Ohio O&G Regulatory & Environmental Matters eBook
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Ohio O&G Regulatory & Environmental Matters eBook



Blog posts covering regulations and environmental issues, written over the past 12 months by some of the lawyers at Porter Wright Morris & Arthur LLP on their Oil and Gas Law Report blog ...

Blog posts covering regulations and environmental issues, written over the past 12 months by some of the lawyers at Porter Wright Morris & Arthur LLP on their Oil and Gas Law Report blog (www.oilandgaslawreport.com). The "best of" posts are complied into a handy PDF ebook. This little ebook (28 pages) is useful for lawyers, drillers and landowners alike.



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Ohio O&G Regulatory & Environmental Matters eBook Ohio O&G Regulatory & Environmental Matters eBook Document Transcript

  • Oil & Gas Law Report Blog series: Regulatory and Environmental MattersA relationship of adifferent stripe.
  • Table of contentsPorter Wright Resources ......................................................................................................................... 3ODNR‟s Preemption of Oil and Gas Regulation Upheld ................................................................... 4Who Should Regulate Oil and Gas Operations, National, State or Local Government? ........... 6Is There a Right To Appeal an Oil and Gas Drilling Permit in Ohio? [UPDATE: No] ........................ 8The Basics of Ohio Prevailing Wage Law........................................................................................... 11Ohio Attorney General Issues Guidance on Road Use Maintenance Agreements (RUMA‟s) . 13Fracking (Fracing) Fluid Not Allowed on Ohio Roads ..................................................................... 15Management of Oil Field Wastes ....................................................................................................... 17Exploring the Disposal of Fracking Waste Water — UIC Class II Wells in Ohio ............................. 22Gas Plant and Gas Wells Are Not Collectively a “Major Source” Due to Being “FunctionallyRelated,” Absent Physical “Adjacency” ........................................................................................... 26EPA‟s Clean Air Act New Source Performance Standards for the Oil and Gas Sector FinallyAppear in the Federal Register ........................................................................................................... 28www.oilandgaslawreport.com Page 2 of 28
  • Porter Wright ResourcesPorter Wrights Oil & Gas practice group includes more than 40 attorneys with extensiveexperience in all aspects of doing business in the Marcellus and Utica shale plays. Theseattorneys include: Brett Thornton is chair of the Oil & Chris Baronzzi has experience with a Gas practice group. He counsels range of oil and gas matters, clients on corporate and financing including the Ohio Dormant Minerals issues related to the operation of Act, lease forfeiture actions, lease pipeline systems for transporting terms, oil and gas well construction petroleum products, and the issues, seismic surveys, water testing, development, production and division orders, pipeline easements, transport of energy resources. eminent domain and appropriation. Jeff Fort advises oil and gas clients Eric Gallon counsels on subjects on operational, governance, including Clean Air Act compliance environmental, employment and and defense, public utilities law, contracting issues. His practice also government relations, contract encompasses permitting, regulatory disputes and damages actions under compliance, environmental audits the Ohio Consumer Sales Practices and assessments. and solid and Act and federal Telephone hazardous waste disposal. Consumer Protection Act. Scott North concentrates in the Rob Schmidt represents clients in areas of complex civil litigation and environmental programs such as the regulatory and governmental Clean Air Act, Clean Water Act, affairs. He presently serves on the Superfund, solid and hazardous Ohio Supreme Court Task Force on waste, emergency planning and Commercial Dockets by agricultural issues. He has extensive appointment of the Chief Justice of experience negotiating with state the Supreme Court of Ohio and federal environmental agencies. Chris Schraff practices in the firm‟s Ryan Sherman concentrates his Environmental/Energy/Government practice on complex commercial department, having special interest disputes, with a particular focus on in the Federal Water Pollution construction matters, IP litigation and Control Act, CERCLA and RCRA securities and shareholder disputes. matters, wetlands regulation, His practice also involves pretreatment requirements, and representing clients in emergency state/local environmental statutes. injunctive proceedings. Porter Wright Morris & Arthur LLP 41 South High St., Suites 2800-3200 Columbus, OH 43215-6194 614.227.2000 www.porterwright.comwww.oilandgaslawreport.com Page 3 of 28
  • ODNR’s Preemption of Oil and Gas Regulation UpheldFebruary 14, 2013 | Jeff FortAs we discussed in an earlierpost about regulatory structures,the question of who is authorizedto regulate oil and gasoperations in Ohio pits localgovernments against the stategovernment. The state won thefirst round earlier this week —and it may have landed aknock-out punch.In State ex rel. Morrison v. Beck Energy The court pointed out, “In 2004, theCorp., 2013-Ohio-356 (Ninth Dist.) Beck General Assembly enacted H.B. 278, whichobtained a permit from the Ohio expanded the regulatory scheme andDepartment of Natural Resources (ODNR) amended R.C.1509.02 to give the Divisionto drill an oil and gas well on property of Mineral Resources Management of thelocated within the city of Munroe Falls, Ohio Department of Natural Resources theSummit County, Ohio. When Beck began „sole and exclusive authority to regulatedrilling, the city issued a stop work order the permitting, location, and spacing of oiland filed a lawsuit. The city claimed that and gas wells.‟”Beck‟s activities were illegal because Beckdid not comply with city ordinances that The court also observed that in 2010required Beck to obtain a city drilling ODNR‟s authority was expanded to includepermit (and pay the associated “production operations,” and wasapplication fee), a zoning certificate, expanded further in 2011 to include “wellrights-of-way construction permits, post a stimulation,” “completing,” “construction”performance bond and attend a public of site and “permitting related to thosehearing. The trial court agreed with the city activities.”and issued an injunction. Beck appealed. Nevertheless, the city argued that ArticleThe appellate court framed the issue on XVIII, Section 3 of the Ohio Constitutionappeal as, “whether the City of Munroe gives municipalities “home-rule” authorityFalls can enforce its ordinances governing to regulate gas drilling operations becauseoil and gas drilling and related zoning and the authority given to the state by therights-of-way issues despite the state‟s statute only pertains to “permitting,comprehensive statutory scheme for location and spacing of” oil and gas wellsdrilling set forth in R.C. Chapter 1509.” The under R.C. 1509.02.court added that this was a case of firstimpression; i.e., the first time the court had To decide whether the ordinances wereconsidered this question. an appropriate use of the city‟s home-rule authority, the court went through a three-www.oilandgaslawreport.com Page 4 of 28
