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. 

What Does a Second Term for President Obama Mean for Environmental Regulation?

Through out the long and contentious election process the focus of the debate was getting America back to work.  Much of the debate centered on tax policy and budget cuts.  However, the President was accused of "over-regulation" which Mitt Romney argued cooled the economic recovery.

As part of the debate over regulation, environmental regulation was discussed.  The President was accused of waging "a war on coal."  Governor Romney also asserted that the President's climate change regulations represented an over-reach.

Now that the election is over and the President has won a second term, what does a second term really mean for forthcoming environmental regulation.  Most observers believe the President will be more emboldened in terms of environmental regulation now that he doesn't need to worry about re-election. 

Below are some of the areas in terms of environmental regulation that the Obama Administration will likely push forward with:

  1. Climate Change-  Some of environmental groups supporting President Obama hope that he will push forward with a major piece of legislation on climate change.  In the President's first term, Democrats came close to passing a cap-and-trade bill that would have put in place the largest new environmental program since creation of the EPA and the early environmental statutes (Clean Air Act, Clean Water Act, Superfund).  In reality, new legislation on climate change looks very unlikely.  The Re publican's still control the House and the margin is thin for the Democrats in the Senate.  Instead, the Administration will continue to implement climate change regulations under EPA's existing authority under the Clean Air Act.  This will likely mean lowering the carbon emission thresholds that trigger New Source Review and Title V permitting utilizing the Tailoring Rule.  It also means establishing emission standards for new major sources (i.e. New Source Performance Standards).
  2. Ozone-  The President came into office promising to undo the Bush era ozone standard of .75 ppm stating the standard was not based on science.  While the EPA proposed lowering the ozone standard it ended up punting on four separate occasions due to pressure from the business community.  Now it appears almost a certainty that the EPA will finally move forward with a lower standard of .70 ppm.
  3. Coal-Fired Power Plant Emission Reductions-  This past August the D.C. Circuit Court vacated U.S. EPA's Cross-State Air Pollution Rule (CSAPR) also known at the "Transport Rule." The Transport Rule was the second attempt by EPA to establish emission standards for existing coal-fired power plants.  The Transport Rule was blamed for potentially forcing the closure of a significant number of existing power plants threatening to driving up energy prices.  CSAPR was the Obama's Administration's effort to fix the issues the predecessor Bush era program known as the Clean Air Interstate Rule (CAIR) which was also struck down by the Courts.  In the Obama Administrations second term, EPA will once again attempt to fix this massive regulation.
  4. Fracking Regulation-  The natural gas industry continue to boom in Pennsylvania, Ohio and West Virginia.  The massive reserves found in the Marcellus and Utica Shale formations promise to provide home grown energy for a century.  Fracking is used to access these deep reserves that were previously not accessible.  Fracking uses deep wells and then breaks up the rock to release the gas.  Environmentalists are very concerned with the air emissions, water pollution and potential to contaminate groundwater from the fracking process. The Obama Administration moved slowly in putting in place new regulations in his first term.  EPA did establish federal air permitting requirements for new wells.  The Obama Administration also created a federal agency fracking working group to look at the process and recommend new regulations and coordinate between federal agencies.  It is very likely that in a second term will be proactive developing new regulation.
  5. Support for Renewable Energy-  The Obama Administration is likely to continue its strong support for renewable energy like wind, solar and biomass.  Its possible the President will explore a federal renewable energy standard similar to the renewable energy portfolio standards (RPS) imposed in many states.  An RPS mandates a certain percentage of power production must be provided by renewable energy sources.  It is possible the President will try and impose such a mandate nationally.  This still seems unlikely given the make up of Congress.  More likely is that the Obama Administration will continue financial support for the industry through tax breaks, grants and loans.
  6. Boiler MACT- In a second term, President Obama is likely to implement long-delayed emissions regulations for industrial boilers that apply to a whole array of industry. The  Boiler MACT (Maximum Achievable Control Technology), was proposed in 2004  before being delayed by litigation in the Courts.  EPA issued a new proposal in 2011 which was again delay due to controversy surrounding the sweeping new standards.  EPA may issue the final rules as soon as December.
  7. The Role of the Courts-  Many of the areas of regulation discussed above are involved in protracted litigation.  Challenges to climate change regulation are still pending.  EPA's re-write of CASPR will be challenged again.  There could be more challenges to the final boiler MACT rule.  The final ozone rule will almost certainly be challenged.  The petroleum industry will likely challenge any new fracking regulation.  Overall, the second term will not only see significant new regulation but major uncertainty as proposals, both new and old, will be challenged in the Courts.  Businesses like certainty.  In the world of environmental regulation that almost never seems to be the case.
     

