October 2014 • Issue 54

The

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

(Continues on page 2)

(Continues on page 34)

®

Well over 150 members turned out for PIOGA’s 2014Annual Meeting on the afternoon of September 11 inGreensburg to hear updates on a wide range of

PIOGA activities and take care of some association business.Leading off the committee and staff reports, Tax Committee

Chairman Don Nestor of Arnett Foster Toothman said the indus-try is recognized as a significant source of existing revenue at thestate level. The Corbett administration and Department of

Annual Meeting provides overview of PIOGA activityRevenue have been good to work with, understanding the indus-try’s growth has resulted in considerable indirect growth in addi-tion to the taxes paid directly by the companies operating inPennsylvania. When an apples-to-apples comparison is made oftax burdens on the industry in producing states, Pennsylvaniacomes out roughly in the middle.

State tax-related issues PIOGA is working on include percent-age depletion, intangible drilling costs and correcting the treat-ment of a plugged well as a capital loss. At the federal level, theindustry is watching to see whether after the upcoming electionsCongress passes any “extenders” to expiring tax provisions,Nestor indicated.

Legislative Committee Chairman Ben Wallace of Penneco OilCompany reported that “the number of bills we are tracking isastounding. It’s a bit of a frenzy out there.” PIOGA is involved ina number of landowner-related bills and in legislation that couldend the exemption of the owners of oil and gas gathering linesfrom mandatory participation in the PA One Call system.

DEP previews draft of splitoil and gas regulations

The Department of Environmental Protection offered thefirst glimpse of what regulators think oil and gas ruleswill look like split into separate sections for conventional

and unconventional operations during the agency’s September 25Oil and Gas Technical Advisory Board (TAB) meeting inHarrisburg.

A provision in this year’s state budget package directs DEP todifferentiate between conventional andunconventional wells in its oil and gasregulations (August PIOGA Press, page9), a change strongly advocated byindustry organizations and many legis-lators concerned about proposedchanges to DEP’s Chapter 78 regula-tions. At TAB’s September meeting, thedepartment spent the morning sessiondiscussing efforts to divide the regula-tions and the afternoon providing anupdate on the status of the Chapter 78

Late-session legislative activity. . . . . . . . . . . . 6Mechanical integrity report training. . . . . . . . . 7New date for producer roundtable . . . . . . . . . 7PIOGA board election results . . . . . . . . . . . . . 8Our newest director. . . . . . . . . . . . . . . . . . . . . 8New DEP enforcement policy proposed . . . . 10Abruzzo resigns as DEP secretary. . . . . . . . 12Promoting LNG exports . . . . . . . . . . . . . . . . 15FERC approves Cove Point project . . . . . . . 15PUC overturns Mariner decision. . . . . . . . . . 16Shell talks about petrochemical project . . . . 17Your vote counts—use it! . . . . . . . . . . . . . . . 17

Title due diligence: Part 1 . . . . . . . . . . . . . . . 18FEMA makes an exception to policy. . . . . . . 21September Spud Report . . . . . . . . . . . . . . . . 22PIOGA testifies at bat-protection hearing . . . 28Sierra Club slapped for frivolous suit . . . . . . 28New OSHA injury reporting requirements . . 29PIOGA visits PJM . . . . . . . . . . . . . . . . . . . . . 30Study finds no water damage . . . . . . . . . . . . 31Member news . . . . . . . . . . . . . . . . . . . . . . . . 32Member profile: CEC . . . . . . . . . . . . . . . . . . 33New PIOGA members . . . . . . . . . . . . . . . . . 38Calendar of Events . . . . . . . . . . . . . . . . . . . . 39

Tax Committee Chairman Don Nestor briefs members on stateand federal tax issues at PIOGA’s September 11 annual meetingin Greensburg.

Page 2 The PIOGA Press

Annual meeting: Continued from page 1

DUE TO OVERWHELMING REQUEST, WE’VE BROUGHT IT BACK!

Matt Vavro (Vavco, LLC), one of Appalachia’s best known trainers and public speakers, will present this educational and entertaining one day seminar.

Updated to include new developments and technology in the Marcellus and Utica. This seminar progresses from a geologist’s idea to develop a prospect, through budgeting, geology and seismic, leasing, surveying, permitting, location construction, drilling, casing/cementing, logging, perforating, fracing, tubing, production equipment, pipeline, processing, and selling product. An overview of domestic and world energy and how our industry is helping the USA become energy independent is also included.

Cost is $450/person and includes a continental breakfast, lunch, an afternoon snack, and a course book. Reduced rates for large groups.

Breakfast served 8:00 AM. Seminar 9:00 AM to 4:30 PM.

