Water Rights & Regulation in the Utica and Marcellus Shale Plays- Part 3 of 3

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.

 

Water Rights & Regulation in the Utica and Marcellus Shale Plays- Part 2 of 3

This is the second post in a three part series which discusses 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 post also reviewed two different strategies employed by companies when accessing water resources:

  1. Companies who look to access nearby water resources to reduce transportation costs; and
  2. Companies that invest upfront in significant water infrastructure to ensure access to reliable sources of fresh water over the long term.

This post provides an overview of water withdrawal regulation and water rights in the Midwest (Ohio, Pennsylvania and West Virginia).

Overview of Water Rights and Regulation

Water rights is a method of allocating water among users. Water rights in the United States is directly related to the availability of water. In states west of the Mississippi, where water is more scarce, water rights is governed by the prior appropriation doctrine (i.e. “First in time means first in line”).

In states east of the Mississippi, where water has been more abundant, water rights are based upon the principal that each holder of water rights is entitled to an equal share of water, while at the same time no landowner is guaranteed a certain amount of water.

Some states, such as Ohio, continue to rely principally on the doctrine of riparian water rights to regulate water use. Other states, such as Pennsylvania and West Virginia, have layered on top of the riparian rights doctrine specific regulations directed at the oil & gas industry designed to regulate water withdrawals.  

What has emerged in these Midwest states is a regulatory philosophy where gaps in regulation or limited regulations are back-stopped by the doctrine of riparian rights. Therefore, to understand how water withdrawals by the oil & gas industry are regulated, you must review both the specific regulations adopted by each state (the third post in the series) as well as gain an understanding of the riparian rights doctrine.

Riparian Water Rights

Ohio, West Virginia and Pennsylvania each have adopted the doctrine for water rights (i.e. riparian water rights associated with real property ownership).

The riparian water rights doctrine was in place in each state long before the resurgence in oil & gas development. These states have preserved the riparian water rights doctrine as the principal means of allocating water among users.  

What are Riparian Rights and How Does Water Get Allocated Among Water Users

Land qualifies as riparian if it fronts a stream, lake or river.  It is not just individuals who can own riparian water rights. Corporations and partnership can hold riparian rights if they own property that qualifies as riparian.

The core principle of the riparian rights doctrine is that all landowners that own property that front a watercourse have an equal right to the use of its water, provided that no one causes harm to another riparian water rights landowner. The right to use water is not absolute, but is limited by similar rights held by other riparian landowners. In other words, a riparian landowner may make any and all reasonable uses of water as long as they do not interfere with the other riparian landowners’ opportunity for reasonable use.

Basic Principals of Water Allocation under the Riparian Water Rights Doctrine

Case law has resulted in certain core principals in relation to riparian water rights.  These include: 

  • Preference is given to water uses for domestic needs;
  • A specific use of water is not unreasonable unless the use causes harm to another;
  • The fact that a use of water creates a perceptibly diminished flow of water does not automatically constitute an unreasonable use; and
  • Water transferred off the riparian land is either per se unreasonable or less favored than on land uses.

Who Decides Whether a Water Use is Reasonable?

Courts, not regulators, are the arbiters of water rights.  First, the Courts must consider the interest of the parties involved in the dispute over water.  Those interests include:

  • The interest of the person making the use
  • The interests of the person harmed by the use, and;
  • The interests of society as a whole in the use of the water.

After considering the interests of the various parties in a dispute involving allocation of water, Court then must weigh certain factors to determine if the use is "reasonable."  Some of the factors include:

  1. Purpose of the use;
  2. Suitability of the use to the watercourse;
  3. Economic value of the use;
  4. Social value of the use; and
  5. Extent and amount of harm the use causes

Riparian water rights, along with the associated factors which determine whether a use is reasonable, govern allocation of water among users. As discussed in the final post in this series, Pennsylvania and West Virginia have elected to go beyond allocations between users and have enacted specific regulations limiting water withdrawals by the oil & gas industry.

