August 2014 • Issue 52

The

PIOGA pressThe monthly newsletter of the Pennsylvania Independent Oil & Gas Association

(Continues on page 2)

(Continues on page 36)

The finishing touches go on an elaborate ice sculpture fea-turing a pig on a spit suspended between a pair of derricks.Provided by Shale Media Group, the sculpture was a big hitat July’s PIOGA Pig Roast at Seven Springs. See page 12 formore from the event.

®

By Kevin J. MoodyPIOGA General Counsel

Addressing issues left over from the PennsylvaniaSupreme Court’s December 2013 Robinson Townshipdecision on Act 13, the Commonwealth Court on July 17

ruled that the Pennsylvania Public Utility Commission (PUC)

Commonwealth Court rules on Act 13 remandcannot play a role in reviewing the legality of municipal ordi-nances affecting oil and gas development. In this context, thecourt also addressed the continuing validity of the traditional Oiland Gas Act preemption of local ordinances that was continuedsubstantively unchanged in Act 13, even though the parties,industry (PIOGA, the MSC and API) and President JudgePellegrini had previously agreed that Section 3302 was not atissue in the remand and remained fully effective.

Section 3302 is the traditional Section 602 Oil and Gas Actpreemption provision that was the subject of two PennsylvaniaSupreme Court decisions in February 2009 [Huntley & Huntley,Inc. v. Borough Council of Borough of Oakmont, 964 A.2d 855(Pa. 2009); Range Resources-Appalachia, LLC v. SalemTownship, 964 A.2d 869 (Pa. 2009)] confirming that local ordi-nances regulating “how” oil and gas operations are conducted arepreempted by state regulation, while those regulating “where”operations are conducted are not preempted. Act 13’s local uni-formity provisions were intended to preempt the “where.”

Subchapter D: The next roundof DEP Chapter 78 rulemaking

The Department of Environmental Protection is in the earlystages of another major oil and gas rulemaking. As wereported in the July issue, DEP recently provided its Oil

and Gas Technical Advisory Board (TAB) with a concept paperoutlining changes the department intends to propose for Chapter78 subchapters D (well drilling, operation and plugging) and H(underground gas storage).

DEP indicated it hopes to issue draft regulations near the endof the year.

According to a presentation availableon DEP’s TAB webpage, there are fivegeneral categories of proposed changes:

• Sections that were not modifiedsubstantively as part of the last rule-making, which occurred in February2011 (e.g., well plugging).

• Subjects that have not historicallybeen addressed through rulemaking(e.g., coalbed methane wells).

Board of Directors voting now open . . . . . . . . 5Auditor general says DEP unprepared . . . . . . 8Plan outlined for splitting regulations . . . . . . . 9Ensure your reporting is complete . . . . . . . . 10No state leasing pending court decision. . . . 15No public utility designation for pipeline . . . . 16Electric expansion will tap Marcellus . . . . . . 16Think you know Act 13? . . . . . . . . . . . . . . . . 17Which statute of frauds governs leases? . . . 20House OKs endangered species reform . . . 21July Spud Report . . . . . . . . . . . . . . . . . . . . . 22Why bump test gas detectors . . . . . . . . . . . . 28

Safety and labor remain priorities. . . . . . . . . 29PIOGA Member Profile: ETC . . . . . . . . . . . . 30Platts Appalachian Oil & Gas Conference . . 31Protecting public health. . . . . . . . . . . . . . . . . 32Who are America’s independents?. . . . . . . . 33Vehicle rebate program extended . . . . . . . . . 34Pirates Energy Night . . . . . . . . . . . . . . . . . . . 34PIOGA Member News . . . . . . . . . . . . . . . . . 35Oil & Gas Trends. . . . . . . . . . . . . . . . . . . . . . 40Calendar of Events . . . . . . . . . . . . . . . . . . . . 42New PIOGA members . . . . . . . . . . . . . . . . . 42PIOGA contacts . . . . . . . . . . . . . . . . . . . . . . 43

Page 2 The PIOGA Press

Act 13 remmand: Continued from page 1

In split decisions, the five-member court also:• Rejected a physician’s assertion that confidentiality language

regarding the proprietary nature of chemicals used in drilling andstimulation amounted to a medical gag order. “There is no indi-cation in the statute that such agreement precludes a physicianfrom sharing the disclosed confidential and proprietary informa-tion with another physician for purposes of diagnosis or treat-ment or from including such information in a patient’s medicalrecords,” wrote Pellegrini in the majority opinion.

• Rejected a challenge to a provision of Act 13 requiring theDepartment of Environmental Protection to notify public watersuppliers, but not private water well owners, in the event of adrilling-related spill. The court acknowledged that the depart-ment does not regulate private water supplies.

• Upheld the ability of certified public utilities to take land forgas storage or transportation by eminent domain.

The Commonwealth Court opinions can be found atwww.pacourts.us/assets/opinions/Commonwealth/out/284MD12_7-17-14.pdf?cb=1

As a result of the Supreme Court’s striking down as unconsti-tutional provisions in Act 13 mandating uniform local regulationof oil and gas activities and facilities—Sections 3303 and3304—the PUC could no longer review local ordinances or with-hold impact fee monies from municipalities whose ordinanceswere not in compliance with those sections. On remand, theCommonwealth Court also nullified the remaining portions ofAct 13 allowing challenges to local ordinances based on viola-tions of the Municipalities Planning Code (MPC) and Chapter 32(the reenacted Oil and Gas Act) to go before the PUC and theCommonwealth Court. Unless overturned on appeal, challengesto local zoning ordinances will be determined under procedurescreated by the MPC.

As part of its analysis nullifying these remaining provisions,the Commonwealth Court held that Section 3302 “is not enforce-able to the extent that it implements 58 Pa. C.S. §§3303 and3304.” This holding is unremarkable because it flows from theSupreme Court’s prior decision. The holding is, however,remarkable because as shown by the transcript (pp. 17, 18, 20,21, 30, 31, 38, 46, 47, 50) President Judge Pellegrini, the authorof the majority opinion, agreed during the April 9 oral argumenton industry’s renewed request to intervene in the remand thatSection 3302 had not been challenged in the lawsuit and was notat issue in the remand—despite its inclusion in his March 13scheduling order stating the issues to be argued. Indeed, he statedrepeatedly that industry had “won” the argument (Tr. pp.18, 21,

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31, 45, 47) that Section 3302 is not at issue in the remand andremains effective. During that oral argument the municipalitiesalso agreed that they had not challenged Section 3302 and it wasnot at issue in the remand (Tr. pp.19, 21, 37, 38, 39, 40, 41, 42,45, 46-47). Consistent with this agreement, the municipalities didnot address the severability of Section 3302 in their brief .Consistent with this agreement, the severability of Section 3302was not addressed during the May 14 oral argument that led tothe majority’s opinion.

Accordingly, PIOGA believes Section 3302 remains fullyeffective—as Judge Pellegrini stated—except to the extent it

implements Sections 3303 and 3304.

What’s next?The parties have 30 days to appeal the majority’s decision, or

until August 18, which is after this commentary has been pre-pared. As industry’s renewed request to intervene was denied,primarily on the basis that Section 3302 was not at issue in theremand, Industry cannot appeal and remains on the outside look-ing in on this litigation. PIOGA intends to participate as amicusin any appeal. ■

Voting for PIOGA Board of Directors now open

Eleven members are vying for seven seats on the PIOGABoard of Directors. A ballot has been mailed to the mainrepresentative of each PIOGA member company and must

be returned to the PIOGA office by mail or hand-delivered nolater than 5 p.m. on September 6.

Under PIOGA’s bylaws, board members are elected by simplemajority. The seven candidates receiving the most votes will bechosen to serve three year terms beginning with the PIOGAAnnual Meeting on September 11.

Biographies for the 11 candidates follow. Those marked withan asterisk (*) are current board members seeking reelection.

If you have questions about voting, please contact DanielleBoston at 724-933-7306 ext. 28 or danielle@pioga.org.

MARY ANNA BABICH, DAWOOD ENGINEERING*Mary Anna’s commitment to the oil and gas industry began in the late 1960s

when her family was active in local gas drilling operations. After receiving a BAin Chemistry and minors in Mathematics and Management from Seton HillCollege, she entered the environmental consulting arena where she assistedclients with renewable energy projects located on landfills and was the fieldremediation project manager for a natural gas company. In 2008, Mary Annaentered the industry as the Supervisor of Permitting for EXCO Resources. In2009, she took the position of Director Water Resources at EQT ProductionCompany. Currently, she holds the position of Director of EnvironmentalServices at Dawood Engineering and is also the VP/President Elect of theAppalachian Chapter of Women’s Energy Networking.

Mary Anna serves as an active member of PIOGA’s environmental andwater resources committees and is participating with the PIOGA Chapter 78Task Force. She was the former Chair of the MSC Water ResourcesSubcommittee, Environmental Stewardship Committee and Pre-drill DatabaseCommittee. As a member of these committees and the Waste Management &Recycling, Invasive Species, SRBC, and Well and Surface Use Permitting sub-committees, she was actively involved in preparing numerous documents sub-mitted by the MSC to PADEP and the SRBC. Mary Anna was also a member ofGovernor Rendell Gas Migration and Environmental Task Force.

Over the past 30 years Mary Anna has successfully negotiated with theagencies to improve the industry’s permitting and compliance requirements andbuilt relationships with the PADEP and the SRBC. CARL J. CARLSON, RANGE RESOURCES – APPALACHIA, LLC

Carl J. Carlson joined Range Resources – Appalachia, LLC in January 2008as Director of Government Affairs, where his primary duties include regulatoryand legislative policy development as well as work on a variety of technical envi-ronmental projects. Mr. Carlson has 38 years of experience in Pennsylvania’s oiland gas industry, including a variety of technical and management positions forlarger production companies as well as independent prospecting and technicalconsulting. Mr. Carlson served on the board of directors of the Independent Oiland Gas Association of Pennsylvania for over 20 years, including two terms asPresident of the association. He received his Bachelor of Science degree inGeological Science from the Pennsylvania State University in 1975.JAMES R. DALEY, PMP, NGE (NOVEL GEO-ENVIRONMENTAL, LLC)

Save the date: PIOGA Annual MeetingThis event will take place on Thursday, September 11, at theRamada Greensburg Hotel and Conference Center (100Ramada Inn Drive, Greensburg, PA 15601) from 2 to 4 p.m.A reception will follow the meeting. Watch for an RSVP soonif you haven’t already received it.

Jim holds a B.S. Degree in Environmental Resource Management fromPenn State, and has worked in the environmental and engineering fields for 34years, primarily in consulting. He is a Project Management Professional (PMP),credentialed by the Project Management Institute.

Jim serves as the Director of Environmental Services for NGE (Novel Geo-Environmental, LLC), a woman-owned small business with offices in MoonTownship, PA, and St. Albans, WV. He and NGE are active members of thePennsylvania Independent Oil and Gas Association, and the Marcellus ShaleCoalition. Jim is very familiar with existing and evolving regulations impactingthe industry and served as Vice-Chair of the Marcellus Shale Coalition’s Welland Surface Use Permitting Subcommittee in 2013, and serves as a Boardmember for the Air & Waste Management Association’s Allegheny MountainSection. He also serves as frequent volunteer speaker for the Marcellus ShaleCoalition, President of the Pittsburgh Post, Society of American MilitaryEngineers, and is an active Hunter-Trapper Education and Successful TurkeyHunting Instructor for the Pennsylvania Game Commission. He has contributedmultiple safety articles to The PIOGA Press and oil and gas related content toother publications and websites.

Jim has been involved in helping to develop Recommended Practices for theMarcellus Shale Coalition, and was instrumental in developing the firstRecommended Practice publicly released by the Coalition concerning site plan-ning, development and restoration, as well as recommended practices for water-lines. More recently he co-chaired a workgroup involved with pollution preven-tion practices for the Marcellus Shale Coalition.

Jim lives in Cranberry Township with his wife, Karen, and sons Jacob (head-ing off to Texas Tech for Petroleum Engineering) and Isaac.ROY R. DOTY, NABORS/NCPS COMPANY

Roy R. Doty has 32 years of oilfield experience in Petroleum Engineering,Technical Drilling, Business Development, and Product Development. Roy isemployed with Nabors/NCPS Company and functions as a Region AccountsManager based in Canonsburg, Pennsylvania. He was previously employed withBJ Services Co. USA for the past 31 years and held various professional posi-tions throughout the US with BJ Hughes, BJ Titan and the Hughes ToolCompany. Prior to the BJ corporate family, he worked with the Colombian Navyin Cartagena, Colombia, and held US Foreign Service posts in Nicaragua andEcuador. Roy is a physical science graduate of the University of New Mexicoand language/cultural studies graduate of University of Central America. He isoriginally from Olean, New York, and resides with his wife and two daughters inIndiana, Pennsylvania.VALERIE R. GRESSANG, SK OPERATING, INC.

Valerie Gressang joined SK Operating, Inc. at inception in 1998 and waselected to the office of Vice President 2002. SK Operating, Inc. operates approx-

Page 6 The PIOGA Press

imately 100 wells and has royalty and working interests in over 300 wellsthrough various limited partnerships and joint ventures with wells located prima-rily in the Commonwealth of Pennsylvania. Valerie is responsible for the dailyoperating activities of running the Corporation. These responsibilities includemonthly revenue distributions, accounts payable, accounts receivable, payroll,tax returns, financial statements, contracts, banking and administrative welloperations.

Prior to joining SK Operating, Inc., Valerie was employed by AngermanAssociates, Inc. for eight years as both its Gas Purchase Contract Administratorand as a Senior Accountant. In 1989 and 1990, she was employed by CNGDevelopment Company in Pittsburgh as an Associate Accountant.