Go to www.vavcollc.com to register an pay by credit card or download registration form

Questions: info@vavcollc.com or call 724-285-6684 ext. 301

November 11, 2014 • Hilton Garden Inn, Southpointe, Canonsburg, PA November 12, 2014 • Pittsburgh Marriott North, Cranberry Twp., PA

OIL & GAS OPERATION BASICS SEMINAR

Wallace noted that the committee is always looking for inputfrom other members on the impact of various pieces of legisla-tive proposals, and he urged members to communicate with theirlegislators and educate them about the industry.

Also addressing the Harrisburg scene, PIOGA lobbyist DickGmerek of Gmerek Government Relations said his firm is fol-lowing more than 200 bills for the association, 65 of which areconsidered high priority. He described the current legislative ses-sion as “so far, so good,” pointing to the failure of severance taxlegislation to gain traction, the directive to split oil and gas regu-lations into conventional and unconventional in this year’s budgetpackage (see related article in this issue), lower impact fee rateson vertical unconventional wells and what appears to be a suc-cessful amending of the One Call legislation to preserve theexemption for conventional operators.

Looking to the near future, Gmerek said that even if the gov-ernorship switches parties, the House and Senate both are likelyto remain in Republican control. Even so, the industry will haveto be very vigilant next session when it comes to legislativeefforts to impose new taxes and fees.

Bob Eckle of Appalachian Producer Services provided anupdate on the Pipeline & Gas Market Development Committee,which has changed its name from the Transportation &Marketing Committee to reflect the evolving emphasis of thegroup. He explained that via the committee PIOGA began doingsomething no other state oil and gas producers’ association haddone up to that point—focus on the burner tip. The associationeven hired a staff member whose sole responsibility to helpingdevelop new markets for our gas.

The largest potential market for natural gas is electric genera-tion, and PIOGA has been on the cutting edge of coordinatingcooperation and facilitating education between the two indus-tries. Committee meetings have featured presentations on every-thing from natural gas vehicles to pipeline expansion projects toliquefied natural gas opportunities.

Safety Committee Chairman Pat Carfagna of CONSOLEnergy Corporation said the group’s meetings include presenta-tions on hot safety topics facing the industry and serve as aforum for exchanging information on best practices and lessonslearned from incidents. He invited more members to participatein the committee.

The association’s busiest group is the EnvironmentalCommittee and PIOGA consultant Scott Roberts, a formerdeputy secretary at the Department of Environmental Protection,provided a quick overview of the many issues being addressed at

February 2014 Page 3October 2014 Page 3

the state and federal levels. Roberts wryly noted that “all thisstuff starts out as legislation,” but then regulators often try to“correct the wrongs” of the legislative branch.

As a sampling of the committee’s work, Roberts highlighted:• The U.S. Fish & Wildlife Service effort to list the northern

long-eared bat as threatened or endangered (see article in thisissue).

• U.S. Environmental Protection Agency Subpart OOOOemissions regulations, particularly as they pertain to storagetanks and low-pressure wells.

•DEP’s air emissions Exemption No. 38 and confusion overreporting requirements.

•Sampling and a likely policy under development at DEPregarding naturally occurring radioactive materials generated bythe industry.

• Problems related to an Army Corps of Engineers policyaddressing the barging of wastewater from unconventional wells.

• PIOGA’s application before DEP for a general permit allow-ing the beneficial use of drill cuttings, an effort requiring greaterparticipation from the membership at large.

• DEP mechanical integrity reporting requirements, whichRoberts called “a frustrating lesson in how government works.”

• DEP’s ongoing amendments to the Chapter 78 regulationsgoverning oil and gas surface operations. The agency currently isworking its way through revisions to the proposal in light of theapproximately 25,000 public comments that were submitted andis dividing the rules into sections for conventional and unconven-tional operations (see article in this issue).

• The EPA’s “waters of the U.S.” rulemaking proposal that

Scott Roberts discusses the many and varied issues that PIOGA’sEnvironmental Committee is working on.

Page 4 The PIOGA Press

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Roberts said the Environmental Committee strives to be pro-ducer-driven, and he praised the group for the wide range ofexpertise among its membership. He also singled out the quarter-ly meetings between DEP and industry representatives as aneffective forum each side uses to raise concerns and disseminateinformation.

PIOGA Vice President & General Counsel Kevin Moodyoffered a summary of legal issues the association is involved inor closely monitoring. Among these are ongoing litigation overAct 13, which is again before the Pennsylvania Supreme Court; achallenge by the Pennsylvania Environmental DefenseFoundation to how state lands are leased and howthe state uses the revenue; litigation involving“equitable extension” of oil and gas leases whenthe surface owner unsuccessfully challenges alease; and several initiatives before thePennsylvania Public Utility Commission.

Dan Weaver, Director Of Public Outreach,detailed the success so far of PIOGA’s EnergyEducation Program (PEEP). In its first year of oper-ation, the program reached more than 13,000 ele-mentary and middle school students.

“We’re training the next generation to be energy-aware citizens,” Weaver explained.

