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DEP Provides Oil & Gas Advisory Board With Updates On Well Plugging Financial Assurance; Pitt Health Studies; Funding Options For Program; Civil Penalty Policy

On September 5, DEP provided the Oil and Gas Technical Advisory Board with updates on a variety of issues including the upcoming changes to the civil penalty policy; well plugging financial assurance options; the just-released University of Pittsburgh shale gas health studies; and options for funding the program.

Shale Gas Health Studies

Kurt Klapkowski, DEP Deputy for Oil and Gas Management, was asked if DEP had a response to the natural gas development health impact studies the University of Pittsburgh released on August 15. Read more here. Read more here.

“I think one of the things that we've always said here is that we want to make sure that our oversight of this industry is based on the best science that we possibly can, and data that we can put our hands around.

“So I think that from that perspective, the Pitt study is certainly something that we're taking into consideration.

“We're taking a hard look at the study itself and trying to figure out-- are there ways in which we need to be moving our program or to protect that level of public health and safety that the citizens of the Commonwealth deserve and expect.”

“This is one piece of data that's indicating certain potential health impacts

“So are there things that are on active well sites that would cause us concern, and do we need to address the regulations to address those sorts of things? Or is it a proximity issue? What is the appropriate regulatory response to the type of data that we're seeing being developed?”

“Just as an example, in the Pitt study, in terms of the asthma exacerbation piece to the study, they indicated that it was actually wells that were in production, the proximity where they were seeing that exacerbation, and not so much in the drilling and completion phases.

“So that suggests to me, okay, what is it about wells that are in production that would potentially cause that type of a negative health outcome?

“Are there ways for us to intervene in that, break that connection between the production site and the negative health response for the folks who are living in proximity, the distances that the study was taking a look at?

“I don't have an answer today in terms of, these are the steps that we're going to take-- these six types of steps.

“But I will say that we are digesting the results of the study and trying to figure out what does that mean in terms of our program in the regulatory response and what that ought to look like going forward.”

[Note: Gov. Shapiro’s office has also made statements supporting “key recommendations” in a 2020 Grand Jury Report that concluded DEP’s oil and gas regulatory program failed to protect public health and the environment.

[Gov. Shapiro’s Office said DEP Secretary Richard Negrin “has established an internal team to review the grand jury report and ‘determine the best policies to protect Pennsylvanians’ constitutional rights to clean air and pure water.” Read more here.]

Well Plugging Financial Assurance

Klapkowski said DEP wants to start a conversation about using financial assurance and other mechanisms to help prevent new well abandonments.

However, he was limited to talking about unconventional shale gas wells at the moment because of a lawsuit filed by environmental groups over conventional oil and gas well plugging bonds. Read more here.

At the same time, he pointed out DEP has never used taxpayer money to plug an unconventional shale gas well since drilling began in 2003.

Klapkowski said he was open to discussing financial assurance mechanisms that would not necessarily follow the bonding approach. As an example, he mentioned the Underground Storage Tank Indemnification Fund.

“[The] Fund is something that we all pay into every day, it's primarily funded on fees on every gallon of gasoline sold in the Commonwealth of Pennsylvania [paid by tank owners]. And it provides funding for underground storage tank cleanups.”

“For 30 years now that fund has been running solvent. It seems like it is a working model.”

“We did have an interesting presentation from a company out of Texas using a life insurance model where you're basically, if you think about how a life insurance company works, everybody's not going to pass away tomorrow hopefully, but they can actuarially say that some people will pass away tomorrow.

“And so they're able to set a fee structure there, a premium structure, so that the company can cover all of their costs and still continue to function. And this company seemed to think that they had a pretty good grip on where wells were in their productive lives.

“So what I'm really interested in is having some exploration of some of these issues so that we can make some decisions about where the program should be headed in the future.”

“We've got a fleet right now of about 120,000 active wells, somewhere in that number. And the goal would obviously be to have all those wells go through the process of decommissioning, plugging, reclamation, abandonment, in a manner that the state would never have to step in on any one of those 120,000.”

