Pennsylvania

DEPARTMENT OF ENVIRONMENTAL PROTECTION SECRETARY


September 27, 2010

Mr. John Kesich

628 Bailey Creek Road

Millerton, PA 16936

Dear Mr. Kesich:

I would like to commend you and your organization, Citizens Concerned About Natural Gas Drilling, for your interest in our environment, protecting our waters, and seeking answers to your questions about natural gas drilling.

Over the last two years Governor Rendell directed the hiring of 105 additional employees for oil and gas staff at the Department of Environmental Protection (DEP), which more then doubled the number of state employees regulating Pennsylvania's gas industry. DEP has also implemented new regulations and permitting requirements to protect our waters. On August 21, 2010, both Chapter 102, the "Buffer Rule" and Chapter 95, the "IDS Rule" were published as final regulations. The Buffer Rule requires riparian buffers of 150 feet on the Commonwealth's most pristine waters designated as High Quality and Exceptional Value. The TDS Rule, requires that industrial wastewater, including gas drilling wastewater, be treated to drinking water standards for total dissolved solids (TDS) prior to discharge to our streams and rivers.

DEP has also implemented Water Plan requirements as part of the permit approval process, requiring an operator to identify how water will be managed on each well site including; the point of water withdrawal, amount of water used to frac the well, and the treatment or disposal methods of the wastewater generated. DEP has also been completing work on Chapter 78, which includes new cementing and casing requirements that will substantially reduce gas migration problems, protecting homeowners and water supplies. Chapter 78 will be voted on as a final rulemaking by the Environmental Quality Board on October 12, 2010.

The enclosure contains answers to your "20 Questions" delivered to Governor Rendell on August 27, 2010. If you have any questions, please contact Duke Adams, Acting Director for DEP Policy Office, by e-mail at ranadams@state.pa.us or by telephone at 717.783.8727.



Sincerely,

ft

John Hanger

Secretary

Enclosure

Rachel Carson State Office Building | P.O. Box 2063 | Harrisburg, PA  17105-2063

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20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

1)   As good corporate citizens would gas companies sign an open letter to Congress asking that all Oil & Gas exemptions to federal regulations be rescinded? If fracking is as safe and benign to the environmental as industry claims, why do they need exemptions? Is this venture only profitable by passing onto the public liabilities which industry should rightly shoulder?  Why can't Gas play by the same rules as everyone else? (Scott Blauvelt, general manager of environmental health and safety for East Resources answered, " We couldn’t do that. " When asked why not, he said, "We just couldn't do that. ")

Pennsylvania state law provides drillers no exemptions from the Clean Streams Law and the Oil and Gas Act. Pollution by drillers of either surface waters or groundwater in Pennsylvania violates state law, no matter what protection federal law provides or does not provide our waters. Further we have tightened state law by requiring for the first time in the long history of the Pennsylvania gas industry the treatment of drilling wastewater for Total Dissolved Solids (IDS) to the Safe Drinking Water Standard. The TDS rule also regulates other sources of TDS pollution as well. The TDS rule became effective on August 21, 2010. In addition we have successfully passed a rule mandating a 150 foot buffer from all development for Pennsylvania's High Quality Streams. More than 20,000 miles of streams in Pennsylvania have that classification or about one-quarter of all streams. We have also required since 2008 that all applications to drill include a completed water plan that details where water would come from and judges the withdrawal against a protective standard that assumes a stream is at low-flow conditions. Finally on October 12, 2010, the Environmental Quality Board (EQB) will vote on the Final Rule for Drilling Standards that will greatly strengthen the standards for cementing, casing, and other drilling practices. This important rule then goes to the Independent Regulatory Review Commission for a vote in November 2010. Pennsylvania state law has been greatly strengthened in part because we cannot rely on the federal government to protect our waters as the disaster in the Gulf demonstrates painfully.

2) Would drillers sign an open letter calling on Harrisburg to implement proper inspections as well as comprehensive monitoring of air, soil and water, funded by a reasonable severance tax?

The severance tax is vital. Governor Rendell and I are pushing hard to have it passed. The Pennsylvania State Senate will be crucial on whether a reasonable tax  or a giveaway to the industry is passed.

In 2008, DEP successfully passed a rule to raise fees substantially to apply for a drilling permit. The application fee was set in 1984 at $100. It had never been raised as fee increases are often opposed by industries that pay them. The new fees are $5,000, $10,000 or more for deep Marcellus wells and are generating about $10 million per year. All revenue is invested to increase monitoring and oversight of the oil and gas industry. In 2009, I directed the hiring of 37 additional employees for oil and gas staff. The Governor again in 2010 directed the hiring of an additional 68 oil and gas employees,

 

 

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

which combined with 2009 hiring more then doubled the number of state employees regulating Pennsylvania's gas industry.