PEEP is a teach-the-teacher program that hasbeen very well received by educators from a varietyof disciplines. In addition to a day’s training andcurriculum materials, each teacher is assigned a

mentor to assist with any questions or issues that might ariselater.

PIOGA members can get involved in the program by sponsor-ing a teach-the-teachers session, sponsoring a teacher or sponsor-ing a scholarship.

Member also heard the results of voting for candidates for thePIOGA Board of Directors (see related article) and approvedchanges to the association bylaws. Many of the revisions wereapproved at previous annual meetings or by the Board ofDirectors, but had not been formally incorporated into thebylaws. A copy of the document can be downloaded from theMembers section of the association website. ■

A reception after the annual meeting provided an opportunity for networking.

February 2014 Page 5October 2014 Page 5

Page 6 The PIOGA Press

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Late-session activity

Conventional producer legislation advances

The House of Representatives will now consider legislationthat would create an advisory council tasked with examin-ing existing regulations and advising the Department of

Environmental Protection on policies that better differentiatebetween conventional and unconventional oil and gas producers.Senate Bill 1310 passed the Senate on October 8 as the GeneralAssembly was winding down its current session.

Any legislation that fails to make its way through the entirelegislative process must soon start from the beginning againwhen a new session starts early next year.

Sponsored by Senator Scott Hutchinson (R-Venango), SB1310 establishes the Pennsylvania Grade Crude Developmentand Advisory Council. The council would be made up of 17members—including two from PIOGA—representing state gov-ernment, industry, economic development and academia. Thepanel would:

• Examine existing DEP technical regulations and policies andmake recommendations on the impact on conventional produc-ers.

• Explore development of a regulatory scheme that providesfor environmental oversight and enforcement specifically appli-cable to the conventional industry.

• Assist DEP with new departmental policy impacting conven-tional operators, including economic impact.

• Review and comment on all technical regulations related tooil and gas.

• Ensure cooperation and communication among governmentagencies and the academic and research community.

• Develop a plan to increase Pennsylvania Grade crude oilproduction in an environmentally responsible way.

• Create a joint working group with DEP to explore anddevelopment an environmentally responsible and economicallyviable water-management option.

• Issue an annual report of the council’s activities and recom-mendations.

The lone negative vote on SB 1310 came from Senator JimFerlo (D-Allegheny), both after the committee rejected hisattempt to amend the bill to include additional members of theenvironmental community on October 6 and again two days laterwhen the full Senate voted 48-1 to approve the measure.

“Technological advances that have allowed for the develop-ment of previously inaccessible formations have necessitatedupdates and revisions to Pennsylvania’s laws and regulationsgoverning this new unconventional shale gas industry,” SenatorHutchinson said in describing the need for his legislation.“Unfortunately, many regulatory and legislative changes did notrecognize the significant differences between conventional andunconventional industries. The council created under Senate Bill1310 would work with the DEP to ensure that the differencesbetween the operations are taken into account as these regula-tions and laws are developed and implemented.”

Other legislationIn other legislative activity, the Senate Environmental

Resources and Energy Committee on October 6 unanimouslysent a pair of House bills sponsored by Representative TinaPickett (R-Bradford) onto the full Senate for consideration.

House Bill 402 provides a formal method for landownersholding an oil and gas lease to obtain a release from the leaseupon its termination or cancellation. The intent of the bill is toprovide a process for addressing situations in which a lease hasexpired, contains no renewal clause and the landowner wants toenter into an agreement with a new producer.

HB 2278 requires operators of unconventional gas wells tofile monthly production reports with DEP rather than twice annu-ally, as mandated under Act 15 of 2010. Explaining the rationalebehind the legislation, Pickett wrote in a sponsorship memoran-dum, “As this industry continues to develop we have seen theneed for monthly reporting requirements so that productionreports are more comparable to monthly royalty payments. Thiswill allow greater transparency for our landowners and provide abetter understanding of production across the Commonwealth.”

Both bills have already won approval by the House ofRepresentatives.

On October 7, the House unanimously adopted HouseResolution 913, which urges DEP to use the latest technology totest for radioactivity related to oil and gas production activities.The resolution was sponsored by Representative Mark Mustio(R-Allegheny). ■

February 2014 Page 7October 2014 Page 7

Date change forConventional Producer Roundtable

The date for PIOGA’s Conventional Producer Roundtablehas been changed from November 3 to Monday the 10th. Theevent takes place at the Ramada Greensburg Hotel andConference Center, the location of last month’s PIOGA AnnualMeeting.

The program will help conventional producers get a betterhandle on how gas prices are set and strategies for getting thebest price possible for their gas. As we explained in theSeptember issue, PIOGA believes the drop in production ratesof conventional production is a serious issue. We have tailoredan agenda specific to conventional producers that will seek toeducate you on your near- and long-term options.

For a detailed agenda and registration information, see thePIOGA Events section at www.pioga.org.

