Municipal Regulation of Oil and Gas Operations

Municipal Regulation of Oil and Gas Operations Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director

Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director History of the Agricultural Law Center • Established through enactment of the Agricultural Law Resource and Reference Center Act on January 29, 1998 • House Bill 1345 (Act 11 of 1998) • Codified at 3 P.S. 2201-2209

Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director Legislative Findings • “The legal issues affecting agriculture . . . are becoming increasingly complex” • “At present there exists no central and effective system for compiling agricultural law materials . . . and disseminating this information to affected parties . . .” • “The alliance between [DSL and PSU CAS] . . . creates a unique opportunity.”

Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director Purpose of Ag Law Center • Section 2205 • “to serve as a resource on agricultural law and related issues for farmers and agribusinesses, attorneys, officials at all levels of government, community groups, and the public.”

Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director Dissemination of Information • Presentations • Educational Programs • Publications • The Agricultural Law Brief • Web site Resources

Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director The Agricultural Law Brief • Monthly e-newsletter • Addresses 5 legal developments from prior month that impact agricultural law in Pennsylvania

Agricultural Law Resource and Reference Center Ross H. Pifer, J.D., LL.M., Director Web-based Resources • www.law.psu.edu/aglaw • Resource Areas • Natural Gas • ACRE • Right to Farm • Clean and Green • Agricultural Area Security Law • Center Publications Library

Agricultural Law Resource and Reference Center Overview of Presentation • Pennsylvania Statutes • Regulatory Agencies • Municipal Regulation of Oil and Gas Operations • Legislative Issues

Agricultural Law Resource and Reference Center PA Oil and Gas Law Library • Statutory authority • 58 Pa. Stat. • Regulatory authority • 25 Pa. Code, chapters 78 and 79 • Case law

Agricultural Law Resource and Reference Center Pennsylvania Oil and Gas Laws • 58 P.S. §§ 1-701.7 • Chapter 1: Oil and Gas Wells • Chapter 2: Test of Illuminating Oil • Chapter 5: Interstate Conservation Compact • Chapter 7: Oil and Gas Conservation Law • Chapter 8: Underground Storage Act • Chapter 9: Pennsylvania Used Oil Recycling Act • Chapter 10: Coal and Gas Resource Coordination Act • Chapter 11: Oil and Gas Act • Chapter 12: Dormant Oil and Gas Act

Agricultural Law Resource and Reference Center Pennsylvania Oil and Gas Act • Organization of Oil and Gas Act • Chapter 1: Preliminary Provisions • Chapter 2: General Requirements • Chapter 3: Underground Gas Storage • Chapter 4: Eminent Domain • Chapter 5: Enforcement and Remedies • Chapter 6: Miscellaneous Provisions

Agricultural Law Resource and Reference Center Preliminary Provisions • Declaration of Purpose – Section 102 • Permit optimal development . . . consistent with protection of health, safety, environment, and property; • Protect safety of employees and facilities; • Protect safety and property of those near development; and • Protect natural resources

Agricultural Law Resource and Reference Center General Requirements • Section 201 – Well permits • Section 202 – Permit objections • Section 203 – Well registration and identification • Section 205 – Well location restrictions • Section 206 – Well site restoration • Section 207 – Casing requirements • Section 208 – Protection of water supplies • Section 210 – Plugging requirements • Section 212 – Well reporting requirements • Section 215 – Bonding

Agricultural Law Resource and Reference Center General Requirements • Permitting Requirements – Section 201 • DEP permit is required prior to drilling. • Notice must be provided to: • Surface owner; • Surface landowner or water purveyors who have water supply within 1000 feet of proposed well location; and • Owner / operator of underlying coal seams.

Agricultural Law Resource and Reference Center General Requirements • Permitting Objections – Section 202 • Surface owner has right to object to permit. • Objection must be filed with DEP within 15 days of receipt of notice and plat. • Objection can be based upon improper location of well or inaccurate information in permit application.

Agricultural Law Resource and Reference Center General Requirements • Well Location Restrictions – Section 205 • Wells cannot be drilled: • Within 200 feet from building or water well • Within 100 feet from spring, stream, body or water, or wetland larger than one acre • Waiver from location restrictions can be granted. • DEP may impose conditions to protect people, property, and waters.

