On June 11, 2012, Ohio Governor Kasich signed Amended Substitute Senate Bill 315 (“S.B. 315”) into law. S.B. 315 makes changes to Ohio’s energy and natural resources laws and related programs, including updates and additions to Ohio’s law governing horizontal wells. Set forth below is a brief discussion of the key changes made by S.B. 315 that will affect the drilling of horizontal wells. The changes made by S.B. 315 go into effect on September 10, 2012.

ADDITIONAL APPLICATION REQUIREMENTS (R.C. 1509.06)

S.B. 315 requires additional information to be provided with well permit applications. Specifically, for an application to drill a new horizontal well, the applicant must now provide the Ohio Department of Natural Resources (“DNR”) with sample results from water wells within 1,500 feet of the proposed horizontal wellhead. [R.C. 1509.06(A)(8)(c)] For an application to drill any well located in an urbanized area, the application must include sample results for water wells within 300 feet of the proposed well prior to commencement of drilling. [R.C. 1509.06(A)(8)(b)] Additionally, in both instances, the application must identify the location of each water well where the owner of the property on which the well is located has denied access to sample the water well. [R.C. 1509.06(A)(8)(b) & (c)]

Notably, the application must also include an identification of each proposed source of ground water and surface water that will be used in the production operations of the well. The application must indicate if the water will be withdrawn from the Lake Erie watershed or the Ohio river watershed. The application must also provide the proposed estimated rate and volume of the water withdrawal for the production operations of the well. [R.C. 1509.06(A)(8)(a)]

Additionally, an applicant for a horizontal well permit must submit a copy of an agreement between the applicant and a corresponding public official regarding the maintenance and safe use of the roads, streets and highways that the well owner anticipates will be used for access to and from the well site. [R.C. 1509.06(A)(11)(b)]

INSURANCE REQUIREMENTS (R.C. 1509.07)

S.B. 315 requires that the owner of a horizontal well obtain liability insurance coverage for an amount not less than $5 million in bodily injury coverage and property damage coverage to address any injury to persons or damage to property caused by the production operations of all the owner’s wells in Ohio. [R.C. 1509.07(A)(2)] The insurance policy must include a reasonable level of coverage available for an environmental endorsement. The owner must maintain the coverage until all the owner’s wells are plugged and abandoned or are transferred to an owner who has obtained the required insurance coverage as well. [R.C. 1509.07(A)(3)]

NEW RULES (R.C. 1509.03)

S.B. 315 allows the Chief of the Division of Oil and Gas Resources Management (the “Chief”) to adopt rules that identify subjects that are required to be addressed by the terms and conditions of a horizontal well permit. Those subjects include the following: (1) safety concerning the drilling or operation of a well, (2) protection of the public and private water supply (including the amount of water used and the source or sources of the water), (3) fencing and screening of surface facilities of a well, (4) containment and disposal of drilling and production wastes, (5) construction of access roads for purposes of the drilling and operation of a well and (6) noise mitigation for purposes of the drilling of a well and the operation of a well, excluding safety and maintenance operations. [R.C. 1509.03(A)(1)-(6)]

STATEMENT OF PRODUCTION (R.C. 1509.11)

As a result of S.B. 315, owners of horizontal wells must now file with the Chief a statement of production of oil, gas, and brine on or before March 31 for the preceding calendar year. [R.C. 1509.11(A)]

WELL COMPLETION RECORD (R.C. 1509.10)

R.C. 1509.10 currently requires any oil and gas well driller to complete and submit a well completion record to the DNR within 60 days after completion of drilling operations. Per S.B. 315, the well completion record is now required to include information about the products, fluids and substances added to facilitate the drilling of any portion of the well until the surface casing is set and properly sealed. [R.C. 1509.10(A)(9)(a)]

Further, the owner must now identify each additive used and provide a brief description of the purpose for which the additive is used. In addition, the owner must include a list of all chemicals, not including any information that is designated as a trade secret, intentionally added to all products, fluids, or substances and include each chemical’s corresponding Chemical Abstracts Service number and the maximum concentration of each chemical. [R.C. 1509.10(A)(10)(b)]

TRADE SECRET PROTECTION (R.C. 1509.10)

Despite the requirements for information to be included in the well completion record discussed above, the well owner may seek trade secret protection with respect to the identity, amount, concentration, or purpose of a product, fluid, or substance, or of a chemical component in a product, fluid, or substance. S.B. 315 prohibits the Division of Oil and Gas Resources Management from disclosing the identity, amount, concentration, or purpose of any product, fluid, or substance or chemical component in a product, fluid, or substance that is designated as a trade secret. [R.C. 1519.10(I)(1)]

Any owner or person who has claimed a trade secret for this information must maintain records for the material for a period of not less than two years after the date on which the material was placed in the well.

CIVIL ACTION CHALLENGING TRADE SECRET (1509.10)

Under S.B. 315, a property owner, an adjacent property owner, or any person or state agency having an interest that is or may be adversely affected by a product, fluid, or substance or by a chemical component in a product, fluid, or substance may commence a civil action in the Franklin County Court of Common Pleas challenging an owner’s or person’s claim to entitlement to trade secret protection. [R.C. 1509.10(I)(2)]