DRBC Finally Near the Gate
The Delaware River Basin Commission, after three years of effort and insistence by the Commissioners, finally brought forth a set of draft regulations on natural gas development in December of last year. Hearings were held in February and the written comment ended on April 15, with literally thousands of comments being submitted.
The most substantive comments came from industry and landowner organizations, including the Marcellus Shale Coalition and 16 economic development and landowner organizations from the upper basin who joined forces to give their opinions on the draft. The verdict: too much regulation of land use and too little in the way of deference to the states. The Marcellus Shale Coalition used ALL Consulting to conduct an intensive review of the draft regulations. That review offers a penetrating analysis of the document, including the following observations:
• The consumptive water use requirements for natural gas development at full build-out, as compared to other water uses within the Basin, are relatively minor. The nuclear power industry uses more than 10 times the amount of water that would be used for natural gas development; golf course maintenance uses more than 20 times the amount; and thermoelectric power generation and agriculture use more than 45 times the amount.
• The land footprint for natural gas development, as compared to other land uses, is relatively minor. The footprint for natural gas development would be less than the footprint for golf courses in the Basin and 50 times less than the footprint for homes in the Basin.
• Many of the submittals, reporting requirements and notices required by the Draft Regulations are duplicative of host state requirements.
• The process of applying for and obtaining approval to develop natural gas wells pursuant to the Draft Regulations is likely to take as long as 24 months.
Utilizing this review, the Marcellus Shale Coalition submitted a lengthy and extremely compelling comment letter illustrating the several serious issues with the draft regulations. The MSC noted the draft includes a Section 7.5 that contains a host of new construction and operational standards that are either not required by or inconsistent with state regulatory requirements, including:
• A requirement to submit a Natural Gas Development Plan (“NGDP”) for review and approval, which would compel operators to prepare detailed, forward-looking information about the development of all of their leasehold areas in the Basin;
• Stricter siting and setback requirements that serve to limit where well pads may be located in the Basin;
• Additional restrictions related to the management and disposal of wastewater and drill cuttings generated as a result of drilling activities that prohibit waste management techniques otherwise allowed under Pennsylvania law and regulations; and
• Significantly enhanced monitoring and reporting requirements that require more data to be collected, more frequent reporting, and the installation of additional monitoring systems.
The MSC goes on to say “imposition of these siting and planning requirements on well pad projects and the expansion of DRBC’s docket approval process for this purpose would significantly enlarge the scope of DRBC’s authority and mark a substantial departure from prior practice. Such action is unauthorized, unnecessary and unprecedented. Accordingly, the MSC urges DRBC to remove Section 7.5 from its rulemaking entirely and defer to host state regulation in this area.”
The folks who will be most affected by these regulations, the residents of the upper basin where drilling will take place, agree – Section 7.5 must go. Sixteen separate organizations, including owners of over one million acres of land in New York and Pennsylvania, jointly submitted comments. The group included both private non-profit and public stakeholder entities representing economic development and landowner organizations in the four counties comprising that portion of the upper Delaware River basin with developable Marcellus Shale (Broome, Delaware, Sullivan and Wayne Counties).
Prior to the Commission releasing its draft regulations, these stakeholders expressed major concerns and needs with respect to the development of natural gas regulations by the Delaware River Basin Commission. Their comments on the draft regulations suggest many of the flaws in the current draft are directly attributable to a failure to properly research, field check and test the proposed regulations before putting them forward. They point out that both the regulations and the supporting materials include several unsupported statements about the amount of drilling expected to place, based on clearly erroneous assumptions.
Most importantly, this group of upper basin stakeholders notes “the proposed regulatory process is exactly backwards. The regulations superimpose standards on the states to be enforced by DRBC staff inexperienced with regulating oil and gas. It should be exactly the opposite, with the states in charge and the DRBC serving as an interested agency to suggest higher or different standards that should be considered by the states prior to permitting individual wells. This would put experienced regulators in charge, allow a meaningful DRBC role and provide a basis for DRBC appeals of decisions. It would deliver certainty without compromising standards and ensure competent enforcement by knowledgeable staff. It would avoid all arbitrary one-size-fits-all standards and the redundant separate pre-construction review of well pads provided for in Section 7.5.”
These local stakeholders suggest Section 7.5 should be deleted and the entire process reversed to put the states in charge and the DRBC in the role of an interested party. They explain that “well pad standards are almost wholly redundant with state regulations and unnecessary. Moreover, such additional standards as are offered are completely unrealistic, particularly the 500 feet setback from water bodies and wetlands. A typical 5-acre well pad would be 467 feet squared in size and a 500 feet buffer around such a pad would require roughly a 40-50 acre site that is free of any water bodies or wetlands. While this might sound reasonable, the definition of water body encompasses seasonal and intermittent depressions, channels, ditches and ‘similar drainageways,’ as well as all wetlands. There are virtually no areas in the Upper Delaware region where 40-50 contiguous acres of land lacking these features can be found. Accordingly, well pad standards and the remainder of Section 7.5 should be completely deleted.”
The next step in the process of developing sensible regulations for the DRBC region is in the hands of the Commissioners, who now have the task of melding what the staff has produced with the public comments to produce a workable set of regulations that will allow natural gas development to go forward in a responsible way. That should happen in the next several months as the affected states negotiate just how much authority they will allow to the DRBC. There is every reason to be optimistic. Not only is Pennsylvania ready to move, but New York State is now on track and New Jersey is not far behind.
New Jersey’s position is generally reasonable, except for its position on the setbacks, which reflects its lack of experience with upper basin land development. Its current stand is also consistent with what that state has been saying from the beginning. It indicates the DRBC role consists of allocating water, regulating waste disposal and ensuring water diversions are not harmful. Who couldn’t agree? New Jersey also notes the economic importance of natural gas development to the region and the nation, which is extremely important, and, ironically, something the DRBC draft ignores.
Staging of well pad approvals is suggested by New Jersey, which recommends a maximum of 30 well pads during the first two years. This is viewed by landowners as reasonable although they take the position the states should be doing that in the context of an overall agreement reached through the auspices of the DRBC, rather than a DRBC fiat. Their view is that well pads shouldn’t require DRBC approval, but the states can certainly agree among themselves to do so and limit the number. All in all, New Jersey seems to have found a reasonable middle ground and this indicates things are moving forward in the DRBC region, at long last.