Valerie graduated from Duquesne University in 1992 with a Bachelors ofScience degree in Accounting and with a minor in Management InformationSystems. She has over 25 years of experience in the oil and gas industry work-ing from the ground up. She resides with her husband in Mars, PA, and is themother of three grown children.JIM MCKINNEY, ENERVEST OPERATING, L.L.C. *

EnerVest Operating, L.L.C. is engaged in the exploration and production ofnatural gas and crude oil. EnerVest’s Charleston, WV, regional office is responsi-ble for over 15,000 wells in Appalachia (6 states), Michigan and North Dakota.Jim’s responsibilities as Senior Vice President and General Manager includeEastern Appalachia, the Marcellus Shale, the Utica Shale, the Bakken Shaleand the shared service groups located in the Charleston office.

Prior to joining EnerVest, Jim worked as Vice President and RegionalManager for Penn Virginia Corporation (1996-2010) and for Royal Dutch Shell(1989-1996).

Jim currently serves as President on the Board of Directors for theIndependent Oil & Gas Association of West Virginia and is a member of theBoard of Directors for the Pennsylvania Independent Oil & Gas Association.McKinney served from 2002-2005 as President of the Virginia Oil & GasAssociation and served previously on the Board of Directors of SummitLeadership Foundation (Johnson City, TN) and TruPoint Bank (Grundy, VA). WILLIAM E. MILLER, ENVIRONMENTAL WELLS DEVELOPMENT, INC. ANDDRA-SURV, INC.

William Miller is President and Owner of Environmental Wells Development,Inc., which is an environmental consulting company that provides complete envi-

ronmental planning and consulting services to the oil & gas industry and to theland development industry. William also is CEO/President and Owner, Dra-Surv,Inc. which is full service engineering and surveying company with emphasis onenvironmental consulting and land development for the oil and gas industry,mining industry, commercial development and various other industrial projects.Dra-Surv, Inc. is well established in Western Pennsylvania and for over thirtyyears has done considerable work and is certified in the states of Pennsylvania,New York, Ohio, West Virginia and Maryland. William is a 1972 graduate of PennState University with a Civil Engineering degree and resides in Indiana, PA.STEPHEN B. MILLIS, VINEYARD OIL AND GAS COMPANY*

Stephen B. Millis, President and owner of Vineyard Oil and Gas Company.Mr. Millis has been with Vineyard since its inception in 1978. Vineyard started asan oil and gas producer and pipeline operator drilling over 500 wells and man-aging in excess of 300 miles of privately owned natural gas gathering lines.Vineyard became one of the first marketers of natural gas in Pennsylvania dat-ing back to 1984 and is recognized for its pipeline capacity expertise. CurrentlyMr. Millis and his company market gas on every major interstate pipeline locatedin the Northeast United States with a combined contracted portfolio in excess of500,000 dth per day. Mr. Millis is a graduate of Gannon University and lives inNorth East, Pennsylvania. Vineyard Oil and Gas Company has held a boardseat on POGAM/PIOGA for over twenty years.FRANK J. ROSS, T&F EXPLORATION LP*

Frank J. Ross is Vice President and partner in T&F Exploration LP. Rossgraduated in 1985 with a BS degree in Petroleum and Natural Gas Engineeringfrom Pennsylvania State University. Upon graduation he went to work for EnergyProduction Company as a staff engineer. Following his three years at EnergyProduction, Ross either managed or was principle in several natural gas market-ing companies specializing in developing marketing programs for industrial andcommercial end users. During his 12 year tenure with the marketing entities, hemanaged all facets of Appalachian supply acquisition, pool operations and salesto customers behind the major LDC’s in the Northeast marketplace. T&FExploration, an exploration and production company, was formed in 1998 andRoss is responsible for all financial and marketing operations of this company. InNovember 2003 Ross acquired a minority interest in a newly formed companyPennsylvania Brine Treatment. Ross has been a board member of IOGA/PIOGAfor 9 years. Ross is also a member of IOGA-WV, IPAA, has chaired or co-chaired the Transportation and Marketing Committee for the past 6 years and isa member of SPE. Frank and his wife Terry reside in Pittsburgh and have threesons.JAKE STILLEY, PATRIOT EXPLORATION CORPORATION*

Jake Stilley is Vice President of Patriot Exploration Corporation and over-sees all operational, financial and business development aspects of the compa-ny. Patriot currently operates over 200 shallow oil and gas wells in Pennsylvania,spanning from northern Clearfield County into southwestern Greene County.Jake personally supervised the drilling and completion of the majority of thecompany’s shallow wells. Patriot is also jointly developing the unconventionalresources under its leasehold and owns working interests in over 35 Marcelluswells. As a result, Patriot has an interest in both stopping burdensome new reg-ulations on the conventional industry, as well as maintaining sensible regulatoryoversight in the drilling and production of unconventional wells. Jake holds a BSin Civil Engineering from Bucknell University and a Masters in BusinessAdministration from the Pennsylvania State University. He is an active memberof PIOGA’s environmental and legislative committees.BURT A. WAITE, MOODY AND ASSOCIATES INC.*

Mr. Waite is a senior geologist and program director at Moody andAssociates Inc. in Meadville, Pennsylvania. He directs a staff of managing geolo-gists and hydrogeologists relative to the environmental and hydrologic implica-tions of energy resource development. In the past 38 years Mr. Waite hasworked closely with natural resource developers (primarily the petroleum andmining industries) to minimize adverse impacts on ground and surface waterresources while encouraging full development of the resources. Burt was thelead author of the Oil and Gas Pollution Abatement Program study conductedon behalf of the Pennsylvania Department of Environmental Protection in 1985.

Mr. Waite serves on the Board of Directors of the Pennsylvania IndependentOil and Gas Association and serves on a five member Oil and Gas TechnicalAdvisory Board to the Pennsylvania Department of Environmental Protection.Mr. Waite earned a Bachelor of Arts Degree from the College of William andMary in Williamsburg, Virginia, and a Master of Science Degree in geology fromthe University of Vermont in Burlington, Vermont. Burt and his family live in thelittle town of Cochranton, PA, where he also serves in the position of Mayor. ■

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Page 8 The PIOGA Press

Auditor general claims rapiddevelopment overtaxed DEP’sability to oversee industry

An audit released July 22 by Auditor General EugeneDePasquale claims the fast growth of the unconvention-al gas industry caught the Department of Environmental

Protection unprepared to effectively administer laws and regula-tions to protect drinking water and unable to efficiently respondto citizen complaints.

The audit covered the period of 2009 through 2012 and waslaunched by DePasquale in January 2013, immediately after hebecame auditor general. The audit’s purpose was to assess DEP’sability to protect the water quality in the wake of greatly escalat-ed shale gas activity.

The audit charges that DEP failed to consistently issue officialorders to well operators determined by DEP to have adverselyimpacted water supplies. After reviewing a selection of 15 com-plaint files for confirmed water supply impact, auditors discov-ered that DEP issued a single order to a well operator to restoreor replace the adversely impacted water supply.

DePasquale also said the department did a poor job communi-cating the results of investigations to citizens who registeredcomplaints, and that DEP’s complaint-tracking system did notprovide management with reliable information to effectivelyoversee the program.

In the area of inspections, auditors tried to measure howquickly DEP conducted initial inspections of unconventional

wells. However, DePasquale said the only way to make a conclu-sion would have been to review thousands of hard-copy files.Auditors also found DEP does not post to its website all statuto-rily required inspection information. When the data was testedfor accuracy, the auditors found errors of more than 25 percent inkey data fields and as many as 76 percent of inspectors’ com-ments were omitted from the online inspection reporting.

Auditors also noted that DEP does not use a manifest systemfor tracking shale gas waste from the well site to disposal.Instead, the department relies on what was described as a dis-jointed process that includes self-reporting by well operatorswith no assurances that waste is disposed of properly.

With respect to transparency, auditors discovered that access-ing DEP data online is challenging—described as “a myriad ofconfusing web links and jargon.” The information that was pre-sented on DEP’s decades-old eFACTS database was oftenincomplete, requiring a physical review of hard-copy files atregional offices to verify the actual information.

“There are very dedicated hard-working people at DEP, butthey are being hampered in doing their jobs by lack ofresources—including staff and a modern information technologysystem—and inconsistent or failed implementation of departmentpolicies, among other things, “DePasquale said in a statementaccompanying the audit’s release. “It is almost like firefighterstrying to put out a five-alarm fire with a 20-foot garden hose.There is no question that DEP needs help and soon to protectclean water.”

DEP responseDEP, meanwhile, emphasized that the audit actually validates

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The fiscal code enacted as part of annual budget legislationsigned into law last month requires the EnvironmentalQuality Board—the rulemaking entity for the Department

of Environmental Protection—to “promulgate proposed regula-tions and regulations under 58 PA.C.S. (relating to oil and gas)or other laws of this commonwealth relating to conventional oiland gas wells separately from proposed regulations and regula-tions relating to unconventional gas wells. All regulations under58 PA.C.S. shall differentiate between conventional oil and gaswells and unconventional gas wells.”

The split in regulations has been strongly advocated byPIOGA and other industry groups, as well as by a number oflawmakers, particularly in the wake of proposed changes to theChapter 78 Subchapter C regulations (May PIOGA Press, page1).

At DEP’s July 15 Citizens Advisory Board meeting, depart-ment officials outlined how they planned to comply with thedirective as part of the ongoing Chapter 78 amendments.Essentially, DEP will divide the oil and gas regulations intoChapter 78 for conventional wells and Chapter 78a for uncon-ventional operations.

“I don’t think that there are going to be substantive impactsto the bifurcation of those conventional and unconventional reg-ulations. It will require a change in form,” Deputy SecretaryChristopher Abruzzo told the board.

He added that “the reality is just the separation is going tonecessarily delay the process (of finishing the current Chapter78 rulemaking.) We’re going to do everything we can to limitthat delay to just a couple of months, if at all possible.”

DEP Policy Director Hayley Book told the group that thechange is “basically a change in format. We’re taking the exist-ing Chapter 78 regulations, copying them into 78a, removing allreferences about conventional operations from 78a and remov-ing all references to unconventional operations from Chapter78.”

The agency will issue an official notice of the draft of itsfinal rule likely sometime next year and take public commentson the proposed changes, it was explained.

Department officials also said Chapter 78 regulations proba-bly will be the only oil and gas-related rules that are separatedinto conventional and unconventional operations. No division isplanned for regulations addressing air quality, water or waste.

February 2014 Page 9August 2014 Page 9

the department’s work and that no instances were found in whichDEP failed to protect health, safety or the environment.

“For the past 16 months, we’ve cooperated fully with theauditor general’s office and we appreciate the professionalismshown by their staff,” DEP Secretary E. Christopher Abruzzosaid. “As we’ve explained to the auditors, because the reportfocused on the time period up until the end of 2012, most of thisaudit reflects how our Oil and Gas Program formerly operated,not how the program currently functions.”

Throughout the audit period until the present, DEP’s oil andgas program has made great strides improving the effectivenessof its regulatory efforts and its transparency to the public, theagency said. Also, it’s important to recognize that Act 13 of2012, the first significant amendment to Pennsylvania’s oil andgas laws in over 30 years, was enacted during the audit period,introducing sweeping changes to DEP’s regulatory authority overthe unconventional natural gas industry.

“We’re not surprised by the results of this audit; we’ve volun-teered to have our oil and gas program audited numerous timesin the past by a nonprofit, multi-stakeholder organization calledState Review of Oil and Natural Gas Environmental Regulations,Inc. (STRONGER),” Abruzzo said. “The most recentSTRONGER audit was in March of 2013, and they found ourprogram to be proficient and ready to address the increase of oiland gas operations in Pennsylvania, specifically praising ourhydraulic fracturing and well construction regulations that aredesigned to protect fresh groundwater.”

The chairman of a key Senate oversight committee dismissedDePasquale’s report as politically driven.

“As far as I can tell, he was just satisfying a campaign prom-ise,” said Sen. Gene Yaw (R-Lycoming County), who chairs theEnergy and Environmental Resources Committee. DePasquale isa Democrat who as a member of the House of Representativesvoted in 2012 against Act 13.

Audit recommendationsOf the eight audit findings and 29 recommendations to

improve DEP’s monitoring of potential water quality impacts ofshale gas development, DEP disagreed with all audit findings,but at the same time agreed with the majority of the recommen-dations. Eighteen of the 29 recommendations do not requireadditional funding. Among the recommendations, auditorsencouraged DEP to:

• Always issue an administrative order to a well operator whoDEP has determined adversely impacted a water supply—even ifDEP used the cooperative approach in bringing the operator intocompliance or if the operator and the complainant have reached aprivate agreement.

• Develop better controls over how complaints are received,tracked, investigated and resolved.

• Invest resources into replacing, or significantly upgrading,the agency’s complaint management system.

• Find the financial resources to hire additional inspectors tomeet the demands placed upon the agency.

• Implement an inspection policy that explicitly outlines therequirements for timely and frequent inspections.

• Create a true manifest system to track shale gas waste andbe more aggressive in ensuring that the waste data the depart-ment collects is verified and reliable.

• Reconfigure the agency website and provide complete andpertinent information in a clear and easily understandable man-ner.

• Invest in information technology resources and develop anIT structure that will ensure the oil and gas program has a strongfoundation for the ongoing demands placed upon it.

• Develop an all-electronic inspection process so that inspec-tion information is accurate and timely to DEP and public stake-holders.

“We agree with many of the helpful recommendations in the

DEP outlines plans to split oil and gas regulations

Page 10 The PIOGA Press

auditor general’s report,” Abruzzo said. “In fact, thanks to theleadership of Governor Corbett, the emphasis he puts on protect-ing the environment, and the increased protections in Act 13,many of these recommendations have already been implemented,or are in the process of being implemented.”

Findings that DEP disagrees with include that “DEP did notroutinely and consistently issue orders requiring oil and gasoperators to restore or replace adversely impacted water suppliesas required by law.” In these instances, orders were not neces-sary, the department indicated. The operators in those instanceshad already remediated the affected water supplies without anorder.

