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January 2011
Prepared by Steptoe & Johnson PLLC
Pittsburgh Bans Natural Gas Drilling
On November 16, 2010 the Pittsburgh City Council voted unanimously to ban natural gas drilling within Pittsburgh city limits, making it the first city in Pennsylvania to approve such a ban.
The ban was passed in response to the recent Marcellus Shale activity in the region. Pittsburgh sits atop the heart of the gas-rich Marcellus Shale, and natural gas companies have converged on Pittsburgh and the surrounding region to explore for and develop the gas reserves. Within Pittsburgh city limits, however, only around one percent of land has been leased, according to the University of Pittsburgh Center for Social and Urban Research, and drilling in the city has yet to take place.
Councilman Doug Shields sponsored the ordinance, which was drafted with the help of the Community Environmental Legal Defense Fund (CELDF). According to Shields, the ordinance asserts “the right of the city to make critical decisions to protect our health, safety and welfare.” In a press release issued following the Council’s vote, CELDF claimed that “‘fracking’ has been cited as a threat to surface and groundwater, and has been blamed for fatal explosions, the contamination of drinking water, local rivers and streams.”
In response to the ban, the Marcellus Shale Coalition (MSC) expressed disappointment, but not surprise, in the Council’s vote. In a press release, Kathryn Klaber, MSC’s president and executive director, stated that “[a]t a time when the natural gas industry is generating jobs and prosperity for tens of thousands of Pennsylvanians and economic development across the Commonwealth, it’s unfortunate that the council continues to maintain a shortsighted view regarding responsible shale gas development and its overwhelmingly positive economic, environmental and energy security benefits.”
The ordinance now goes to Mayor Luke Ravenstahl, who has ten days to decide whether to veto or not sign the bill. A veto would require six of nine Council votes to be overridden; failure to sign the bill would result in it becoming law by default.
Gas companies involved in Marcellus Shale development have suggested a possible legal challenge to the ordinance on grounds of federal and state environmental regulatory pre-emption.
New Proposed Rules for Natural Gas Development in Delaware River Basin Released
After months of development, the Delaware River Basin Commission (“DRBC”) has issued new draft rules regarding the development of natural gas projects within the boundaries of the Delaware River basin.
More stringent than rules governing oil and gas projects in the Susquehanna River basin, the rules propose certain limitations on well pad locations in critical habitats, include setback provisions from water bodies, wetlands and other natural features, and require the development of Natural Gas Development Plans (“NGDPs”) for larger developers. It is clear that the DRBC hopes to influence and drive the development of natural gas projects through the use of NGDPs to areas it deems best suited for project development while limiting impacts to more sensitive areas of the basin.
The proposed rules establish a new Article 7 to the DRBC’s Water Quality Regulations and will apply to the operation and construction of oil and natural gas projects regardless of the formation being explored or type of well being drilled. There is also no threshold water use volume which will trigger the rules’ application to oil and gas projects. All projects will be required to obtain approval from the DRBC. Developers holding in excess of 3,200 acres under lease within the basin or any developer planning to construct more than five well pads must draft and submit NGDPs to the DRBC.
Very important to future development is the DRBC’s new Approval By Rule (“ABR”) process for oil and gas projects. Any project that will use a previously approved water source allocation as its water resource, and whose location is consistent with a previously approved NGDP and with existing setback and location provisions in the rule, would be eligible for project approval through the ABR process. The anticipated time for approval of projects pursuant to the ABR process is thirty days, as opposed to the six-to-nine month minimum time frame for full commission approval of projects.
The December 9, 2010 publication of the draft rules began a 90-day comment period. Three public hearings on the draft regulations are planned. A copy of the new rules can be viewed at http://www.state.nj.us/drbc/notice_naturalgas-draftregs.htm
NY Gov Ends Moratorium, Stops High Volume Hydro Fracing
In December, 2010, New York Governor David Paterson issued an executive order prohibiting the use of high-volume, horizontal hydraulic fracturing as a means of oil and gas exploration in New York until at least July 1, 2011.
But the outgoing governor also rejected a more expansive natural gas exploration moratorium by vetoing legislation passed by the New York Legislature. The latest action by the governor is another attempt to balance environmentalists’ worries about the potential harm to groundwater resulting from natural gas development with business groups’ concerns that the moratorium legislation as drafted would adversely impact more than just high-volume hydraulic fracturing and horizontal well drilling.
The governor’s order prohibits the use of high-volume, horizontal hydraulic fracturing in New York’s Marcellus shale while the New York Department of Environmental Conservation continues its review of the Supplemental General Environmental Impact Statement, which it is developing to regulate high-volume hydraulic fracturing and the use of horizontal wells.
The governor stated that although the bill may have been well intended, it would have had a negative impact on the economy by prohibiting drilling that “causes no demonstrated environmental harm, in order to effectuate a moratorium that is principally symbolic.” He added, “Symbols can have great importance, but particularly in our current terrible economic straits, I cannot agree to put individuals out of work for a symbolic act.”
Business groups agreed. Brad Gill, the executive director of the Independent Oil and Gas Association, said the industry is “grateful to Governor Paterson for his courage and clear-headed judgment.” The group estimated that the moratorium passed by the Legislature would have imperiled 300 companies currently drilling in New York, along with 5,000 employees.
These moves on the political front only concentrate more attention on New York’s incoming governor, Andrew Cuomo, who has not stated clearly his own position on the future of natural gas development in the state.
