Municipal Regulation of Oil and Gas Operations

Municipal Regulation of Oil and Gas Operations

Agricultural Law Resource and Reference CenterRoss H. Pifer, J.D., LL.M., Director

History of the Agricultural Law Center

• Established through enactment of the Agricultural Law Resource and Reference Center Act on January 29, 1998– House Bill 1345 (Act 11 of 1998)– Codified at 3 P.S. 2201-2209


Legislative Findings

• “The legal issues affecting agriculture . . . are becoming increasingly complex”

• “At present there exists no central and effective system for compiling agricultural law materials . . . and disseminating this information to affected parties . . .”

• “The alliance between [DSL and PSU CAS] . . . creates a unique opportunity.”


Purpose of Ag Law Center

• Section 2205– “to serve as a resource on agricultural law

and related issues for farmers and agribusinesses, attorneys, officials at all levels of government, community groups, and the public.”


Dissemination of Information

• Presentations

• Educational Programs

• Publications

• The Agricultural Law Brief

• Web site Resources


The Agricultural Law Brief

• Monthly e-newsletter

• Addresses 5 legal developments from prior month that impact agricultural law in Pennsylvania


Web-based Resources• www.law.psu.edu/aglaw • Resource Areas

– Natural Gas– ACRE– Right to Farm– Clean and Green– Agricultural Area Security Law

• Center Publications Library


http://www.law.psu.edu/aglaw

• Pennsylvania Statutes

• Regulatory Agencies

• Municipal Regulation of Oil and Gas Operations

• Legislative Issues

Agricultural Law Resource and Reference Center

Overview of Presentation

• Statutory authority– 58 Pa. Stat.

• Regulatory authority– 25 Pa. Code, chapters 78 and 79

• Case law


PA Oil and Gas Law Library







• 58 P.S. §§ 1-701.7– Chapter 1: Oil and Gas Wells– Chapter 2: Test of Illuminating Oil– Chapter 5: Interstate Conservation Compact

– Chapter 7: Oil and Gas Conservation Law– Chapter 8: Underground Storage Act– Chapter 9: Pennsylvania Used Oil Recycling Act– Chapter 10: Coal and Gas Resource Coordination Act

– Chapter 11: Oil and Gas Act– Chapter 12: Dormant Oil and Gas Act


Pennsylvania Oil and Gas Laws

• Organization of Oil and Gas Act– Chapter 1: Preliminary Provisions

– Chapter 2: General Requirements– Chapter 3: Underground Gas Storage– Chapter 4: Eminent Domain– Chapter 5: Enforcement and Remedies– Chapter 6: Miscellaneous Provisions


Pennsylvania Oil and Gas Act

• Declaration of Purpose – Section 102– Permit optimal development . . . consistent with

protection of health, safety, environment, and property;

– Protect safety of employees and facilities;– Protect safety and property of those near

development; and– Protect natural resources


Preliminary Provisions

• Section 201 – Well permits• Section 202 – Permit objections• Section 203 – Well registration and identification• Section 205 – Well location restrictions• Section 206 – Well site restoration• Section 207 – Casing requirements• Section 208 – Protection of water supplies• Section 210 – Plugging requirements• Section 212 – Well reporting requirements• Section 215 – Bonding


General Requirements

• Permitting Requirements – Section 201– DEP permit is required prior to drilling.– Notice must be provided to:

• Surface owner; • Surface landowner or water purveyors who

have water supply within 1000 feet of proposed well location; and

• Owner / operator of underlying coal seams.



• Permitting Objections – Section 202– Surface owner has right to object to

permit.– Objection must be filed with DEP within 15

days of receipt of notice and plat.• Objection can be based upon improper

location of well or inaccurate information in permit application.



• Well Location Restrictions – Section 205– Wells cannot be drilled:

• Within 200 feet from building or water well• Within 100 feet from spring, stream, body or water, or

wetland larger than one acre

– Waiver from location restrictions can be granted.• DEP may impose conditions to protect people, property,

and waters.



• Ground Water Protection – Section 207– Casing is required when:

• Drilling through fresh water strata;• Certain coal seams;

– Brines must be disposed of in compliance with Clean Streams Law.