“DEP’s goals are to determine if oil and gas activities contam-inated a water supply and to ensure restoration of that water sup-ply if it is warranted,” Abruzzo said. “If an operator voluntarilyreplaces or restores an impacted water supply prior to DEP’sdetermination, negating the need for an order, our goals are stillachieved.”

Further, several of the 15 cases highlighted by the auditorgeneral were not related to unconventional drilling activities, andwhile some of the cases are still pending, the operators in ques-tion have been fined more than $848,000 to date, DEP pointedout.

The department also did not agree with the finding that “DEPutilizes an ineffective complaint tracking system that does notprovide management with timely and accurate complaint infor-mation related to oil and gas activities.” DEP’s ComplaintTracking System (CTS) is an internal case management tooldeveloped for and utilized by the entire department, rather thanjust the oil and gas program. However, with the recent expansion

of unconventional oil and gas activities, DEP realized that CTSlacked some functionality with respect to tracking data specificto oil and gas. Due to this, DEP’s Bureau of InformationTechnology has made numerous adjustments to CTS to allow formore precise tracking of information related to water supplycomplaints. Consequently, many of the criticisms contained inthis finding have already been addressed, the department said.

DEP additionally did not agree with the auditor general’sfinding that “it could not provide reliable assurance that all activeshale gas wells were inspected timely.” In fact, the audit staffacknowledged that they did not conduct a comprehensive reviewof the information necessary to make this conclusion. DEPstressed that it is committed to inspecting all unconventional gaswells during “critical stages” of the well construction processand has significantly increased unconventional well site inspec-tions over the past five years. In 2008, DEP conducted 1,262unconventional well inspections. By 2012, the number of inspec-tions increased to 12,680 and remained steady through 2013.

This June, a fee increase on unconventional well permits wentinto effect, which is projected to result in additional annual rev-enue of approximately $4.7 million, supporting new informationtechnology projects related to oil and gas, including streamliningelectronic review, mobile digital inspections, upgrades to report-ing systems and modernization of forms and databases, DEPsaid. The new revenue will also be used to hire additional officeof oil and gas management staff for inspections, policy and pro-gram writing, and permitting. ■

PIOGA members:Make sure your reporting is complete

In an email to members, PIOGA President & ExecutiveDirector Lou D’Amico noted that the auditor general’s reportcontradicted other assessments of DEP’s oil and gas pro-

gram, including the most recent multi-stakeholder STRONGERreview. At the same time, D’Amico urged members to take aproactive approach toward ensuring that all data and reportssubmitted to DEP are complete and accurate.

“(W)e are asking all members to review your prior submittalsof data and reports to DEP—both manual and electronic—andto FracFocus to make sure that they are complete and accu-rate, and to make any necessary corrections as soon as rea-sonably possible,” D’Amico wrote.

Based on discussions during PIOGA’s EnvironmentalCommittee meetings, members should focus on making surethe following data and reports have been timely, completelyand accurately provided:

• Demonstration of compliance with Exemption No. 38.• Well record and completion reports (including the easily

missed “CO” column and the CAS# on the “ConfidentialAdditive” form).

• Well plugging reports.• Inactive well status and annual monitoring reports.• FracFocus chemical reporting.• Well production and waste reporting.“Thank you for your cooperation in making sure that oppo-

nents of our industry have one less topic for unwarranted criti-cism,” D’Amico wrote.

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February 2014 Page 15August 2014 Page 15

Administration agrees to no new leasing pending court decision

The Corbett administration’s plan to generate $95 millionthis fiscal year through new no-surface-impact leasing ofstate lands is on hold until a Commonwealth Court judge

decides a challenge of the leasing proposal.In a settlement filed July 18 between the Commonwealth and

the Pennsylvania Environmental Defense Foundation (PEDF),the administration agreed not to execute any additional leases forgas or mineral interests in state forests and parks until thePEDF’s lawsuit is decided. In return, the foundation dropped itsrequest for a temporary injunction to halt transfers from the Oil& Gas Lease Fund to cover operating costs for the Departmentof Conservation and Natural Resources.

At the end of May, Governor Corbett issued an executiveorder rescinding a moratorium on issuing new leases for naturalgas development on state-owned lands that had been put in placeduring the final days the term of his predecessor, Ed Rendell.Corbett’s order allows leasing if the gas can be accessed withoutadditional surface disturbance on lands administered by DCNRor via horizontal drilling from adjacent private lands (JunePIOGA Press, page 1). The administration’s proposed budget forfiscal year 2014-15 included $75 million in revenue that wouldbe generated from this type of leasing and used for general stateexpenses, but the legislature upped the amount to $95 million inthe final version of the spending plan.

The PEDF went to court to block the new leasing, arguingthat DCNR was being directed to lease additional state landssolely for generating revenue without identifying the tracts to beleased or evaluating the impacts on surrounding public naturalresources. The foundation also objected to transfer of funds fromthe protected Oil & Gas Lease Fund to pay for DCNR’s day-to-day operations. The transfer proposed by Corbett was $117 mil-lion, but ended up as $72.5 million in the final budget. All rev-enue from leasing on state lands goes into the fund and is to bespent only on conservation, recreation and flood control projectsat the direction of DCNR.

The PEDF asked Commonwealth Court to issue an expeditedinjunction while budget negotiations were going on, but JudgeKevin Brobson ruled that he would wait until the budget wasfinalized before considering the matter.

Under the July 18 settlement, the administration and thePEDF agreed to these points:

• The administration will not lease any additional state forestor park land until Commonwealth Court has made a decision onthe merits of PEDF’s lawsuit.

• PEDF will not continue to ask the court to enjoin the use ofthe Oil & Gas Lease Fund for DCNR’s general operations whilethe case is pending. Enjoining the funds, the foundation conced-ed, would have left the department without the ability to operatefor the next year, causing and parks and forests to be closed.

• Briefs in the case are to be submitted by September 14, withoral arguments taking place in October.

“Without this settlement, DCNR’s capacity to preservePennsylvania’s natural treasures would have been decimated,”Corbett said in a statement. “We cannot allow our commitmentto protecting Pennsylvania’s state parks and forests to be heldhostage during the duration of this lawsuit.”

An attorney for the PEDF said in response to Corbett’s state-ment, “Our whole lawsuit is to enable DCNR to do its job. And

the governor’s continuing to take Oil & Gas Lease Fund moneyto operate DCNR does the opposite.”

Pennsylvania has earned $413 million in bonus bids forMarcellus Shale leases and $285 million from royalties on the425-plus producing wells since 2008. Beginning in 2009, theRendell and Corbett administrations and lawmakers have tappedthe Oil & Gas Lease Fund to help balance the state budget.

In a companion bill to this year’s budget, the GeneralAssembly said that it is “in the best interest of the common-wealth to lease oil and gas rights in state forests and parks” aslong as DCNR and the governor require strong protective meas-ures and there is enough money left in the fund for DCNR tocarry out its duties. The PEDF wants the court to rule that it isunconstitutional for the state to divert oil and gas revenues awayfrom the fund’s conservation purposes. ■

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Apair of administrative law judges (ALJs) for thePennsylvania Public Utility Commission have ruled thatSunoco Logistics does not qualify as a public utility in a

case related to the company’s Mariner East pipeline project thatwould carry natural gas liquids (NGLs) from westernPennsylvania to Delaware County. Sunoco had sought publicutility status so it could be exempt from local zoning ordinancesand exercise eminent domain in siting the 300-mile-long pipelineacross southern Pennsylvania.

The ALJs determined in a ruling issued July 30 that Sunocodoes not meet the definition of a “public utility corporation” inSection 1103 of the Business Corporation Law (BCL) because itis an interstate common carrier regulated by Federal EnergyRegulatory Commission (FERC) under the Interstate CommerceAct, and the proposed Mariner East pipeline service is neither aFERC-regulated public utility service nor intrastate public utilityservice regulated by the PUC under the Public Utility Code. TheALJs relied on a February 15, 2013, FERC decision that Sunocohad demonstrated a need for additional pipeline capacity totransport excess NGLs produced in association with natural gasin the Marcellus and Utica shale production regions, as well asYork County Common Pleas Court decisions in February andMarch 2014 finding that because Sunoco was regulated as acommon carrier by FERC, it was not entitled to eminent domainpowers under Section 1103 of the BCL.

The ALJs also concluded that the nature of Sunoco’s proposedintrastate service is private, as it is limited to a selected few num-ber of shippers and not available to members of the publicbecause Sunoco has not shown what end-user customer membersof the public—as distinguished from third-party storage facilitiesor distribution terminals—would use Sunoco’s proposedintrastate service.

The ALJs’ conclusion that Sunoco’s proposed Mariner Eastpipeline service does not constitute public utility service meansthat the proposed buildings are not public utility buildings, so the

PUC lacks jurisdiction to make a finding that the buildings arenecessary for public utility service and therefore exempt fromlocal zoning ordinances.

The case will ultimately be decided by the five-memberPublic Utility Commission. The commission can accept, reject ormodify the judges’ decision. Regardless of the outcome, the par-ties in the case can appeal to the Commonwealth Court.

For more information about the case and the issues involved,see the article on page 16 of the July PIOGA Press. ■

Utility to expand electric lines to tap shale

PPL Corp. plans to spend billions of dollars to build a 725-mile system of electric transmission lines that will bringenergy from the Marcellus Shale fields to customers on the

heavily populated Eastern Seaboard.The Allentown-based utility said the 500-kilovolt line would

span much of Pennsylvania and reach into New York, NewJersey and Maryland, although the route has not been deter-mined. PPL said the project was likely to increase reliability dur-ing demand-driven power shortages and save money for cus-tomers.

A rough map produced by the company shows a line runningfrom Pittsburgh through Pennsylvania’s rural northern tier andinto the New York City region. A second line branches souththrough the Susquehanna River corridor into Maryland, while athird spur runs through the Lehigh Valley and Pocono Mountainsinto central New Jersey.

The project requires regulatory approval, and the companyhas begun the process with a submission to PJM Interconnection,the regional coordinator for wholesale energy. PPL also mustreceive approval from utility regulators in each state.

PPL said the transmission lines would help develop powerplants along its route that would be fueled by natural gas fromthe Marcellus.

The company estimates the project’s total cost at $4 billion to$6 billion. If construction begins by 2017, PPL said the workcould be complete around 2023-2025. ■

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February 2014 Page 17August 2014 Page 17

Think you know Act 13?By Joe Baran, Principal& Laura Zewe, Managing Director - Analysis, Data

Management and GISBertison-George Oil & Natural Gas Consulting

What would you do with your portion of $630 million? That’sthe question now facing the Commonwealth of Pennsylvania.Over the past three years Pennsylvania’s unconventional gas pro-ducers remitted $632,434,000 in Act 13 impact fees. Some ofthis money funneled into government oversight, a portion fundedservices like the Department of Transportation and the Fish andBoat Commission, and the Commonwealth’s counties andmunicipalities each received their own distributions.

While the recipients of Act 13 fees have been deciding whereto invest their funds, at Bertison-George we have uncovered thereality behind Pennsylvania’s Act 13 distributions. Many quali-fied and self-appointed experts are debating the pros and cons ofthe tax structure. Their arguments are varied—some are valid,some miss the mark—but they all have one thing in common:they rarely showcase the intricacies of Act 13.

Did you know that every Pennsylvania county is guaranteed aminimum Act 13distribution of$25,000? Wereyou aware that ofthe seven munici-palities recentlyinvolved in thePennsylvaniaSupreme Courtcase over localzoning regula-tions for oil andgas development,one received

$365,889 for its 2013 distribution without having a single Act 13well drilled within its borders?

In 2013, the year’s collected Act 13 fees amounted to$225,752,000. After allocating funds to oversight and state agen-cies, just over half of the total was doled out to counties andmunicipalities. Each county received a county-level distribution;municipalities received their own, individual distributions. Of the67 counties in the Commonwealth, 37 with drilled, eligible wellsand their municipalities shared $117,689,671; while, 30 countieswithout wells received $8,069,487 to divvy up.

The pot from which counties andmunicipalities draw their money has beensteadily increasing by $21,542,000 since2011. That does not mean, however, thatall counties are seeing an increase in theirAct 13 distribution.

From 2011 to 2013, the piece of pie forBradford County and its municipalitiesshrunk by $2,842,627, the biggest decreasein the Commonwealth. However, duringthis time, Bradford County saw the drillingof 128 new, eligible wells. Why thenwould its distribution shrink? Easy:Bradford County did not maintain thesame rate of drilling as the rest of theCommonwealth.

A portion of Act 13 distributions arepaid based on the number of eligible wellseach county hosts as compared to thenumber of eligible wells within theCommonwealth. In 2011, Bradford washome to 21.9 percent of Pennsylvania’seligible Act 13 wells. By 2013, Bradford

could claim only 16.4 percent as its own.In brighter news, the Act 13 distribution to Washington

County and associated municipalities has grown by $4,564,210since 2011. Washington County outpaced others by drilling 429Act 13 eligible wells in the past three years, jumping it from11.1 percent ownership to 13.9 percent of the Commonwealth’seligible wells.

It isn’t only the counties with wells that are benefiting fromAct 13 funds. Philadelphia County, without a single well to itsname, received $1,483,017 in 2013. Something else in additionto the number of wells must affect Act 13 distributions.

Comparison of Philadelphia, Fayette and Allegheny counties’county-level distribution provides an excellent case study forhow population can affect Act 13 funds. Although AlleghenyCounty (with 31 eligible wells) and Philadelphia County (withzero wells) can barely hold a candle to Fayette County’s 205 eli-gible wells, Fayette only received $81,889 more in Act 13 distri-butions for 2013. How did Allegheny and Philadelphia make upfor the lack of wells? By having 9.63 percent and 12.13 percent,respectively, of the Commonwealth’s total population; FayetteCounty can boast only 1.03 percent.

In fact, Philadelphia County’s population alone provided more

Average Expected Annual Act 13 Payment:County without eligible wells: $268,982.90

County with eligible wells: $3,180,801.91

Page 18 The PIOGA Press

Act 13 funds to the county than were received by 29 countieshosting eligible wells. Huntingdon County, with a single eligiblewell, received $50,519 (the lowest amount distributed to a countywith at least one eligible well).

