DRBC Releases Draft Natural Gas Development Regulations

Earlier today, the Delaware River Basin Commission (DRBC) released its long-awaited draft natural gas development regulations, which address a wide range of activities relating to Marcellus Shale exploration and production. A copy of the regulations can be downloaded at this link. If you are involved in any work relating to the development of Marcellus Shale gas in Eastern Pennsylvania, you absolutely must read the draft regulations and share them with your clients. The draft regulations are comprehensive in scope, covering permit applications for water withdrawals, review fees, financial assurance requirements, reporting of violations, enforcement including DRBC's power to suspend or revoke permits, drought emergency planning, responding to complaints from competing water users, mitigation of impacts, well pad siting requirements, well construction and operating procedures, and requirements for treating and disposing wastewater. DRBC is giving members of the public and the regulated community 90 days to comment on the draft regulations, and it has announced plans to hold three public hearings. There is definitely the potential for conflict between the DRBC's regulations and oversight and control over Marcellus Shale development by PADEP. At the outset, DRBC has declared that a well developer's compliance with the PA Oil and Gas Act and the Chapter 78 regulations relating to well construction and operation "shall constitute satisfaction of the project sponsor's obligations under section 3.8 of the Compact that relate to regulation of gas well construction and operation, except as specified in Section 7.5" of the draft regulations. Without doing a line by line review of Section 7.5, I can't tell you what requirements of DRBC's would apply to well construction and operation over and above PADEP's recently issued regulations on that subject. It would appear, however, that DRBC has agreed to defer most of the control over those activities to PADEP. The potential points of conflict or overlap with PADEP jurisdiction are many. Here is just a sampling: DRBC's draft regulations include a definition of "drill cuttings" as rock cuttings and mineral residues generated during the drilling of an oil, gas or exploratory well. Under Section 7.5(h) (2)(iii)(A), DRBC requires that "the cuttings" must be properly transported offsite and beneficially reused or disposed of at an appropriate waste disposal facility(s) approved by the host state." Arguably, under PADEP's Management of Fill Policy, drill cuttings that consist of natural dirt and rock could be considered "clean fill" and not subject to any disposal or reuse limitations, if sampling results demonstrated the material met the requirements of clean fill. I understand that PADEP Central Office is considering the applicability of GP096 to Marcellus Shale drill cuttings, but no decision has been made. It is unclear if the DRBC's draft regulations will have any impact on that review. DRBC's draft regulations include provisions that impose a duty on the project sponsor to "report in writing" to DRBC any violation of the rules "or any circumstances that may reasonably lead to a finding of violation" within 48 hours. That would appear to be more stringent that any reporting obligations imposed by PADEP regulations. DRBC's power to suspend or revoke approvals for "serious, continuing or repeated violations of Commission regulations" could present a situation where a well developer resolves any violations with PADEP through a CACP or a CO&A, but still faces the prospect of being shut down by DRBC. DRBC's draft regulations state that a permit can be reinstated, but only upon a showing of "full compliance". Again, that would seem to limit PADEP's ability to use a CO&A and compliance schedule as a mechanism for bringing a well developer into compliance. DRBC reserves the right to issue emergency resolutions or orders limiting water withdrawals in the case of a drought, even if the Governor has not issued any prohibition or limitation. In the case of complaints received from competing water users, such as neighbors with drinking water wells, the regulations state that DRBC will investigate such complaints and that any ground or surface water user "which is substantially adversely affected, rendered dry or otherwise diminished, as a result of the docket holder's project withdrawal, must be repaired, replaced or otherwise mitigated at the expense of the project sponsor." How would that relate to wells impacted by methane migration? Would that constitute being "substantially adversely affected"? Currently, PADEP is responsible for investigating such complaints and holding the well developer responsible. Will there be dual jurisdiction now? Which agency would have primary responsibility? If you resolve the issue with PADEP would you still have to answer separately to DRBC? The draft regulations state that "wastewater, recovered flowback and or production water and brines from natural gas well pads may not be applied to any road or other surface within the Delaware River Basin." I think that is a very interesting prohibition. During the debate between PADEP and the regulated community in Pennsylvania over the TDS regulations, there was a lot of discussion about what to do with the brines left over after treatment of the frac water. PADEP staff at one time discussed the possibility of using it as a substitute for road salt. The draft regulations would appear to close the door on that possible reuse. Wonder if DRBC consulted with PADEP or PennDot on that? In the case of a release of any hazardous substance or pollutant from a Marcellus Shale gas well, pad site or associated equipment and structures, the draft regulations require immediate notification of DRBC, followed by written notification to DRBC and all potentially impacted users. The draft regulations state: "If necessary, the project sponsor must stop all other operations to effectuate the mitigation or remediation of the release or spill". Does that mean the well has to be shut down in the case of a release? The draft regulations also reserve for DRBC's Executive Director the right to make a "final determination" regarding "the extent of appropriate mitigation measures, if required." So, hypothetically, let's say there is a release of frac fluids at a drilling site permitted by both PADEP and DRBC. Who makes the decisions regarding any remediation that is required? Do you have to answer to both PADEP and DRBC on any remediation plans? Will everyone have to sit down at the same table and agree? I'm not exactly sure how this will work between the two agencies. I understand that DRBC has the authority to regulate water withdrawals and it has responsibility to protect the waters of the Delaware River Basin. I wonder how this dual control over a broader set of activities at Marcellus Shale drilling sites is going to work. In the context of many environmental programs, PADEP has been delegated authority by US EPA to issue permits and exercise enforcement authority. That doesn't mean that EPA doesn't have any authority and can't overfile or second-guess PADEP in some circumstances, but generally, there is an understanding that PADEP has primary authority for those programs. How is that going to work with regard to the overlap between Pennsylvania laws and regulations and the DRBC's regulations governing Marcellus Shale operations. I assume that part of the discussion over the draft regulations will cover the issue of overlapping jurisdiction. Just as PADEP doesn't want to cede authority over Marcellus Shale development to US EPA, I assume it doesn't want to cede any authority to DRBC beyond the bare minimum necessary to comply with the Compact between the states. In addition to PADEP, I also assume that the broad array of industries that are now involved in Marcellus Shale development in Pennsylvania will want to look closely at the fine print in the draft regulations. As I pointed out above, the scope of the regulations goes well beyond water withdrawals, covering things like the disposal and reuse of drill cuttings, brines, frac fluids and wastewater. All of those ancillary players could be affected by these draft regulations, and those players should participate actively in the hearings and the comment period to protect their interests.

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