  • step analysis established by the Ohio granted to the state by statute is broaderSupreme Court. After disposing of the first than the city‟s interpretation and in conflicttwo steps, the court determined that the with the remaining city ordinances. Thethird step — whether the ordinances court held, “We are compelled to followconflicted with a state statute — was most the established law in our application ofcritical. The court said: “… the issue to be the constitutional home-rule analysis toresolved in this appeal boils down to Munroe Falls‟ drilling ordinances. Becausewhether the ordinances Munroe Falls the drilling ordinances are in direct conflictattempts to enforce are in conflict with with the state statutes, the city cannotR.C. 1509.02. In the event of a direct enforce the ordinances as presentlyconflict, the state regulation prevails.” written.”The city argued that because none of its With that, the court reversed the judgmentordinances infringed on the states control of the Summit County Court of Commonover “permitting, location and spacing” of Pleas, but instructed that Beck would needoil and gas wells, the ordinances did not to apply for the excavation and rights-of-conflict with the statute and were way permits.enforceable. You can bet that, given this guidance,The court agreed that the city‟s ordinances creative city council members who areregarding excavations and rights-of-way opposed to oil and gas production willdo not conflict with R.C. 1509.02 and found stretch the court‟s reasoning as far asthose ordinances to be enforceable as possible. We expect to see more litigationlong as the city did not enforce those testing the limits of home rule authority.ordinances “in a way that discriminatesagainst, unfairly impedes or obstructs oil Back to topand gas activities and operations.”However, with respect to the otherordinances, the court did not agree withthe city, finding instead that the authoritywww.oilandgaslawreport.com Page 5 of 28
  • Who Should Regulate Oil and Gas Operations, National,State or Local Government?September 14, 2012 | Rebecca Mott and Jeff McNealeyLaws and regulations are adopted at all authorities may have a differentlevels of government. The scope of perspective. Such is the case for oil andcoverage and the need for uniformity gas production, fracking and brinenormally dictate the jurisdictional level of disposal.regulation. But, when the objectives offederal, state, and local governments Pennsylvania Wrestles with Preemptionconflict, legal battles erupt under the rally In the spring of 2012, the Pennsylvaniacries of “federalism,” “states rights,” “home legislature passed a law known as Act 13,rule,” “preemption,” and “constitutional which prohibits local government fromrights.” regulating oil and gas activities in contravention of state law. On July 26,Some issues, such as interstate pipelines 2012, pursuant to a challenge fromand air quality, are clearly better regulated Robinson Township, a Pennsylvaniaat a federal level, while others are more Commonwealth Court (analogous tosuited to the state or local level. For Ohio‟s Common Pleas Courts ) overturnedexample, uniform federal Clean Air Act key provisions of Act 13. In Robinsonregulations prevent states from creating Township v. Commonwealth, the court“pollution havens” to attract business. declared unconstitutional: (1) the provision of Act 13 that preempts local municipalitiesSimilar concerns exist between state and from enacting zoning ordinances that arelocal regulation. The state, as a whole, more restrictive than the provisions of Actmay want to encourage development of 13; and (2) the provision of Act 13 thatsome kind, but communities and local authorizes the Department of Environmental Protection (“DEP”) to waive setback requirements for oil and gas wells from the waters of the Commonwealth. Both sides appealed the decision to the Pennsylvania Supreme Court, which is expected to issue a much anticipated ruling in the near future. Ohio State Law Also Preempts Oil and Gas Operations Through ORC §1509.02, Ohio law vests Ohio Department of Natural Resources (“ODNR”), Division of Oil and Gaswww.oilandgaslawreport.com Page 6 of 28
  • Resources Management with “sole and However, pursuant to the controlling caseexclusive authority to regulate the of Am. Financial Servs. Assn. et al. v.permitting, location, and spacing of oil and Cleveland, 112 Ohio St. 3d 170, 2006-Ohio-gas wells and production operations within 6043, the Ohio Supreme Court has routinelythe state … .” held that the home rule provisions of the Ohio Constitution do not apply in the faceAlthough windmills are far more attractive, of comprehensive statewide legislation, asand clearly far less mobile, than oil and gas in the case of those impacting the oil anddrilling rigs, the rigs are a far more popular gas industry. The legal precepts underlyingtarget here in Ohio. Local communities, the American Financial decision have alsosome small and some larger, fueled by been extended to regulation of electricconcerns over fracking, have attempted transmission lines, hazardous waste facilitiesto block various oil and gas operations and solid waste facilities. It is clearly thewithin their respective jurisdictions. While state policy of Ohio to encourageundoubtedly politically responsive to their extraction of Ohio‟s mineral resources in anconstituents, community leaders should be expeditious, efficient, and environmentallyforewarned that Ohio laws, i.e. ORC compliant manner. The current Ohio§1509.02, preclude effective challenges to program under the oversight of the Ohiooil and gas operations in this manner. Department of Natural Resources accomplishes this. For its part, the DivisionOhio has adopted a comprehensive of Oil and Gas Resources Managementstatewide regulation of oil and gas encourages public participation. As aoperations, including fracking, which laws result of its initiative, Section 1509.61 waswere most recently comprehensively added to its governing statute. Thisupdated in June, 2012. Absent specific provision requires that local governmentsstate legislative authority to counties and notify affected land owners and provide atownships for control over certain local hearing before entering into an oil and gasmatters such as local impact cost lease covering property it owns.recovery, these political entities have noauthority to regulate oil and gas operations Accordingly, while local jurisdiction in Ohioother than as a part of the statewide may want to charge these “moderncomprehensive system. For municipalities, windmills,” their “intellectual and financialOhio‟s Constitution provides for “home capital” would be far more wisely andrule” provisions which may seemingly give effectively expended through activesome authority for municipalities to participation with qualified experts in theregulate oil and gas operations by zoning ODNR permitting processes to assure thator similar local regulations. There is a similar each permits addresses any particularlegislative process which could also extend local situations needing specific attention“limited” home rule for townships beyond the general prevue of state law.undertaking the process to qualify. Back to topwww.oilandgaslawreport.com Page 7 of 28
