The shale-gas industry on Thursday filed a legal challenge to block controversial new rules intended to reduce the surface impacts of oil and gas drilling in Pennsylvania.
The Marcellus Shale Coalition, the trade group representing unconventional gas producers, on Thursday asked the Commonwealth Court to delay implementation of the new drilling regulations until its appeal can be decided. The new rules went into effect Saturday.
The legal action is the latest skirmish over regulation of the shale-gas industry, which critics say was able to grow rapidly in Pennsylvania under old rules designed for less-intensive drilling. The industry says that the state's laws already are among the nation's most stringent, and that the new rules add more burdens without improving environmental protection.
The shale coalition says it is not challenging the entire package of Department of Environmental Protection regulations, known as Chapter 78a of the Pennsylvania Code. The lawsuit, assembled by the Pittsburgh law firm Babst Calland, takes narrow aim at specific provisions that the industry says are vague or are unsupported by authorizing legislation.
"These shortcomings are immediately harmful to our industry because they affect our ability to conduct business and remain competitive," said David J. Spigelmyer, the president of the shale coalition.
The industry resisted the rule changes during the five-year drafting process, which in May claimed then-DEP Secretary John Quigley as a casualty after he tried to rally environmentalist support in a profanity-laced email. Gov. Wolf approved the new rules in June.
The new performance standards at oil- and gas-well sites ban open-air waste-storage pits, establish minimum distances that wells must be from schools and playgrounds, and add new rules for monitoring wells and cleaning up spills. The rules presume that any water contamination near a new well is the driller's fault.
They also set 100 feet as the general setback distance of a well from water resources, as well as requiring notification of state agencies if a well is within 200 feet of a public park or forest, and notification of a water utility if it is within 1,000 feet of an extraction point for public water.
Acting DEP Secretary Patrick McDonnell said last week that the revisions "increase protection for public resources and water supplies, improve data transparency, enhance access to relevant information for the public, and help provide business certainty to the industry."
The new rules apply only to the unconventional gas industry, which includes large operators that have transformed Pennsylvania into the nation's second-largest gas producer by using hydraulic-fracturing techniques to unlock oil and gas from deep shale formations.
Under legislative pressure, the Wolf administration set more lenient standards for the conventional gas industry, which targets shallow formations.
The industry, which has shrunk in a climate of low energy prices, contends that the new regulations would increase costs by up to 30 percent, or $2 million per well. The shale coalition says the provisions it is challenging might impose an initial cost of $40 million to $70 million, and up to $16 million a year thereafter.
The legal action specifically targets rules that it contends are not authorized by several laws, including surviving sections of Act 13, the 2012 oil and gas law that has been reviewed twice by the Pennsylvania Supreme Court.
The challenges include:
* A rule expanding the responsibility of drillers to avoid and protect threatened and endangered species, which the industry says goes beyond current state or federal law.
* A rule that requires operators to identify and plug any nearby abandoned well, which drillers say would require them to obtain access to property they do not control, and would impose plugging liability for wells the operators do not own.
* New rules governing centralized freshwater storage ponds, which the industry says are not authorized by Act 13.
* Other rules governing site restoration, spill-reporting, and waste-disposal permitting.
The new regulations are coming into play just as the shale-gas industry is showing faint signs of new life.
The number of drill rigs operating in Pennsylvania was 24 last week, up from 13 in June, but down from 114 in October 2011.
And the backlog of drilled-but-uncompleted Marcellus wells has declined from 893 in 2014 to 642 in August, according to the U.S. Energy Information Administration. A large inventory of wells that are awaiting connection to a pipeline would be a bearish signal for new drilling.