• Protection of Water Supplies – Section 208– Well operator must restore or replace a water supply

that is polluted or diminished.– Presumption of liability

• Well is presumed to have caused pollution of water supply located within 1000 feet of well.

• Presumption can be rebutted by demonstrating pollution existed prior to drilling.

• Presumption also is rebutted if landowner refuses permission to perform a predrill test.



• Well Site Restoration – Section 206– Surface estate must be restored from disturbances

caused by drilling activities.– Well operator must follow erosion and sediment

control plan at all times during drilling.– Equipment must be removed and well site restored

within nine months of completion of activity.• Time period can be extended for six months.• Equipment can be stored on-site with landowner permission.



• Reporting Requirements – Section 212– Completion report must be filed with 30 days

of the completion of drilling.– AMENDED REQUIREMENT:

• Report containing production data must be filed with DEP every six months.

• Report is published on DEP Web site.



• Well Plugging – Section 210

• Bonding – Section 215

• Registration – Section 203



• Declaration of Purpose– “[F]oster, encourage, and promote the

development, production, and utilization” of Pennsylvania’s oil and gas resources;

– Prevent the waste of oil and natural gas;– Permit the Commonwealth to “realize and enjoy

the maximum benefit of these natural resources.”


Oil and Gas Conservation Law

Image by: Robert Milici and Christopher Swezey, 2006, Assessment of Appalachian Basin Oil and Gas Resources: Devonian Shale–Middle and Upper Paleozoic Total Petroleum System. Open-File Report Series 2006-1237. United States Geological Survey.

Depth of Marcellus Shale

Depth of Onondaga Horizon

The Oil and Gas Conservation Law does not apply to wells that do not penetrate the Onondaga horizon, meaning wells drilled into the Marcellus Shale generally are not covered by this law.


• Well Spacing– When a well is drilled into, or below, the

Onondaga horizon, those “directly and immediately affected by the drilling” of the well can apply to DEP for a well spacing order.


Oil and Gas Conservation Law







• Department of Environmental Protection (DEP)– Bureau of Oil and Gas Management

• Department of Conservation and Natural Resources (DCNR)

• Public Utility Commission (PUC)• Department of Transportation (PennDOT)• Department of Agriculture (PDA)


State Agencies

• Susquehanna River Basin Commission (SRBC)

• Delaware River Basin Commission (DRBC)• Federal Energy Regulatory Commission

(FERC)• Environmental Protection Agency (EPA)


Federal Agencies







• “Except with respect to ordinances adopted pursuant to the . . . Municipalities Planning Code, and the . . . Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and gas well operations regulated by this act are hereby superseded. No ordinances or enactments adopted pursuant to the aforementioned acts shall contain provisions which impose conditions, requirements or limitations on the same features of oil and gas well operations regulated by this act or that accomplish the same purposes as set forth in this act.”


Oil and Gas Act § 602

• “Except with respect to ordinances adopted pursuant to the . . . Municipalities Planning Code, and the . . . Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and gas well operations regulated by this act are hereby superseded. No ordinances or enactments adopted pursuant to the aforementioned acts shall contain provisions which impose conditions, requirements or limitations on the same features of oil and gas well operations regulated by this act or that accomplish the same purposes as set forth in this act.”


Oil and Gas Act § 602

• Huntley & Huntley v. Borough of Oakmont – Permissible municipal regulation

• Range Resources v. Salem Township– Impermissible municipal regulation


Supreme Court Case Law

• Features– Pertains to technical aspects of well functioning

and ancillary matters rather than location

• Purposes– Zoning considers “the community’s development

objectives, its character, and the ‘suitabilities and special nature of particular parts of the community.’”


Huntley & Huntley v. Borough of Oakmont

• “Overall restriction on oil and gas wells in R-1 districts [was] not preempted” by Oil and Gas Act.



• Bottom line:– Municipalities have some ability to limit /

govern natural gas operations through zoning.