  • Is There a Right To Appeal an Oil and Gas Drilling Permitin Ohio? [UPDATE: No]February 1, 2013 | Andrew TraffordOhio Supreme Court Rules Drilling Permits contained in that permit. But, recent casesAre Not Appealable to the Oil and Gas in Ohio and West Virginia have forcedCommission courts to more clearly define who can appeal the issuance of an oil and gas wellThe Ohio Supreme Court this week ruled in drilling permit.the case Chesapeake Exploration, LLC v.Oil and Gas Commission, Slip Opinion No. In most States, when an operator wants to2013-Ohio-224, agreeing with Chesapeake drill a new well, it has to obtain a drillingand holding that permit from thethere is no right to State agencyappeal a drilling charged withpermit in Ohio. In regulating thosedoing so, the court activities. Thosedecided that R.C. permits affect other1509.06(F) does parties, namelyexclude drilling landowners,permits as neighbors, and otherappealable orders. oil companies. InThis means that both Ohio and Westonce a drilling Virginia, landownerspermit is issued by are asking courts tothe Chief, it cannot recognize a right ofbe appealed to appeal to challengethe Oil and Gas Commission. You can read the issuance of an oil and gas well drillingthe whole opinion (it‟s short). permit. The laws in both States will inevitably be litigated and that process hasTo learn more about this topic, read our begun.original post: Who Has The Right To Appeal The IssuanceIs There a Right To Appeal an Oil and Of A Drilling Permit Under Ohio Law?Gas Drilling Permit in Ohio? The Ohio statute that governs drilling permits is not entirely clear about this,November 2, 2012 | Andrew Trafford and though recent changes to these laws andJeff Fort a case pending before the Ohio Supreme Court both address the issue.Surface owners, neighbors and othersindirectly affected by the issuance of an oil The issue is this: the section of the Ohioand gas well drilling permit might be Revised Code (Chapter 1509), whichsurprised to learn that they do not have a governs oil and gas regulation in the State,clear right to challenge the terms grants a right to appeal decisions of thewww.oilandgaslawreport.com Page 8 of 28
  • State‟s oil and gas regulatory agency. (R.C. 1509.06(F))Later in the same Code section arespecific rules for issuing drilling permits (R.C. Because the right to appeal only exists for1509.06), which includes language “orders of the chief”, this language createssuggesting that drilling permits are not a potential carve-out for drilling permitsappealable. rendering them un-appealable.Take a look: here the Ohio Revised Code A recently filed case in the Supreme Courtprovides a general right to appeal a permit of Ohio seeks to clarify this potentialissuance: ambiguity.Any person adversely affected by an order In Chesapeake Exploration LLC v. Oil andby the chief of the division of oil and gas Gas Commission et al, Case No. 12-207resources management may appeal to (2012), Chesapeake is the lessee of an oilthe oil and gas commission for an order and gas lease for land owned byvacating or modifying the order. Summitcrest. When Chesapeake was issued a drilling permit in February 2012,R.C. 1509.36 (emphasis added). The statute Summitcrest appealed to the Ohio Oil andgoes on to permit any party to the hearing Gas Commission to vacate the permitbefore the Commission to appeal to the arguing that the lease is invalid. TheCourt of Common Pleas. R.C. 1509.37. Division of Oil and Gas Resources Management and Chesapeake bothThere is another general right to appeal, by moved to dismiss the appeal on theway of the Administrative Procedure Act, grounds that the Commission did not havein a different part of R.C. 1509: jurisdiction, which is the issue currently before the Supreme Court of Ohio. "Any order issuing, denying, or Chesapeake argues that the language in modifying a permit or notices R.C. 1509.06(F) removes drilling permits required to be made by the chief from the appellate jurisdiction of the Oil pursuant to this chapter shall be and Gas Commission. The Oil and Gas made in compliance with [The Commission argues that R.C. 1509.06(F) is Administrative Procedure insufficient, by itself, to remove their power Act]…Every order issuing, denying, or to hear an appeal in the face of two modifying a permit under this general grants of jurisdiction in R.C. 1509.36 chapter and described as such shall and R.C. 1509.03(B), cited above. be considered an adjudication for purposes of [The Administrative The Supreme Court of Ohio has asked for Procedure Act]. (R.C. 1509.03(B)(1))" further briefing on the issue, and will issue a decision in the future.Left alone, these sections provide ageneral right to appeal. But take a look at Interestingly, in the middle of all the eventsR.C. 1509.06, which outlines the procedure in the Chesapeake case, above, Senatefor obtaining drilling permits, and it states: Bill 315 went into effect and expressly exempted drilling permit issuances from“…the issuance of a [drilling] permit shall being subject to the Administrativenot be considered an order of the chief.” Procedure Act (amendment to R.C. 1509.03(B)(1)). This takes away one leg ofwww.oilandgaslawreport.com Page 9 of 28
  • the Commission‟s argument that they have UPDATE: The WVSC issued its opinion onthe power to hear permit appeals. The Nov. 21, 2012, denying Mr. Hamblet a rightother leg, R.C. 1509.36 was unchanged by to appeal the well drilling permit. The courtS.B. 315. said that the West Virginia Code “is clear and unambiguous with regard to who mayDoes this create more confusion, or will the object to the well proposed to be drilled.Supreme Court‟s ruling in the Chesapeake Notably absent from the statute is anycase settle the issue? Until the Supreme mention of the surface owner of theCourt of Ohio issues its opinion, it is unclear subject property.” Read the full opinionwho has the right to appeal drilling permits, here.if those rights exist at all. Waiting for ClarificationAsk The Neighbors: West Virginia Supreme So, this issue is being viewed throughCourt Will Hear A Similar Case multiple lenses. Landowners are wantingA very similar issue is in front of the West their day in court and are seeingVirginia Supreme Court in the case Martin constitutional problems. The Statev. Hamblet, Case No. 11-1157 (2012). regulatory agency and its judicialMatthew Hamblet is a fractional owner of counterpart, the Oil and Gas Commission,a large surface estate in West Virginia and are seeing threats to their jurisdiction. Theclaims that previous wells drilled on his land operators are seeing regulations that areby EQT Production Company, an operator, designed to fast-track production andcaused “substantial damage” in his words. wondering whether the Oil and GasThis included heavily eroded and rutted Commission is the appropriate forum foraccess roads, silted streams, and felled issues like title disputes. Once the Supremetimber left in inaccessible hillside locations. Court of Ohio rules on Chesapeake, we willEQT applied for, and received, a permit for know much more about the right toa new well. EQT contends that they have appeal drilling permits.followed the statutory procedure forobtaining a permit and will comply with all Back to topsafety and environmental regulations.In this case the issue is framed differently:the West Virginia statute does not allow forappeals from surface owners (or is at leastmore clear about it than the Ohiostatutes), but Mr. Hamblet argues thatappeal rights have been recognized by aprevious West Virginia Supreme Courtruling. Moreover, Mr. Hamblet argues thatdenying his right to appeal violates hisconstitutional right to due process.www.oilandgaslawreport.com Page 10 of 28
  • The Basics of Ohio Prevailing Wage LawJanuary 24, 2013 | Leigh Anne BenedicMany employers who infrequently dealwith Ohio prevailing wage requirementsoften ask us how to determine whetherOhio‟s prevailing wage will apply to theirproject. The most practical consideration isto determine whether prevailing wagesapply to your project before bidding forwork or seeking bids for subcontractors.Oftentimes companies who aren‟t thinkingabout prevailing wages on the front endcan have it unexpectedly derail theirproject budget and/or cause disputes withits subcontractors over the appropriatewages to be paid.Consistent with this, we thought it helpful tolist a few things for employers to thinkabout when they are considering thisquestion.1. “Public Improvement”Determine whether your project meets thedefinition of “public improvement” under turn required the oil and gas company toOhio Revised Code Chapter 4115. This pay prevailing wages to the workers whoincludes “all buildings, roads, streets, alleys, maintained the road. Read more in thissewers, ditches, sewage disposal plants, recent post. Local governments havewater works, and all other structures or required prevailing wages in line with thisworks” constructed by a public authority or Attorney General Opinion, such aspursuant to a contract with a public Jefferson County‟s recent decision toauthority, such as the state of Ohio, a require prevailing wages on county andcounty, or other political subdivision. township road improvements associated with construction of an oil pipeline.Note that recent interpretations by theOhio Attorney General have construed this For housing projects, a public fundingdefinition broadly. For example, Ohio source can also trigger Ohio prevailingAttorney General Opinion 2012-029 found wages. Ohio Revised Code § 176.05 statesthat an oil and gas company‟s agreement that a “public improvement” includes anywith an Ohio county to maintain the roads “construction, rehabilitation, remodeling orwas a “public improvement” that required improvement of residential housing … thatthe county to comply with Ohio‟s is financed in whole or in part from stateprevailing wage requirements, which inwww.oilandgaslawreport.com Page 11 of 28
