On July 22, 2011, Governor Corbett’s Marcellus Shale Advisory Commission (“the Commission”) issued its report containing 96 recommendations to “develop a comprehensive, strategic proposal for the responsible and environmentally sound government of Marcellus Shale.” The report resulted from the Governor’s issuance of Executive Order 2011-01 which created the Commission and further required it to conduct a complete review of existing and proposed statutes, legislation, regulations and policies regulating or affecting Marcellus Shale natural gas development. Governor Corbett established the Commission due to the extensive and expansive development and production of the Marcellus Shale formation in Pennsylvania over the past five years and the growing concerns raised by state regulatory agencies, local communities and environmental advocacy groups.

Since March 25, 2011, the Commission met on five occasions and relied upon four Work Groups that were charged with examining specific issues related to Marcellus Shale gas development. The Commission’s four Work Groups included: Public Health, Safety & Environmental Protection; Local Impacts & Emergency Response; Infrastructure; and Economic & Workforce Development. Each of the four Marcellus Shale Advisory Work Groups developed a summary of the important needs and impacts identified through their meetings which are summarized below. Overall, four key needs and issues were identified, as well as recommendations to address each need and issue.

Environmental Impact Mitigation is the first need recognized by the Commission. Specifically, the Commission acknowledged that the development of non-conventional shale gas resources will require additional steps to protect, conserve and enhance the State’s natural resources as well as to further mitigate developmental impacts on water, land and air resources. Related recommendations include the adoption of best management practices and monitoring to minimize impacts to natural resources. In addition, a recommendation to minimize the number of well pads, as well as to utilize existing rights of way, was made in order to mitigate cumulative environmental impacts. A recommendation was also included to establish an air emission inventory in order to estimate NOX and VOC emissions for gas development activities.

Infrastructure Development in connection with the development, transportation and processing of shale gas is the second need identified by the Commission.. The Commission noted that the regulation of natural gas occurs at both the federal and state level. The Commission further noted that many pipeline projects are underway or proposed in order to transport Marcellus Shale gas from the well pads. Several recommendations were offered to mitigate infrastructure development issues including a recommendation to designate a lead agency to prevent delays in pipeline project development and approvals and to designate a state agency to create a “One-Stop” permitting process for pipeline deployment.

Economic Development and Impact Needs is the third key issue identified by the Commission. The Commission observed that unemployment rates are dropping rapidly in counties with a high concentration of drilling activity, but that there are some “skill gaps” found in various industries supporting development. Importantly, the Commission recommended that Pennsylvania’s business climate be evaluated to ensure that the State attracts private investment capital and maximizes downstream natural gas use.

Mitigation of Local Adverse Impacts is the fourth issue identified by the Commission as a primary need associated with shale gas development and production. Since natural gas development has expanded rapidly in the Commonwealth, some communities have decided to enact prohibitions on such gas development through the use of zoning regulations and ordinances. The Commission acknowledged that while these types of governmental limitations may be used, land use controls still need to be consistent with state laws. The Commission expressed concern about impeding the growth of the natural gas industry.

In response to the Commission’s recommendations, two bills are underway in the Pennsylvania House of Representatives. Representative Matt Baker plans to introduce a bill to amend the Oil and Gas Act to regulate unconventional drilling (which includes horizontal drilling used to fracture shale). The proposed legislation would also include increased setbacks between wells and water supplies, the development of a system to track wastewater from development activities and would extend the “presumptive” liability for an operator from 1000 feet to 2,500 feet. Representative Camille George has introduced H.R. 1800, which includes greater setbacks between wells and water supplies and increases bonding requirements.

It is clear that the oil and gas industry is facing increasing scrutiny not only from those who are philosophically opposed to hydraulic fracturing but also from state, regional and federal regulators who are under increasing pressure to regulate unconventional drilling for oil and gas reserves. Concurrently, there will likely be no end to the litigation efforts that will be made by environmental groups, private citizens and environmental agencies.