Hydraulic Fracturing Regulatory Updates in California and Pennsylvania
California Exploring Hydraulic Fracturing Regulation
California currently has no regulations specific to fracing but has well construction standards designed to keep natural gas and oil field fluids away from underground water sources. Fracing has taken place in California, but applications for permits to frac are reviewed on a case-by-case basis by the Department of Environmental Conservation's (DEC) Division of Oil, Gas and Geothermal Resources. This is likely to change soon, however, as the DEC announced last week that it will propose new rules specifically for fracing by the end of summer 2012. DEC will hold a series of workshops across the State to gather data and will commission a study on fracing’s effects in the state. The agency also plans to review its existing policies for underground injection wells. If prior regulatory efforts in California are any indication, the issue could progress quickly and fairly strict regulations could be proposed by August or September 2012.
Parallel to this recent activity by DEC, fracing legislation remains pending in Sacramento but there has been little movement on it. Under this proposed legislation, oil companies would be required to post the names and concentrations of fracing chemicals on a national online registry within 60 days of stopping hydraulic fracturing and list the locations of any wells where fracing occurred and the dates when fracing was performed.
"Marcellus Compact" Introduced in Pennsylvania to Limit Hydraulic Fracturing
Earlier this year, the Pennsylvania Legislature passed Act 13, putting into place comprehensive new rules regulating almost every aspect of hydraulic fracturing. Among the new rules in Act 13, and arguably the most controversial, is one that effectively preempts towns from putting in place well siting restrictions that are more stringent than those provided for in state rules. The effect of this rule is that towns and municipalities are prevented from banning (or significantly restricting) fracing within their borders – something that more than 100 towns in neighboring New York have already done under "home rule" laws. Several towns recently filed a legal challenge to the constitutionality of this particular provision of Act 13, and in April they won a 120-day injunction to bring local rules into compliance with the new state rules. The underlying constitutional claim remains pending in that case.
In the interim, several House Democrats recently unveiled what they call the "Marcellus Compact," – six separate pieces of legislation aimed at amending or overriding different Act 13 provisions. One of those bills, sponsored by Democratic Whip Mike Hanna, would substitute a statewide severance tax for Act 13's local impact fee and, more importantly, would restore local and municipal authority to ban or restrict hydraulic fracturing .
The other bills introduced as part of the Marcellus Compact seek to (1) increase environmental setbacks and bonding requirements for wells; (2) establish a public online tracking system for fracing wastewater storage and disposal; (3) prohibit drilling in floodplains; (4) place a moratorium on discharging drilling wastewater into surface waters; (5) require full medical disclosure of fracing fluid constituents to doctors and physicians, when necessary to protect the health of patients; and (6) establish a Marcellus Shale Job Creation Tax Credit that, supporters believe, will incentivize companies to hire Pennsylvania workers.