Fracking Insider Readers:  We are pleased to bring you Volume 3 of our State Regulatory Roundup.   As we explained in Volumes 1 and 2, we designed the Roundup to provide quick overviews on state regulatory activity.  If you have any questions on any of these summaries, please do not hesitate to ask.

Pennsylvania – On July 26th, the Pennsylvania Commonwealth Court struck down provisions of Act 13 that prohibit municipalities from imposing ordinances that restrict oil and gas development.   The decision has already been appealed by the state.

Act 13 has drawn controversy since it was enacted five months ago.  Many oil and gas companies objected to the imposition of impact fees on the industry and many municipalities, particularly those with stringent regulations on the books or in the works, objected to language that could preempt local ordinances by prohibiting the imposition of restrictions on the “reasonable development of oil and gas resources.”   The oil and gas industry favored the language because it could help companies operating in the state avoid the confusion and uncertainty of having to comply with a patchwork of evolving, and often contradictory, local regulations.  State officials supported the language out of concern that onerous local ordinances could chill much needed investment in the state.  Many local governments and environmental groups disagreed.   They saw the preemption language as overreaching and designed to eliminate local governments’ ability to protect their citizens and local resources.  The court was persuaded and declared the preemption sections of Act 13 null, void, and unconstitutional.  The court similarly struck as impermissibly vague a provision that would have allowed DEP, upon petition, to waive setback requirements.

As discussed further below, preemption and setback issues are topics under close consideration in many state capitals as lawmakers and regulators struggle to update their extraction regulations.  There will be many eyes on this decision and the coming appeal.

Pennsylvania IIDimock, Pennsylvania, which became infamous after its citizens and pyrophoric well water were featured in Gasland, got its second clean bill of health on July 25, 2012.  EPA, after extensive testing, found no health threats from gas drilling and no links between methane migration and hydraulic fracturing.   EPA’s testing was conducted pursuant to its CERCLA emergency removal authority.  Previous to EPA’s testing, Cabot Oil & Gas, which is alleged to have contaminated the drinking water in Dimock, conducted its own testing and similarly found no health effects.  The only contaminants detected were naturally occurring and within residential limits.   Cabot, however, is still not clear to resume operations as it remains still under investigation for the alleged methane migration.   Significantly, even EPA acknowledges that the migration is not caused by hydraulic fracturing, but rather from improper well casing.  While such a distinction may be meaningless to someone whose well is contaminated, it matters from a policy perspective.   As hydraulic fracturing regulations and laws are debated around the country, it is important for regulators and lawmakers to understand the risks where they actually lie, and avoid artificially classifying all gas drilling impacts as caused by hydraulic fracturing.

Colorado – Colorado, like Pennsylvania, is experiencing its own conflict over local ordinances restricting oil and gas operations.   On July 17, 2012, the city council in Longmont, Colorado voted 5-2 to ban drilling in residential areas of Longmont and, in November, will vote to ban all drilling within city limits.   The Colorado Oil and Gas Conservation Commission responded quickly by filing suit in Boulder County District Court on July 30, 2012.   The circumstances of the action are similar to the action in Pennsylvania and resemble actions that are emerging in several states as gas plays bring industry operations into non-traditional and populated areas.   Longmont and its environmentalist backers want the right to restrict oil and gas operations within city limits and the state and industry want coherent state-wide regulations that promote efficient and orderly development.   Rest assured that the preemption issue will not remain constrained to Pennsylvania and Colorado.   We expect to see this issue litigated repeatedly in state courts across the country.

New York -    Preemption fights are even rearing their heads in places subject to the Department of Environmental Conservation’s ban on fracking.  Avon, New York recently passed a ban on horizontal drilling so that drilling would continue to be banned within the town limits if the DEC ban is lifted later this year.   Horizontal drilling, when combined with hydraulic fracturing, is key to developing salable quantities of natural gas in shale formations like the Marcellus.  Avon’s belt-and-suspenders approach has drawn threats of litigation from Lenape Resources, Inc., an oil and gas company and local leaseholder that is bearing the brunt of the local ban.   Lenape has sent a letter to DEC demanding that if the DEC does not challenge the local ordinance, Lenape will do so directly.  DEC has been reluctant to challenge local ordinances – perhaps because New York is home to some of the most aggressive anti-fracking groups, but perhaps also because industry challenges to local ordinances have been recently dismissed by two separate courts.  Both actions are being appealed. 

Meanwhile, Governor Andrew Cuomo’s attempts to allow localities to determine for themselves whether or not to allow fracking has come under attack by Binghamton Mayor, and former environmental lawyer, Matthew Ryan, and other opponents of hydrofracking.  Mayor Ryan has signed a letter addressed to Governor Cuomo’s top 1,000 individual donors to urge them to use their influence to convince the governor to ban fracking.  Binghamton’s mayor also has weighed in on the situation in Dimock Township by “offer[ing] to send a tanker with fresh water to a northeastern Pennsylvania village where about a dozen households were left scrambling this week after a gas driller blamed for polluting the aquifer three years ago stopped making daily deliveries.”

Members of the Dimock Township board of supervisors, however, apparently refused to sign a “mutual aid agreement” proferred by Ryan.  That agreement, in part, stated:

"As Dimock Township does not have the capability of providing water for the eleven families on Carter Road, whose shipments of water were suspended as of today, we are requesting any community or organization capable of providing water for these residents to come to their aid."

To say the least, the Binghamton mayor is taking an unusually deep interest in this issue, regardless of the political jurisdictions.

Wyoming -  In a July 19, 2012 letter to operators in the state, the Wyoming Oil and Gas Conservation Commission significantly tightened up the process for seeking confidentiality of well statistics.  During the exploratory stages, companies often seek to protect as propriety well status information to avoid allowing competitors the benefit of their research and risk.  The Commission believed that many companies were over-designating and that confidentiality determinations were being too freely given.   Operators must now provide written requests supported by specific justifications for the request.    

Ohio – On August 1, 2012, the Cincinnati City Council banned the deep well injection and storage of oil and gas wastewater.   Deep well injection and storage raises concerns over groundwater contamination and seismic activity.  While Cincinnati succeeded in being the first Ohio city to ban injection and storage, the practical impact is unclear as the Ohio Department of Natural Resources is the exclusive permitting authority over injection and storage of oil and gas wastes.   As we noted in an earlier blog post, Ohio has taken significant steps forward in updating its oil and gas regulations.