  • moneys” or other funding sources from 4. Federal Prevailing Wagescounties, cities, including bonds. There are If federal funding is involved such thata few exceptions to this particular federal prevailing wage requirementsrequirement for housing projects, including apply, those obligations will supersede andthresholds for the number of housing units replace any Ohio prevailing wageand whether the developer or sponsor of requirements. Note that many fundingthe project is a for-profit or nonprofit entity. sources from state and local governments sometimes originate from the federal2. Ohio Cost Thresholds government, and have federal prevailingEven if the definition of “public wage requirements attached. However,improvement” is met, the project still must the types of projects in which federal andbe above Ohio‟s cost thresholds. These Ohio prevailing wage are requiredthresholds are set biennially and depend frequently differ, so even if one set ofon the type of construction. The Ohio requirements does not apply, the otherDepartment of Commerce explains these may.thresholds in detail. 5. Exceptions May ApplyFor 2013, the new construction threshold is Finally, there are several exceptions to$200,000, and will increase to $250,000 on Ohio‟s prevailing wage requirements foundSept. 29, 2013. Projects involving throughout the Ohio Revised Code. Anyreconstruction, enlargement, repair, time the above steps lead to a conclusionremodeling, renovation, or painting have a that Ohio prevailing wages apply, makethreshold of $60,000, to be adjusted to sure that these exceptions are examined in$75,000 on Sept. 29, 2013. detail to ensure the right conclusion was made.For the 2012-13 biennium starting Jan. 2,2012, construction projects involving roads, Back to topstreets, alleys, sewers, ditches, and otherworks connected to road or bridgeconstruction are subject to lower thresholdsof $82,137 for new construction and$24,609 for reconstruction, enlargement,repair, remodeling, renovation or painting.3. Contractual ObligationsConsider also whether your fundingsources or contracts contain expresslanguage requiring Ohio prevailing wagesto be paid. The absence of that languagedoes not guarantee that Ohio prevailingwages do not apply, but it can be a triggerto perform your own analysis to confirmthat it is the type of project covered byOhio prevailing wages.www.oilandgaslawreport.com Page 12 of 28
  • Ohio Attorney General Issues Guidance on Road UseMaintenance Agreements (RUMA’s)November 30, 2012 | Chris Baronzzi and Jeff FortIn response to questions posed by the attesting that the applicant attempted inRichland County Prosecuting Attorney, the good faith to enter into such anOhio Attorney General recently provided agreement, but was unable to do so.”guidance to public authorities aboutentering into Road Use Maintenance II. Next, when a county enters into a RUMAAgreements (“RUMA‟s”) with oil and gas with a private company, must theoperators. This is a distillation of the 20- private company comply with:page Attorney General Opinion No. 2012-029, which addressed three primary A. R.C. 307.86-.92: Competitive Biddingquestions. for Purchases of Goods or Services B. R.C. 153.44: Review of Contract byI. May a county enter into an agreement Prosecuting Attorney with a private oil and gas drilling company to have the company C. R.C. 153.69: Professional Design improve and repair the county roads it Services uses at no cost to the county? D. R.C. 4115.03-.16: Payment of Prevailing Wage RatesAnswer: Yes. After analyzing various Ohiostatutes relevant to a public authority‟s Before responding to these questions, theobligation to improve and repair roads, the Attorney General observed that it is notAttorney General concluded, “[a] county within his authority to advise privatemay, in accordance with R.C. 9.334, R.C. companies about their legal obligations.153.693, R.C. 1509.06, R.C. 5555.022, R.C. The Attorney General only advises public5557.06, or R.C. 5727.75, enter into an officials and entities. So, with regard to theagreement with a private company that county’s obligations, the Attorney Generalconducts oil and gas drilling operations . . . advised:to have the company improve and repairthe county roads it uses at no cost to the A. R.C. 307.86-.92: Competitive Biddingcounty.” (2012 Op. Att‟y Gen. No. 2012- for Purchases of Goods or Services.029, Syllabus ¶1) Answer: No. Since the work is being doneThe opinion points out that R.C. at no cost to the county, R.C. 307.86 and1509.06(A)(11) specifically requires a the related statutes that require publiccompany applying for an oil and gas well contracts to be submitted to a competitivepermit to (1) identify what roads it will use bidding process do not apply.to access the well site, and (2) provide acopy of its agreement with the B. R.C. 153.44: Review of Contract byappropriate governmental authority Prosecuting Attorney.“concerning maintenance and safe use ofthe roads ” or provide “an affidavitwww.oilandgaslawreport.com Page 13 of 28
  • on a public improvement project. SinceAnswer: Not unless required by the county work under a RUMA is considered a “publicprosecutor. R.C. 153.44 provides that all improvement,” as defined in R.C.public improvement contracts “that 4115.03(C), a governmental agency thatexceed [1,000] dollars in amount shall be enters into a RUMA is required to complysubmitted by the board of county with R.C. 4115.03-.16 when the total projectcommissioners to the prosecuting attorney cost to the company will be more than theof the county” for review. But in the case of amount prescribed in R.C. 4115.03(B)(4).a RUMA, since the county is not paying for (2012 Op. Att‟y Gen. No. 2012-029, Syllabusthe improvement and repairs, “the county ¶4)is not required to comply with R.C. 153.44.”