FERC Has Final Say on Pipeline Routing Over Active Coal Mining
On January 7, 2011, a federal court denied a petition filed by underground longwall coal mine operator Murray Energy Corporation (“Murray”) seeking review of Federal Energy Regulatory Commission (“FERC”) orders approving the construction of an interstate natural gas pipeline (“REX-East”) and the plan for post-construction monitoring and mitigation associated with expected subsidence from Murray’s longwall coal mining activities.
In 2007, Rockies Express Pipeline LLC (“REX”) filed an application with FERC seeking its permission to construct the REX-East pipeline. FERC approval is required for the construction of interstate natural gas pipelines, and FERC has jurisdiction over interstate natural gas pipeline routing. Murray objected to REX’s proposed route because eight miles of the route crossed over Murray’s active longwall mining operations or reserves that were the subject of planned mining. Longwall coal mining causes surface subsidence, which, in turn, can place stress on natural gas pipelines on the surface, possibly leading to their rupture and a resulting explosion.
When FERC approved the construction of the REX-East pipeline, FERC’s order contained a condition requiring REX to collaborate with Murray prior to construction of the pipeline over the Murray mining operations and file with FERC a construction and operations plan. The plan was to address expected subsidence issues from mining to maintain “pipeline integrity and operation while not impeding the mining operation.” REX, after consultation with Murray, filed a plan with FERC containing several proposals to address and mitigate the effects of subsidence on the pipeline. FERC approved the plan in two orders, including one in response to Murray’s objections to the plan.
On appeal to the federal court, Murray challenged FERC’s orders on several grounds, including the alleged failure of REX’s plan to adequately ensure the safety of the pipeline. Among other things, Murray attacked REX’s experts and their recommendations.
In denying Murray’s appeal, the court found that the expert recommendations and evidence supported FERC’s determination that REX’s plan, including the use of slanted-trench wall design, thicker-walled pipe, gentler pipe bends, and granular backfill, would adequately ensure the safety of the REX-East pipeline. The FERC-approved plan also provided for post-construction subsidence monitoring and mitigation measures, which included input and guidelines from the Department of Transportation Pipeline and Hazardous Materials Safety Administration (“PHMSA”).
The battle involving pipeline routing over active coal mining or coal reserves is one that can play out in several forums, but FERC has the ultimate say over the routing of interstate natural gas pipelines and the appropriate conditions applicable to their construction, such as the filing of a construction and operation plan in this case. Pipeline and coal mining operators should be aware of FERC precedent with respect to this type of routing conflict and take steps to preserve their respective rights and positions before FERC.
Environmental Groups Sue Mine; Claim State Suit Is Sham
The Sierra Club, the Ohio Environmental Coalition and the West Virginia Highlands Conservancy Inc. have filed a lawsuit against Maple Coal Co. in connection with alleged water pollution at two West Virginia mines.
The environmental groups are seeking more than $14 million in damages under both the Surface Mining Control and Reclamation Act and the Clean Water Act. The West Virginia Department of Environmental Protection has already brought suit against Maple over the same pollution and typically, such action by the state precludes citizen suits. The environmental groups, however, claim the state’s suit is merely a sham and thus should not prevent them from pursuing relief.
According to the law suit, excessive levels of selenium have polluted creeks near the mines in Fayette and Kanawha counties, West Virginia.
Environmental Groups Lose Challenge to WV SMCRA Program
A federal judge has ruled against environmental groups that had challenged West Virginia’s program for implementing the Surface Mining Control and Reclamation Act as being inadequate.
According to Judge Robert C. Chambers, with the U.S. District Court for the Southern District of West Virginia, the plaintiffs -- the West Virginia Highlands Conservancy, Inc., and the Ohio River Valley Environmental Coalition Inc. – failed to show that West Virginia’s program was less stringent than SMCRA and less effective than federal regulations, or that the Department of the Interior had erred in approving West Virginia’s rules.
Specifically, the plaintiffs had claimed that the West Virginia rules contravened the Clean Water Act by including a definition of material damage that only cited existing uses and not designated uses of potentially affected water resources, while also excluding violations of water quality standards that are not long-term or permanent.
In granting summary judgment to the US Secretary of the Interior and intervenors, the West Virginia Department of Environmental Protection and the West Virginia Coal Association, the judge noted that the Department of the Interior had relied upon the state to ensure the definition of material damage would allow for the development of additional criteria and for the inclusion of water quality standards and that the definition did not limit the state’s authority or obligation to do so.
The case is Ohio River Valley Environmental Coalition Inc. v. Salazar, case no. 09-cv-00149.
Supreme Court to Hear Climate Change Nuisance Case
The United States Supreme Court announced in early December that it would hear the case of AEP v. Connecticut, in which several states have sued major electric utilities, claiming that greenhouse gases being emitted by those utilities constitute a public nuisance.
The case is important for a number of reasons, not the least of which is that the Court will decide whether a nuisance case can go forward on substantive grounds or whether efforts by the Environmental Protection Agency (EPA) to regulate greenhouse gases under the Clean Air Act displace federal common law nuisance claims.
The Court will also decide whether the plaintiffs have standing to sue — in other words whether they are proper plaintiffs who have the right to bring the case. The Court’s ruling on standing will also have a direct impact on any future cases involving climate change. At least three other major cases have alleged common law nuisance against energy and utility companies, with contradictory outcomes.
Only eight of the nine Supreme Court justices will consider the case because Justice Sonia Sotomayor, who was a member of the appellate court panel that reversed the district court decision, has recused herself. This means that the Court could be split 4–4 on the issue, which would allow the appellate court ruling to stand, but would not be binding on the other federal common law nuisance challenges pending in other parts of the country.
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