Since January 2010, DEP oil and gas inspectors and water quality specialists have performed 2,863 inspections on Marcellus wells. The inspections include monitoring for the proper construction of the well, water use plan, waste management, and erosion and sedimentation controls for the well site. As of September 3, 2010, DEP has issued 816 violations and completed 221 enforcement actions on Marcellus wells this year.

3) Would they call for a moratorium until DEP mandates best practices? For example, green completions instead of flaring, banning open pits for flowback and installing pipes (alongside the collector pipelines) to transport water rather tan trucking it?

Governor Rendell supports the bill that passed the House of Representatives imposing a 3-year moratorium on further drilling on state forest but does not support a moratorium on drilling on private lands.

The DEP is updating existing requirements regarding the drilling, casing, cementing, testing, monitoring and plugging of oil and gas wells, and the protection of water supplies. On October 12, 2010, the final Best Drilling Practices rule comes to the EQB for a vote. The proposed modifications include updated material specifications and performance testing and revised design, construction, operational, monitoring, plugging, water supply replacement, and gas migration reporting requirements. With this rulemaking, the DEP is adding additional measures that will further minimize the concerns associated with gas migration and will provide an increased degree of protection for both public and private water supplies.

The updated casing and cementing requirements will provide an increased degree of protection for homeowners and water supplies.

There have been problems caused by poor pit construction, and DEP has put extra enforcement resources into inspecting pits. Some companies have moved to tanks only. DEP is now considering changes in policies concerning pits. The DEP also continues to require water management plans for all water sources utilized for each hydraulic fracturing project in the Commonwealth. Such plans are necessary to maintain and protect surface and groundwater resources.

4) Would they call on the PA Department of Justice to seek out and challenge predatory leases? Industry knew that the Marcellus would change the rules of the game at least 5 years ago; the public was not informed. Isn 't that a form of insider trading?

I agree that some of the early leases did reflect an imbalance in negotiations. We have urged landowners to obtain good legal advice before signing anything. We also

 

 

 

 

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

constantly remind landowners that drilling is industrial activity with costs that are regulated but not zero. In Pennsylvania, landowners with unleased mineral rights are protected to some extent by the Guaranteed Minimum Royalty Act, 58 P.S. § 33, which provides that "[a] lease or other such agreement conveying the right to remove or recover oil, natural gas or gas of any other designation from lessor to lesee shall not be valid if such lease does not guarantee the lessor at lease one-eighth royalty of all oil, natural gas or gas of other designations removed or recovered from the subject real property."

5) Industry is giving away lots of money to buy good will (East donated $50,000 to the Tioga 4H).  Would they give each county where they operate at least one of those fancy IR cameras which can document emissions? How about supporting a severance tax so the state could afford to buy them and hire staff to use them?

In 2008, DEP raised fees substantially to apply for a drilling permit. The application fee was raised from $100 to now $5,000, $10,000, or more for deep Marcellus wells. All revenue was invested to increase monitoring and oversight of the oil and gas industry. DEP has bought 5 IR cameras. Governor Rendell and I both support a Pennsylvania Severance Tax that is modeled after what West Virginia has enacted.

6) How many gas executives live in, or downwind/downstream from, the massive

(10,000+ square miles in PA) industrial complexes they are creating without an EIS or a

comprehensive harms/benefits analysis?

DEP does not know how many executives live nearby drilling. However, DEP is aggressively enforcing often new or strengthened rules to reduce emissions and costs. Air emissions from this industry are regulated as well. Inspectors conduct routine and unannounced inspections of drilling sites and wells statewide. DEP has issued fines. DEP has withheld permits. It has issued orders to stop drilling and fracking. It has required wells to be fixed or plugged. It has required companies to clean up. The industry requires strong regulation.

7) Since industry claims to support disclosure of frack chemicals, what is its objection to closing the Halliburton loophole to the Safe Drinking Water Act, which would restore mandatory disclosure? Isn't the "voluntary disclosure " industry favors meaningless since there would be no penalty for failure to disclose, disclosing an incomplete list or even falsely claiming full disclosure?