A provision in Act 13 limits the funds individual municipali-ties receive to the greater of 50 percent of their prior year’sadjusted budget or a set amount. This does not affect county-level distributions. For 2013, $515,100 was the maximum distri-bution municipalities could receive. Of the 13 municipalitiesaffected by the total exceeding restriction, Cummings Townshipin Lycoming County saw the greatest reduction in its distribu-tion. Cummings Township exceeded the maximum allowance by$546,100. These funds, instead of being distributed to the munic-ipality, were then deposited by the Pennsylvania Public UtilityCommission (PUC) into the Housing Affordability andRehabilitation Enhancement Fund and used to increase the avail-ability of affordable housing in counties with Act 13 eligiblewells.

Whether a county receives $25,000 or $7,054,000 (the lowestand greatest individual county distributions made in 2013,respectively), it must establish a plan for how to spend or savethe money. Act 13 provides guidelines and structure for how dis-tributed funds can be utilized by counties and municipalities.Authorized uses include development of greenways and commu-nity parks, water resource management, emergency preparedness,and tax reductions.

Over $30,000,000 worth of 2012’sAct 13 funds were utilized for publicinfrastructure construction. GreeneCounty topped the charts by investing$1,742,657 toward these improve-ments. Lycoming County devoted$1,295,787. Three municipalities put$500,000 or more of their own fundsback into public infrastructure:Lawrence Township, ClearfieldCounty; Morris Township, GreeneCounty; and Sullivan Township, TiogaCounty. Public infrastructure construc-tion was far and away the top item onwhich counties and municipalitiesspent their 2012 Act 13 distributions.

Emergency preparednessand public safety came insecond with $14,557,416spent.

Exercising the optionto save all or part of theirdistributions,Pennsylvania’s countiesand municipalitiesstashed away$39,214,699. Countiesand municipalities cantap into these funds tofinance necessary

improvements, programs and services in the future, as long asthe ultimate use falls within the guidelines of Act 13. In this way,areas in immediate need of funding a project are able to directlyapply their Act 13 distributions, but localities with their eyes onupcoming projects or worried about a rainy day can use their dis-tributions to cover future expenses.

Act 13 money reaching counties and municipalities comesfrom two funding sources: the Unconventional Gas Well Fundand the Marcellus Legacy Fund. A percentage of Act 13 fees col-lected are set aside to form these two funds.

The Unconventional Gas Well Fund allocates money based onthe presence of Act 13 eligible wells. Of the resources set asidefor the Unconventional Gas Well Fund, 36 percent are allocatedto counties with eligible wells, 37 percent are distributed tomunicipalities with eligible wells and the remaining 27 percentare dispersed to municipalities located in counties with eligiblewells. Counties without Act 13 eligible wells and their associatedmunicipalities do not receive any funds from the UnconventionalGas Well Fund.

The other source, the Marcellus Legacy Fund, distributesmoney across a broad array of recipients: Department ofConservation and Natural Resources, Department ofTransportation, and the Commonwealth Financing Authority, forexample. These entities administer grant programs and fund spe-cific improvement projects with their Marcellus Legacy Funddistributions.

Additionally, 15 percent of the Marcellus Legacy Fund is paidby the PUC to counties based on their population, regardless ofwells drilled, with a minimum distribution of $25,000. Countiesare limited in the ways in which they can ut lize these

Environmental Initiative funds. Some optionsinclude acquisition and development of recre-ational trails and natural areas, beautificationprojects, and the repair of community parks.

For the 2012 Act 13 distributions made tocounties and municipalities, the PUC lists$4,759,590 as “Amount Not Reported.” These areUnconventional Gas Well Fund allocations thathave been distributed, but for which the appropri-ate county or municipality did not file paperworkshowing how they were used or saved. Theseunreported funds account for 4.8 percent of the$98,860,814 distributed directly to theCommonwealth’s counties and municipalities aspart of Act 13’s 2012 fees. Counties and munici-palities are required to report how their distribu-

February 2014 Page 19August 2014 Page 19

tions will be spent or saved by filing an Unconventional GasWell Fund Usage report to the Public Utility Commission annu-ally. Marcellus Legacy Fund money is not subject to the samereporting requirement.

The Commonwealth of Pennsylvania’s Act 13 is a multi-faceted legislation with many twists and turns affecting the totaldistribution made to an individual municipality or county. Whilesome counties benefit from having a large population, others seethe reintroduction of housing development money and still othersqualify for project grants funded by fees collected through Act13. As the Commonwealth of Pennsylvania continues to calcu-late, distribute and spend Act 13 funds, Pennsylvanian communi-ties are growing, improving and completing projects funded par-tially or wholly by Act 13 money. ■

Source: Pennsylvania Public Utility Commission

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“2 sign or not 2 sign:”Which statute of fraudsgoverns oil & gas leases?

In a recent decision, the Pennsylvania Superior Court resolvedan open question of state law regarding which one of twoalternative statutes of frauds apply to oil and gas leases, in

the process making clear that for an oil and gas lease, only thegrantor of the interest must sign.

In Nolt v. T.S. Calkins & Assocs., et al., —-A.3d—-, No. 1214MDA 2013, 2014 PA Super 141 (Pa. Super. Ct. July 7, 2014), thecourt concluded that the “general” Pennsylvania statute offrauds—rather than the statute of frauds in the PennsylvaniaLandlord and Tenant Act—applies to oil and gas leases, such thattheir validity cannot be challenged solely on the basis that thelessee’s signature is missing.

The “general” statute of frauds in Pennsylvania applies toconveyances of interests in real property and requires that instru-ment be “signed by the party” granting the interest (i.e., by thegrantor or, in the case of an oil and gas lease, the lessor). 33 P.S.§ 1.

On the other hand, the Pennsylvania Landlord and Tenant Actrequires that a lease of “real property” for a term of three yearsor more must be signed by “the parties making or creating thesame” (i.e., the lessor and the lessee must sign), or the lease isone at-will only (and, thus, potentially terminable by either partyat any time). 68 Pa.C.S. § 250.202.

Although oil and gas leases are univer-sally understood to create an arrangementfar different from that of a typical landlordand tenant, the commentary to the LandlordTenant Act suggests that its version of thestatute of frauds (as opposed the “general”statute) applies to leases of any “interests inland,” including “the right to extract oil,coal, stone, iron, ore, etc.”

In Nolt, the lessors invoked the statute offrauds in the Landlord and Tenant Act tochallenge the validity of their oil and gaslease. They claimed that, although theysigned the oil and gas lease, the statute offrauds in the Landlord Tenant Act requiresthat both the lessor and lessee sign (thelessees had not signed the lease at issue, asis typical of many oil and gas leases.).

The Superior Court rejected the lessors’claim and concluded that the “general”statute of frauds applies to oil and gasleases. The court reasoned that “an oiland gas lease, despite the use of theterm ‘lease,’ actually involves the con-veyance of property rights[.]” The courtnoted that the law in Pennsylvania “unequivocally establish[es]that rights to oil and gas are to be treated as transfers of estatesin property and not leaseholds.” Because the lessor signed theinstrument granting the oil and gas rights to the lessee, the leasesatisfied the applicable statute of frauds despite the fact that thelessee had not signed it.

At this point, the Superior Court’s decision forecloses the useof the statute of frauds as a basis for challenging the validity ofan oil and gas lease as long as the lessor signed it. If the lessorsseek appeal of the decision to the Pennsylvania Supreme Court,however, the industry will want to keep careful watch and con-sider friend of the court involvement on the proceedings, as acontrary result could call into question many thousands of leasesin Pennsylvania that contain only the signature of the lessor. ■

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U.S. House approves endangeredspecies reform legislation

By a 233-190 vote, the U.S. House of Representativesapproved legislation at the end of July requiring federalagencies to publish online the data they use to determine

whether a species should be designated as threatened or endan-gered. H.R. 4315 would reform the Endangered Species Act(ESA) by:

• Requiring the federal government to disclose to affectedstates the data used prior to an ESA listing decision, and requirethe federal government’s “best available scientific and commer-cial data” to incorporate data provided by states, tribes and localcounty governments.

• Directing the Interior Department to report annually toCongress on the amount of money and staff spent on lawsuitsrelated to enforcing the ESA.

Supporters argued changes are necessary because the 1973law is not working and that more transparency is needed in thelisting process. “While respecting the original intent of the ESAto conserve species, this bill would help make the law moreeffective for both species and people,” Natural ResourcesCommittee Chairman Doc Hastings (R-WA) said.

“Because of the more than 500 ESA-related lawsuits that havebeen filed against the government during this administrationalone, it has become clear that costly litigation is not only driv-ing ESA priorities, but litigation has become an impediment tospecies recovery,” Hastings said in a floor statement before thevote. ■

Page 22 The PIOGA Press

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Spud Report:July

The data show below comes from the Department ofEnvironmental Protection. A variety of interactive reports are

OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY

available at www.portal.state.pa.us/portal/server.pt/community/oil_and_gas_reports/20297.

The table is sorted by operator and lists the total wells report-ed as drilled last month. Spud is the date drilling began at a wellsite. The API number is the drilling permit number issued to thewell operator. An asterisk (*) after the API number indicates anunconventional well.

February 2014 Page 23August 2014 Page 23

Page 24 The PIOGA Press

Pre-Drilling Water Supply Inventory and Sampling

Post-Drilling Complaint Resolution and Investigations

Gas Well Permitting for Conventional and

Unconventional Plays

Development of High Capacity Groundwater Supply Wells

Soil & Groundwater Contamination Investigations

Assistance with Water Sourcing

Water Management Plan Preparation

SPCC/Control & Disposal Plans

Pre-Drilling Water Supply Inventory and Sampling

Post-Drilling Complaint Resolution and Investigations

Gas Well Permitting for Conventional and

Unconventional Plays

Development of High Capacity Groundwater Supply Wells

Soil & Groundwater Contamination Investigations

Assistance with Water Sourcing

Water Management Plan Preparation

SPCC/Control & Disposal Plans

Disposal Well Permitting

Erosion & Sedimentation Control Planning

Fresh Water Determination Studies

Soil and Groundwater Remediation

Stray Gas Migration Investigations

Hydrogeologic Studies

Expert Witness Testimony

Wetland Delineation and Aquatic Surveys

Disposal Well Permitting

Erosion & Sedimentation Control Planning

Fresh Water Determination Studies

Soil and Groundwater Remediation

Stray Gas Migration Investigations

Hydrogeologic Studies

Expert Witness Testimony

Wetland Delineation and Aquatic Surveys

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February 2014 Page 25August 2014 Page 25

7/31/14 051-24613* Fayette Washington Twp7/3/14 085-24685* Mercer Jackson Twp7/3/14 085-24686* Mercer Jackson Twp

Chief Oil & Gas LLC 13 7/25/14 113-20286* Sullivan Cherry Twp7/25/14 113-20285* Sullivan Cherry Twp7/26/14 113-20282* Sullivan Cherry Twp7/27/14 113-20284* Sullivan Cherry Twp7/28/14 113-20283* Sullivan Cherry Twp7/9/14 113-20265* Sullivan Fox Twp7/10/14 113-20266* Sullivan Fox Twp7/11/14 113-20267* Sullivan Fox Twp7/12/14 113-20268* Sullivan Fox Twp7/17/14 113-20295* Sullivan Fox Twp7/21/14 115-21783* Susquehanna Springville Twp7/29/14 115-21793* Susquehanna Springville Twp7/29/14 115-21794* Susquehanna Springville Twp

CNX Gas Co LLC 22 7/17/14 003-22287* Allegheny Findlay Twp7/17/14 003-22288* Allegheny Findlay Twp7/17/14 003-22289* Allegheny Findlay Twp7/17/14 003-22281* Allegheny Findlay Twp7/17/14 003-22290* Allegheny Findlay Twp7/17/14 003-22291* Allegheny Findlay Twp7/20/14 059-26434* Greene Center Twp7/20/14 059-26435* Greene Center Twp7/20/14 059-26436* Greene Center Twp7/20/14 059-26437* Greene Center Twp7/20/14 059-26438* Greene Center Twp7/20/14 059-26439* Greene Center Twp7/20/14 059-26440* Greene Center Twp7/20/14 059-26441* Greene Center Twp7/20/14 059-26406* Greene Center Twp7/20/14 059-26442* Greene Center Twp7/20/14 059-26443* Greene Center Twp7/20/14 059-26444* Greene Center Twp7/8/14 059-26522* Greene Richhill Twp7/8/14 059-26547* Greene Richhill Twp7/8/14 059-26539* Greene Richhill Twp7/8/14 059-26540* Greene Richhill Twp

D&M Energy LLC 1 7/21/14 053-30688 Forest Jenks TwpDevonian Resources Inc 2 7/9/14 053-30489 Forest Harmony Twp

7/15/14 053-30491 Forest Harmony TwpEM Energy PA LLC 6 7/24/14 019-22250* Butler Oakland Twp

7/25/14 019-22249* Butler Oakland Twp7/26/14 019-22251* Butler Oakland Twp7/27/14 019-22210* Butler Oakland Twp7/28/14 019-22297* Butler Oakland Twp7/29/14 019-22296* Butler Oakland Twp

Enervest Opr LLC 5 7/7/14 083-56515 McKean Lafayette Twp7/14/14 083-56492 McKean Lafayette Twp7/18/14 083-56516 McKean Lafayette Twp7/24/14 083-56504 McKean Lafayette Twp7/31/14 083-56503 McKean Lafayette Twp

EQT Production Co 9 7/8/14 003-22283* Allegheny Forward Twp7/8/14 003-22284* Allegheny Forward Twp7/8/14 003-22285* Allegheny Forward Twp7/8/14 003-22286* Allegheny Forward Twp7/24/14 005-31205* Armstrong Plumcreek Twp7/17/14 059-26594* Greene Center Twp7/7/14 059-26156* Greene Morgan Twp7/5/14 059-26573* Greene Morris Twp7/5/14 059-26574* Greene Morris Twp