Water Rights & Regulation in the Utica and Marcellus Shale Plays- Part 1 of 3

World Water Day

March 22nd is World Water Day which was created, in part, to learn more about the issues that surround water.  This includes the importance of access to fresh water for both people and industry. In recognition of World Water day, I will be posting a three part series this week discussing the use of fresh water in oil & gas development in West Virginia, Pennsylvania and Ohio.

 

Surge in Oil & Gas Development Triggers Demand for Fresh Water

Since its inception the oil & gas industry has been a boom or bust industry. With high oil prices, national security concerns and advancements in technology, oil & gas development saw a major resurgence over the last decade. Areas of the country, such as the Midwest, which had not seen major development in many years, suddenly experienced a renaissance in energy investment.

The surge in oil & gas exploration and development in the Utica and Marcellus Shale Regions resulted in sharp increases in the demand for fresh water. Some companies addressed their needs by accessing the most readily available sources of fresh water, which out of necessity included small streams and tributaries. Other companies elected to invest millions of dollars in water infrastructure to ensure a consistent and reliable source of fresh water.

Due to the abundance of fresh water in the Midwest (as compared to other portions of the country) most states employed very little regulation of water withdrawals prior to the surge in fracking for oil & gas development. Limited regulation coupled with a spike in demand for fresh water triggered concerns regarding ecologic impacts as well as concerns pertaining to availability of water. Some states responded by adopting complex water management requirements. Other states relied principally on water allocation based upon riparian rights.

With the drop in oil prices, the Midwest has seen significant decline in oil & gas exploration in the last 12 months. The reduction in drilling activity has also lessened the demand for fresh water. However, it is only a matter of time before oil prices go back up. This temporary lull in drilling activity offers an excellent opportunity to analyze the current state of water rights and water withdrawal regulation in the Midwest.


The Need for Fresh Water in Oil & Gas Exploration

Hydraulic fracturing (fracking) is the technology that allowed oil & gas deposits in the Utica and Marcellus Shale regions to be accessible. Fracking is the process of injecting fluids, including large amounts of fresh water, under pressure into a well to create fractures in the rock that allow the gas to be released and recovered. The amount of fresh water used to develop an oil & gas well varies greatly depending upon the region, in the Midwest a typical well can utilize anywhere from 3 to 5 million gallons of water.

Which water resources are accessed for fracking is dependent on the location of the oil & gas well. Location of wells is driven by anticipated productivity. Once the oil & gas company determines the location of its well, it then tries to determine how it will source fresh water to allow for development of the well.

How the Oil & Gas Industry Selects Fresh Water Resources

Fresh water resources are largely selected based upon economics- the cost to move water from its source to the oil & gas well. The shorter the distance between the well and the fresh water resource,  the higher the strategic value of the resource. While reliability of the resource (i.e. abundance of fresh water) is an important factor, distance is still the most significant economic driver behind selecting which fresh water resources to access.

There are significant differences in the strategies employed by oil & gas operators when it comes to securing access to fresh water. Due to capital constraints, some companies are driven by short-term delivery costs and simply chose the most readily accessible resources. Other companies have elected to make long-term investments in major fresh water infrastructure to move water from large reliable sources to their operations.

As an example of the costs to move fresh water, in West Virginia it can cost $4-6 per barrel of water to truck water to the drill pad. In comparison, it may cost only .50 cents per barrel to pump water using pipes to the drill pad. However, piping typically requires large upfront capital costs that many companies find difficult to justify unless they have large and consolidated acreage under control. Furthermore, aggressive development must be planned in order to justify significant upfront investment in water infrastructure.

These distinct business strategies trigger a different array of legal issues. Companies electing to utilize the most readily available resources are more likely to access small streams and truck water when those streams are dry during summer and fall.  Companies that access the most readily available sources of water are more likely to trigger legal disputes with landowners regarding how much water is utilized or concerns regarding ecological impacts.

Those companies that elect to make major capital investments in water infrastructure face a very different set of legal concerns.  These companies must be assured that they will have uninterrupted access to an abundant water source in order to justify their expenditures. These operators are most concerned that their legal right to utilize the water is secure over the long term.