I support all efforts to require full disclosure of information about the fracking process, including chemicals. The rulemaking proposed by the DEP in June 2010 would significantly enhance the required reporting requirements, the construction and the operation of wells. Some of the additional reporting requirements include: a descriptive list of all additives used in the fracing/stimulation fluids; the percent by volume of each

 

 

 

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

chemical additive; a list of chemicals in Material Safety Data Sheets (MSDS), by name and Chemical Abstract Number; the percent by volume of each chemical listed in the MSDS sheets; and the total volume of the base fluid. DEP has put on its Web site since 2008 information it has obtained about chemicals used in the fracking process and recently updated this information.

8) Will the industry discuss forced pooling honestly?

Pooling is an important issue that should be determined on its own merits and discussed honestly by all sides. Pooling without mandatory spacing of wells and without full compensation for mineral owners is a non-starter. Spreading out the wells to limit impact on communities is important and a mandatory spacing requirement would help protect the environment and communities.

9) For every dollar a landowner gets in royalties, at least four end up in the pockets of gas executives and Wall St speculators. Is that fair? If so, why? If not, what would be an equitable sharing of gas profits? Don't the current minimum royalties date back to the 1800 's and reflect the success rate then rather than current reality? Have there been no advances in geologic understanding and prospecting technologies?

The Guaranteed Minimum Royalty Act, 58 P.S. § 33, was approved on July 20, 1979. We also strongly advise landowners to negotiate for higher royalties and many have been successful in doing so.

10) Can industry frack with enough accuracy to actually respect property boundaries? What on-line resources are there -which document state-of-the-art fracking accuracy? How large a safety margin should be allowed to responsibly frack only what is leased but not an unleased neighbor? What regulations are in place to properly compensate landowner whose unleased property is fracked?

Hydraulic fracturing techniques have been refined through years of development in other shale gas plays, notably the in Barnett Shale in Texas. Today, well stimulation in the Marcellus Formation, as well as other reservoirs in Pennsylvania is a highly specialized operation that utilizes computer simulation/modeling to design the fracing process, develop specifications on the volumes of fluid and proppant to use, calculate the pressure required, and determine the composition of the fracing fluid. This data is integrated with lithologic and other characteristics unique to the formation, such as depth, temperature and thermal maturity, and the structural characteristics of the shale.

Other than spacing for wells in coal areas pursuant to the Coal and Gas Resource Coordination Act, 58 P.S § 501.1 et seq., and spacing for wells under Oil and Gas Conservation Law, 58 P.S. § 405, Pennsylvania places no restrictions on well location in

 

 

 

 

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided-by DEP

proximity to tract boundaries for development of oil or gas. Instead, the law of capture applies. The rule of capture states that there is no liability for drainage of oil and gas from under the land of another so long as there has been no trespass and the individual observes all relevant statutes and regulations.

The issue of whether drainage of natural gas from neighboring property by hydraulic fracturing constitutes a trespass has not been addressed by the courts of Pennsylvania. However, the Texas Supreme Court in Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.Sd 1 (Tex. 2008), recently held that hydraulic fracturing that drained neighboring property of gas was not actionable as a trespass.

11) Are baffles mandatory on all tankers used by the industry, including water trucks and subcontractors' equipment, to minimize accidents caused by liquids sloshing around? Does industry acknowledge any responsibility for effecting such regulations? What objections do they have to them?

Transportation vehicle requirements for use of baffled tank trucks are subject to federal regulation under the purview of the U.S. Department of Transportation's Federal Motor Carrier Safety Administration. The Pennsylvania State Police is responsible for enforcing most federal and state vehicle safety regulations. Pennsylvania's environmental statutes do not specifically regulate the use of baffled tank trucks to transport frac fluids and drilling materials; however, state environmental regulations found at 25 Pa. Code Section 299 require additional safety requirements to be met when hauling residual waste such as frac fluids and other drilling residuals. Specifically, such requirements include signage requirements, availability of fire extinguishers and safety equipment, ensurance of no leaking loads, maintenance of daily operational records, and contingency plans.

DEP is not familiar with industry's position on the federal requirements related to the use of baffled tank trucks.

12) Why isn't industry using "green chemistry" such as Schlumberger's GreenSlurry?

As the "green chemistry" and the new and "green" technologies continue to develop, the DEP will continue to review and incorporate these standards in all aspects of the natural gas industries.

13) Wouldn't most, if not all, tankers transporting flowback fluid have to display one or more hazardous materials placards were it not for legislated exemptions for materials originating from oil and gas wells?

Placarding requirements associated with the transportation of hazardous waste are subject to federal regulation under the purview of the U.S. Department of Transportation's

 

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

Federal Motor Carrier Safety Administration. Frac fluids associated with drilling operations that are transported off site are regulated as residual waste in Pennsylvania and must conform to all applicable federal and state transportation requirements. Specifically, 25 Pa. Code Section 299.220 requires that vehicles transporting residual waste maintain proper identification signs with letters at least 6 inches in height to identify when residual waste is being transported. If hazardous materials are transported from oil and gas well sites then all appropriate federal placarding requirements apply.