 

Governor Signs Three Major Pieces of Environmental Legislation

Typically, environmental legislation may be passed in Ohio once every few years.   In fact, most environmental regulatory reform is done in small doses during the budget bill process.  In the last two weeks, Governor Kasich has signed into law three separate bills that including major environmental regulatory provisions. 

  • S.B. 315- Establishes new regulations for oil & gas drilling, including provisions regarding fracking;
  • S.B. 294- Contained a series of legislative overhauls to laws administered by Ohio EPA including: wetlands, solid waste, and underground storage tanks
  • H.B. 473- Implemented Ohio's Water Withdrawal Regulatory Program under the Great Lakes Compact

Below are some of the major highlights from each piece of legislation. 

H.B. 473- Ohio's Implementation of the Great Lakes Compact

The Great Lakes Compact required each State to pass implementation legislation to set up regulations governing withdrawls and diversions from the Great Lakes.  Under the Compact, the Great Lake States were given wide discretion for deciding when a permit would be needed and the criteria for issuance of a water withdrawal permit. Now that H.B. 473 has passed, for the first time Ohio, businesses may need to get a permit before withdrawing water from Lake Erie or its tributaries.

Last summer, Governor Kasich vetoed Ohio's first attempt at passage of the Compact implementation legislation- H.B. 231.   The bill was sharply criticized as being too business friendly. 

This time Governor Kasich signed the legislation after certain aspects of the water withdrawal permitting program were made more stringent. (See Prior Post) Here are the most notable changes from H.B. 231:

  • Withdrawal Triggers-  The thresholds for triggering a permit were significantly lowered.  Any withdrawal of the following size will trigger a permit: 
    • 2.5 million gallons per day (MGD) from Lake Erie or a recognized navigation channel;
    • 1 MGD from a river or ground water
    • 100,000 gallons from designated high quality streams
  • Adverse Impact-  If you trigger a permit, ODNR can't grant a permit if it determines the withdrawal will have an "adverse impact" on Lake Erie.  H.B. 231 defined adverse impact in the negative- any withdrawal from the Lake less than 90 mgd was presumed to cause no impacts.  This proved highly controversial and was jettisoned in H.B. 473.  Rather than try and define adverse impacts in the legislation, H.B. 473 simply defers to ODNR to define the term through rulemaking. 

In one significant way H.B. 231 and H.B. 473 are very similar.  Only impacts to Lake Erie are to be considered in determining whether a withdraw would have an adverse impact.  Impacts to the receiving stream itself are not evaluated, except possibly with high quality streams.  In the end, Ohio's program is still, in essence, a Lake Erie and not a stream protection program.

S.B. 294- Ohio EPA Omnibus Regulatory Reform Bill

S.B. 294 was dubbed the Ohio EPA regulatory reform bill by the Administration.  While it does contain some significant changes to certain Ohio EPA programs, the regulatory reform could hardly be described as controversial. 

Most of the changes tweak certain administrative aspects of Ohio EPA's programs. While it is true the legislation does not contain any major substantive regulatory reforms, there are some much needed reforms in the bill, including the following:

  • OCAPP Confidentiality- The Office of Compliance Assistance and Pollution Prevention is housed within Ohio EPA.  The Office serves as a free compliance assistance resource to businesses.  One historical impediment to use of OCAPP has been related to confidentiality.  Previously, Ohio law only protected as confidential inquiries related to air pollution compliance.  S.B. 294 changes this and provides confidentiality protection to all inquiries made to OCAPP regardless of subject matter (hazardous waste, solid waste, wetland permitting, surface water, and drinking water). 
  • Underground Storage Tanks-  S.B. 294 addresses a longstanding issue with regulatory overlap pertaining to clean up of underground storage tanks.  Prior to the legislative changes, a developer or business wishing to clean up their property under Ohio EPA's Voluntary Action Program (VAP) had to first deal with any underground storage tanks regulated by BUSTR.  Those portions of the property with BUSTR tanks had to be cleaned up first under BUSTR's clean up program before proceeding with the VAP.  This double regulation made no practical sense since VAP standards were designed to address this type of contamination.  S.B. 294 allows volunteers to address BUSTR USTs through the VAP thereby removing a significant hurdle that had delayed and increased costs at many brownfield and site clean ups.
  • Wetland Mitigation- S.B. 294 provides Ohio EPA the authority to establish an "in-lieu fee" program for wetland mitigation.  Instead of a developer needing to create wetlands on-site or buying credits at a wetland bank to offset its wetland impacts, the developer could write a check to pay for the necessary wetland mitigation.  If the program is established it could significantly streamline the wetland permitting process.