Next Post: Overview of Water Rights and Regulation
 

 

Oil & Gas Triggers Renewed Focus on Ohio Water Rights

Oil & gas development in Ohio has reinvigorated an area of law- water rights- that had laid mostly dormant for more than a century.  The need for fresh water for fracking has resulted in large investments in water infrastructure and competition among companies to secure access to prime sources of fresh water. 

According to the "Explore Shale" website, each drill site that utilizes hydraulic fracturing requires between 3 to 5 million gallons of water. The site states that, based upon 2011 information, there were 1,500 active wells in Pennsylvania which resulted in between 12- 20 million gallons of water used per day.  According to the Ohio Department of Natural Resources (ODNR), in 2015 Ohio had 1134 wells.  This likely correlates to approximately 8-15 million gallons of water used per day (extrapolating the Pennsylvania figures to Ohio). 

The increased demand for water has triggered renewed interest in how Ohio regulates water withdrawals and water rights of property owners.  Below is a quick overview of current Ohio law.

When is a water withdrawal permit required?

In 2012, the Ohio Legislature passed H.B. 473 which implemented the Great Lakes Compact.  The bill established new regulatory standards for water withdrawals from the Lake Erie basin.  From the map below you can see the most of the State lies outside the Lake Erie basin.  

The majority of oil & gas drilling activity takes place in the Ohio River Basin.  Therefore, the regulatory standards for new water withdrawals established in H.B. 473 typically do not apply to oil & gas play and will not be covered in this post.

In all other areas outside the Lake Erie Basin, Ohio has very limited regulations on water withdrawals. New withdrawals over 100,000 gallons per day are required to register with the Ohio Department of Natural Resources (ODNR).  See, R.C. 1521.16  

In the Ohio River Basin, a water withdrawal permit is not triggered unless the new or increased consumptive use exceeds 2 million gallons of water per day (averaged over any 30-day period - 60 million gallons per month).  See, R.C. 1501.33  Many operations elect to keep withdrawals below 2 million gallons per day in order to avoid triggering the need for a permit from ODNR.  

How much water can be used?

There are no regulations in Ohio establishing the exact quantity of water a property owner may use. Going back to the 1850's, Ohio has followed the "reasonable use" standard for determining the quantity of water a property owner may use.  In 2008, Ohio amended its constitution to include the reasonable use standard to govern water rights for both surface and groundwater. Article I, Section 19d states:

"Owners of riparian land have a property interest in the reasonable use of the water in the non-navigable lake or watercourse located on or flowing through their land." 

Key terms have been underlined.  First, the water rights are held by property owners whose property fronts a waterway (or the groundwater beneath their property).  Second, the right is a property right established by Ohio's constitution.  This gives more legal weight to the right.  Third, each riparian property owner has a right to "reasonable use" of the water.  

Ohio courts are left to decide when a property owner has used too much water.  The factors used by courts to determine "reasonable use" have been codified in Ohio law in R.C. 1521.17.  These factors include:

  1. The purpose of the use
  2. Economic value of the use
  3. Social value of the use
  4. Extent and amount of harm the use causes
  5. Practicality of avoiding harm to other by adjusting the use or the method of use of one person or the other

Each riparian property owner has an equal right to use of water.  Canton v. Shock, 66 Ohio St. 19 (1902) In order to sustain a claim that a riparian property owner's use of water has been unreasonable, it must be demonstrated that the use is causing "material and substantial injury" to another landowner.  See, Cooper v. Hall, 5 Ohio 320 (1832)

Note the age of the cases cited in the preceding paragraph- each is over 100 years old.  Due to the age of the case law, there is little guidance offered by the courts as to how today's water use issues will likely be resolved.  These vague standards provide little guidance to Ohio property owners or companies looking to secure access to water to support their business. 