Galati Enterprises Inc 3 7/21/14 123-47568 Warren Conewango Twp7/25/14 123-47569 Warren Conewango Twp7/29/14 123-47566 Warren Conewango Twp

Hilcorp Energy Co 8 7/17/14 073-20464* Lawrence Mahoning Twp7/19/14 073-20468* Lawrence Mahoning Twp7/19/14 073-20470* Lawrence Mahoning Twp7/20/14 073-20455* Lawrence Pulaski Twp7/18/14 085-24709* Mercer Shenango Twp7/18/14 085-24710* Mercer Shenango Twp7/18/14 085-24712* Mercer Shenango Twp7/18/14 085-24714* Mercer Shenango Twp

Inflection Energy (PA) LLC 2 7/1/14 081-21466* Lycoming Uppr Fairfield Twp7/2/14 081-21467* Lycoming Uppr Fairfield Twp

Interstate Gas Mkt Inc 1 7/28/14 019-22121 Butler Center TwpKastle Resources Enterprises 1 7/17/14 039-25787 Crawford Summerhill TwpLendrum Energy LLC 1 7/26/14 053-30543 Forest Harmony TwpLindell & Maney LLC 5 7/2/14 123-47343 Warren Brokenstraw Twp

7/10/14 123-47347 Warren Brokenstraw Twp7/15/14 123-47346 Warren Brokenstraw Twp7/21/14 123-47345 Warren Brokenstraw Twp7/24/14 123-47344 Warren Brokenstraw Twp

LT Oil Co LLC 1 7/31/14 121-45692 Venango Allegheny TwpMJ Oil LLC 2 7/23/14 123-47490 Warren Conewango Twp

OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY

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Page 26 The PIOGA Press

7/25/14 123-47491 Warren Conewango TwpMSL Oil & Gas Corp 5 7/3/14 083-56133 McKean Lafayette Twp

7/8/14 083-56124 McKean Lafayette Twp7/10/14 083-56132 McKean Lafayette Twp7/14/14 083-56131 McKean Lafayette Twp7/16/14 083-56123 McKean Lafayette Twp

Noble Energy Inc 16 7/29/14 059-26458* Greene Richhill Twp7/29/14 059-26459* Greene Richhill Twp7/29/14 059-26460* Greene Richhill Twp7/29/14 059-26461* Greene Richhill Twp7/29/14 059-26462* Greene Richhill Twp7/29/14 059-26463* Greene Richhill Twp7/29/14 059-26464* Greene Richhill Twp7/29/14 059-26465* Greene Richhill Twp7/29/14 059-26466* Greene Richhill Twp7/29/14 059-26467* Greene Richhill Twp7/7/14 125-27158* Washington West Finley Twp7/7/14 125-27159* Washington West Finley Twp7/7/14 125-27160* Washington West Finley Twp7/7/14 125-27161* Washington West Finley Twp7/7/14 125-27258* Washington West Finley Twp7/7/14 125-27163* Washington West Finley Twp

Pembrooke Oil & Gas Inc 4 7/9/14 121-45467 Venango Cornplanter Twp7/14/14 121-45466 Venango Cornplanter Twp7/15/14 121-45465 Venango Cornplanter Twp7/17/14 121-45464 Venango Cornplanter Twp

PennEnergy Resources LLC 3 7/18/14 019-22268* Butler Jefferson Twp7/18/14 019-22271* Butler Jefferson Twp7/18/14 019-22272* Butler Jefferson Twp

Range Resources Appalachia 15 7/7/14 081-21358* Lycoming Pine Twp7/8/14 081-21359* Lycoming Pine Twp7/11/14 125-27151* Washington Cross Creek Twp7/11/14 125-27152* Washington Cross Creek Twp7/11/14 125-27167* Washington Cross Creek Twp7/11/14 125-27305* Washington Cross Creek Twp7/11/14 125-27168* Washington Cross Creek Twp7/11/14 125-27169* Washington Cross Creek Twp7/1/14 125-27415* Washington Smith Twp7/2/14 125-27301* Washington Smith Twp7/2/14 125-27303* Washington Smith Twp7/21/14 125-27410* Washington Somerset Twp7/21/14 125-27407* Washington Somerset Twp

7/21/14 125-27408* Washington Somerset Twp7/21/14 125-27409* Washington Somerset Twp

RE Gas Dev LLC 7 7/5/14 019-22254* Butler Connqunssng Twp7/6/14 019-22252* Butler Connqunssng Twp7/29/14 019-22273* Butler Connqunssng Twp7/30/14 019-22257* Butler Connqunssng Twp7/31/14 019-22258* Butler Connqunssng Twp7/5/14 019-22247* Butler Muddycreek Twp7/6/14 019-22248* Butler Muddycreek Twp

Rice Drilling B LLC 7 7/10/14 125-27346* Washington W Pike Run Twp7/10/14 125-27297* Washington W Pike Run Twp7/10/14 125-27292* Washington W Pike Run Twp7/10/14 125-27293* Washington W Pike Run Twp7/10/14 125-27294* Washington W Pike Run Twp7/10/14 125-27295* Washington W Pike Run Twp7/10/14 125-27296* Washington W Pike Run Twp

Rick & Sons Oil LLC 1 7/17/14 123-47304 Warren Glade TwpSeneca Resources Corp 6 7/2/14 023-20175* Cameron Shippen Twp

7/3/14 023-20173* Cameron Shippen Twp7/18/14 047-24805* Elk Saint Marys City7/20/14 047-24831* Elk Saint Marys City7/8/14 117-21699* Tioga Delmar Twp7/10/14 117-21688* Tioga Delmar Twp

Snyder Bros Inc 1 7/25/14 083-56215* McKean Hamilton TwpSouthwestern Energy Prod Co 15 7/9/14 015-22717* Bradford Herrick Twp

7/10/14 015-22716* Bradford Herrick Twp7/10/14 015-22718* Bradford Herrick Twp7/10/14 015-22719* Bradford Herrick Twp7/1/14 115-21776* Susquehanna New Milford Twp7/1/14 115-21799* Susquehanna New Milford Twp7/2/14 115-21775* Susquehanna New Milford Twp7/2/14 115-21800* Susquehanna New Milford Twp7/3/14 115-21774* Susquehanna New Milford Twp7/3/14 115-21801* Susquehanna New Milford Twp7/30/14 115-21096* Susquehanna New Milford Twp7/30/14 115-21097* Susquehanna New Milford Twp7/30/14 115-21098* Susquehanna New Milford Twp7/30/14 115-21099* Susquehanna New Milford Twp7/30/14 115-21629* Susquehanna New Milford Twp

Stonehaven Energy Mgt Co LLC 1 7/3/14 121-44062 Venango Cranberry TwpTalisman Energy USA Inc 4 7/7/14 115-21721* Susquehanna Apolacon Twp

7/8/14 115-21817* Susquehanna Apolacon Twp7/14/14 115-21718* Susquehanna Choconut Twp7/14/14 115-21719* Susquehanna Choconut Twp

Trimont Energy LLC 6 7/8/14 053-30628 Forest Harmony Twp7/21/14 053-30637 Forest Harmony Twp7/11/14 121-45660 Venango Allegheny Twp7/24/14 121-45450 Venango Allegheny Twp7/29/14 121-45477 Venango Allegheny Twp7/30/14 121-45661 Venango Allegheny Twp

Vantage Energy Appalachia II 4 7/25/14 059-26560* Greene Washington Twp7/25/14 059-26561* Greene Washington Twp7/25/14 059-26562* Greene Washington Twp7/25/14 059-26563 Greene Washington Twp

Weldbank Energy Corp 1 7/31/14 123-47536 Warren Mead TwpWilmoth Interests Inc 3 7/17/14 031-25647 Clarion Toby Twp

7/7/14 123-47524 Warren Sheffield Twp7/10/14 123-47523 Warren Sheffield Twp

Xite Energy Inc 1 7/8/14 121-45643 Venango Cornplanter Twp

OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY

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Page 28 The PIOGA Press

Safety Committee CornerSafety Committee Corner

Digging Out Potential SavingsDigging Out Potential SavingsDigging Out Potential Savings

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avigueras@ecbm.com

888-313-3226 ext. 1335

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Insurance Brokers & Consultants

The reason to bumptest gas detectorsBy Melissa A. Heike, M.S., Vice PresidentNOVA Safety and Health Consulting, Inc.

During the early days of sensor development, manufactur-ers recommended that the instruments be fully calibratedbefore each use. This was very cumbersome for industry

and compliance was difficult. As a result, industry began tolobby the manufacturers to relax the recommendation or offersome suitable compromise. The manufacturers’ original require-ment was based on the knowledge that sensors slowly fail overtime, and fail at different rates depending on the environment inwhich they are used. To satisfy their customers and maintain theintegrity of the instruments, the manufacturers began recom-mending a function test or “bump test” option.

Bump tests are a quick and simple way to determine if a sen-sor still functions. The basic premise is to subject the sensor tothe substance that it is designed to detect at a concentrationslightly greater than the lower alarm limit. If the sensor alarmed,the user has assurance that the sensor will offer protection. If itfailed, then the user could replace it with a functioning unit. Thisis a good compromise which, when performed correctly, willprotect people from harm.

The trouble is, sometimes it’s impossible to determine ifemployees are actually performing the bump tests or if they trulyunderstand the importance of the procedure. Every year, faultysensors give a false sense of security to employees, which

could—and too often does—lead to disaster.During a recent study* of over 4.7 mil-

lion bump test records by a major manufac-turer of gas detection equipment, it wasfound that on average 3 instruments out of1000 will fail to respond properly. When thebump test interval is extended to 20 days,the failure rate doubles. A further studycombined this test data with an analysis of

how frequently gas detectors are exposed to hazardous, alarmingconditions. This study found that, on average, one out of every100 gas detectors not bump tested before use will fail to respondand alarm properly to an actual gas alarm event every 25 days.

Sometimes monitors are on the shelf for months before theyare used. When this happens and the period between bump testsare as much as 6 months, failure rates have been as high as 50percent. Therefore, half of the detectors in service may actuallylull employees into believing that they are safe when they areactually at high risk for exposure. All monitors—not simply per-sonal monitors—should be tested before use. Multi-gas detectorshave multiple sensors that can fail, which gives them an evengreater chance of failure. A quick bump test can give employeesthe confidence that they will actually be protected by the equip-ment.

The exact time of failure for a single sensor is, in large part,impossible to determine. Sensor life depends upon not only thequality of manufacture but also on the environment in which theinstrument is used. Sensors are very sensitive to shock fromdrops, humidity and exposure to the gasses that they are meant todetect. Generally, the more rigorous and demanding the environ-ment is in which they are used, the shorter the life of the sensorswill be. The only way to detect these failures is to perform adaily bump test of the instrument. Without the bump test,employees may be rolling the dice and hoping that they are notwithin the 3 percent that will not make it out alive.

Take a minute to perform this quick and simple check. Itmight save your life! ■

Source: Industrial Scientific

August 2014 Page 29

Safety and laborremain prioritiesThe following is an excerpt from “The 2014 Babst CallandReport – Appalachian Shale Industry in Transition: EvolvingChallenges for Producers and Midstream Operators.” Torequest a copy of the report, contact info@babstcalland.com.

The industry’s workforce and supply chain partners arekeys to productivity gains and maintaining the all-impor-tant license to operate. As the oil and gas industry must

protect its workers 24/7, it must remain vigilant on safety andlabor matters. Babst Calland is supporting industry in these fun-damental matters.

Revisions to the Silica Standard and HazardCommunication Standard will increase regulatoryburdens and costs of compliance

Silica standard: The Occupational Safety and HealthAdministration (OSHA) originally published the proposed silicastandard amendments in the Federal Register on September 12,2013 (78 Fed. Reg. 56273), and public hearings on the amend-ments began on March 18, 2014. If enacted, the proposedamendments would become part of the General Industry andConstruction Industry standards. OSHA has acknowledged con-siderable uncertainty exists with respect to the cost estimates forcompliance with the proposed silica standards. The table belowshows OSHA’s estimation of combined control and programcosts for hydraulic fracturing establishments affected by the pro-posed silica standard.

Major features of the proposed amendment to the silica stan-dard include a reduction in the permissible exposure limit forrespirable crystalline silica, a regulatory preference for engineer-ing controls instead of the use of personal protective equipment,employer requirements to provide baseline medical evaluationsand undertake exposure assessments, and an increase in hazardcommunication and record keeping requirements.

Since the cost of compliance with the proposed silica standardis predicted to be substantial, operators and others involved inthe hydraulic fracturing industry should begin to prepare for thisnew regulatory scheme that will likely be upon them in the com-ing year.

The Hazard Communication Standard is revised. Therevised hazard communication standard now aligns OSHA’scommunication requirements with the United Nations’ globalchemical labeling system.

The revised standard will provide specif-ic criteria for health and physical hazardsand classification of mixtures, revised label-ing requirements for chemical manufactur-ers and importers, and a standardized 16-section format for Material Safety DataSheets (MSDS). Employers will need toprovide training regarding these revisionsand other revisions expected in the next fewyears.

There is heightened scrutiny ofsafety compliance

With the transportation of natu-ral gas, drilling equipment andwastewater—whether by pipeline,barge, truck or railway—being comprised of a variety of movingparts, the importance of a safety protocol and compliance withfederal and state safety regulations remains paramount. In orderto ensure the safety of the industry’s workforce and the generalpublic, state and federal legislatures have charged agencies suchas the Pipeline and Hazardous Materials Safety Administrationand state public utility commissions with larger roles in monitor-ing and enforcing safety compliance. This will likely continue tolead to heightened scrutiny of safety-related issues. In light ofthis heightened scrutiny, the industry should continue to takeproactive steps in developing preventative solutions to ensuresafety at all stages of oil and gas production and distribution.