S.B. 315- New Regulation for Oil & Gas Drilling including "Fracking"

While S.B. 315 was dubbed as an all encompassing energy bill, it is largely tilted toward one form of energy- natural gas.  The most significant provisions in the bill place new regulation on the oil & gas industry, in particular "fracking."

For over a year, renewable energy companies and advocates feared Governor Kasich would do away with Ohio's fledgling renewable energy standards (RPS).  For many, the good news regarding S.B. 315 is what the bill didn't do- overhaul Ohio's RPS.  The bill did allow waste energy recovery systems to qualify for credits towards meeting Ohio's RPS, but the main structure of Ohio's RPS was left in tact.

With regard to oil & gas drilling, S.B. 315 did put in place major new regulations, including:

  • New Oil & Gas Permit Requirements-  The legislation requires more information to be submitted with permit applications.  This includes: agreements with local governments regarding road maintenance, identification of the proposed source of surface or ground water, as well as requiring water well sampling in the neighboring area prior to drilling.
  • Disclosure of Chemical Used in Drilling- Upon well completion, the well owner must supply information regarding the amount of products, fluids, and substances used to facilitate drilling or stimulate the well.  However, the bill includes a broad trade secret provision that exempts covered chemicals or materials from the disclosure requirements.
  • Insurance-  Requires the oil and gas well owner to obtain liability insurance in an amount not less than $5 million dollars for bodily injury or property damage.  The insurance policy must also include a "reasonable level" of coverage for environmental claims. 

 

U.S. EPA Releases New Air Emission Standards for Fracking

On April 17th, EPA issued new rules designed to reduce air emissions from oil & gas operations, including wells drilling using hydraulic fracturing ("fracking").  The new federal standards (New Source Performance Standards -NSPS) are seen as the first significant new federal regulation governing fracking. 

Some may wonder how gas wells generate air emissions.  When a horizontal gas well is drilled and fracking is used, large amounts of water and some chemicals are pumped down the well to break up rock in the shale formations in order to release the gas for recovery.  Prior to putting the well into production, the water and chemicals are removed.  This is referred to as "flowback water."

When flow back water is recovered it is accompanied by gases, including volatile organic compounds (VOCs) and methane, which in most cases, is simply vented to the atmosphere. 

Methane emissions from fracking has received significant attention recently due to the fact it is a potent greenhouse gas- 20 times more damaging than CO2 emissions.

EPA says that the oil & gas industry is the largest source of methane emissions in the U.S. making up approximately 40% of all methane emissions.  Controlling VOC and methane emissions is what prompted EPA to issue the new federal standards.

EPA Delay's More Expensive Controls to 2015

EPA seeks to reduce air emissions from fracking by requiring, initially destruction of the gas and then recovery through "green completion."  In a green completion, special equipment separates gas and liquid hydrocarbons from the flowback that comes from the well as it is being prepared for production. The gas and hydrocarbons can then be treated and used or sold.

EPA's draft rule would have mandated "green completion" as the best control technology.  However, industry voiced strong concern that the equipment wasn't widely available and requiring this technology too quickly could impact production.  In the final rule, EPA decided to delay the mandate for "green completion" until January 1, 2015.

Until 2015, producers must control emissions by using flares to burn off the VOCs and methane emissions. The flare must be able to eliminate 95% for the VOC emissions.

For more information:

 

President Issues Executive Order Creating Interagency Work Group on Fracking

On April 13th, President Obama issued an Executive Order creating a federal inter-agency task to coordinate efforts on oversight of horizontal well drilling and hydraulic fracturing for natural gas.  Method such as hydraulic fracturing (i.e. "fracking") have allowed access to massive new deposits of natural gas bring the price down for natural gas to historic lows.  While fracking has resulted in a huge increase in production, the drilling method continue to generate environmental concerns.

Thus far, the States have really taken the lead in development of new regulations and requirements for fracking.  In my last post I discussed Ohio's recent legislative proposal. Now, the federal government will attempt to coordinate its efforts regarding oversight and planning associated with unconventional natural gas drilling techniques such as fracking.  The Executive Order creates the inter-agency work group for the following purposes:

  1. Coordinate agency policy activities, ensuring their efficient and effective operation and facilitating cooperation among agencies, as appropriate;
  2. coordinate among agencies the sharing of scientific, environmental, and related technical and economic information;
  3. engage in long-term planning and ensure coordination among the appropriate Federal entities with respect to such issues as research, natural resource assessment, and the development of infrastructure; 
  4. promote interagency communication with stakeholders; and
  5. consult with other agencies and offices as appropriate.