Civil Penalty Policy

Kurt Klapkowski said his office is in the final stages of drafting revisions to the proposed Civil Penalty Assessments Technical Guidance describing how they calculate and assess penalties for the program.

He noted the agency as a whole has an initiative underway to revise its enforcement policy that is impacting the Oil and Gas Program that includes the Environmental Justice Policy, restorative community funding in penalty assessments and a better referral process for criminal investigations to the Office of Attorney General. Read more here.

He had no timeline for when the revisions would be put out for public review, other than to say in a few months.

Klapkowski said DEP will also be hiring a new Enforcement Coordinator to help address issues like consistency between regional offices for the Oil and Gas and Mining programs.

Natural Gas Storage Areas

Klapkowski said Equitrans and DEP are still dealing with the contamination left over from efforts to plug a conventional gas well serving the Rager Mountain Natural Gas Storage Area in Cambria County that resulted in an uncontrolled release of 1.1 billion cubic feet of natural gas.

On August 24, Equitrans released a root cause analysis report on what caused the venting of natural gas-- corrosion in the gas well casing. Read more here.

He said DEP is reviewing the report.

"The tricky part here in Pennsylvania has to do with [federal] preemption of our regulatory standards under the [state] Oil and Gas Act and our regulations, and we're still sort of feeling our way around some of that right now,” said Klapkowski.

“But we're looking very hard at the preemption issues and trying to figure out as we turn the corner into what is typically the inspection season for natural gas storage facilities because this is the time of year when they're getting to the end of their injections and reaching full pressure.”

Funding Oil & Gas Program

Klapkowski said, “We have been seeing declining permit numbers on the unconventional [shale gas] side, and while that does sort of speak to a workload issue in terms of fewer permits to review and either approve or deny, the thing that's tough for us is so much of our expenditure is actually on the field-operation side of things.

“So the compliance and enforcement oversight is really where the bulk of our staffing is located.”

“We do a two-year projection. I think that'll give us a much clearer picture of where things stand fiscally.

“I know where they're headed, and it's not good. I can promise you that, but it is something that we're going to be addressing in the year ahead, I think, especially as we start to pull together those fiscal numbers for the out years and start to see just how much of an issue we have here.”

“I will say that I don't think that the permit fee is sustainable.” [The Independent Regulatory Review Commission has said the same thing. Read more here.]

“The unconventional industry has gotten a lot better at drilling much longer well bores, so they're draining more acreage with fewer wells. And they seem to be drilling more of the wells that they get permits for, so there aren't a lot of permitted wells that aren't being drilled.”

[Note: The unconventional shale gas drillers were not using 40% of the well drilling permits DEP issued them at one point just a year ago which resulted in a tremendous waste of DEP staff time. Read more here.]

“My goal is to have a stable and predictable source of funding going forward,” said Klapkowski.

Injection Well Primacy

Klapkowski said there wasn’t a whole lot to report on DEP’s application to EPA for underground injection well permitting primacy.

He said DEP is most interested in Class 2d and Class 2R injection wells for oil and gas wastewater. He noted EPA also regulates Class 5 wells are for geothermal energy and Class 6 for carbon sequestration.

Klapkowski said DEP is waiting for EPA to release the guidelines on applying for Bipartisan Infrastructure Act funding to support states going through the primacy process.

Click Here for a recording of the meeting [when available].

Next Meetings

The next meeting of the Oil and Gas Technical Advisory Board is scheduled for December 5.

DCED’s PA Grade Crude [Oil] Development Advisory Council meeting to discuss issues related to the conventional oil and gas industry is scheduled for October 19 in State College. Visit the Council webpage for information on joining the meeting remotely.

Visit DEP’s Oil and Gas Technical Advisory Board webpage for available information and a recording of the meeting [when available]. Questions should be directed to Todd Wallace twallace@pa.gov or 717-783-6395.