(2012 Op. Att‟y Gen. No. 2012-029, Syllabus III. May a County be held liable for civil¶2) damages if an oil and gas company does not pay prevailing wage rates forThe Opinion concludes, however, that a work performed under the authority of aprosecuting attorney, as counsel for RUMA?county officials, “may nonetheless requirea board of county commissioners or Answer: Unknown. As discussed above, thecounty engineer to submit to him for Attorney General determined thatreview a [RUMA].” (2012 Op. Att‟y Gen. No. prevailing wage laws are implicated by2012-029, Syllabus ¶3) RUMA‟s but the Attorney General refused to address whether a private company C. R.C. 153.69: Professional Design must comply with prevailing wage laws in Services. connection with a RUMA.Answer: No. R.C. 153.69 authorizes a public The Attorney General observed that theauthority to contract for professional question of whether a public authoritydesign services, such as engineering and could be held liable for failing to require anarchitectural services, and imposes various oil and gas drilling company to payrequirements for those contracts. While a prevailing wages for work done under apublic authority “must follow R.C. 153.69 RUMA has never before been addressedwhen planning to enter into a contract for by Ohio courts and is “a question of factprofessional design services”, a RUMA “is that cannot be determined by means ofnot a „professional design services an Attorney General opinion.” (2012 Op.contract,‟ as that term is used in R.C. Att‟y Gen. No. 2012-029, Syllabus ¶5).153.69, since the company also will makethe improvements and repairs to the While the Attorney General sidesteppedcounty roads set forth in the plans and this question, it is apparent to the authorsdesigns.” (2012 Op. Att‟y Gen. No. 2012- of this blog that a RUMA should require oil029, Syllabus ¶2 and p.14) and gas drillers to pay prevailing wages and a public authority that ignores this D. R.C. 4115.03-.16: Payment of requirement, especially in light of this Prevailing Wage Rates. Attorney General opinion, is inviting litigation and may very well be held liableAnswer: Yes. Ohio‟s prevailing wage laws for damages.require a public authority to ensureprevailing wages are paid for work done Back to topwww.oilandgaslawreport.com Page 14 of 28
  • Fracking (Fracing) Fluid Not Allowed on Ohio RoadsSeptember 24, 2012 | Chris BaronzziA common misunderstanding of Ohio oil In laymans terms, brine is a naturallyand gas law is that it allows oil and gas occurring liquid that flows from deep in theoperators to spread drilling fluid on Ohio earth when an oil and gas well is drilled. It isroads. essentially very salty water that may also contain some dissolved minerals and otherThe Ohio Revised Code authorizes local elements. Brine is not the carefullygovernments to spread “brine” produced engineered drilling fluid that oil and gasfrom oil and gas wells on roads. Ohio law companies use to drill and hydraulicallydoes not allow drilling fluid (aka “frac” or fracture oil and gas wells.“frack” fluid) to be spread on roads underany circumstances and does not even Local Government May Spread Brine, Notallow brine to be spread without Drilling Fluid, on Roadsauthorization from a local government. Ohio law authorizes a board of county commissioners, a board of townshipBrine ≠ Frack Fluid trustees, or the legislative authority of aThe distinction between brine and drilling municipal corporation to “permit thefluid in the oil and gas industry is critical, surface application of brine to roads,even if those terms are sometimes used streets, highways, and other similar landinterchangeably by the public. surfaces it owns or has the right to control for control of dust or ice,” subject to variousThe Ohio Revised Code defines brine as reporting requirements and other“all saline geological formation water guidelines established by the Ohioresulting from, obtained from, or produced Department of Natural Resources. ORCin connection with exploration, drilling, well §1509.226stimulation, or production of oil or gas, orplugging of a well.” ORC §1509.01(U). Ohio law is very clear that drilling fluid can not be spread on roads. ORC §1509.226(B)(10) states, “only brine produced from a well shall be allowed to be spread on a road. Fluids from the drilling of a well, flowback from the stimulation of a well, and other fluids used to treat a well shall not be spread on a road.”www.oilandgaslawreport.com Page 15 of 28
  • Everything in Moderation Chief of the ODNR so that the Chief canEven though brine is not the same as monitor any brine spreading. The Chief hasdrilling fluid, there are still environmental discretion to determine what informationconcerns if it is not handled responsibly. must be provided. Through thisYou certainly would not want to dump a requirement, the Chief could require brinetruckload of brine on a corn field. But, even to be tested for radiation, if necessary.plows that spread rock salt on the roads inwinter have the potential to be destructive The bottom line is that spreading brineif they are used excessively. serves a purpose on Ohio roads and it is carefully controlled. Admittedly, it wouldFortunately, the ODNR imposes regulations be better if asphalt roads never becameand limits on how, and how much, brine icy or if country lanes never got dusty butcan be spread on roads. Everything from until road construction technologythe speed of the spreader truck to the improves, brine spreading offers andiameter of the nozzle that sprays the brine alternative to the other options foris regulated by the ODNR. Further, the controlling ice and dust: rock salt and oil.statute requires the local government toprovide annual informational reports to the Back to topwww.oilandgaslawreport.com Page 16 of 28
  • Management of Oil Field WastesMarch 29, 2013 | Jeff FortThe disposal of wastes associated with oiland gas production continues to draw theattention of regulators and concernedcitizens. In a series of articles we willexamine the waste issue from thecharacterization of these wastes (discussedbelow) and their ultimate disposal inunderground injection wells.A Brief History of Waste Managementand RCRABy the 1960s it was becoming clear thatthe country had a waste managementproblem. The only modern environmental management system for hazardous waste.law on the books at the time was the Nonhazardous solid wastes are addressedClean Air Act. So the Solid Waste Disposal in Subtitle D of RCRA. (Note: Under federalAct of 1965 was enacted as an law, all hazardous wastes are solid wastes,amendment to the air law. This initial foray but not all solid wastes are hazardousinto comprehensive waste regulation wastes.)proved inadequate in many respects. Thetreatment, storage and disposal of waste The key point to understand is that if a solid— even defining what a waste is — is waste is a hazardous waste, a considerablycomplicated, especially when recycling is more complicated and comprehensiveconsidered. regulatory system applies. For purposes of this discussion, it is this key regulatoryThe modern regulation of solid and difference that is critical to understandinghazardous waste can be traced to 1976 how oil field wastes are regulated.with the enactment of the ResourceConservation and Recovery Act (RCRA). Defining Exempt vs. Non-ExemptGenerally, when looking at the world As RCRA was getting off the ground, EPAthrough the lens of RCRA, all material is recognized that certain solid wastes wereeither a product or a solid waste. A relatively benign but generated in largesubcategory of solid waste is hazardous quantities. If properly managed, thesewaste that is regulated under Subtitle C of “special” wastes pose little threat toRCRA. human health or the environment. So, in 1978, EPA proposed to exempt oil and gasA solid waste is “hazardous” if it has been exploration and production (E&P) wastespecifically listed as hazardous by the EPA from the Subtitle C, 43 Federal Registeror if it has certain hazardous 58946, and in 1980, the exemption wascharacteristics, e.g., flammability. Subtitle included in amendments to RCRA knownC of RCRA prescribes a “cradle-to-grave”www.oilandgaslawreport.com Page 17 of 28