Water use and water rights in focus

In 2010, Congress urged EPA to examine the relationship between hydraulic fracturing and drinking water resources in the United States.  In May of 2015, U.S. EPA issued its highly detailed analysis of the impacts on drinking water resources from hydraulic fracturing.  The report contained a detailed analysis of water use impacts on water supplies in the West as well as in the Marcellus and Utica shale areas.

While complex water acquisition regulations have long been in place in Western States, increased water withdrawal regulations have been initiated in the eastern Marcellus and Utica shale plays. For example, in the summer of 2012, the Susquehanna River Basin Commission developed strong new regulations regarding water withdrawals and use.  The Commission strengthened its regulations to require permits to constrain the volume, rate and timing of water withdrawals. 

This increased focused on oil & gas drilling and fresh water supplies in the Eastern States has resulted in the oil & gas industry investing millions of dollars in new water infrastructure to better secure reliable sources of fresh water.  As drilling activity continues to increase, Ohio is very likely to see increased focus on the issue of water rights, particularly in the Ohio River basin area.  

Aggregation of Oil & Gas Equipment for Federal Air Permitting

As part of President Obama's Clean Power Plan, the EPA recently released rule proposal directed at the oil & gas industry.  On August 27, 2015, U.S. EPA published its proposed rule for "single source permitting" for the oil & gas industry.  The comment period will close October 26, 2015.  

The proposed rule will have a major implications for the oil & gas industry.  The rule will make it much more likely for oil & gas operations to trigger federal air permitting requirements.  The purpose of the rule is to establish standards for when air emissions from oil & gas equipment, which may not be at the same location, should be aggregated.  By aggregating emissions from the equipment total emissions will be more likely to exceed federal permitting thresholds (i.e. New Source Review or NSR). 

The proposed rule has two options for determining adjacency for purposes of evaluating when oil & gas equipment should be aggregated (i.e. considered part of the same stationary source). The proposed rule targets oil & natural gas production (which includes natural gas compressor stations) and natural gas processing facilities.

Option 1- Adjacency will be determined based solely on physical proximity of the facility. The proposed rule states that emitting activities at the same surface site would be aggregated. The rule specifically states “surface site” includes “any combination of one or more graded pad sites, gravel pad sites, foundations, platforms, or immediate physical location upon which equipment is physically affixed.” Furthermore, any emitting equipment separated by less than ¼ mile will be aggregated.

Option 2- Adjacency will be based on whether the activities are “functionally interrelated.” While the rule is not specific on how this will be determined, it is likely that groups of equipment will be aggregated if they are dependent on one another.

Litigation Regarding Aggregation

In 2012, EPA lost a case on aggregation in the Sixth Circuit in the energy sector when it attempted to apply the functionally interrelated test. The Sixth Circuit Court of Appeals struck down EPA’s consideration of “functional interrelatedness” to determine adjacency. See, Summit Petroleum Corp. v. EPA, 690 F.3d 733 (6th Cir. 2012).

The Sixth Circuit reversed an EPA determination that a natural gas plant and associated wells were one “source” for purposes of Clean Air Act permitting.   Specifically, the court held that “EPA’s determination that the physical requirement of adjacency can be established through mere functional relatedness is unreasonable and contrary to the plain meaning of the term ‘adjacent.” Id. at 735.  EPA has issued an internal memorandum that it intends to continue to apply the functional relatedness test everywhere except the Sixth Circuit.

More recently, in the case of Citizens for Pennsylvania's Future v. Ultra Resources, Inc., (No. 4:11-CV-1360 Feb. 23, 2015), an environmental group challenged the State's (Pennsylvania DEP) issuance of eight separate air permits to oil & gas compressor stations. The compressor stations operate to compress gas from wells at nearby locations.  The compressor stations were not interconnected, but designed to work together (i.e. boosting pressure at a specific well and pushing gas to a common meter).  Perhaps most importantly to the Court, the compressor stations were about 1 mile apart within a five square mile area.