The Work Group is made up of 13 federal agencies and departments, including: U.S. EPA, U.S. Dept. of Transportation, Dept. of Interior, Dept. of Energy, and others. 

It appears that industry supports the working group as a potential mechanism to avoid applicative regulation.  This from the Washington Post:

“We have called on the White House to rein in these uncoordinated activities to avoid unnecessary and overlapping federal regulatory efforts and are pleased to see forward progress,” said Jack Gerard, president and CEO of the American Petroleum Institute, the largest lobbying group for the oil and gas industry.

Gerard and other industry leaders met with White House officials Friday.

Dave McCurdy, president and CEO of the American Gas Association, said the new working group will help promote consistency among administration policies.

In it is interesting that the Washington Post and other news outlets reported the purpose of the working group as to "coordinate new regulation."  However, reading through the five stated purposes of the working group none of them even mention regulation. Rather, it appears as if the purpose of the group is to share information, not coordinate regulatory efforts.

In my experience working with such federal inter-agency workgroups associated with the Great Lakes, federal agencies were reluctant to give up their own turf.  Unless the Administration takes an active role in working group it seems very unlikely the agencies, on their own, will coordinate their regulatory efforts.. 


 

 

Governor Releases Bill to Regulate Shale Gas Drilling and Wastewater Disposal

Right now there is no other topic in Ohio that generates more news coverage than horizontal gas drilling (or "fracking").   It seems a day doesn't go by without a new news story regarding fracking or related developments.

Ohio has seen oil & gas wells installed for well over a hundred years.  However, until recently huge deposits of natural gas in shale formations deep beneath the ground were not accessible.  Now, using new technology (i.e. fracking) those deposits can be tapped.  The implications for Ohio are certainly significant.

Along with the tremendous opportunity that access to the Utica Shale deposits present, come concerns regarding protecting the environment, including ground water resources. Many have said that Ohio's out dated oil & gas laws need to catch up with today's technology.

Senate Bill 315

In order to address these concerns, on March 22nd Governor Kasich released Ohio Senate Bill 315 (S.B. 315).  While the bill is dubbed an energy bill and does touch on other subjects, its principal focus is new regulation of horizontal gas well drilling.

The bill also attempts to increase regulations on deep well injection as a means of disposal of massive amounts of fracking wastewater and/or brine.  In the aftermath of the controversy as to whether disposal of fracking wastewater led to earthquake(s) in Northeast Ohio, the bill adds to the growing list of new regulations governing this method of disposal.

Major New Requirements in S.B. 315 Governing Horizontal Wells or "Fracking"

  • Creates a new oil & gas permit to be issued by the Ohio Department of Natural Resources (ODNR) for "horizontal wells:"
  • The new horizontal well permit application will require new information that the old oil & gas permit applications never addressed, including:
    • A $15,000 permit fee;
    • Road Use Maintenance Agreements-  will require the applicant to provide a copy of an agreement with local government(s) concerning maintenance of roads, streets, and highways;
    • Source Water Identification- must identify the ground water or surface water source for the production of the well.  This is requirement applies to horizontal well permits because they use millions of gallons of water;
    • Residential Well Sampling-  must show the sample results of all water wells within 1,500 feet of the proposed well prior to commencement of drilling;
    • Insurance Coverage-  must obtain $5 million in coverage for injury to persons or property.  Also, must include a "reasonable level" of coverage for any pollution or contamination that may occur as a result of the drilling, operation, or plugging of the owner's wells. (See discussion below regarding insurance)
    • Disclosure of fluids used in wells- one area of controversy associated with fracking is the use of chemicals along with the water during the drilling and fracking process.  Under the bill, the owner of the well will have to disclose all chemicals used and the amount used during service, operation, and plugging of the well.  These compounds will be posted on ODNR's web page.
    • Fresh Water Impoundments-  ONDR is given rule making authority to regulate location and construction of fresh water impoundments used in fracking.