Misclassification of employees remains a prevalent concernWith increasing employment in the oil and gas industry,

employers are faced with a number of Fair Labor Standards Actand state minimum wage law complaints alleging misclassifica-tion of employees as independent contractors or non-hourlyemployees. Misclassified employees can bring actions to receivedenied protections and benefits for which they are otherwiseentitled, such as overtime, health insurance, family and medicalleave benefits, minimum wage, and unemployment insurance.

The figure below shows that between January 2007 andSeptember 2013, approximately 17 percent of allegations in set-tled wage and hour cases related specifically to misclassificationof employees and 40 percent of said allegations related to over-time violations.

If deemed to be in violation of state or federal wage and hourlaws for the misclassification of an employee, employers cananticipate substantial penalties such as payment of back taxes,overtime compensation, penalties, fines, attorneys’ fees, and pay-

ment of medical expenses that otherwise would havebeen provided for under a health insurance plan.Employers should continue to proceed cautiously whenclassifying employees as independent contractors and/ornon-hourly employees. In an effort to ensure employeemisclassifications do not occur, employers should regu-larly review their compensation practices to ensure allclassifications are appropriate and comport with the fed-eral and state wage hour law requirements. ■

© Copyright 2014 Babst Calland Clements and Zomnir, P.C. All Rights

Reserved

John A.McCreary, Jr.

Author:

Page 30 The PIOGA Press

In late 2010, unsure of the role manufacturing might play inthe growing natural gas industry, Bill Polacek, CEO of JWFIndustries (JWFI), sent Vice President of Business Develop -

ment Matt Hughes to investigate potential opportunities. Hughes visited drill pads, attended industry trade shows,

and spoke with producers and rental companies in search ofinformation to take back to JWFI. He quickly identified a voidwithin the burgeoning market. The industry needed a manufac-turer who would not only deliver quality products on time, butone who was willing to listen to their needs and build equip-ment tailored to their requirements. Upon submission of hisfindings, the decision was made to enter the market with a sim-ple product, then use the company’s massive facility and 400-plus workforce to springboard into more complex projects. ByJuly 2011, JWFI completed its first 500-barrel frac tank proto-type and had orders in hand before the prototype was tested.From this simple prototype, Polacek launched EnvironmentalTank & Container, known as ETC (www.etctank.com).

Polacek built ETC on the same core values that allowedJWFI to grow to $120 million per year in revenue: “We’ll act withhonesty and integrity in everything we do; we’ll satisfy our cus-tomers with uncompromising quality, service and safety; andwe’ll find what the customer needs, then grow and change to

meet those needs.” To uphold Polacek’s commitment to excel-lence, ETC pursued and received the following quality andsafety certifications: ISNetworld, ISO 9001:2008, API Q1; API12F and an ASME U stamp.

With a growing need for high-volume onsite water storage,ETC expanded its product line to include the KwikTank (alsoknown as ASTs or water corrals). Ranging in size from 9,000-46,000 barrels, KwikTanks can be assembled and filled in threedays or less.

ETC understands that products and processes are alwayschanging. “We can build and design anything. We’ll build prod-ucts a year from now that we haven’t even thought of,” Polaceksays. ETC also manufactures mud tanks, weir tanks,flowback/gasbuster tanks, monogramed API 12F productiontanks, sand separators ranging from 3,000-10,000 psi and vari-ou ASME pressure vessels and piping.

Based in the heart of the Marcellus and Utica shale plays,ETC has developed long-term relationships with many of thecompanies operating within the area. “We’ve also shipped ourproducts to Canada, California, Colorado, North Dakota, Texas,New Mexico and Oklahoma,” said Hughes. Since its inception,ETC has been growing to meet market demand. The companyexpects to hire 50-100 more employees within the next 18months. Although drilling is not taking place ETC’s base ofJohnstown, the oil and natural gas industry has brought family-sustaining jobs to the region. People who fled Johnstown due tothe declining steel and coal industries now have a reason toreturn—thanks to shale energy.

PIOGA Member Profile

Member Profile guidelines

Introduce your company and tell other members what youoffer to Pennsylvania’s oil and gas industry. The guidelinesfor making a PIOGA Member Profile submission are:• Include a brief history of your company. When and where

was it founded, and by whom? Is the company new to the oiland gas industry in general or to Pennsylvania?

• Describe the products and services you offer specificallyfor the oil and gas industry. Do you have a product in particu-lar that sets your company apart from the competition, or anew product you would like to make the industry aware of?

• If applicable, tell how the business been positively impact-ed by Pennsylvania’s oil and gas industry? Have you expand-ed, added employees or opened new locations?

• Include a website address and/or phone number.• Your submission may be a maximum of 400-450 words

and should be provided as a Word document. Use minimal for-matting—bold and italic fonts are OK, as are bulleted or num-bered lists. Your submission is subject to editing for length,clarity and appropriateness.

• Include your company logo or a photo. Images must behigh-resolution (300 dots/pixels per inch or higher) and in anycommon graphics format. Please include identifications for anypeople or products in a photo. Send image files separately, notembedded in your document.

Email material to Matt Benson at matt@pioga.org. This is afree service to our member companies and publishing datesare at the discretion of PIOGA. If you have questions or wantto follow up on a submission, email Matt or call 814-778-2291.

August 2014 Page 31

f rom explorat ion to marketReliable Resources...SM

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Profitability vs. bottlenecks—theMarcellus/Utica production challenge

Gas and NGL production continues to increase in theMarcellus—and is coming on in the Utica—even withreduced rig count. But it competes with other plays and

can’t yet reach all its potential markets in the Northeast,Southeast and Midwest, to say nothing of the Gulf Coast.

We’ve heard it said that production moves from bottleneck to bot-tleneck every six months. So what’s the outlook for these potentiallyvery profitable plays? Will production continue to rise? How soonwill it reach new markets?

Platts Seventh Annual Appalachian Oil & Gas conference onOctober 16-17 at the Omni William Penn Hotel in Pittsburgh con-fronts these issues. Leaders from various industry segments provideknowledgeable perspectives on production and price outlooks, mar-ket demand, infrastructure requirements, and development plans.

Chesapeake and others supply updates on gas, NGLs, and crudeproduction in the Marcellus and Utica plays. Connecticut NaturalGas, Florida Public Utilities, ICF International and Poten & Partnersoffer their perspectives on demand for Appalachian gas in the LDC,generation and LNG export sectors, as well as demand in variousgeographic regions. EdF Trading adds to this discussion an outlookon gas prices.

Wood Mackenzie, Bentek and the National Propane GasAssociation present their outlooks on ethane, propane, natural gaso-line and condensate demand, markets, and prices, both domestic andexport. ASCENT tops off this section with a case study on its region-al petrochemical complex.

A second Bentek analyst shares findings on the true extent ofinfrastructure constraints and the likely timelines for completionof new development. Then Access Midstream, Blue Racer,Regency, Enterprise, Spectra and Kinder Morgan provide updateson their progress with projects in development: processing, frac-tionation and gas and NGL pipelines. In addition, Crestwoodshares its perspective on the outlook for propane storage devel-opment and management.

Each session is followed by time for audience Q&A.Networking breaks, luncheon, and an evening reception offeradditional opportunities to network with speakers and colleaguesto continue the discussion.

Members of the Pennsylvania Independent Oil & GasAssociation receive a $350 discount. To register or for moreinformation, visit www.platts.com/appalachiangas or call 866-355-2930 (781-430-2100 outside the U.S.). Be sure to mentionpriority code PC433PIOGA. ■

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Despite what you’ve read,Pennsylvania is protecting publichealth on Marcellus Shale By Michael Wolf

Recently published news concerning Marcellus Shale-relat-ed health questions and the work of the PennsylvaniaDepartment of Health has included dangerous allegations

that are misleading the public. As the current secretary of the state Department of Health,

and someone who has been involved with public health reportingwhen shale-related health concerns became an emerging issue forthe state, I am writing to set the record straight with the peopleof Pennsylvania.

The Pennsylvania Department of Health has specific protocolsfor all public health inquiries and concerns that employees mustfollow.

All inquiries are immediately reported to the department’sBureau of Epidemiology, the experts who have training in con-trolling and preventing the spread of disease or illness, for reviewand follow-up. This is a strict and standard protocol for anyhealth report the department receives, whether it’s related toMarcellus Shale or other environmental health issues.

The process includes a review, investigation, data collectionand a formal response to the complainant. The Bureau ofEpidemiology works directly with the caller or patient’s physi-cian in charge for follow-up, and any immediate threats to thepublic’s health found would be given a priority.

Multi-disciplinary responses may, at times, be required suchas when environmental sampling is needed with thePennsylvania Department of Environmental Protection.

Large-scale responses can involve coordination with state andfederal agencies. A log is kept of each complaint that comes in,responses are tracked, and outcomes noted.

Know, too, that the department has conducted outreach on theissue. We have sent requests out through the PennsylvaniaMedical Society, asking physicians to let us know if they arehearing from concerned patients.

We encourage open dialogue and want to hear from individu-als if they have concerns. This applies to both dialogue with ouremployees and the public.

The department employs approximately 1,300 individualsdedicated to serving the public’s health.

We are mindful of time and resources when consideringspeaking engagements or participation in events and send outinformation to our employees to assist with public inquiries, asmost public-service oriented businesses or organizations do.

Our goal is, and will continue to be, to provide informationand a forum for discourse on public health issues. To claim any-thing less is a great disservice to our professionals.

The department will continue to carry out related monitoringactivities under Act 13 of 2012, working with other stateresources and public health stakeholders across the state in our

Commentary

February 2014 Page 33August 2014 Page 33

collective efforts to better understand the potential effects ofMarcellus Shale drilling.

This includes participation in initiatives such as the MarcellusShale health outcomes study from Geisinger Health System’sResearch Institute, which is a large-scale, detailed look at healthhistories of hundreds of thousands of patients who live near natu-ral gas wells and facilities.

The Department of Health is providing consultation and veri-fication of data and study methodology review for this project.We have also been working with schools of public health inPennsylvania to further understand and study the potential healthimpacts of drilling.

We continue to support a health registry and are exploringpublic-private partnerships to help achieve our goal and developa quality product for Pennsylvanians.

As has been reported, Pennsylvania is ahead of several otherstates on this matter. We may not have a multi-million dollarhealth registry right now at the department as some have calledfor, but the records are kept, the proactive follow-up and coordi-nation is happening and we are leveraging the talents andresources we have to get the job done.

To say that we are not doing anything and turning a blind eyeto this matter is degrading to the dedication of the public healthemployees at the department who are working on this matter onbehalf of Pennsylvanians. ■

This article originally appeared July 22 as an op-ed in theHarrisburg Patriot-News. Michael Wolf is Pennsylvania’s secre-tary of health.

IPAA survey answers question, Who are America’s independents?

The Independent Petroleum Association of America’s(IPAA) 2012-2013 Profile of Independent Producers pro-vides an in-depth view of independent oil and gas E&P

companies in the United States. Based on a survey of IPAAmembers, the profile presents data in seven key areas: (1) com-pany characteristics, (2) views on taxes and regulations, (3)American oil and gas operations, (4) international operations, (5)marginal wells, (6) finance and risk management, and (7) person-al characteristics of the industry’s business leaders. Some of thesurvey’s major conclusions follow.

Company characteristics• Independent E&P companies remain diverse in size. They

vary from small one- or two-person, private firms to large pub-licly traded companies with thousands of employees. Among sur-vey respondents, the average firm size was 246 full-time employ-ees and 15 part-time employees in 2012. These figures wereskewed by several very large firms, as the median size firm con-stituted 12 full-time and two part-time employees.

• The typical independent is fairly well-established, havingbeen in business for 23 years. One-third of respondents havebeen in business for 10 or fewer years, and 15.4 percent ofrespondents have been in business for 50 years or longer.

• Similar to employee size, independents’ average revenuewas heavily influenced by the sector’s largest companies. Themedian gross revenue and net taxable income for fiscal year2012 were $9.25 million and $648,000, respectively. Nearly halfof independents spend $5 million or more annually on oil fieldservices and supplies.

• One quarter of responding independents are publicly tradedfirms.

• Independent E&Ps are typically structured as LLCs (31.3percent), C Corporations (27.3 percent), S Corporations (23.7percent) or Limited Partnerships (12.9 percent). Compared with2009, the share of independent E&Ps organized as LLCs hasmore than tripled.

Taxes and regulations• Intangible drilling costs (IDCs) are overwhelmingly the

most important tax issue for independent E&Ps: 57 percent of

respondents said that IDCs were the most important tax issue fortheir business and another 24 percent said IDCs were their sec-ond or third most important tax issue. “Percentage depletion” isthe second most important tax issue, followed by “depreciationrates for tangible costs.”

• If IDCs were repealed, the impact on capital budgets couldbe significant—more than two-thirds of respondents reported thattheir capital budgets would decrease by 20 percent or more.

• On the regulatory front, air pollution standards, Bureau ofLand Management drilling requirements, and the Safe DrinkingWater Act were ranked similarly in terms of having a significantimpact on respondents’ businesses. The Endangered Species Actwas typically viewed as a less immediate priority.

• Overall, regulation has become more burdensome over thepast five years; 48 percent of respondents said the administrativecosts to comply with new regulations have increased slightly,while 43 percent reported a significant increase. Only 9 percentreported no change. Twenty-seven percent of respondents report-ed hiring a full-timeenvironmental health andsafety manager.

Oil & gas operations• Hydraulic fracturing

and horizontal drillingwere widely utilized in2012. Among respon-dents, 59 percent ofwells drilled in 2012were hydraulically frac-tured, and 41 percentwere horizontally drilled.Six percent of wellsdrilled in 2012 werecompleted using othermeans.

• Independents report-ed that, in 2012, an aver-age of 52.6 percent oftheir production came

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from conventional oil, and 21.9 percent came from conventionalgas. On average, 11.5 percent of independents’ production camefrom “unconventional” (e.g., shale/tight) oil and 14.0 percentfrom unconventional gas. Comparatively, 67.2 percent of overallnatural gas production and 34.7 percent of overall oil productionwas “unconventional” in the entire United States.