  • as the Solid Waste Disposal Act wellhead or gas plant and including onlyAmendments. those operations necessary to locate and recover oil and gas from the ground andIn the Solid Waste Disposal Act to remove impurities. As a practical matter,Amendments of 1980, Congress amended any waste generated downhole isRCRA to add section 3001 (b)(2)(A), which probably exempt E&P waste from primaryexempted drilling fluids, produced waters field operations.and certain other wastes associated withexploration, development and production With regard to nonexempt transportation-of crude oil, natural gas and geothermal related waste, the EPA explained:energy from regulation as hazardouswastes. The law also required EPA to study Transportation of oil and gas can bethe exemption and report to Congress. In for short or long distances. For crude1988, the EPA concluded that E&P wastes oil, “transportation” is defined in theneed not be regulated under Subtitle C. Report to Congress and theThe exemption is codified in EPA subsequent Regulatoryregulations at 40 CFR § 261.4 (b)(5). EPA Determination as beginning afteralso published a list of exempt and non- transfer of legal custody of the oilexempt E&P-related wastes, which is from the producer to a carrier (i.e.,reproduced below. Consequently, most oil pipeline or trucking concern) forand gas E&P-related waste is regulated as transport to a refinery or, in thea solid waste under Subtitle D, not absence of custody transfer, afterhazardous waste under Subtitle C. the initial separation of the oil and water at the primary field site. ForIn a 1988 report to Congress, the EPA natural gas, “transportation” isidentified criteria for determining what defined as beginning afterwastes are included in the exemption and, dehydration and purification at atherefore, exempt from Subtitle C. For a gas plant, but prior to transport towaste to be exempt: market. [I]t must be associated with 58 FR 15284, 3/22/93. operations to locate or remove oil or gas from the ground or to remove Exemption for Crude Oil Reclamation impurities from such substances and Operations it must be intrinsic to and uniquely Next, the EPA was asked to clarify the associated with oil and gas scope of the exemption for crude oil exploration, development or reclamation operations. The EPA explained production operations (commonly that the inclusion of “liquid and solid referred to simply as exploration and wastes” from crude oil reclamation on the production or E&P); the waste must list of non-exempt wastes was intended to not be generated by transportation refer only to those non-E&P wastes or manufacturing operations. generated by reclaimers (e.g., waste solvents from cleaning reclaimers‟See, 58 FR 15284, 3/22/93. The EPA further equipment) and was not intended to referexplained that only waste from “primary to wastes remaining from the treatment offield operations” is exempt. Primary field exempt wastes originally generated by theoperations are activities at or near thewww.oilandgaslawreport.com Page 18 of 28
  • exploration, development or production of oilfield wastes or do not meet the “uniquelycrude oil or natural gas. The EPA explained: associated with E&P operations” standard, they are not exempt. For example, waste The Agency has consistently taken solvents generated from the cleaning of the position that wastes derived from tank trucks would not be exempt. the treatment of an exempt waste, including any recovery of product To summarize: from an exempt waste, generally remain exempt from the Generally, crude oil reclaimer wastes requirements of RCRA Subtitle C. that are derived from exempt oilfield Treatment of, or product recovery wastes (e.g., produced water, from, E&P exempt wastes prior to BS&W) are not subject to the Subtitle disposal does not negate the C waste management requirements exemption. of RCRA. Such wastes, however, *** remain subject to any applicable For example, waste residuals (e.g., state solid waste management BS&W) from the on-site or off-site requirements. Moreover, this process of recovering crude oil from exemption from RCRA Subtitle C tank bottoms obtained from crude requirements may not apply if the oil storage facilities at primary field crude oil reclaimer wastes are operations (i.e., operations at or near combined with other wastes that are the wellhead) are exempt from subject to RCRA Subtitle C RCRA Subtitle C because the crude requirements. oil storage tank bottoms at primary field operations are exempt. In 58 FR 15284, 3/22/93. effect, reclaimers are conducting a specialized form of waste treatment Exemption for Service Companies in which valuable product is Likewise, service company wastes may or recovered and removed from waste may not be covered by the exemption. uniquely associated with E&P Empty drums, drum rinsate, vacuum truck operations. rinsate, sandblast media, painting wastes, spent solvents, spilled chemicals and waste58 FR 15284, 3/22/93. acids are all nonexempt wastes because they are not uniquely associated withHowever, to the extent that reclaimer “primary field operations.”wastes are derived from non-exempt It doesn‟t matter which company generates the waste. The property owner, a lessee, a contractor — all are potential “generators” and therefore liable if the wastes are hazardous. However, if the service company generates a waste uniquely associated with the exploration, development or production of crude oil or natural gas at primary field operations, those wastes are exempt from regulation under Subtitle C.www.oilandgaslawreport.com Page 19 of 28
  • Gas plant sweetening wastes for sulfurLessons Learned removal, including amines, amine filters,Though the current upswing in oil and gas amine filter media, backwash,exploration activity in Ohio is relatively precipitated amine sludge, iron sponge,new, the characterization of its wastes, and hydrogen sulfide scrubber liquidand the concordant management and sludgestandards, are not. EPA and Congress Spent filters, filter media, and backwashhave considered the issues, determined a (assuming the filter itself is not hazardouspolicy and successfully implemented it for and the residue in it is from an exemptthe last 25 years. waste stream) Pipe scale, hydrocarbon solids,_________________________________________ hydrates, and other deposits removed from piping and equipment prior toThe following is excerpted from the EPA transportationpublication “Exemption of Oil and Gas Produced sandExploration and Production Wastes from Packing fluidsFederal Hazardous Waste Regulations.” Hydrocarbon-bearing soil Pigging wastes from gathering linesExempt E&P Wastes Wastes from subsurface gas storage Produced water and retrieval, except for the non- Drilling fluids exempt wastes listed on page 11 (of the Drill cuttings EPA publication) Rigwash Constituents removed from produced Drilling fluids and cuttings from offshore water before it is injected or otherwise operations disposed of onshore disposed of Geothermal production fluids Liquid hydrocarbons removed from the Hydrogen sulfide abatement wastes production stream but not from oil from geothermal energy production refining Well completion, treatment, and Gases from the production stream, such stimulation fluids as hydrogen sulfide and carbon Basic sediment, water, and other tank dioxide, and volatilized hydrocarbons bottoms from storage facilities that hold Materials ejected from a producing well product and exempt waste during blowdown Accumulated materials such as Waste crude oil from primary field hydrocarbons, solids, sands, and operations emulsion from production separators, Light organics volatilized from exempt fluid treating vessels, and production wastes in reserve pits, impoundments, or impoundments production equipment Pit sludges and contaminated bottoms from storage or disposal of exempt Non-Exempt Wastes wastes Unused fracturing fluids or acids Gas plant dehydration wastes, Gas plant cooling tower cleaning including glycol-based compounds, wastes glycol filters, and filter media, Painting wastes backwash, and molecular sieves Waste solvents Workover wastes Oil and gas service company wastes Cooling tower blowdown such as empty drums, drum rinsate, andwww.oilandgaslawreport.com Page 20 of 28