Major New Requirements Governing Deep Well Injection

  • S.B. 315 increases disposal fees and includes new regulations governing oil & gas injections wells, including:
    • Doubles the fee for each barrel of substance generated locally that is disposed through deep well injection;
    • Raises the fee by five times the amount (20 cents to $1 dollar) for out of state substances shipped in for disposal in Ohio deep wells.  This is likely to address the concern Pennsylvania is shipping its wastewater associated with fracking to Ohio for disposal;
    • Increases the information that must be submitted by a brine/wastewater transporter to be properly certified by the State; and
    • Owner of deep well must obtain list from transporter of brine or wastewater generated through fracking a list of all chemical compounds.

Key Issue under S.B. 315:  How Much Environmental Insurance will be Required?

The philosophy of the bill seems to be requiring data collection prior to commencing the fracking process.  What data is being collected?  The current levels of contamination, if any, in existing residential wells within 1,500 feet prior to horizontal drilling.  Followed by disclosure of all the chemicals compounds used in the fracking process.  

The hope is that the information  (i.e. baseline record) could be used to determine if fracking contaminated groundwater or drinking water supplies.  Simply compare the old well samples to new sample, post fracking, and see if any of the disclosed chemical compounds are detected.

Assume it is demonstrated that contamination did occur as a result of fracking.  The bill requires a "reasonable level" of insurance coverage be provided for environmental contamination.  The determination of "reasonable" will be key issue.

It is likely (and would make good business sense) if you were an oil & gas driller to use the corporate form to try and limit liability if something goes wrong.  This means it is quite possible the only funds that may be available to address contamination will be insurance proceeds.    Therefore, how much insurance coverage is required will be a key issue. 

Ohio EPA Issues "Faster Air Permit" for Shale Gas Sites

In anticipation of an influx of shale gas drilling operations coming to the State, Ohio EPA decided to try and get ahead of the curve by developing an expedited permit to cover air emissions from such operations.

On February 1st, Ohio EPA issued a final air pollution general permit to cover production operations at shale gas well sites. By issuing the general permit, Ohio EPA is providing a path for shale gas operators to received expedited regulatory approval necessary to cover air emissions.  Without the general permit, operators must obtain an individual air permit which can take longer and may be less certain as to terms and conditions for operations.

Applicants that meet the criteria, terms and conditions of the permit can expect to receive approval within weeks of applying.  An individual air permit can take six months to issue.  The process is expedited because all the terms and conditions of the permit are established up-front instead of after the application is filled.

The only issue with general permits is that they are one-size fits all templates.  Meaning, you must be sure that your specific operation can meet the terms and conditions cause they can't be changed or modified to meet your specific circumstances.  Company's that cannot live with the general permit terms & conditions can still apply for an individual air permit.

The Agency received many comments from both industry and environmental groups/concerned citizens on the draft permit released in October.  The Agency announced that it had modified the permit to address the following concerns:

  • restricts normal flare operation, increases total flare capacity and allows for emergency flaring to safely burn gas;
  • requires installation of newer spark ignition internal combustion engines if total horsepower is to exceed 1300;
  • removes a limit on the number of storage tanks and replaces it with a limit on the total volume of material stored in tanks;
  • increases allowable dehydrators from one to two; removes unpaved roadways as an emissions unit (it is covered under another existing general permit); and
  • removes the natural gas micro turbine emissions unit (it was determined to be exempt).

Study Reveals Environmental Issues in Oil & Gas Leases

There was an excellent article in the New York Times discussing the issues homeowners and landowners are facing when signing oil & gas leases- Learning Too Late of the Perils in Oil & Gas Leases

The Times reviewed 111,000 oil & gas leases from Ohio, Pennsylvania, New York Texas and West Virginia.  It found many of the leases contained very unfavorable terms for landowners and homeowners who sign up with drilling companies.  Many of the issues pertain to the potential environmental problems that may happen once drilling commences or even after work is finished at the property.

Concerns identified included:

  • less than half the leases compensate for water contamination;
  • many lack language to protect against livestock and crop damage;
  • grant driller broad rights to build road, store chemicals and even leave waste in place once drilling has ceased.

Not discussed in the article are other issues that need to be considered by landowners when negotiating leases. 

First, even if the lease contains language which entitles the landowner to compensation if environmental contamination or other property damage occurs, does the company really have the resources to pay?  Its possible the corporate structure is established to prevent liability from flowing to the parent corporation.  

Second, what happens if you neighbors sue you claiming environmental contamination, nuisance or property damage?  Does the lease provide any guarantee that your attorney costs will be paid? 

Landowners are constantly hearing about the opportunities associated with the Marcellus and Utica shale deposits.  However, are they protecting themselves properly in the event something goes wrong?