The District Court did not believe the compressor units emissions should be aggregated because the units were physically too far apart.  However, in dicta the Court disagreed with the Sixth Circuit by stating that functional interrelatedness could lead to or be a factor in deciding adjacency.  It also held that emission sources could be aggregated, even if physically distant from one another, if each source is part of a "physically connected process."

Conclusion

EPA's clear intent to look more closely at emissions from oil & gas operations.  Regardless of which option EPA selects following the public comment period, it will be more likely that such operations will trigger NSR permitting requirements.  

Ohio Warns Oil & Gas Companies to Comply with Federal Hazardous Reporting Requirements

Back in April of this year, a citizen group filed a petition that argued Ohio illegally tried to exempt oil & gas companies from complying with federal emergency planning and citizen reporting requirements under the "Emergency Planning and Community Right-to-Know Act ("EPCRA").  EPCRA requires companies that store certain hazardous chemical above certain thresholds to inform local emergency responders, known as "local emergency planning committees" (LEPCs), regarding the chemical storage.  The Act also makes certain information available to the public.   

In 2001, the Ohio General Assembly adopted Ohio Revised Code (R.C.) 3750.081, Compliance by Oil & Gas Facilities: Use of Electronic Database which provided an alternative to EPCRA's reporting requirements.  The State believed the state and federal reporting requirements were "overlapping" and, therefore, felt R.C. 3750.081 was necessary to eliminate potentially duplicative reporting requirements.  The law stated that the information required under EPCRA could be provided in the Ohio Department of Natural Resources (ODNRs) Division of Oil & Gas annual reporting requirements.

In response to the Citizen's petition, U.S. EPA determined that R.C. 3750.081 does not supersede the reporting requirements of EPCRA.  Therefore, U.S. EPA determined oil & gas well owners and operators must separately comply with EPCRA.  

On September 11th, the Ohio State Emergency Response Commission (SERC) notified oil and gas well owners and operators of U.S. EPA's determination.  It clarified that owners and operators must comply with the reporting requirements under EPCRA despite R.C. 3750.081.  The memorandum contained the following guidance:  

  1. EPCRA Initial Reporting Requirements-  If a well owner maintains any hazardous chemical for which a facility must maintain a Material Safety Data Sheet (MSDS) in quantities at or above 10,000 pounds, the owner must provide written notice to the SERC, LEPC and local fire department within 90 days after receiving a shipment or producing the substance at the site.  A lower reporting threshold applies to chemical classified as "Extremely Hazardous Substances (EHS)."
  2. Tier II Chemical Inventory Annual Reporting-  By March 1st of each year, a well owner must provide a chemical inventory report annually if, at any time during the calendar year, the owner stored more than 10,000 pounds of a hazardous chemical or between 1 to 500 pounds of an EHS (depending on the chemical). 
  3. Trade Secret Claims-  Any well owner who does not want to disclose a particular chemical for proprietary reasons, must follow U.S. EPA's procedures for asserting trade secret protection.  

Failure to comply with EPCRA requirements may result in enforcement by U.S. EPA, including civil penalties of up to $32,500 per day for violations of the Tier II chemical reporting requirements.  It is worth noting that U.S. EPA frequently takes enforcement for failure to comply with EPCRA reporting requirements.

If you believe you may have failed to report, it may be worth evaluating U.S. EPA Audit Policy.  If a company performs a voluntary audit of its compliance an discloses any noncompliance to U.S. EPA, the company may qualify for reduction in civil penalties.  You should consult your attorney before deciding whether to report noncompliance under the Audit Policy.

 

Ohio EPA Guidance On TENORM Oil & Gas Related Wastes

This past summer the Ohio General Assembly passed House Bill 59 which changed various aspects of the regulatory approach toward oil & gas waste material management.  One aspect dealt with under H.B. 59 was the regulation of oil & gas related waste that may be considered technologically enhanced naturally occurring radioactive material (TENORM).  H.B. 59 provided Ohio EPA the authority to adopt rules regarding the regulation of TENORM.

What is TENORM?