Agricultural Law Resource and Reference Center General Requirements • Ground Water Protection – Section 207 • Casing is required when: • Drilling through fresh water strata; • Certain coal seams; • Brines must be disposed of in compliance with Clean Streams Law.

Agricultural Law Resource and Reference Center General Requirements • Protection of Water Supplies – Section 208 • Well operator must restore or replace a water supply that is polluted or diminished. • Presumption of liability • Well is presumed to have caused pollution of water supply located within 1000 feet of well. • Presumption can be rebutted by demonstrating pollution existed prior to drilling. • Presumption also is rebutted if landowner refuses permission to perform a predrill test.

Agricultural Law Resource and Reference Center General Requirements • Well Site Restoration – Section 206 • Surface estate must be restored from disturbances caused by drilling activities. • Well operator must follow erosion and sediment control plan at all times during drilling. • Equipment must be removed and well site restored within nine months of completion of activity. • Time period can be extended for six months. • Equipment can be stored on-site with landowner permission.

Agricultural Law Resource and Reference Center General Requirements • Reporting Requirements – Section 212 • Completion report must be filed with 30 days of the completion of drilling. • AMENDED REQUIREMENT: • Report containing production data must be filed with DEP every six months. • Report is published on DEP Web site.

Agricultural Law Resource and Reference Center General Requirements • Well Plugging – Section 210 • Bonding – Section 215 • Registration – Section 203

Agricultural Law Resource and Reference Center Oil and Gas Conservation Law • Declaration of Purpose • “[F]oster, encourage, and promote the development, production, and utilization” of Pennsylvania’s oil and gas resources; • Prevent the waste of oil and natural gas; • Permit the Commonwealth to “realize and enjoy the maximum benefit of these natural resources.”

Agricultural Law Resource and Reference Center The Oil and Gas Conservation Law does not apply to wells that do not penetrate the Onondaga horizon, meaning wells drilled into the Marcellus Shale generally are not covered by this law. Depth of Marcellus Shale Depth of Onondaga Horizon Image by: Robert Milici and Christopher Swezey, 2006, Assessment of Appalachian Basin Oil and Gas Resources: Devonian Shale–Middle and Upper Paleozoic Total Petroleum System. Open-File Report Series 2006-1237. United States Geological Survey.

Agricultural Law Resource and Reference Center Oil and Gas Conservation Law • Well Spacing • When a well is drilled into, or below, the Onondaga horizon, those “directly and immediately affected by the drilling” of the well can apply to DEP for a well spacing order.

Agricultural Law Resource and Reference Center State Agencies • Department of Environmental Protection (DEP) • Bureau of Oil and Gas Management • Department of Conservation and Natural Resources (DCNR) • Public Utility Commission (PUC) • Department of Transportation (PennDOT) • Department of Agriculture (PDA)

Agricultural Law Resource and Reference Center Federal Agencies • Susquehanna River Basin Commission (SRBC) • Delaware River Basin Commission (DRBC) • Federal Energy Regulatory Commission (FERC) • Environmental Protection Agency (EPA)

Agricultural Law Resource and Reference Center Oil and Gas Act § 602 • “Except with respect to ordinances adopted pursuant to the . . . Municipalities Planning Code, and the . . . Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and gas well operations regulated by this act are hereby superseded. No ordinances or enactments adopted pursuant to the aforementioned acts shall contain provisions which impose conditions, requirements or limitations on the same features of oil and gas well operations regulated by this act or that accomplish the same purposes as set forth in this act.”

Agricultural Law Resource and Reference Center Supreme Court Case Law • Huntley & Huntley v. Borough of Oakmont • Permissible municipal regulation • Range Resources v. Salem Township • Impermissible municipal regulation

Agricultural Law Resource and Reference Center Huntley & Huntley v. Borough of Oakmont • Features • Pertains to technical aspects of well functioning and ancillary matters rather than location • Purposes • Zoning considers “the community’s development objectives, its character, and the ‘suitabilities and special nature of particular parts of the community.’”

Agricultural Law Resource and Reference Center Huntley & Huntley v. Borough of Oakmont • “Overall restriction on oil and gas wells in R-1 districts [was] not preempted” by Oil and Gas Act.