DEP mechanical wellintegrity training sessions

PIOGA is joining with the Department of EnvironmentalProtection to offer training sessions on mechanical integri-ty assessment (MIA) reporting for conventional producers.

In light of recent revisions to the MIA reporting forms for con-ventional operators, the agency has agreed to offer additionaltraining sessions. Dates and locations include:

❐ Wednesday, October 15, noon to 4 p.m., WestmorelandCounty Conservation District

❐ Thursday, October 16, 8 a.m. to noon, Warren PublicLibrary

❐ Wednesday, October 29, noon to 4 p.m. DEP New StantonOffice

❐ Thursday, October 30, 8 a.m. to noon, Northwest PA loca-tion TBD

If there is sufficient demand, an additional session may bescheduled for November.

Anyone interested in attending should contact Jeff Walentoskyat jwalentosky@moody-s.com or 724-746-5200 ext. 2005 toreserve a seat for one of the sessions. Space is limited, so RSVPas soon as possible. There is no fee to attend. ■

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Page 8 The PIOGA Press

PIOGA Board of Directors elections

This month we introduce a new member of our Board ofDirectors and say farewell to another. Carl Carlson ofRange Resources – Appalachia, LLC joins the board

following elections last month, while reelected to three-yearterms were:

• Mary Anna Babich, Dawood Engineering, Inc. (Note: Shehas since left the company and is being replaced on the boardby Dawood’s Joy Ruff)

• Jim McKinney, EnerVest Operating, LLC• Steve Millis, Vineyard Oil & Gas Company• Jake Stilley, Patriot Exploration Corporation• Frank Ross, T&F Exploration, LP• Burt Waite, Moody and Associates, Inc.Thanks to these individuals for seeking the opportunity to

serve their association, and thanks too to the members casttheir votes in the election.

We also thank Gary Violi, General Manager of AWS, Inc.,for his service on the Board of Directors. Gary chose not toseek reelection this year.

Get to know PIOGA’s newest director

Depending on how you lookat it, it’s either “welcome”or “welcome back” to the

Board of Directors for Carl J.Carlson of Range Resources –Appalachia, LLC. Even though heis the newest elected member ofthe PIOGA board, Carl previouslyserved as a director for theIndependent Oil & Gas Associationof Pennsylvania for over 20 years,including two terms as president.In March 2010, IOGA merged withthe Pennsylvania Oil & GasAssociation to form PIOGA.

Carl’s experience with Pennsylvania’s oil and gas businessbegan as a summer job in 1974 with Quaker State in Bradfordbetween his junior and senior years pursuing a bachelor’s degreein geological science at Penn State. After graduation in 1975 heworked several months underground in a West Virginia coal minefor US Steel, but preferred a job with windows and joinedQuaker State full time in 1976.

Carl held several operations positions with Quaker State,working in Pennsylvania, Ohio and West Virginia. In 1990 hewas named president of the Exploration & Production Divisionin Oil City, a job he held until Quaker State sold its E&P assetsto Belden and Blake Corporation in 1995. He then served asBelden & Blake’s vice president of Pennsylvania/New York oper-

ations until 2001. Next he worked as an independent for sixyears, developing coalbed methane prospects in southwesternPennsylvania and western Maryland.

In 2008 he joined Range Resources – Appalachia as Directorof Government Affairs. Carl’s first three years at Range werefocused primarily on local and state government issues, lobby-ing, and educating. Since then, his work has shifted more towardregulatory policy and a variety of other technical projects.

On the personal side, Carl is married to the love of his life,Frankie. They have three children: Dr. Michael Carlson, D.O.;Amanda Tomko, Pharm.D.; and Amy Carlson, a Ph.D. chemistrycandidate at Duquesne University.

The Bridgeville resident enjoys hunting, camping and fishing,and previously was very active with the Boy Scouts when helived in Oil City. More recently, he has gotten involved in bicy-cling and rides two or three times a week.

“I am not in the same class as Roger Willis [the PIOGA boardmember from Universal Well Services], but enjoy it immensely.My longest ride was D.C. to Pittsburgh two years ago, 360miles,” Carl says.

Even though Range Resources is known for its prolific shale-gas development, the company also has more than 5,000 legacywells in Pennsylvania that continue to generate cash flow, pro-vide jobs and hold valuable acreage for future shale develop-ment. Because the association is widely focused, Carl explains,“PIOGA is clearly the best organization to protect our conven-tional well interests.”

“As the trade organization with the broadest base in thePennsylvania oil and gas industry, spanning all sectors of boththe traditional and shale industries, PIOGA has a unique oppor-tunity, challenge and responsibility to advocate for positions thatwill benefit all oil and gas producers,” he continues.

