This is the final post in the series discussing water rights & regulation in the Utica and Marcellus Shale Regions.  The first post discussed how oil & gas companies select water resources to supply their drilling activities.  The second post discussed the riparian water rights doctrine which is followed in the Midwest.  This final post will provide an overview of the water withdrawal and use regulations in Ohio, Pennsylvania and West Virgina.

Ohio Water Withdrawal Regulations

Ohio is divided into two watersheds- the Ohio River and Lake Erie Watersheds. The Lake Erie Water shed is governed by a complex set of relatively new water withdrawal regulations that were adopted as part of the Great Lakes Compact. However, by far the heaviest concentration of oil & gas wells is located in the Ohio River Watershed where there is very limited water withdrawal regulation.

Ohio requires all withdrawals of greater that 100,000 gallons per day to register with the Ohio Department of Natural Resources (ODNR). See, R.C. §1521.16 Any consumptive use of more than two million gallons per day (mgd), averaged over any 30-day period (i.e. 60 million gallons per month), must obtain a consumptive use permit from the Ohio Department of Natural Resources. See, R.C. §1501.33. ODNR considers the use of water in fracturing to be a 100% consumptive use.

While many water withdrawal users have registered their withdrawals, companies have strategically limited withdrawals to stay below the consumptive permit threshold to avoid the permitting requirements. To date, ODNR has not issued a single consumptive use permit. Furthermore, ODNR does not have the regulatory authority to determine whether a user’s water withdrawals are “reasonable” under the riparian rights doctrine, at best ODNR can issue advisory opinions.

As a result of the limited regulation in the Ohio River basin, water withdrawals are principally governed by the doctrine of riparian water rights. Because ODNR cannot enforce “reasonable” use of water, one holder of riparian rights must sue another before courts can evaluate the reasonableness of a water withdrawal.  A demonstration of harm is also typically required before a use can be challenged as unreasonable.

As a result of Ohio’s limited regulations on water withdrawals, litigation is the primary mechanism to resolve disputes over water use. Courts are left with a vague series of factors to determine reasonableness.

Despite limited regulations, Ohio had not seen high profile instances where water withdrawals have resulted in ecological harm or harm to other users.  Industry in Ohio, not just the oil & gas industry, has asserted that limited regulations are appropriate due to fact no significant issues have arisen.

West Virginia Water Withdrawal Regulations

West Virginia has elected to ratchet up its regulation of water withdrawals in response to the increased demand for fresh water associated with oil & gas development. The State’s efforts culminated in 2013 with the passage of a series of more stringent regulations governing water withdrawals.

Title 35, Series 8 of West Virginia’s code contain new requirements applicable to any natural gas operator developing a horizontal well that will use more than 210,000 gallons of water. Such operators must submit a Water Management Plan as part of their permit applications submitted to the West Virginia Department of Environmental Protection (WVDEP). The water management plan must contain the following:

• Water source type and location;
• Anticipated volume of withdrawal;
• Dates when the withdrawal will be made (November through June withdrawals encouraged);
• Identification of any existing water uses within one mile downstream of the withdrawal location;
• Demonstrate that sufficient in-stream flow is maintained when a pass-by flow that is protective of the stream is preserved immediately downstream; and
• Methods to be implemented to minimize adverse impacts to aquatic life

The most complex component of WVDEP of the Water Management Plan development process is the requirement to demonstrate the adequate pass-by flow to protect aquatic life.

WVDEP encourages plan developers to allow the Agency to estimate the volume of water that will be available for withdrawal.  WVDEP utilizes information from the nearest USGS gauge and historic flow statistics are correlated to the withdrawal location. A target withdrawal rate is calculated that will not impact aquatic life in the stream. WVDEP may require installation of a gauge or in-stream flow measuring device to measure and monitor flow.

Impoundments are commonly uses to insure availability of water. WVDEP requires a separate water management plan be developed even for impoundments.

The regulations adopted by West Virginia are specifically tailored to the oil & gas industry. The regulations require prior approval of withdrawals and monitoring to ensure adequate flows are maintained.

The State still relies on the doctrine of riparian water rights to allocate water among various users. In WVDEP guidance related to development of Water Management Plans, the Agency is careful to note “approval of the withdrawal location conveys no property or riparian rights.” However, compliance with an approved water management plan would be strong evidence that a water user withdrawals are “reasonable.”

Pennsylvania Water Withdrawal Regulations

Pennsylvania’s water regulatory scheme is unique in that the state water regulatory authority is not entirely dependent on state regulation but also dictated by two federal interstate compact commissions- the Susquehanna River Basin Commission (SRBC) and the Delaware River Basin Commission (DRBC). Water withdrawals located outside of the either Commission’s jurisdiction are governed by state regulations.

The SRBC and DRBC require water allocation permits for withdrawals of surface water or groundwater greater than 100,000 gallons per day (gpd). The Commissions also have “consumptive use” rules that limit withdrawals during times of drought or that require the payment of fess to allow for release from reservoirs during low flow. The SRBC requires approval of any new or increased consumptive water use in excess of 20,000 gpd.

In 2008, SRBC began requiring oil & gas companies to obtain approval before withdrawing any amount of water, even if the withdrawal is less than their historical thresholds that triggered permitting. SRBC has the authority to tailor regulations to specific industry if the Commission believes the industry’s water-use activities could have an “adverse, cumulative adverse, or interstate effect on the water resources of the basin.”

While the SRBC and DRBC were first to adopt more stringent water management requirements for oil & gas development, by 2013 the State adopted similar water management requirements. Regardless of the basin in which water sources are located, Pennsylvania Department of Environmental Protection (DEP) requires an approved water management plan in connection with the gas well permit. 58 Pa.C.S. § 3211(m)

Water management plans in Pennsylvania are similar to those in West Virginia. Plans are required to address the following:

• The source of the water, include the major river basin where the source is located;
• Any water withdraw that exceeds 10,000 gpd in a 30-day period is required to register their withdraw with the State (Water Resources Planning Act);
• Development of a water use monitoring plan, including the methods utilized to accurately monitor the amount of water withdrawn on a daily basis;
• Methods for ensuring compliance with maximum rate limitations placed on withdrawals; and
• Methods to ensure compliance with applicable passby flow conditions (including use of upstream or down stream gaging station)

In terms of management of maximum water withdrawals, the water management plan must include a low flow analysis. Using data, the user must calculate the 7-day, 10-year low flow for the water source (referred to as the Q7-10). Any flow that is less than or equal to 10% of the Q7-10 flow is presumed to be not significant.

Between the three states discussed in this article, Pennsylvania has enjoyed the longest and most robust oil & gas development.  Pennsylvania also has the most stringent regulations on water withdrawals by the oil & gas industry.

The Future of Water Withdrawal Regulation

This three post series has provided an overview of water use in the oil & gas industry in Ohio, Pennsylvania and West Virginia. Here are some observations regarding the future of water withdrawal regulation in those states:

1. Industry in Ohio has strongly resisted increased regulation of water withdrawals.  It seems unlikely that additional regulations will be adopted unless there is a high profile incident involving ecological impacts or harm to other water users; 
2. Once oil and gas prices rise again (and they certainly will), the competition for water resources will lead to more scrutiny as to impacts on water resources;
3. With more robust regulation, riparian water rights will play a diminished role in determining what constitutes a “reasonable use” of water;
4. Property rights aspects associated with riparian water rights will play a more important role in securing access to strategic water resources; and
5. If the current downturn in oil & gas prices leads to consolidation within the industry, oil gas developers with investment in water infrastructure will have a strategic advantage due to the greater need for fresh water associated with consolidated and larger acreage followed by increased well development.