To understand TENORM, one must understand what constitutes NORM- naturally occurring radioactive materials.  NORM is radioactive materials naturally present in the environment (i.e. soils, air and water).  NORM emits low levels of naturally occurring radiation and is common to the environment.   

TENORM is naturally occurring radioactive material with radionuclide concentrations that are increased by or as a result of pat or present human activities.  TENORM is regulated by the Ohio Department of Health.   Oil & gas drilling can generate TENORM.

Which oil field wastes are NORM and which are TENORM?

Certain oil & gas related waste is classified as NORM and exempt from regulation.  As set forth in the Ohio EPA Fact Sheet on TENORM (see below), drill cuttings are considered NORM and not TENORM.  Drill cuttings are the mixture of rock, soil and other subterranean matter brought to the surface during drilling of oil & gas production wells.

Oil & gas drilling related waste classified as TENORM include tank bottoms, spent drilling muds and pipe scale.  Here is a description of each of those waste streams:

  • Tank Bottoms- material accumulated in storage tanks associated with the oil & gas drilling
  • Pipe Scale- the build-up of minerals, rocks, oil and other substances that accumulate on the inside of metal casing and tubing used for the production of oil and natural gas.
  • Drilling Mud-  fluid used to cool and lubricate the drill bit, helps stabilize the well bore during drilling and keeps fluids in the formation from entering the borehole

What do the new guidance documents from Ohio EPA require?

As of September 29, 2013, any landfill or solid waste transfer facility must receive sample results of any TENORM regulation waste to ensure that the material doesn't exceed the regulatory limit of 5 pCI/g above natural background.  The facilities receiving this material must maintain daily logs that identify the waste streams from oil & gas drilling and retain copies of the sampling.

A solid waste transfer facility or landfill that wants to accept TENORM with concentrations above 5 picocuries per gram must receive proper authorizations from ODH and Ohio EPA.  Facilities may receive the material if authorized for purposes of dilution.  However, material above 5 picocuries per gram cannot be disposed of in the landfill. 

Are rules likely to be adopted by Ohio EPA regarding TENORM?

Yes.  Ohio EPA has released a fact sheet soliciting early stakeholder outreach regarding the development of rules regarding TENORM at solid waste landfills and transfer facilities.  The rules would potentially govern:

  • Monitoring leachate and groundwater for radioactive material;
  • Establishing regulations to ensure that TENORM greater than 5 picocuries per gram above natural background is not accepted at the facility.  This include development of detection and prevention plans at landfills or solid waste transfer facilities.


What available guidance documents and fact sheets are available  from Ohio EPA on this issue?

  1. Fact Sheet: Drill Cuttings from Oil and Gas Exploration in the Marcellus and Utica Shale Regions of Ohio (October 2013)
  2. Fact Sheet:  House Bill 59- TENORM Acceptance at Solid Waste Landfills and Transfer Facilities;
  3. Guidance Document:  Impact of HB 59 on Solid Waste Landfills and Transfer Facilities
  4. Municipal Solid Waste Landfill- Daily Log of Operations (Draft)
  5. Solid Waste Transfer Facility- Daily Log of Operations (Draft)

 

Ohio Enacts More Restrictions on Oil & Gas Related Wastes

With the passage of Ohio's budget bill (House Bill 59), the State has enacted tougher regulation of oil & gas related wastes. Beginning January 1, 2014, a person is prohibited from storing, recycling, treating, processing, or disposing of brine or other waste substances associated with oil & gas exploration and production without a permit or order authorizing those activities. The relevant provisions are found in Ohio Revised Code 1509.22.

Under the old law, the Chief of the Oil & Gas Division at the Ohio Department of Natural Resources had to either adopt rules or issue orders regarding the management of oil & gas related wastes. H.B. 59 establishes a new permit program. In addition, the old law covered only storage and disposal of such wastes. Under the new law, it clarifies that a permit or order would be needed for recycling, treatment and processing of such wastes.

One aspect these changes are meant to address are operations that take flow back (brine) and allow for solids to settle out prior to disposal via injection well. It was somewhat unclear whether this was deemed "storage" under the old law. Now it is clear these operations are meant to be covered.