“I look forward to working on the PIOGA board to shareknowledge from my years in the traditional Pennsylvania oil andgas industry, provide information on critical issues facing theshale gas industry, and to advocate for a favorable climate togrow Pennsylvania’s energy industry.” ■

Carl Carlson

February 2014 Page 9October 2014 Page 9

DIRECTIONAL SURVEY PLUS

Page 10 The PIOGA Press

DEP proposes tough new policy for enforcing oil and gasviolations and responding to water contamination complaints

On October 3, the Pennsylvania Department ofEnvironmental Protection unveiled a new draft policythat would strengthen its compliance and enforcement

protocols for both unconventional and conventional oil and gasoperators in the Commonwealth. A 30-day public comment peri-od was opened by a notice published in the October 4Pennsylvania Bulletin.

The draft policy, entitled “Standards and Guidelines forIdentifying, Tracking, and Resolving Oil and Gas Violations,”both modifies prior inspection and enforcement procedures anddescribes a new process for providing timely responses to watersupply contamination complaints. The draft policy would placerenewed emphasis on issuing notices of violation (NOVs) for anyalleged violation that cannot be remedied during an inspection,and for fully resolving violation negotiations within 180 days ofnotice. Further, the draft policy would affirm DEP’s commitmentto inspecting every well in the Commonwealth at key operationalstages, such as before and during drilling, during casing andcementing, following well stimulation and completion, afterpost-drilling restoration, during plugging, after post-pluggingrestoration, before financial security is released, and after anycomplaint or violation.

DEP is accepting public comments on the draft policy throughNovember 2. Together, this policy and other impending eventsportend a significant effect on oil and gas enforcement for yearsto come, and it will be important for the industry to review thepolicy carefully and offer appropriate comments on its compli-ance approaches and procedures.

Relationship to currently effective oil and gas enforcementpolicies

The Pennsylvania Bulletin notice1 announcing the release ofthe draft policy indicates that when finalized, the new policy willreplace DEP’s 2005 guidance document entitled “ComplianceMonitoring of Oil and Gas Wells and Related Facilities andActivities.”2 While not stated in the Pennsylvania Bulletin, thedraft policy would also effectively supplant two additional DEPpolicies, (1) “Enforcement Actions by DEP’s Oil and GasManagement Program”3 and (2) “Inspection Policy RegardingOil and Gas Well Activities,” codified at 25 Pa. Code Ch. 78Subch. X.

Parts I and II of the draft policy closely track the languagefrom the “Enforcement Actions” policy, with only minor modifi-cations. Similarly, Part III of the draft policy (regarding frequen-cy of well inspections) parallels the “Inspection Policy” codifiedat 25 Pa. Code § 78.903, in that both establish a schedule forinspecting wells. However, the inspection schedules called for inthe draft policy are somewhat different than those in current §78.903.4 Thus, the draft policy, if finalized, would essentiallymerge three important oil and gas enforcement policies into one.

However, the draft policy would not directly affect or super-sede DEP’s current guidance document entitled “Civil PenaltyAssessments in the Oil and Gas Management Program,”5 whichprovides a methodology for calculating an appropriate civilpenalty in instances where DEP determines a civil penalty isappropriate. This important guidance is often used, for instance,

to guide negotiations of consent assessmentsof civil penalty (CACP) and consent ordersand agreements (CO&A). Notably, however,the “Civil Penalty” guidance has not yetbeen updated to reflect changes (includingstatutorily increased penalty maximums)enacted as part of Act 136 in 2012.

Water supply investigation requestsOne of the most notable aspects of the

draft policy is the process it would establishfor evaluating and responding to water sup-ply contamination complaints. Part IV.B ofthe draft policy would set the followingseries of deadlines for actions by DEPemployees after receipt of a water supplyinvestigation request:

• District office staff where the request isreceived should immediately collect andenter basic information regarding therequest into DEP’s “water supply investiga-tion request tracking system.”

• The same business day, a waterquality specialist (WQS) “should”attempt to contact the requestor, and“under no circumstances shall the WQSor the WQS’s supervisor fail to attempt to contact the requestorwithin two business days” of receiving the request.

• Within two business days of contacting the requestor, theWQS “should” conduct and document a site inspection andobtain water samples if warranted. A site inspection “shall beconducted within 10 calendar days of contacting the requestor”unless the landowner refuses to grant access to the site.

If the WQS observes a potential impact to the water supply(“e.g. effervescence, turbidity or similar obvious contamina-tion”), the process then diverges depending on if the water sup-ply is within the “rebuttable presumption area.” In accordancewith 58 Pa.C.S. § 3218(c), the “rebuttable presumption area” forconventional operators is within 1,000 feet of the well and sixmonths of completion of drilling or alteration activities, and forunconventional operators is within 2,500 feet of the vertical wellbore and 12 months of the later of completion, drilling, stimula-tion or alteration activities.

