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 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


EPA Release New National Enforcement Initiatives for 2017-2019

On February 28, 2016, U.S. EPA publicly announced its priority enforcement areas (EPA National Enforcement Initiatives or NEIs) for the next three years (fiscal years 2017-2019).  The announcement provides keen insight into how EPA plans to allocate its enforcement resources in the coming years.  

 EPA describes the NEIs in the following manner:

"Every three years, EPA selects National Enforcement Initiatives to focus resources on national environmental problems where there is significant non-compliance with laws, and where federal enforcement efforts can make a difference"

EPA has elected to keep five of its current enforcement initiatives, expanding some of its efforts, as well as add two new initiatives.  This brings the total priorities to seven for fiscal years 2017-2019.  The NEIs take effect on October 1, 2016. 

A brief summary of each NEI is provided below.


  • Reducing Air Pollution form the Largest Sources-  EPA's New Source Review (NSR) initiative has targeted cement, glass and acid plants.  However, its principal target has been coal fired power plants.  According to U.S. EPA statistics, from FY 2010 to FY 2015, of the 800 facilities inspected, EPA has increased the number of facilities with enhanced air pollution controls from 41% to 77%.  By maintaining this enforcement priority, EPA will likely focus on compliance with existing decrees as well as target new industries.
  • Cutting Hazardous Air Pollutants - EPA is expanding this initiative for the FY 2017-2019 to focus its efforts on two additional source categories-
    • Large product storage tanks used by refineries,chemical plants and bulk storage facilities- EPA will likely used enhanced inspection techniques, such as infrared cameras to looks for leaks of volatile organic compounds (VOCs) from these storage units;
    • Hazardous waste generator and treatment, storage, and disposal facilities-  the focus of this expanded initiative will be to address hazardous waste tanks, surface impoundments, or containers, as well as related hazardous waste treatment equipment.

Energy Extraction

  • Ensuring Energy Extraction Activities Comply with Environmental Laws

The attached chart shows the dramatic increase in the number of inspections and enforcement actions related to energy extraction.  

EPA has increased the number of inspections from 361 in FY 2011 to between 600 to 700 per year.  Interestingly, the number of enforcement actions has not significantly increased when comparing FY 2011 to subsequent years. 

It is also interesting that EPA maintained this initiative despite the recent dramatic economic downturn in the energy sector.


Hazardous Chemicals

  • Reducing Pollution from Mineral Processing Operations- Focus is on releases from mining operations that EPA believes threaten drinking water, surface water as well as cleanup mining sites.
  • Reducing Risks of Accidental Releases at Industrial and Chemical Facilities (NEW)-  The focus of this new initiative will be compliance with Risk Management Plan (RMP) rule.  RMPs are required for facilities that store extremely hazardous materials.  RMP is required under Section 112(r) of the Clean Air Act.  Facilities are required to have plans that inventory the materials and have a plan to implement in the event of releases or emergencies.  Plans are required to be updated every five years. It is likely EPA will look for facilities that have failed to comply with the RMP rule or those facilities with outdated plans.


  • Keeping Raw Sewage and Contaminated Stormwater Out of Our Nation's Water-  EPA has largely addressed municipal wastewater treatment plants (WWTPs) with combined sewer overflows (CSOs) and/or sanitary sewer overflows (SSOs).  This initiative was renewed most likely to focus on compliance with existing consent decrees.  In many cases, cities are facing the most expensive parts of their compliance schedules.
  • Preventing Animal Waste from Contaminating Surface and Ground Water- EPA has been focused on inspections and enforcement of Combined Animal Feeding Operations (CAFOs) for a number of years.  Since 2011 it has conducted over 1,800 inspections and concluded 217 enforcement actions under the Clean Water Act.
  • Keeping Industrial Pollutants Out of the Nation's Waters (NEW)-  EPA will be focusing on certain industries that it believes contribute a larger portion of nutrient and metal pollution. Those industries include chemical and metal manufacturing, mining and food processing.  On its web-page, EPA signals that it will look to compliance with NPDES permits and electronic reporting of effluent violations (eDMRs) to initiate actions.

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."


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 High Court Ruling on Local Authority Over Fracking More Limited Than Portrayed

Municipalities across the country have attempted to place restrictions on the use of fracking associated with oil & gas drilling.   Most cases involve outright bans on fracking or more rigorous permitting requirements.    Ohio was no different.  Other states, like Pennsylvania and New York, both allowed local regulation of fracking.  Ohio was different, sort of.