Agricultural Law Resource and Reference Center Huntley & Huntley v. Borough of Oakmont • Bottom line: • Municipalities have some ability to limit / govern natural gas operations through zoning.

Agricultural Law Resource and Reference Center Range Resources v. Salem Township • Features • Various requirements overlapped with Oil and Gas Act • Purposes • “enabling continuing oil and gas drilling operations . . . while ensuring the orderly development of property . . .”

Agricultural Law Resource and Reference Center Range Resources v. Salem Township • “Not only does the Ordinance purport to police many of the same aspects of oil and gas extraction activities that are addressed by the Act, but the comprehensive and restrictive nature of its regulatory scheme represents an obstacle to the legislative purposes underlying the Act.”

Agricultural Law Resource and Reference Center Supreme Court Case Law • Huntley & Huntley v. Borough of Oakmont • Zoning restrictions permitted in R-1 district. • Range Resources v. Salem Township • Comprehensive regulatory scheme not permitted.

Agricultural Law Resource and Reference Center Huntley & Huntley v. Borough of Oakmont • Unresolved questions: • Are restrictions limited to R-1 districts? • How does geology affect permissible limitation?

Agricultural Law Resource and Reference Center Penneco Oil Co. v. County of Fayette • Commonwealth Court opinion • Issued on July 22, 2010 • Facts: County zoning ordinance allowed wells only by special exception in residential, industrial, and airport zones.

Agricultural Law Resource and Reference Center Penneco Oil Co. v. County of Fayette • Ordinance was reflection of traditional zoning principles rather than a comprehensive regulatory scheme. • Although there was some overlap of purposes of Oil and Gas Act, primary purpose of ordinance was to encourage compatible land use.

Agricultural Law Resource and Reference Center Preemption – Procedural Issue • Arbor Resources v. Nockamixon Twp., 973 A.2d 1036 (Pa. Commw. May 12, 2009) • Zoning ordinance provisions • Where a facility can be located • Operational ordinance provisions • How a facility may be technically designed and operated

Agricultural Law Resource and Reference Center Arbor Resources v. Nockamixon Twp. • Identify prohibited zoning districts • Set-backs, Lot size, proximity to habitat • Number of well sites per pad • Submission of environmental reports • Performance bonds

Agricultural Law Resource and Reference Center Arbor Resources v. Nockamixon Twp. • Prior precedent: • Where zoning regulations and operational regulations are inextricably connected, CCP has jurisdiction. • Holding: • Township ordinances do not contain operational provisions.

Agricultural Law Resource and Reference Center Arbor Resources v. Nockamixon Twp. • Rationale: • “Court is not persuaded that the challenged provisions . . . clearly regulated the operation of oil and gas drilling . . . in addition to location and physical configuration.” • “Challenged provisions are part of the land use process and not unique operational regulations that become pertinent only after land use approval is granted.”

Agricultural Law Resource and Reference Center Range Resources v. Blaine Twp. • Corporate Rights Ordinance • Corporate Disclosure and Environmental Protection Ordinance • Temporary Structure Fee Resolution

Agricultural Law Resource and Reference Center Range Resources v. Blaine Twp. • Motion to Dismiss filed by Township denied June 23, 2009. • Range has standing to challenge ordinance as Township cannot annul corporation’s constitutional rights. • Motion for Judgment on Pleadings filed by Range granted Oct. 29, 2009.

Agricultural Law Resource and Reference Center Range Resources v. Blaine Twp. • Oil and Gas Act preemption • Disclosure Ordinance forbids what the OGA permits. • OGA was intended to be exclusive regulator of oil and gas well development. • Disclosure Ordinance stands as obstacle to accomplishment of OGA purposes.

Agricultural Law Resource and Reference Center Road Bonding • Authority • 75 P.S. Chapter 49 • 67 Pa. Code Chapters 189, 191, and 193 • Reference • Timber Harvesting in Pennsylvania, Penn State School of Forest Resources

Agricultural Law Resource and Reference Center Road Bonding • Posting restrictions on roads / bridges • Requires engineering and traffic study • Local traffic • May exceed posted limit unless notice provided

Municipal Regulation of Oil and Gas Operations