In line with the State's shift toward fees to pay for Agency services which has occurred over the last decade, the new law establishes a $2,500 fee for obtaining such a permit.

Finally, H.B. 59 clarifies the materials that are covered under new permit program. The old law covered: brine, crude oil, natural gas, or other fluids associated with exploration & development of oil and gas resources. H.B. adds to the "other fluids" category- well stimulation, production operations or plugging. It appears the intent was to ensure all waste material associated with either exploration, production or closing of a well are captured under the requirements. As Ohio continues to see development of the Utica Shale resources, it is likely additional changes and regulations will be enacted.

Ohio Court Finds State Law Preempts Local Oil & Gas Ordinances

Across the country more local governments are attempting to pass their own ordinances regulating or even prohibiting natural gas drilling in their jurisdictions.  Under home rule principals, the typical rule of thumb is that local ordinances are preempted if the state has a comprehensive regulatory scheme for that area.  However, various state courts have reached different conclusions as to whether local ordinances are banned by a comprehensive state regulatory scheme.  Now, an Ohio court has weighed in on this issue.

New York

Recently, in New York, two state courts upheld bans on natural gas drilling.  In one case, the town of Dryden amended its zoning ordinance to “ban all activities related to the exploration for, and production or storage of, natural gas and petroleum."  The ordinance was challenged by company owning thousands of acres of leases in the area. 

The Court said the ordinance was not preempted by state law governing oil & gas drilling.  The Court said the purpose of the state law is to “regulate any development or production of such resources which may occur in a manner that prevents waste, permits greater ultimate recovery of oil and gas, and protects the correlative rights of all persons."  See, Anschutz Exploration Corp. v. Town of Dryden

Pennsylvania

The Pennsylvania Supreme Court found a local ordinance governing drilling preempted while, in a separate case, upheld an ordinance governing where drilling could take place. The Supreme Court found a municipal ordinance that regulated the permitting of drilling as well as site restoration requirement preempted by the state Oil & Gas Act. See, Range Resources Appalachia, LLC v. Salem Tp., 600. Pa. 231, 964 A.2d 869, 876-77 (2009 The Court held the Act preempts all local regulation of gas well operations.

However, the Court upheld a ordinance which designated where natural gas drilling could take place. See, Huntley & Huntley, Inc. v. Borough Council of Borough of Oakmont, 600 Pa. 207, 964 A.2d 855, 866 (2009).  The Court said such an ordinance serves a different purpose that the state Oil & Gas Act.

Ohio

Now, an Ohio Court has reviewed the extent of preemption of natural gas drilling.  In State ex rel. Morrison v. Beck Energy Corp., Ninth Dist. Case No. 25953, 2013-Ohio-356, the Ninth Appellate District reversed a decision of the Summit County Court of Common Pleas and held that local ordinances of the City of Munroe Falls regarding oil and gas drilling were preempted by the comprehensive state regulatory scheme granting authority to regulate oil and gas drilling to the Ohio Department of Natural Resources (ODNR). As a result, the City was barred from enforcing its oil and gas drilling ordinances against Beck Energy.

In its “home rule” analysis, the Appellate Court found that the City’s permit, zoning and rights-of-way ordinances were exercises of the City’s police power, but also that Ohio Revised Code Chapter 1509 was a general law and provided a comprehensive regulatory scheme for oil and gas well operations in this state. The Appellate Court found that the City’s oil and gas drilling and zoning ordinances were in direct conflict with Ohio Rev. Code Chapter 1509 and thus preempted.

The Appellate Court said the City could enforce its ordinances regarding construction of rights-of-way, as long as it did not enforce them in a discriminatory manner against oil and gas well drilling.

The Court did not opine as to whether a local ordinance banning fracking would be preempted.  Similar ordinances were upheld in New York despite state drilling regulations. In this instance,the Munroe Falls zoning ordinance could be viewed simply as a permit to drill which was more clearly preempted by the state's oil & gas drilling regulations.