The Ohio Supreme Court issued its decision in State ex del. Morrison v. Beck Energy Corp., ruling 4-3 that the City of Munroe Falls could not stop Beck Energy Corp. from drilling based on non-conformance with local ordinances.  Justice French wrote the decision for the majority:

R.C. Chapter 1509 regulates oil and gas wells and production
operations in Ohio. While it preserves certain powers for local governments, it
gives state government “sole and exclusive authority” to regulate the permitting,
location, and spacing of oil and gas wells and production operations within the
state. R.C. 1509.02.

Ohio has Home Rule, which grants local governments the power to adopt local regulations.  Ohio's Home Rule provision is set forth in the Ohio Constitution, Article XVIII, Section 3, which states:

"Municipalities shall have authority to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws."

It is the last part of the provision which is key- "as are not in conflict with general laws."   Justice French opined that R.C. 1509 is a state law that establishes all regulation on permit, location and spacing of oil and gas wells.  Justice French ruled that since the General Assembly clearly intended R.C. 1509 to regulate most aspects of oil and gas exploration, it follows that local governments lack authority to pass their own regulations.  However, Justice French opinion was only supported by three of the Court's seven justices.

Fourth Vote- Justice O'Donnell's Concurrence

While Justice French's opinion seems to be very clear that R.C. 1509 prohibits most aspects of local regulation of fracking, the fourth and deciding vote of Justice O'Donnell concur in judgment only.  While his fourth vote struck down the City of Munroe's law, his concurring opinion is not as clear cut as Justice French in terms of the scope of preemption of R.C. 1509.

Justice O'Donnell begins his opinion by noting that the Court's decision is limited to the City of Munroe's ordinances only.  He also states that ordinances designed to add permitting requirements are preempted by R.C. 1509.  However, Justice O'Donnell indicates other traditional areas of zoning may still be valid. He states:

"This appeal does not present the question whether R.C. 1509 conflicts with local land use ordinances that address only the traditional concerns of zoning laws, such as ensuring compatibility with local neighborhoods, preserving property values, or effectuating a municipality's longterm plan for development, by limited oil and gas wells to certain zoning districts without imposing a separate permitting regime applicable only to oil and gas drilling."

This language makes clear the door is still open for local regulation.  With Justice O'Donnell representing the swing vote, this decision is not as clear cut as the news media has portrayed.  The majority of Justices do believe municipalities have powers to regulate fracking.  

This key point seemed to be missed by many of the stories in the media. These are headlines from various papers (click on the link to read the full story):

"Local governments cannot regulate fracking, Ohio Supreme Court says."  Columbus Dispatch

"Ohio Supreme Court case over Munroe Falls' drilling laws could impact home rule authority across the state."  Cleveland.com

"Ohio Municipalities Can't Regulate Drilling and Fracking On Their Own, State Supreme Court Rules." Huffington Post


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)


Huge Increase in Disposal of Frac Water in Ohio Deep Wells

An article in the Akron Beacon Journal discusses a study by Kent State University regarding the disposal of flow back water from natural gas fracking in deep wells in Ohio.  Flow back water is the water that comes back up from fracking a natural gas well.  The flow back water is considered wastewater.

A prior post discussed the issues Pennsylvania was facing in handling disposal of flow back water.  As a result of increased regulations in Pennsylvania, the main method of disposal of flow back water had become shipment to Ohio for disposal in deep wells.  Ohio has 179 permitted deep wells.  Pennsylvania has five permitted deep wells. 

Here are some of the key statistics from the study as discussed in the ABJ article:

The volume of Marcellus wastewater has grown 570 percent from 2004 to 2011 due to increased shale gas production in Pennsylvania, Lutz said.

Pennsylvania has about 6,400 Marcellus shale wells that have been drilled and another 3,500 that have been permitted. In comparison, Ohio has about 500 wells permitted in the Utica shale, of which 200 have been drilled.

Lutz said Pennsylvania generated about 20 million barrels (each holding 42 gallons) of wastewater in 2011. About 7 million barrels were shipped to Ohio injection wells.

Ohio is projecting that its injection wells handled nearly 14 million barrels in 2012, up from 12.8 million barrels in 2011. (Final figures have not been compiled). More than half of that volume came from Pennsylvania and West Virginia.

While the increases are huge, what happens when Ohio has more wells?  Will there be a reliable method for disposal of the flow back water from the Pennsylvania and Ohio wells.