  • blast media, painting wastes, spent Waste in transportation pipeline related solvents, spilled chemicals, and waste pits acids Caustic or acid cleaners Vacuum truck and drum rinsate from Boiler cleaning wastes trucks and drums transporting or Boiler refractory bricks containing non-exempt waste Boiler scrubber fluids, sludges, and ash Refinery wastes Incinerator ash Liquid and solid wastes generated by Laboratory wastes crude oil and tank bottom reclaimers1 Sanitary wastes Used equipment lubricating oils Pesticide wastes Waste compressor oil, filters, and Radioactive tracer wastes blowdown Drums, insulation, and miscellaneous Used hydraulic fluids solids______________________1 Althoughnon-E&P wastes generated from crude oil and tank bottom reclamation operations (e.g., wasteequipment cleaning solvent) are non-exempt, residuals derived from exempt wastes (e.g., produced waterseparated from tank bottoms) are exempt. For a further discussion, see the Federal Register notice, Clarificationof the Regulatory Determination for Waste from the Exploration, Development, and Production of Crude Oil,Natural Gas and Geothermal Energy, March 22, 1993, Federal Register Volume 58, Pages 15284 to 15287.Back to topwww.oilandgaslawreport.com Page 21 of 28
  • Exploring the Disposal of Fracking Waste Water —UIC Class II Wells in OhioApril 13, 2013 | Jeff FortAs discussed in an earlier post about themanagement of oil field wastes, mostexploration and production waste is notregulated as a hazardous waste. Instead, itis regulated as a solid waste. Even so, asdiscussed in a recent article by StephenEllis: “One of the biggest problems in the oil and gas industry today is water management. Solving the technical and economic challenges around managing the millions of gallons of water used to properly fracture tight oil and gas wells has been called the holy grail of the industry by Southwestern Energy CEO Steve Mueller. He estimates that water hydraulic fracturing is called flowback. transportation (primarily trucking) Later, as the well is producing costs around $1.5 million (25%) of the hydrocarbons, it also produces water $6 million that an average Marcellus named, appropriately enough, “produced well costs.” water.”See: Stephen Ellis, “Oilfield Water All water that flows out of a well needs toManagement: The Oil And Gas Industry‟s be treated, recycled or disposed ofHoly Grail,” Seeking Alpha, March 31, 2013. properly. Perhaps the most common and least expensive way to deal with thisWater Used in Operations wastewater is to pump it backWater is used in the drilling of the well. It is underground through a specialized wellalso used in the stimulation — i.e., fracking commonly referred to as either an— of the well. According to the Ohio “injection well” or “disposal well.” There areDepartment of Natural Resources (ODNR), only a handful of disposal wells inmost of the water used in fracturing Pennsylvania but there are almost 200 inremains thousands of feet underground in Ohio.the formation. However, about 15-20percent returns to the surface through a The abundance of disposal wells in Ohiosteel-cased well bore and is temporarily makes it a popular destination for flowbackstored in steel tanks or lined pits. The and produced water disposal fromwastewater that returns to the surface after surrounding states.www.oilandgaslawreport.com Page 22 of 28
  • Regulatory Response Pits water, or fluids from drilling andThe history of how disposal wells came to cementing operationsreplace evaporation pits for the safe Mixture of drilling mud, freshwaterdisposal of certain kinds of drilling fluids is and formation brinesdescribed in a 2011 ODNR-DOGRM Flowback or frack water, which is apresentation to the Ohio Geological mixture of chemicals, brine andSociety. Injection wells are now heavily brackish water associated withregulated to ensure the safety of people horizontal drillingand the environment. Produced water; i.e., natural formation brine, which is aTo address the possibility of groundwater byproduct of oil and gas production.contamination by injection wells, the Brine contains mainly sodium,regulation of multiple types of injection chloride, calcium, barium, iron,wells, including those for the disposal of strontium, magnesium, andflowback and produced wastewater, is potassium. Chloride is theauthorized in the Safe Drinking Water Act, predominant constituent with42 U.S.C. § 300f, and its implementing concentrations as high as 200,000regulations, 40 CFR Parts 144, 145 and 146. ppm (mg/L).Under the Safe Drinking Water Act, Ohioreceived delegation from USEPA to Approximately 98 percent of oilfield fluidsimplement and enforce its the regulatory in Ohio are disposed of through injection inprogram for injection wells in 1983. Section disposal wells. The remaining 2 percent is1509.22 of the Ohio Revised Code also spread legally for dust and ice control. Inregulates the storage and disposal of brine, 2011, more than half of the liquids disposedand in 2010 and 2012, the Ohio General of in Ohio‟s disposal wells came from out ofAssembly further tightened the standards state. (Read more in the ODNR-DOGRMapplicable to these wastewater streams in presentation referenced above.)response to the shale play. Since the Underground Injection ControlPermits are required to drill a disposal well. (UIC) program‟s inception in 1983, more(R.C. 1509.221.) Any person who transports than 202 million barrels of oilfield fluidsbrine has to register with the state and get have been successfully disposed of, withan ID number. Well owners can only use no reports of ground water contaminationthe services of registered persons for incidents. In addition, before thewastewater management and those Youngstown event, discussed below, nopersons are required to file annual reports. seismic event had been previously linked(R.C. 1509.223.) Transporters are also to operations at any of the state‟s Class IIrequired to have insurance in specified wells. See: “Preliminary Report on theamounts and a surety bond. (R.C. Northstar I Class II Injection Well and The1509.225.) The ODNR regulations are found Seismic Events in the Youngstown, Ohio,at OAC 1509:9-3 et seq. Area,” ODNR, March 2012.Liquids Eligible for Disposal Permitting Class II WellsThe liquids that can be injected into a Ohio‟s stringent regulations are reflected inClass II well include liquids associated with the Class II well permitting process.drilling and stimulation activities such as: Depending on the projected disposalwww.oilandgaslawreport.com Page 23 of 28
  • volume, ODNR establishes a preliminary monitoring or monthly mini-tests.area of review around the proposed well Production casing need be at least 300site of either 1⁄4 mile or 1⁄2 mile, followed by feet above the injection zone and tubinga “pre-site field review.” and packer are required.A “pre-site field review” involves an On the surface, the injection well facilityinspection by ODNR of the area around must be within a dike area with a 30 milthe location of a proposed Class II well. The liner or a concrete dike. The truckreview is intended to identify all water unloading pad must be concrete with awells, dwellings and surface bodies of drain, vault and sump.water within the area of review. If thesetypes of features are identified in close ODNR conducts unannounced inspectionsproximity to the proposed injection well, on each well every 11 to 12 weeks. TheODNR has the regulatory discretion to inspections include a check of injectionimpose additional requirements on the and annulus pressures to insure integrity.applicant. Likewise, ODNR has the There is also an overall inspection of thediscretion to order seismic testing and facility and pipelines for leaks.monitoring if it believes those are necessaryor warranted based on its review of the Earthquakes?area. In the first quarter of 2011, a series of small- magnitude earthquakes occurred in theAfter an injection well application is Youngstown area. After a thoroughreviewed and deemed complete, ODNR investigation, ODNR concluded that theyalso sends instructions for public notice to had been induced by a nearby injectionthe well operator. Notice of the proposed well — the result of a confluence ofpermit is then published in the local extremely rare circumstances. In fact, allnewspaper by the operator. If there are evidence indicates that properly