• Features– Various requirements overlapped with Oil

and Gas Act

• Purposes– “enabling continuing oil and gas drilling

operations . . . while ensuring the orderly development of property . . .”


Range Resources v. Salem Township

• “Not only does the Ordinance purport to police many of the same aspects of oil and gas extraction activities that are addressed by the Act, but the comprehensive and restrictive nature of its regulatory scheme represents an obstacle to the legislative purposes underlying the Act.”


Range Resources v. Salem Township

• Huntley & Huntley v. Borough of Oakmont – Zoning restrictions permitted in R-1

district.

• Range Resources v. Salem Township– Comprehensive regulatory scheme not

permitted.


Supreme Court Case Law

• Unresolved questions:– Are restrictions limited to R-1 districts?– How does geology affect permissible

limitation?



• Commonwealth Court opinion – Issued on July 22, 2010

• Facts: County zoning ordinance allowed wells only by special exception in residential, industrial, and airport zones.


Penneco Oil Co. v. County of Fayette

• Ordinance was reflection of traditional zoning principles rather than a comprehensive regulatory scheme.

• Although there was some overlap of purposes of Oil and Gas Act, primary purpose of ordinance was to encourage compatible land use.


Penneco Oil Co. v. County of Fayette

• Arbor Resources v. Nockamixon Twp., 973 A.2d 1036 (Pa. Commw. May 12, 2009)– Zoning ordinance provisions

• Where a facility can be located

– Operational ordinance provisions• How a facility may be technically designed and operated


Preemption – Procedural Issue

• Identify prohibited zoning districts

• Set-backs, Lot size, proximity to habitat

• Number of well sites per pad

• Submission of environmental reports

• Performance bonds


Arbor Resources v. Nockamixon Twp.

• Prior precedent:– Where zoning regulations and operational

regulations are inextricably connected, CCP has jurisdiction.

• Holding:– Township ordinances do not contain

operational provisions.



• Rationale:– “Court is not persuaded that the challenged

provisions . . . clearly regulated the operation of oil and gas drilling . . . in addition to location and physical configuration.”

– “Challenged provisions are part of the land use process and not unique operational regulations that become pertinent only after land use approval is granted.”



• Corporate Rights Ordinance

• Corporate Disclosure and Environmental Protection Ordinance

• Temporary Structure Fee Resolution


Range Resources v. Blaine Twp.

• Motion to Dismiss filed by Township denied June 23, 2009.– Range has standing to challenge

ordinance as Township cannot annul corporation’s constitutional rights.

• Motion for Judgment on Pleadings filed by Range granted Oct. 29, 2009.



• Oil and Gas Act preemption– Disclosure Ordinance forbids what the

OGA permits.– OGA was intended to be exclusive

regulator of oil and gas well development.– Disclosure Ordinance stands as obstacle

to accomplishment of OGA purposes.



• Authority– 75 P.S. Chapter 49– 67 Pa. Code Chapters 189, 191, and 193

• Reference– Timber Harvesting in Pennsylvania, Penn

State School of Forest Resources


Road Bonding

• Posting restrictions on roads / bridges– Requires engineering and traffic study

• Local traffic– May exceed posted limit unless notice

provided


Road Bonding

• Permit required for overweight vehicle traffic– Different type of permit issued based upon extent of use– Issuance of permit conditioned on excess maintenance

agreement

• Level of security required– $6,000 per lineal mile for maintenance of unpaved road– $12,500 per lineal mile for maintenance of paved road– $50,000 per lineal mile for degradation of road


Road Bonding







• Reporting requirements • Severance tax• Forced / Fair Pooling• Extent of municipal zoning regulation• County Assessment Law• Surface owners rights• FRAC Act (Federal legislation)


Legislative Issues

Governments’ Roles in Natural Gas Development


• Agricultural Law Resource & Reference Center

207C Lewis Katz Building

University Park, PA 16802

Phone: (814) 865-3723

Email: [email protected]

Web: www.law.psu.edu/aglaw

mailto:[email protected]

http://www.law.psu.edu/aglaw.cfm

http://www.law.psu.edu/aglaw.cfm

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Municipal Regulation of Oil and Gas Operations

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