As mentioned in the article, Ohio has no means of banning the shipments from out of state.  Ohio tried to regulate shipments of out-of-state solid waste from the east coast.  A similar issue arose when eastern states stopped permitting new landfills and Ohio was the closest state with available capacity.  Ohio starting receiving shipments of solid waste by rail. 

Laws meant to regulate the shipments of out-of-state solid waste were struck down as unconstitutional.  Solid waste was determined by the courts to constitute "interstate commerce."  Under the U.S. Constitution, one state cannot treat unfairly interstate commerce.

Now a similar dynamic is playing out with flow back water from fracking.  The issue will only get worse when Ohio has more wells drilled and needs to find a home for more flowback water generated in-state.


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:


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?   

Ohio and Pennsylvania Debate Regulation of Hydraulic Fracking Wastewater

Hydraulic fracking provides the opportunity to tap into massive natural gas reserves which is located deep beneath the earth.  In Ohio and Pennsylvania, Marcellus and Utica Shale is sedimentary rock which contains huge quantities of natural gas.

Hydraulic fracking uses water injected at high pressure to break up the rock allowing the gas to be released into wells.  The process uses large amounts of water.  One well may use up to three to eight million gallons of water in about a week. 

Most of the water stays deep underground, but around 10% resurfaces and is called flowback water.  Regulators consider flowback water wastewater from an industrial operation because the water contains total dissolved solids (TDS), salts and metals/oils used to aid in the fracking process.

Disposal of the flowback water has been hotly debated in Pennsylvania where massive quantities of the water have been generated.  Pennsylvania Department of Environmental Protection (Pennsylvania DEP) estimates 235 million gallons of flowback water was generated in 2010.

Methods for Disposal of Flowback Water

The primary method of disposal of flowback water in Pennsylvania was through publicly owned sewage treatment plans (POTWs).  However, concerns emerged that POTWs could only dilute the water, not treat it prior to discharge to streams and rivers. 

Pennsylvania passed regulations establishing effluent standards for treatment of flowback water.  However, the regulations exempted existing loads and only kicked in if a treatment facility was expanding.  Pressure mounted on DEP to regulate disposal of all flowback water.

Industry Voluntarily Ceases Use of POTWs in Pennsylvania

Last week, Pennsylvania DEP announced that the oil/gas industry voluntarily agreed to stop the practice of shipping flowback water to POTWs.  The DEP announcement from last Thursday was covered in Pennlive.com:

Environmental Protection Secretary Michael Krancer told officials in a meeting in Washington, D.C., on Thursday that drilling wastewater is no longer being discharged to rivers or streams in Pennsylvania without full treatment.

DEP spokeswoman Katy Gresh said the agency has not yet confirmed full compliance with Krancer’s request that drillers voluntarily stop taking the wastewater to such facilities.

But she said it has confirmed that “We’ve gone from millions and millions of gallons being discharged to virtually none.”

After the announcement, its seems clear Pennsylvania is moving toward use of dedicated treatment facilities that can treat the brine and materials in flowback water.  Approximately 25 of these facilities are slated to open. 

Debate over Disposal of Flowback Water Shifts to Ohio

Perhaps seeing the debate unfold in Pennsylvania, Ohio regulators decided they needed to tackle the issue over disposal of flowback water.  In part, the issue was brought to a head by a company, Patriot Energy Partners, who had built and operated a pretreatment center connected to the City of Warren's POTW.  The company also was in process to build and operate facilities in Steubenville and East Liverpool.

On May 16th Ohio EPA issued a letter to the Ohio Department of Natural Resources clarifying regulatory authority over the disposal of flowback water.  In part, the letter was issued to clear up a debate between the Agencies as to who had regulatory authority since ODNR regulates oil & gas drilling and Ohio EPA regulates POTWs through NPDES permits.

The letter set forth the Agencies regulatory determination on several key issues:

  • ODNR has regulatory authority over the disposal of flowback water (letter uses the term "brine")
  • POTWs will not be allowed to accept flowback water for disposal (the City of Warren permit will not be renewed)
  • Current Ohio law (R.C. 1509.22) only allows disposal of flow back water by the following methods:
    • deep well injection into underground formations
    • road surface application
    • catchall: other approved methods by ODNR

For practical purposes, deep well injection will likely be the primary method of disposal in Ohio unless its shown that dedicated treatment facilities are a cheaper disposal option.  Its interesting to note that Pennsylvania has only one commercial deep well and Ohio has approximately 150 wells that may be capable of disposing of flowback water.