Other key conclusions• Independents reported operating a median number of 11

gross and eight net marginal crude oil wells, and three gross andthree net marginal natural gas wells in 2012. This is a declinefrom 2008-2009 levels of 37 gross and 32 net marginal oil wellsand 23 gross and 37 net marginal natural gas wells. The resultsfor the 2012-2013 profile may be skewed by the sample. Forexample, in 2012-2013 some independents reported that they donot operate marginal wells. Among the companies that do oper-ate marginal wells, the median is higher than in 2008-09—50gross and 34 net marginal oil wells, and 43 gross and 25 netmarginal natural gas wells.

• International operations have been declining since 2000. Atotal of 7.3 percent of responding firms reported participating ininternational operations, down from 10.8 percent in 2008-2009and 11.6 percent in 2000.

• In 2012, half of all respondents accessed external capitalmarkets. Among these companies, more than half of their capitalcame from private equity (27.5 percent) or private debt (28.1 per- cent). About half of respondents reported no change in their abil-

ity to access financial capital compared with one year ago.• Slightly less than half of respondents (47.0 percent) do not

engage in risk hedging, while 32.8 percent actively hedge and20.1 percent passively hedge their risk exposures. Besides energyprices, interest rate movements are the most common risk that ishedged by independent E&Ps (81.8 percent), followed by foreigncurrencies (13.6 percent) and non-energy materials prices (4.5percent).

• Survey respondents reported median capital annual capitalexpenditures of $30 million in 2012, with median plans to spendof $32 million in 2013, and $25 million in 2014.

• IPAA members, as a whole, are highly educated and techni-cally-oriented. More than 70 percent of respondents were 50years or older, nearly 97 percent have a bachelor’s degree orhigher education, more than a third have a professional back-ground in engineering and another 28 percent have training infinance or geology. ■

Alternative fuel rebate program extended

The Department of Environmental Protection hasannounced the extension of the Alternative Fuel VehicleRebate program. Rebates of $1,000 are being extended for

natural gas, propane, hydrogen or fuel-cell vehicles, such as thecompressed natural gas-powered Honda Civic or any 2014 CNG-powered car or pickup truck.

CNG original equipment, manufacturer retrofits, or certifiedconversions to CNG or propane are also eligible for the $1,000rebate.

Additionally, the program continues to provide $2,000 rebatesfor large-battery system plugin hybrid electric and battery-elec-tric vehicles; $1,000 for plugin hybrid electric vehicles and bat-

PIOGA staffer Tracy Koval along with her son Grant (left)and fiancee Rick Zink (center) were among a large oil andgas industry turnout supporting Pirates Energy Night andenjoying an evening at the ballpark August 6 in Pittsburgh.

August 2014 Page 35

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PIOGA Member News

JWF industries to receive $1M state grant

Governor Tom Corbett announced on July 14 that JWFIndustries, parent company of Environmental Tank &Container (ETC), is the recipient of an Economic

Growth Initiative Grant (EGI) for $1 million. ETC manufacturesportable fluid storage solutions including mud tanks, weir tanks,flowback/gasbuster tanks, API 12F production tanks, sand sepa-rators, and various ASME pressure vessels and piping. Grantrecipients are selected based on their job-creation potential, eco-nomic impact and construction readiness.

JWF industries will use the funds to continue renovations onits 160,000-square-foot plant in Johnstown that houses ETC. Thefacility formerly was occupied by United Industrial MechanicalServices and once housed a World War II munitions and rail carfactory. With the help of the grant, ETC hopes to double thenumber of employees 200 within the next five years. JWFIndustries was also a recipient of a $1 million EGI grant for ETCin 2013.

Heike joins NOVA Safety and Health Consulting

Melissa Heike is the new co-owner and vice president ofNOVA Safety and Health Consulting, Inc. Prior to joiningNOVA, over the past 23 years she held positions that includedmanager of EHS training for a risk management company, safetyand health consultant in the oil and gas industry, safety engineerfor an environmental hazardous waste transportation/disposalcompany, safety training coordinator for a specialty chemicalmanufacturer, safety engineer for flat-rolled steel corporation,and Safety, Training and Development Facilitator for a manufac-turer in the food industry.

NOVA Safety and Health Consulting, Inc. is a small woman-owned business founded in 2008 by Debbie Chiz Novakowski ,owner and president, with the goal of proactively preventingworker injuries and promoting the continuous improvement ofoccupational safety and health performance.

ESL opens Ohio satellite office

Environmental Service Laboratories, Inc. (ESL) announces

the opening of a new satellite location in Saint Clairsville, Ohio.Conveniently located along National Road in proximity toInterstate 70, the new location will initially operate as a servicecenter to support ESL’s existing Ohio natural gas clients and bet-ter position ESL to target natural gas and municipal clientele insoutheastern Ohio.

Incorporated in 1988 to provide basic laboratory testing to theconventional natural gas industry in western Pennsylvania, ESLhas grown exponentially in recent years by specializing in pre-drilling water surveys, wastewater analysis, soil/cuttings analysisand spill support. With a NELAP-accredited headquarters inIndiana, Pennsylvania, and two Pennsylvania satellite laborato-ries in Lycoming and Washington counties, ESL’s fully integrat-ed laboratory network and its 80 employees support samplingand analytical testing programs in Pennsylvania, Ohio, New Yorkand soon West Virginia.

Jackson Kelly relocates and expands Ohio office

To serve its growing energy practice, Jackson Kelly PLLC hasmoved its Ohio office from Canton to Akron and added estab-lished Akron attorneys Mark Bernlohr, Clay Keller and J. AlexQuay, who will practice in the firm’s Industrial, Environmentaland Complex Litigation Practice Group.

Jackson Kelly CEO, Michael D. Foster, said that the firm’seastern Ohio expansion is in response to continued client needs.The firm currently has offices throughout the Marcellus, Utica,Niobrara and New Albany shale basins and recently announcedthe addition of more than 20 attorneys in its Indiana offices

Larson Design Group names Damon Rhodes asprincipal

Damon Rhodes, PE, has joined Larson Design Group as aprincipal with its Pittsburgh office. An engineer for 19 years,Rhodes has extensive experience managing all aspects of trans-portation projects from the planning stages through implementa-tion. Most recently, he has experience with successfully buildinga construction management and inspection group and a trafficengineering group. In his new role, Rhoads will facilitate LDG’sgrowth in all aspects of the transportation market in westernPennsylvania.

Larson Design Group provides innovative design solutions forthe private and public sectors. With offices in Pennsylvania, NewYork, West Virginia and Texas, LDG staff members have diverseknowledge in environmental systems, energy, surveying, sitedevelopment, structures, transportation and inspection. ■

tery-electric vehicles with battery system capacities of less than10 kWh; and $500 for electric motorcycles and scooters.

DEP provides these rebates as incentives to assistPennsylvanians with the incremental cost of purchasing an alter-native fuel vehicle. To qualify, the vehicle must be registered inPennsylvania, operated primarily in-state and be purchased nomore than six months before the rebate application is submitted.The rebates are funded by the Alternative Fuels Incentive GrantProgram, which is supported by a gross receipts tax on utilities.

Rebate applications and updated guidelines are available onDEP’s website, www.dep.state.pa.us (keyword: Alternative FuelVehicle Rebates). Information on rebate availability will beupdated regularly. ■

Page 36 The PIOGA Press

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• Minor modification/clarification regarding sections that werechanged substantively as part of the February 2011 rulemaking.

• Consistency between chapters (e.g., discrepancies betweenChapter 78 and Chapter 79).

• New/substantively enhanced subjects associated with fielddata analysis and observation.

What follows in a section-by-section look at the proposedchanges and DEP’s justification, taken from the concept paper.

Subchapter D subsurface activities§ 78.1. Definitions• Tophole materials. Clearly define parameters related to what

drilling additives, substances and other materials may be used inconjunction with tophole operations.

• Mine string. Add a definition for casing strings installedacross mine voids or through coal pillars.

• Oil well. Add a definition that distinguishes oil wells fromcombination wells at the permitting stage so provisions through-out the subchapter are applied appropriately.

• Deepest fresh groundwater/fresh groundwater. Refine defi-nitions to allow for enhanced groundwater protection consistentwith recommendations made by STRONGER, the State Reviewof Oil and Natural Gas Environmental Regulations, Inc.

§ 78.72. Use of safety devices—blowout prevention equip-ment

• Propose BOP “anchor-string” requirements. Develop per-formance standards and specifications to ensure that casing stringused to support BOP will provide an adequate foundation in the

event of a well-control incident.• Propose different requirements for production in depleted

fields. This provision will address BOP requirements for infielddrilling in low-pressure fields.

§ 78.73. General provision for well construction and oper-ation

• Propose annular space accessibility requirements for all newwells. The intent is to require well surface configurations thatpermit at least a visual assessment of all well annular spaces.

• Propose that the production annulus pressures must be con-tinuously (digitally) monitored during hydraulic fracturing andflowback, and the monitoring results submitted to the departmentelectronically. This provision is consistent with recommendationsmade by STRONGER and will allow for a well integrity assess-ment during hydraulic fracturing and flowback.

• Propose that surface pressures must be monitored continu-ously (digitally) during hydraulic fracturing and flowback ofopen-hole completions. This will allow for well integrity assess-ment during open-hole completions.

• Clarify that the 80% x 0.433 psi/ft x casing seat depth crite-rion applies only to scenarios where gas is produced inside a coalor surface string. This is intended to prevent confusion regardingthe applicability the established standard, i.e., does not applywhen gas is flowing through cement.

• Clarify that the 80% x 0.433 psi/ft x casing seat depth crite-rion applies to a pressure estimate at the casing seat. This isintended to prevent the practice of installing packers at the cas-ing seat to lower surface-measured gas pressures.

• Require pressure tests be conducted after all applicable wellremediation measures to ensure the adequacy of well repairs.

DEP rulemaking: Continued from page 1

August 2014 Page 37

§ 78.74. Venting of gas• Develop numerical criteria to define “safe venting” to help

establish verifiable standards for ensuring safe venting practices.§ 78.82. Use of conductor pipe• Clarify uses of conductor pipe to prevent installations that

allow for commingling of groundwaters of variable quality. Thisprovision will prevent the installation of conductor pipe to depthsthat penetrate multiple water-bearing zones.

§ 78.83. Surface and coal protective casing and cementingprocedures

• Require permanent cementing of coal casing/mine strings tominimize the length of coal or mine casing potentially exposedto mine water.

• Ensure that cement baskets are of sufficient strength to sup-port hydrostatic pressure associated with cement slurry and alsominimize the length of open annular space.

• Add further protections for surface or coal casing seats tolimit the potential for overpressuring of surface or coal casingseats for all new wells.

• Propose language related to the use of open-hole logging oftophole sections to determine the base of fresh groundwater. Thisprovision is intended to incorporate how open-hole logging maybe applied to identify an appropriate surface casing set depthlocally.

§ 78.83b. Casing and cementing—lost circulation• Address steps that must be taken when “zone of critical

cement” is not achieved. This is intended to clarify what optionsare available when the “zone of critical cement” is not met forsurface or coal casing strings.

• Propose language ensuring adequate surface seal when cir-culation is not achieved or significant fallback is observed to pre-vent surface infiltration to groundwater.

§ 78.83c. Intermediate and production casing• Propose language to address cementing of production strings

for open-hole completions to indicate the required length ofcemented production casing for open-hole completions.

§ 78.84. Casing standards• Propose language related to pressure-test thresholds for

used, welded and high-pressure BOP-support casing for high-pressure applications, clarifying the appropriate pressure bench-marks when completing pressure testing.

§ 78.85. Cement standards• Revise compressive strength benchmarks to consider indus-

try standard guidance for drill-out and apply to all casing stringto limit mechanical failure and gas infiltration.

• Broaden applicability of certain cement standards to addi-tional casing strings.

• Refine reference to “gas block” additives to indicate per-formance-based requirements.

• Propose language related to using mechanical barrier ele-ments on surface and coal casing strings to address external cas-ing packers.

• Update the different means available for casingsupport/immobilization during primary cementing and WOC.Existing language will be enhanced to reflect more recent devel-opments for stabilizing casing during cementing and cementhydration.

• Give the department authority to require that a cement bondlog or other suitable cement evaluation log be run prior to thenext stage of well construction/completion.

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lation applies, per policy.• Develop regulations related to the construction, stimulation

and operation of coalbed methane wells.• Provide clarifications where intent of existing regulations is

not well defined.Sections to be determined• Propose language to address simultaneous operations. This

provision will establish appropriate notifications and other provi-sions during simultaneous operations, i.e., when activities at onewell location on a pad coincide with the operation of wells onthat same pad.

• Specify situations when intermediate casing strings arerequired.

• Propose language specifying accuracy statements for alldeviation surveys to allow for deviated wellbore locationaluncertainty to be assessed.

• Broaden the applicability of the welder’s certification to allcomponents of a well intended to contain pressure or fluids andto those that may otherwise affect well integrity.

• Propose language to identify appropriate course of actionwhen cement fallback is noted.

• Resolve current inconsistencies related to permitting wells incoal areas by clarifying terms and practices for wells in suchareas.

• Propose language addressing the proper construction andabandonment of microseismic monitoring wells, seismic moni-toring wells and shotholes for seismic surveys. This provisionwill provide construction requirements for microseismic moni-toring wells, which may be shallower than the surface casing seator designed to intercept the target formation—in addition towellbores for geophone placement and shotholes, which aredesigned to monitor for returns and house charges used, respec-tively—when completing seismic surveys. Some of these mattersare currently addressed by policy.

• Propose language that will allow abandoned wells to be“adopted.” This provision will provide a mechanism for opera-tors to acquire assets that have been abandoned.