• If the potentially impacted water supply is outside the rebut-table presumption area, the WQS should refer the request to a“program geologist” to conduct a hydrologic investigation todetermine whether pollution or diminution of the water supplyhas occurred and, if so, whether the pollution or diminution wascaused by oil and gas activities. DEP’s “goal” is to make thisdetermination within 45 calendar days of receiving the com-plaint. If “extenuating circumstances” prevent DEP from makinga determination within 45 days, a letter “shall” be sent to thewater supply user/owner summarizing the state of the investiga-tion. At the end of the investigation, if DEP positively determinesthat oil and gas activities adversely impacted the water supply,DEP will request that the responsible operator provide a tempo-

R. TimothyWeston

Tad J.Macfarlan

Authors:

February 2014 Page 11October 2014 Page 11

rary water supply, if necessary, within 24 hours.• If the potentially impacted water supply is within the rebut-

table presumption area, DEP “shall advise” the operator to pro-vide a temporary water supply within 24 hours, regardless ofwhether the operator can establish one of the statutory defensesto liability (including, for instance, results of pre-drill samplingindicating that the water supply was already contaminated, orthat the landowner refused access to the site to conduct suchsampling). Instead, DEP is to request information from the oper-ator supporting the statutory defenses at the same time the opera-tor is advised to provide a temporary water supply. If the opera-tor fails or refuses to provide a temporary water supply within 24hours and fails to rebut the presumption of liability, DEP “shall”issue an administrative order directing the operator to provide atemporary water supply within 24 hours. Then DEP will fullyinvestigate whether pollution or diminution of the water supplyhas occurred and, if so, whether the pollution or diminution wascaused by oil and gas activities, as above.

Within 30 calendar days of a final positive determination,DEP “shall” issue an NOV to the responsible operator, directingthe operator to respond in writing within 10 business days.Within 30 calendar days of the operators’ written response, DEP“shall” issue an administrative order to permanently restore orreplace an adversely affected water supply, unless (1) the waterhas already been restored or replaced, (2) the water supply inves-tigation request has been withdrawn, (3) the operator and watersupply owner have come to an agreement, or (4) the water sup-ply is no longer polluted or diminished.

While certain aspects of this process adhere to the language ofAct 13, other elements go beyond Act 13, such as the suggestion

that DEP can and should “advise” an operator to provide a tem-porary water supply even if the operator can firmly rebut the pre-sumption of liability.

Issuance and negotiations of NOVsThe release of the draft policy may also signal the beginning

of a more stringent enforcement stance regarding oil and gaswell operations with respect to the issuance and expedited reso-lution of NOVs.

The draft policy provides that all oil and gas violations shouldtrigger the issuance of an NOV within 14 days of discoveryunless “the violation is corrected before the end of an inspec-tion,” in which case DEP may exercise its discretion to merelyrecord the violation in an inspection report. Notably, this policyis more stringent than required by DEP’s generally applicable“Standards and Guidelines for Identifying, Tracking, AndResolving Violations”7 across all programs, which only requiresthe issuance of an NOV if an operator fails to resolve a violation“within the 14 calendar day period”—not before the end of aninspection, which is often impossible to do.

The draft policy also states that violation negotiationsaddressed through an enforcement document (such as a CACP orCO&A) “must be finalized within 180 calendar days” of notifi-cation to the alleged violator, “unless the Deputy Secretary orBureau Director agrees that an extension of time is acceptable inthe specific case. Otherwise, [DEP] should take the applicableenforcement action that imposes the obligations necessary toresolve the violations.” Under current practice, violation negotia-tions often take more than 180 days to complete, especially whenthere are novel or complex technical and legal issues involved.

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This policy, if strictly adhered to, could result in fewer negotiatedsettlements and more unilateral enforcement actions resulting incostly litigation before the Environmental Hearing Board.

It should be noted that most or all of the above-referencedlanguage is already included almost verbatim in DEP’s“Enforcement Actions” policy, which was last updated in 2005.The restatement of this language in the draft policy may be anindication that DEP plans to more literally adhere to these proce-dures in the future, and provides operators with a new opportuni-ty to comment on its appropriateness.

Inspection ScheduleThe draft policy also includes a rigorous inspection schedule,

requiring district offices to ensure that all wells are inspected atleast once at the following intervals:

a) Prior to the commencement of drilling on a new well pad.b) During drilling, casing and cementing operations.c) Following well stimulation and completion activities.d) Following the time period in which the owner or operator

is required to restore a site after drilling a well.e) While a well is being altered or repaired or when casing is

being replaced.f) Prior to a well being granted inactive status.g) During the plugging of a well.h) After the owner or operator restores a site following plug-

ging or abandonment.i) Before a bond or other financial security is released.j) Annually for disposal wells.k) Following a violation to determine whether the violation

has been corrected.l) Following a complaint. This schedule is similar to the well inspection schedule

already codified at 25 Pa. Code § 78.903 of the “InspectionPolicy,” but the two schedules are not the same. Most notably,the draft policy drops the blanket once-per-year inspection ofoperating wells—a change that DEP oil and gas program leadersindicate is needed to focus available inspection resources onthose activities that are most likely to present compliance issues.It is unclear if and when DEP plans to amend the “InspectionPolicy” codified in the Pa. Code to conform to the draft policy.