locatedrelevant objections relating to public Class II injection wells will not causehealth or safety, or good conservation earthquakes. See: “Preliminary Report onpractices, ODNR may require a public the Northstar I Class II Injection Well andhearing. The Seismic Events in the Youngstown, Ohio, Area,” ODNR, March 2012.Injection PressureThe surface injection pressure is initially set As a result of the Youngstown incident,by a formula prescribed in OAC 1501:9-3- Ohio adopted new procedures to ensure07 (D) taking into account the specific the set of circumstances that led to seismicgravity of the injectate. Thereafter, the well activity is not repeated. Thisoperator reports the specific gravity of the comprehensive list of new standardsinjectate to ODNR on a quarterly basis. If prohibits the drilling of any new wells in thenecessary, ODNR can adjust the permitted Precambrian basement rock formationpressure to ensure that the water is being and requires thorough reviews and analysissafely assimilated into the geologic of geologic data as well as ongoingformation. evaluation, monitoring and testing. Read the complete list of standards adopted inMechanical integrity of the well is March 2012.determined before injection. Thereafter,the regulations require continuouswww.oilandgaslawreport.com Page 24 of 28
  • ConclusionBrine and other liquid wastes are anunavoidable by-product of oil and gasproduction. To the extent they cannot berecycled, underground injection — withappropriate safeguards — is currently oneof the most reliable and safe disposalmethods available.Back to topwww.oilandgaslawreport.com Page 25 of 28
  • Gas Plant and Gas Wells Are Not Collectively a “MajorSource” Due to Being “Functionally Related,” AbsentPhysical “Adjacency”August 13, 2012 | Robert BrubakerOn Aug. 7, 2012, the U.S. Court of Appeals ownership and control, that they belongedfor the Sixth Circuit in Cincinnati vacated a to the same two-digit SIC code majorUSEPA determination that a natural gas industrial grouping, and that they were notsweetening plant and gas wells supplying it on “contiguous” property. The onlyconstituted a single “major source” for Title disagreement was whether the termV permitting purposes. The decision “adjacent” in the Title V definition of afocuses solely on the meaning of “major source” refers to physical proximity,“adjacent” in the three-part “major or to functional relationship.source” definition, which requires: The court‟s two-judge majority relied upon Common control the dictionary definition, etymology, and Contiguous or adjacent property case law meanings of “adjacent” to SIC code commonality conclude that “adjacency is purely physical and geographical,” and not anThe case involved approximately 100 sour ambiguous term. The court rejected EPA‟sgas production wells argument that activitiesspread over a 43 square can be adjacent so longmile area on separate as they are “functionallyparcels located 500 feet related,” irrespective ofto eight miles from a the distance thatnatural gas processing separates them.plant. All of the output ofthe wells is pipelined to An interesting aspect ofthe plant. Neither the wells the decision is the court‟salone nor the plant alone refusal to grant deferencehave enough emissions to to the agency‟sbe classified as a Title V interpretation of its own“major source.” However, regulation. The courtthe combined emissions of wrote:both the wells and theplant together exceed the “Having determined that“major source” threshold (100 tons per year the word „adjacent‟ is unambiguous, weof actual or potential emissions of a apply no deference in our review of EPA‟sregulated air pollutant, such as nitrogen interpretation of it.”oxides, sulfur dioxide, or carbonmonoxide). There was no dispute that the The court also rejected EPA‟s argumentwells and the plant had common that its interpretation of “adjacent” was sowww.oilandgaslawreport.com Page 26 of 28
  • longstanding — dating back to 1980 — Almost seven years after the applicabilitythat it was entitled to deference for that determination request was made, the Sixthreason alone. To this argument the court Circuit has remanded the matter to EPAresponded: “An agency may not insulate “for a reassessment of Summit‟s Title Vitself from correction merely because it has source determination request in light of thenot been corrected soon enough, for proper, plain-meaning application of thelongstanding error is still an error.” requirement that Summit‟s activities be aggregated only if they are located onThe victory in the Sixth Circuit is an physically contiguous or adjacentimportant milestone in the long, but as yet properties.”unfinished, ordeal of the prevailingpetitioner, Summit Petroleum Corp., to In a dissenting opinion, Judge Karen Nelsonestablish that its gas wells and production Moore expressed her view that on remand,plant are not subject to Title V permitting “EPA is free to reach the same conclusionrequirements. Summit Petroleum filed its that Summit‟s operations should berequest for a Title V “major” vs. “minor” aggregated as a major source for Title Vsource determination in January 2005. EPA permitting purposes, so long as it basesmade its final determination that Summit‟s that conclusion on the considerations thatgas wells and sweetening plant on Indian the majority today deems appropriate.”territory in Michigan constituted a single On remand, Summit Petroleum will learn“major source” subject to Title V permitting whether EPA interprets physical adjacencyrequirements in October 2010. The court to mean something more than 500 feet ofnoted that during that five-year interval, separation or something less than eight“[t]he parties engaged in at least twenty- miles.five conference calls and exchanged a„small mountain of paper.‟” Back to topwww.oilandgaslawreport.com Page 27 of 28
  • EPA’s Clean Air Act New Source Performance Standardsfor the Oil and Gas Sector Finally Appear in the FederalRegisterAugust 29, 2012 | Eric GallonOn April 17, 2012, the United States Require “wet seal centrifugalEnvironmental Protection Agency (EPA) compressors located between theissued final revised New Source wellhead and the point at which thePerformance Standards (NSPS) and gas enters the transmission andNational Emission Standards for Hazardous storage segment” to reduce theirAir Pollutants (NESHAPs) for the oil and VOC emissions by at least 95%natural gas industry. Four months later, EPA Require “reciprocating compressorspublished those rules in the Federal located between the wellhead andRegister. the point where natural gas enters the natural gas transmission andEPA‟s website provides summaries of the storage segment” to take certainnew rules‟ requirements for natural gas well measures to reduce VOC emissionssites, natural gas gathering and boosting Require leak detection and repairstations, gas processing plants, natural gas procedures for smaller leaks at oiltransmission compressor stations, and the and natural gas processing plantsoil industry. In short, the rules: Impose NESHAPs on small glycol dehydration units. Require owners and operators of fractured and refractured gas wells The new rules are set to go into effect on to use “reduced emissions October 15, 2012. The Oil and Gas Journal completions” (also called RECs or reports that the American Petroleum “green completions”) or Institute has already petitioned EPA to “completion combustion devices‟ reconsider and stay the rules. (e.g., flaring), so that gas and liquid hydrocarbons produced when the well is prepared for production are Back to top either captured for use or sale or burned Require storage vessels with volatile organic compound (“VOC”) emissions of at least 6 tons per year to reduce those emissions by at least 95% Set “natural gas bleed rate limit[s] for individual, continuous bleed, natural gas-driven pneumatic controllers”www.oilandgaslawreport.com Page 28 of 28