DEP is not familiar with placarding exemptions related to the transport of hazardous materials that originate at an oil and gas well site location.

14)While fracking out West, where water is scarce, why didn’t industry recycle frack fluids?

Reuse or recycling technology is new. It was developed in Pennsylvania primarily because the DEP in 2008 told the industry that it was going to pass a TDS rule that banned the dumping of untreated drilling wastewater in our rivers and streams.

15) Didn’t EPA rule that frack fluids don’t need to be subject to disclosure rules for injected materials because most of it returns to the surface? Shouldn’t EPA revisit that decision based on industry claims that only 20% is returning as flowback in the

Marcellus?

.

At this point the EPA has not revised their position. However, the EPA is currently preparing to conduct a long-term scientific study of the effects of the hydraulic fracturing practice.

16) Where can one find accurate scientific estimates of how much water the gas industry actually pollutes? What figures are circulated within the industry as to acceptable rates of water contamination?

There are no acceptable rates of water contamination or other sources of pollution.

17) How many non-disclosure agreement has the gas industry signed with landowners in order to resolve water issues claimed to be caused by gas operations? What percentage of wells are alleged to have impacted water?

DEP would not have any knowledge or means of tracking agreements between gas companies and individuals. Impacts to a water supply from natural gas drilling are generally related to gas migration (See response to #18 for further discussion on gas migration). Under the Oil and Gas Act, 58 P.S. § 601.208(a), companies that impact a

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

water supply have an obligation to replace or restore the water supply to pre-existing quality.

18) What is the expected failure rate of gas well casings? (Mr. Blauvelt said, "It's a very small number. " And repeated that statement in response to, "I should hope so, by what exactly is it? ")

The success of a well is dependent on the overall construction of the well, not just the casing. When casings are installed properly there is minimal failure expected. The problems DEP has investigated with gas migration tend to result from insufficient casing or cement. The issues related to gas migration are not a direct result of the Marcellus formation. The gas migrating is shallow gas that is drilled through to get to the deeper Marcellus formation. Since 2005, and based on reporting to DEP as of September 3, 2010, in Pennsylvania 20,729 traditional and Marcellus natural gas wells have been drilled. Of those 20,729 wells drilled, 99 wells have had gas migration problems. Of Marcellus wells, 33 out of 1922 drilled have been investigated for possibly causing gas migration.

The DEP's updated casing and cementing requirements will provide an increased degree of protection for homeowners and water supplies. These strong rules will be before the EQB on October 12, 2010, for a vote on the Final Rule. The Final Rule than goes to the Independent Regulatory Review Commission in November. The requirements in the final rule will substantially reduce gas migration problems.

19)  What chemicals, and how much of them, does the gas industry release into the air each year? Where do they return to earth? What effects do they have on human health and the environment?

Marcellus shale drilling, fracturing, flaring, gas collection, and processing can emit nitrogen oxides (NOx), carbon monoxide (CO), particulate matter (PM), hazardous air pollutants (HAP) such as benzene, and toluene, other volatile organic compounds (VOC) and PM. Air emissions are regulated and technologies now exist that can cut substantially emissions.

Natural gas itself also has air and climate benefits when compared to coal and oil. Natural gas usage in electric power plants is increasing, while the use of coal and oil are stable or falling.

In addition, Governor Rendell and I have led the charge to increase renewable energy and energy conservation. There are now 16 operating wind farms in Pennsylvania, with more in development. More than 2,000 operating solar systems exist in Pennsylvania, with many more in development. Every electric utility is operating large energy conservation programs, with cumulative budgets of about $250 million per year.

 

 

 

 

 

 

 

20 Questions from the Concerned Citizens About Natural Gas Drilling to Governor Edward G. Rendell; with Responses Provided by DEP

20) Can industry quantify the health effects the air pollution it has already produced in PA will have? For example, what impact will its diesel emissions alone have just in terms of asthma?

The DEP is not aware of any industry quantified health effects study. The DEP has begun a multi-phase effort to conduct preliminary air monitoring to determine what pollutants are released from impact natural gas well sites have on air quality. Initial monitoring was conducted in southwestern Pennsylvania and monitoring is currently underway in the Northeast and Northcentral portions of the state.

The DEP has alerted the Marcellus Shale industry of the need to quantify emissions. The industry will be required to supply emission inventory data.