ConclusionThe release of the draft policy provides an important opportunityfor operators in the Commonwealth to provide input to the direc-

tion and procedures used in DEP’s enforcement of oil and gasregulations, both for conventional and unconventional operations.Broader enforcement priorities will also be shaped by the out-come of the upcoming gubernatorial election and the selection ofthe next DEP secretary, among other developments. There is lit-tle doubt that in the current political setting, high public attentionhas been placed on compliance issues related to the industry,with significant implications as to the future for both public trustin regulatory regimes and the industry’s reputation. The industrymust closely monitor and consider its options for participation inshaping these compliance policies and procedures, as they have a

substantial potential to significantly affect operations in theyears ahead. ■

1 44 Pa.B. 6290 (October 4, 2014).2 Doc. No. 550-3000-001 (Rev. June 25, 2005).3 Doc. No. 550-4000-001 (Rev. June 25, 2005).4 Presumably, the existing inspection policy set forth in § 78.901–78.906,which was originally adopted by the Department (but not as a rule by theEnvironmental Quality Board) in 1987, see 17 Pa.B. 3235 (August 1,1987), would be repealed and removed from the Pennsylvania Code. 5 Doc. No. 550-4180-001 (January 12, 2002).6 Act of February 14, 2012 (P.L. 87, No. 13), 58 Pa.C.S. §§ 2301–3504.7 Standards And Guidelines For Identifying, Tracking, And ResolvingViolations (April 4, 2004), available atwww.dos.state.pa.us/portal/server.pt/document/504415/standardsandguide-lines_pdf.

Abruzzo resigns as DEP secretary

Department of Environmental Protection SecretaryChris Abruzzo and a top aide resigned October 2 overrevelations that they

sent or received sexually orient-ed email over state computers.

Abruzzo (shown at right)and DEP chief counsel GlennParno were among eight stateofficials who Attorney GeneralKathleen Kane disclosed hadsent or received hundreds ofsexually explicit photos, videosand messages from state email accounts between 2008 and2012.

In a statement, Governor Corbett said: “I thank Chris forhis dedicated service to the people of Pennsylvania. Our envi-ronment and natural resources are better protected today dueto his leadership, as well as the hard work of the men andwomen of DEP.”

Dana Aunkst, executive deputy secretary for programs, hasbeen designated as acting secretary. Aunkst is a 22-year veter-an of the department.

The state Senate approved Corbett’s nomination ofAbruzzo as DEP secretary in December. He had been adeputy chief of staff to Corbett, and a chief deputy attorneygeneral under Corbett. Following the departure of MichaelKrancer, Abruzzo was DEP’s acting secretary for five monthsbefore Corbett nominated him for the promotion.

February 2014 Page 13October 2014 Page 13

Page 14 The PIOGA Press

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February 2014 Page 15October 2014 Page 15

Our Energy Moment:Promoting LNG exportsBy Joyce TurkalyDirector Natural Gas Market Development

The John H. Heinz History Center was the back-drop for the Pittsburgh launch of Our EnergyMoment, the third stop in a series for this coali-

tion comprised of energy stakeholders (includingPIOGA) whose message supports America’s continuedenergy development and most specifically liquefiednatural gas (LNG) exports.

Leading the introductory remarks was JasonFrench, director of government and public affairs forCheniere Energy’s Sabine Pass, Louisiana, liquefac-tion facility, currently permitted with a 2.2 Bcf/dayexport capacity to be completed in Q2 2015 and pend-ing application of approval of an additional volume bringing thetotal export capacity to 4 Bcf/day by 2017. He spoke to theimportance of starting the conversation with people who may notbe familiar with LNG exports.

The tag line or theme “Our Energy Moment” draws connec-tions between economic opportunities the privately funded stim-ulus packages that these multi-billion-dollar projects are creatingfor the United States and creating for the oil and gas industry.French drew the connection in football terms: Pittsburgh’s HeinzField built in today’s dollars would cost $374 million; by com-parison, the facility that Cheniere is building equates in cost to53 Heinz Fields.

Dovetailing remarks were made by Congressman KeithRothfus, who recognized that “folks get nervous,” but they needto recognize how much gas we have here. He spoke to expeditingthe permitting process and imposing time limits. In June, theHouse passed the Domestic Prosperity and Global Freedom Act(H.R.6) to streamline and expedite the federal process forapproving LNG export terminals. The legislation, however, cur-rently sits on Senate Majority Leader Harry Reid’s desk awaitingfurther action. Providing further support for the advocacy effortswas former Pennsylvania Governor Tom Ridge; George Stark,Cabot Oil & Gas; and David Taylor, executive director of thePennsylvania Manufacturers’ Association.

