Emergency Response Planning at Unconventional Well Sites Act 9 of 2012 Regulations issued January 26, 2013 78 Pa. Code 78.55 Requires operators to identify well sites by GPS coordinates and signage Operators must submit emergency response plan to PEMA, PaDEP and County Applies to both new and existing unconventional wells Transition period: Section 78.55(f)(3) Registration of Addresses February 25, 2013 Section 78.55(f)(4) Signage Requirements July 25, 2013 Section 78.55(f)(5) Emergency Response Planning April 26, 2013

Pennsylvania Regulatory Update (continued) Final Draft Spill Policy February 20, 2013 Final Draft Spill Policy released at Oil and Gas TAB meeting Synthesizes requirements imposed on operators under regulations implementing Act 13 and Pennsylvania Clean Streams Law Three Main Components Preparing for and Responding to a Spill or Release PPC Plans Reporting a Spill or Release Must report v. Recommended reporting Remediation of a Spill or Release Act 2 process v. Alternative process

Pennsylvania Regulatory Update (continued) PaDEP NORM/TENORM Study PaDEP undertaking a comprehensive review of NORM/TENORM from all O&G activities Both conventional and unconventional formations Study is expected to take a year to complete

SIGNIFICANT MATTERS BEFORE THE COURTS AND AGENCIES

Significant Matters Before the Courts and Agencies Pending Pennsylvania Supreme Court Decision: Robinson Township v. Commonwealth Act 13 & Uniformity of Local Regulation

Significant Matters Before the Courts and Agencies (continued) Delaware Riverkeeper Network v. Tennessee Gas Pipeline Natural Gas Act Preemption Challenge to TGP s Northeast Upgrade Project FERC Certificate & Environmental Assessment Mitigation Measures Required State Permits PaDEP Permits Chapter 105 Obstruction and Chapter 102 ESCPG-1 Litigation on Multiple Fronts

Significant Matters Before the Courts and Agencies (continued) Ashley Funk v. PaDEP Attempt to Force Regulation Of Greenhouse Gases Funk Submits Rulemaking Petition to PaDEP Petition based in Article I, Section 27 of the Pennsylvania Constitution PaDEP Rejects Funks Petition Funk s Response to PaDEP Rejection: Appeals to EHB Brings Action in Commonwealth Court Example of tactics/things to come by environmental groups opposed to oil and gas development?

Significant Matters Before the Courts and Agencies (continued) Penn Future v. Ultra Resources Collateral Attacks on State Permitting Decisions The Issue & District Court s Decision Administrative Finality v. Exhaustion Should Not Be Able to Avoid Legal Effect of Failure to Appeal

Significant Matters Before the Courts and Agencies (continued) Albert v. PaDEP Regulation of Drill Cuttings Albert seeks to use of drill cuttings as replacement for fine aggregate in concrete production Claims: (1) not waste, and (2) alternatively, co-product PaDEP rejects both claims Are the cuttings waste? Are the cuttings a co-product? What about beneficial reuse?

LOCAL REGULATION AND CONTROL

Local Regulation and Control Subdivision and Land Development Well Pads and Midstream Facilities Traffic and Roads Impact Studies and Road Use Agreements Occupying a Right-of-Way Pipeline Ordinances Import Bans PIOGA v. Columbus Twp. Nuisance Suits

A BRIEF STOP IN OHIO

A Brief Stop In Ohio EPCRA Petition U.S. EPA Region V (March 5, 2013) Underground Injection Control Petition U.S. EPA Region V (March 14, 2013) House Bill 59

DEVELOPING AND EMERGING LEGAL ISSUES

Developing and Emerging Legal Issues Tort Suits Claims and Causation Sue & Settle A Growing Problem for Industry Unpublished Rules Expanding Regulatory Reach Through Policies

QUESTIONS?

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