PA Oil & Gas Industry Public Notice Dashboards:

-- Pennsylvania Oil & Gas Weekly Compliance Dashboard - September 2 to 8; Equitrans Issued NOVs For Failing To Provide DEP Inspectors Access To Facilities As Requested [PaEN]

-- PA Oil & Gas Industrial Facilities: Permit Notices/Opportunities To Comment - September 9 [PaEN]

-- DEP Posted 47 Pages Of Permit-Related Notices In September 9 PA Bulletin [PaEN]

NewsClips:

-- AP: Investigators Pinpoint House As Source Of Gas Explosion That Killed 6 In Plum Boro, Allegheny County

-- TribLive: Investigators Say Cause Of Fatal Plum Boro Gas Explosion Came From Inside The Home

-- The Derrick - Makayla Keating: Officials Update Sugarcreek Boro On Continuing Reno Water Issues In Venango County, Aqua PA Still Hauling Water To Keep System Going; DEP To Hold Public Meeting [Water Supply Contaminated By Conventional Oil Well Wastewater] [PDF of Article]

-- Post-Gazette - Anya Litvak: Lessons Of Equitrans 1.1 Billion Cubic Feet Natural Gas Storage Facility Blowout Just Starting To Surface As Gas Injection Season Nears

-- Post-Gazette - Anya Litvak: Equitrans Names New CEO To Coincide With Completion Of Mountain Valley Natural Gas Pipeline Project

-- DEP Holds Sept. 19 Meeting On Ethane Chilling Expansion Project At Energy Transfer Marketing In Marcus Hook Boro, Delaware County

-- University Of Pittsburgh News: Pitt Studies Link Unconventional Natural Gas Development To Childhood Cancer, Asthma Attacks

-- Inquirer Editorial: Natural Gas Development Is Making Pennsylvanians Sick, Lawmakers Must Act

-- TribLive Guest Essay: Leaders Aren’t Helpless And Must Take Action To Protect Constituents From Natural Gas Development Health Impacts - By Tom Pike, Penn Twp., Westmoreland County

-- The Daily Item Guest Essay: Is Natural Gas Development Good For Pennsylvania? $3.8 Billion In PA Taxpayer Subsidies; University Of Pittsburgh Health Studies; Methane Leaks; Jobs Decline - By Sandy Field, Climate Reality Project - Susquehanna Valley Chapter

-- Reading Eagle Guest Essay: PA Farmers Benefit From Strong Natural Gas Industry, Don’t Adopt A Severance Tax - By Matt Espenshade, President Of PA State Grange

-- Observer-Reporter: Operating In Marcellus Energizes Range Resources [Puff Piece On Shale Gas Industry, Nothing On Real Impacts To Environment, Health In PA’s Most Densely Drilled County-- Washington]

-- The Guardian: Report - Natural Gas Projects In Australia Risk Exposing People To Cancer And Birth Defects [Following University Of Pittsburgh Studies]

-- NJ Spotlight News - Jon Hurdle: Feds Suspend Rule Allowing Natural Gas To Be Shipped By Train, Another Blow To Plan For LNG Natural Gas Export Terminal In South Jersey

-- Scranton Times Editorial: US DOT Defuses Rolling Bombs [Shipping LNG Natural Gas By Train] For Now

-- Bloomberg: Higher Natural Gas Price In Europe Makes Holding Back Supplies For A Month Lucrative

-- Washington Examiner: Fragile LNG Natural Gas Market Vulnerable To Major Price Swings, Supply Shortages

-- Wall Street Journal: Saudi Oil Production Cuts Send World Diesel Prices Soaring

-- AP: Oil Prices Spike As Saudi Arabia, Russia Extend 1.3 Million Barrel A Day Oil Cut Thru December

-- Inside Climate News: New PA Legislation Aims To Classify Oil & Gas Wastewater As Hazardous Waste

-- Utility Dive: PJM, Natural Gas, Other Electric Generators Reach Agreement To Resolve $1.8 Billion In Winter Storm Elliot Nonperformance Penalties; Details Confidential Now But Will Be Made Public Later In September

-- Wall Street Journal: Race To Drill America’s Longest Oil And Gas Wells [PA Included]

Related Articles This Week:

-- KDKA: Natural Gas Gathering Pipeline Crashes Into, Thru Westmoreland County Home And A Loophole In State Law That Doesn’t Regulate Gathering Pipelines For Safety [PaEN]