• Propose language that will establish requirements in “seis-mic hazard areas.” This provision will address risks associatedwith well stimulation in areas that may be susceptible to

enhanced “induced seismicity” related towell stimulation.

• Establish integrity testing requirementsfor subsurface lines and tanks containinghydrocarbons or other produced fluids. Theprovision will outline recurring integrity test-ing requirements for any equipment designedto provide subsurface containment in orderto prevent releases.

Subchapter D plugging section§ 78.1. Definitions• Drilling mud. Develop definition perti-

nent to use as spacer between plugs.• Nonporous material update. Expand to

include drilling mud.• Noncementing material update. Clarify

as needed.§ 78.91. General provisions• Specify additional measures needed to

§ 78.88. Mechanical integrity of operating wells• Clarify the alternatives to measuring water-level to allow

more flexibility in situations where measuring fluid level in awell is an indicator of casing integrity.

• Require pressure or flow measurement/estimates for outercasing strings, allowing operators to measure pressure for outercasing strings if those casing strings are under the wellhead andshut-in.

§ 78.89. Gas migration response• Require closure reports documenting the findings of all stray

gas investigations.§ 78.101-78.105. Inactive status• Ensure consistency with other mechanical integrity assess-

ment requirements of the subchapter and consistency with mod-ern well construction and operational practices. This is a broadprovision intended to update the inactive status section substan-tively. Mechanical integrity assessments in accordance with §78.88 are already permitted by policy.

§ 78.122. Well record and completion report• Require well records to be updated when casing is removed

from a well, allowing DEP to maintain accurate records for alloperating wells and enabling assets to be assessed accuratelyprior to well transfers.

• Require final wellhead schematics be submitted along withthe completion report.

• Propose language clarifying appropriate reference for allgas, oil, and water shows and geologic contacts based on the truevertical depth (TVD) or vertical depth with regard to the surface-hole location. Also, geologic formation names must be reportedwhen known.

§ 78.123. Logs and additional data• All collected microseismic data will be required to be sub-

mitted electronically. Locational and moment magnitude datawill both be addressed.

• Operators will be required to submit all FIT test data elec-tronically.

Various sections• Propose language enduring consistency between chapters 78

and 79—the conservation regulations and regulations pertainingto all other oil and gas wells. Currently, the more protective regu-

February 2014 Page 39August 2014 Page 39

ensure no gases are present prior to installing cement plugs. Thisprovision will outline additional steps to prevent gas channelingduring cementing.

• Establish standards for mechanical plugs or require DEPapproval for operator-fabricated mechanical plugs.

• Authorize the department to require tagging of cement plugsto ensure proper placement.

•Authorize DEP to require pressure testing of cement plugsand respotting. This provision will ensure sufficient integrity ofplaced cement plugs and provide a mechanism for addressingplugs that fail to meet requirements.

• Ensure that plugging solid option is applied consistently anddoes not contradict other sections of the regulations.

§ 78.96. Marking the location of a plugged well• Ensure that vented locations continue to allow gas to flow

freely should a plug fail, while ensuring the area surrounding thelocation is safe and precludes surface water infiltration. In addi-tion, language changes will be proposed to minimize the poten-tial for marker disturbance.

§ 78.97. Plugging a well stimulated with explosives• Ensure that cement slurry is not lost to subsurface voids in

wells stimulated with explosives by requiring installation of amechanical plug prior to slurry placement.

§ 78.98. Restricting surface water from the well bore• Propose language to minimize surface water infiltration

while allowing for gas to vent should a plug fail.Various sections• Make an overall attempt to simplify the plugging section

language, which is characterized by significant redundancy andoverlap. The reorganization will make interpretation simpler andeliminate improper application of various regulatory provisions.

• Address the installation of proper vents in coal areas in con-sideration of modern well designs.

• Refine language addressing retrievable production casing;non-retrievable production casing; and surface casing, coal pro-tective casing and production casing cemented to surface. Thisprovision will address known variability associated with differentcasing strings in different settings, i.e., coal areas and noncoalareas. Most changes are not substantive, although specific lan-guage pertaining to the installation of functioning vents, whereneeded, is being proposed. In addition, for certain situations,DEP will be granted authority to determine if a second attempt isnecessary to remove uncemented lengths of casing. Activitiesaimed at removing uncemented casing in ecologically/environ-mentally sensitive areas will also be addressed. Finally,changes in language will be suggested to ensure that fluid-bearing zones are properly isolated while plugging.

• Standardize cement plug lengths to avoid confusionand also account for situations in which a standard-lengthbottom plug cannot be placed. Plugging across multiplehorizons will also be addressed.

• Propose language to address clean-out to total depth.This provision will introduce acceptable measures forensuring that attainable bottom has been reached.

Sections to be determined• Address plugging of unconventional wells, in particu-

lar the production-hole section in horizontal/intentionallydeviated wells in different settings, i.e., coal areas and non-coal areas.

• Address plugging of the intermediate casing string

section in wells in different settings, i.e., coal areas and noncoalareas.

• Address plugging of horizontal/intentionally deviated andvertical coalbed methane wells.

• Address the proper plugging of microseismic monitoringwells, seismic monitoring wells, and shotholes for seismic sur-veys.

• Address plugging of conductor pipe holes when no othersection of the well has yet been drilled.

•Establish minimum standards for cement used in pluggingoperations.

• Propose language that will cross-reference when the plug-ging certificate is due as described in § 78.124. Confusion hasarisen due to current location.

Subchapter H§ 78.402. Inspections by the gas storage operator• Propose updates to this section for consistency with other

mechanical integrity assessment requirements of Subchapter D.This provision is intended to allow for the recording of mechani-cal integrity assessment data on the same form available foroperating wells regulated under § 78.88.

Language modifications• Propose several minor language modifications/updates for

the subchapter. These updates will be consistent with appropriateindustry standard practices associated with well construction,operation, integrity assessment and repair.

Chapter 79Tagging Onondaga• Propose updates to address different scenarios where wells

targeting a producing formation shallower than the Onondagapenetrate the Onondaga. This provision is intended to address therequirements in cases where the Onondaga is accidentally pene-trated due to a geologic condition or drilling error, or intentional-ly penetrated to apply conservation-well status.

Industry involvementPIOGA’s Environmental Committee is creating a working

group under its Well Construction Subcommittee to analyze theproposals and provide DEP with input. It’s anticipated that con-siderable industry involvement will be necessary as the processmoves along. Current Chapter 78 regulations can be found atwww.pacode.com/secure/data/025/chapter78/chap78toc.html. ■

Page 40 The PIOGA Press

Natural Gas Futures Closing PricesAs of August 7

Month PriceSeptember 2014 3.946October 3.963November 4.036December 4.120January 2015 4.192February 4.191March 4.124April 3.875May 3.854June 3.894July 3.925August 3.929

SourcesAmerican Refining Group: www.amref.com/Crude-Prices-New.aspxErgon Oil Purchasing: www.ergon.com/prices.phpGas futures: http://quotes.ino.com/exchanges/?r=NYMEX_NGBaker Hughes rig count: http://gis.bakerhughesdirect.com/ReportsNYMEX strip chart courtesy of Mid American Natural Resources,

manrenergy.com

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February 2014 Page 41August 2014 Page 41

Physical and Hedging Expertise for the O&G Industry

Art Cipriani Frank Kronz Phill Sabol

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Page 42 The PIOGA Press

PIOGA Events17th Annual Divot Diggers Golf Outing

August 15, Tam O'Shanter Golf Club, HermitageInfo: www.pioga.org/events/category/pioga-events/

Industry EventsPA Energy Games

September 6, Lycoming County Fairgrounds, WilliamsportInfo: paenergygames.com

WVONGA Fall MeetingSeptember 9-11, Oglebay Resort, Wheeling, WVInfo: www.wvonga.com

IOGAWV Sports WeekendSeptember 19-20, Lakeview Resort, Morgantown, WVInfo: www.iogawv.com

Shale Insight 2014September 24-25, David Lawrence Conv. Center, PittsburghInfo: www.shaleinsight.com

WV Oil & Gas ExpoOctober 1, Morgantown, WVInfo: www.wvoilandgasexpo.com

PUC Gas Safety SeminarOctober 7-8, Ramada Conference & Golf Hotel, State CollegeInfo: 717-787-3416 or bbiggard@pa.gov

Platts 7th Annual Appalachian Oil & GasOctober 16-17, Omni William Penn Hotel, PittsburghInfo: http://www.platts.com/conferencedetail/2014/pc433/index

IOGANY Annual MeetingNovember 11-12, Hyatt Regency, Buffalo, NYInfo: www.iogany.org

IPAA Annual MeetingNovember 12-14, The Breakers, Palm Springs, FLInfo: www.ipaa.org/meetings-events/upcoming-meetings

OOGA Oilfield ExpoDecember 2-4, IX Center, Cleveland, OHInfo: ooga.org/events

OOGA Winter MeetingMarch 11-13, Hilton Columbus at Easton, OHInfo: ooga.org/events

Calendar of Events

➤ More events: www.pioga.org

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Additional OfficesAllentown, PAPittsburgh, PA

WINNERNortheast

2013

PIOGA Board of DirectorsGary Slagel (Chairman), Steptoe & Johnson PLLC (representing

CONSOL Energy)Sam Fragale (Vice Chairman), Chief Oil & Gas, LLCFrank J. Ross (2nd Vice Chairman), T&F Exploration, LPJames Kriebel (Treasurer), Kriebel CompaniesCraig Mayer (Secretary), Pennsylvania General Energy Co., LLCTerrence S. Jacobs (Past President), Penneco Oil Company, Inc.Mary Anna Babich, Dawood EngineeringThomas M. Bartos, ABARTA Oil & Gas Company, Inc.Stanley J. Berdell, BLX, Inc.Rob Boulware, Seneca Resources CorporationMike Cochran, Energy Corporation of AmericaDon A. Connor, Open Flow EnergyTed Cranmer, TBC ConsultingJack Crook, Atlas Resource Partners, LPRobert Esch, American Refining Group, Inc.Michael Hillebrand, Huntley & Huntley, Inc.Jim Hoover, Phoenix Energy Productions, Inc. Ron McGlade, Tenaska Resources, LLCJim McKinney, EnerVest Operating, LLCSteve Millis, Vineyard Oil & Gas CompanyGregory Muse, PennEnergy Resources, LLCStephen Rupert, Texas Keystone, Inc.Jake Stilley, Patriot Exploration CorporationGary M. Violi, Appalachian Well Services Inc.Burt A. Waite, Moody and Associates, Inc.Roger B. Willis, Universal Well Services, Inc.Thomas Yarnick, XTO Energy

Committee ChairsEnvironmental Committee

Paul Hart, Fluid Recovery Services, LLCKen Fleeman, ABARTA Oil and Gas Company, Inc.

Legislative CommitteeBen Wallace, Penneco Oil CompanyHolly Christie, Steptoe and Johnson, PLLC

Pipeline & Gas Market Development CommitteeBob Eckle, Appalachian Producer Services, LLCRon McGlade, Tenaska Resources, LLC

Health & Safety CommitteePat Carfagna, CONSOL Energy

Meetings CommitteeLou D’Amico, PIOGA

Tax CommitteeDonald B. Nestor, Arnett Foster Toothman, PLLC

Communications CommitteeTerry Jacobs, Penneco Oil Company, Inc.

Membership CommitteeVacant

StaffLou D'Amico (lou@pioga.org), President & Executive DirectorKevin Moody (kevin@pioga.org), Vice President & General Counsel Debbie Oyler (debbie@pioga.org), Director of Member ServicesMatt Benson (matt@pioga.org), Director of Internal Communications

(also newsletter advertising & editorial)Joyce Turkaly (joyce@pioga.org), Director of Natural Gas Market

DevelopmentDan Weaver (dan@pioga.org), Public Outreach DirectorDanielle Boston (danielle@pioga.org), Director of AdministrationChris Lisle (chris@pioga.org), Manager of Finance Tracy Koval (tracy@pioga.org), Administrative Assistant

Pennsylvania Independent Oil & Gas Association115 VIP Drive, Suite 210 • Wexford, PA 15090-7906724-933-7306 • fax 724-933-7310 • www.pioga.org

Northern Tier Office (Matt Benson)Mail: P.O. Box L, Mount Jewett, PA 16740-0554

Physical address: 167 Wolf Farm Road, Kane, PA 16735Phone/fax 814-778-2291

© 2014, Pennsylvania Independent Oil & Gas Association

February 2014 Page 43August 2014 Page 43

New PIOGA members — welcome!

Aggreko651 Holiday Dr., Foster Plaza 5, Suite 300, Pittsburgh, PA 15220904-874-6659www.us.aggreko.comService Provider

Complete Energy Services, Inc.7338 US Route 6, Pierpont, OH 44082440-576-6000www.cesinc.comService Provider

Exponent, Inc.4007 Sharoden Drive, York, PA 17408717-793-2791www.exponent.comProfessional Firm

Flow Ezy Filters905 Robin Road, Amherst, NY 14228716-998-1610www.flowezyfilters.comService Provider

HBK Energy, LLC7000 Stonewood Drive, Suite 300, Wexford, PA 15090724-934-5300www.hbkcpa.com/energyProfessional Firm

Oil and Gas Safety Supply1230 Jefferson Avenue, Washington, PA 15301855-533-8585www.oilandgassafetysupply.comService Provider

Steel City Safety500 South Center Avenue, New Stanton, PA 15672724-635-0050www.steelcitysafety.comProfessional Firm

Tri-State Office Furniture2707 West Carson Street, Pittsburgh, PA 15204412-771-0760www.tristateofficefurniture.comService Provider

Western Environmental Liner109 Willow Wick Drive, Morgantown, WV 26505570-575-9399www.westernliner.comService Provider

Have industry colleagues or vendors you thinkshould be PIOGA members? Encourage them toclick on “Join PIOGA” at the top of ourhomepage, www.pioga.org. There’s strength innumbers!

115 VIP Drive, Suite 210Wexford, PA 15090-7906

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