Responding to a question regarding siting an export terminalin the Philadelphia port region, French stated that the Gulf ofMexico is the current “hub” where most of the export projectsare being built, yet he did not discount the fact that the EastCoast—specifically Cove Point, Dominion’s Maryland facility(original built in 2007 as an import, and most recently the fifthapplication approved by the Department of Energy for LNGexport (see article at right)—is helping to place the U.S. in aposition of global energy leadership.

Expanding exports of liquefied natural gas will help the U.S.realize its potential as a global energy leader while creating hun-dreds of thousands of jobs and strengthening the nation’s econo-my. It is estimated that LNG could generate as many as 2.4 mil-lion jobs by 2035. According to a report by ICF International, upto 59,000 new jobs and $10 billion in economic impacts will becreated for Pennsylvanians in this same time period.

As of September 10, the Department of Energy had approvedonly nine applications for permits to export LNG to non-free

FERC approves Cove Point LNG project

The Federal Energy Regulatory Commission on September29 granted final approval to Dominion to construct andoperate the company’s Cove Point liquefied natural gas

(LNG) liquefaction and export project. The FERC authorizationallows Dominion to transport up to 860,000 dekatherms per dayof natural gas from existing pipeline interconnects and export upto 5.75 metric tons of LNG annually from the facility located onthe Chesapeake Bay in Maryland.

Dominion has received authorization from the Department ofEnergy to export natural gas to both Free Trade Agreement(FTA) and non-FTA countries. Dominion has agreements withenergy companies in India and Japan to liquefy natural gas andship it overseas. The Japanese company, Sumitomo, made a dealwith Cabot Oil and Gas last December to purchase 350,000MMBtu per day of natural gas from the producer’s Marcelluswells in Pennsylvania.

The export facility will be within the 131-acre footprint of theexisting LNG import terminal site, which has been in CalvertCounty on the western shore of the Chesapeake Bay for nearly40 years. No new pipelines or storage tanks are needed at thefacility. Construction of the export project, which is estimated tocost between $3.4 billion and $3.8 billion, will create thousandsof skilled construction jobs, 75 permanent jobs and an additional$40 million in annual tax revenue to the host county. The compa-ny expects exports to begin in 2017.

Cove Point is the fourth LNG export project to receive FERCapproval to site, construct and operate. It is the first such projecton the East Coast. The others are located in Louisiana and Texason the Gulf of Mexico. Fourteen other projects are waitingapproval. ■

trade agreement nations. There are currently 22 pending applica-tions covering 21 facilities where U.S. businesses are seeking tobuild and operate terminals to process LNG for sales abroad.

To learn more about Our Energy Moment and how yourorganization can become a member, visit www.ourenergymo-ment.org. ■

Jason French of Cheniere Energy talks about his company’s Sabine Passproject and other LNG export opportunities.

Page 16 The PIOGA Press

PUC overturns judges’ decision on public utility status for Sunoco pipeline

In a 4-1 ruling on October 2, the Pennsylvania Public UtilityCommission bucked the advisory opinion of a pair of admin-istrative law judges (ALJs) and determined that Sunoco

Logistics qualifies as a public utility in a case related to the com-pany’s Mariner East pipeline project.

Sunoco proposes using a 300-mile pipeline to carry naturalgas liquids from western Pennsylvania to the former MarcusHook refinery near Philadelphia and is seeking public utility sta-tus so it can be exempt from local zoning ordinances and exer-

cise eminent domain in siting the pipeline and related facilities.The ALJs determined in a July 30 ruling that Sunoco does not

meet the definition of a “public utility corporation” in Section1103 of the Business Corporation Law because it is an interstatecommon carrier regulated by Federal Energy RegulatoryCommission (FERC) under the Interstate Commerce Act, and theproposed Mariner East pipeline service is neither a FERC-regu-lated public utility service nor intrastate public utility serviceregulated by the PUC under the Public Utility Code (AugustPIOGA Press, page 16).

The ALJs also concluded that the nature of Sunoco’s proposedintrastate service is private, as it is limited to a select number ofshippers and not available to members of the public becauseSunoco has not shown what end-user customer members of thepublic would use Sunoco’s proposed intrastate service.

At its October 2 meeting, the PUC ruled Sunoco’s pipelinesand services have been certified as public utilities since the1930s.

“Sunoco’s amended petitions adequately plead sufficient factsfor the commission to find that it is both a ‘public utility’ and a‘public utility corporation,’ “ said PUC Vice Chairman John F.Coleman Jr. and Commissioner Pamela A. Witmer in a jointmotion approved by the commission. The PUC dismissed eightother remaining preliminary objections brought in the case deal-ing with issues such as safety and the pipeline’s route.

“In this proceeding, the commission is being asked to decideon a very narrow question: Whether enclosures (walls and a roof)that are built around and over a valve control or pump stationshould be exempt from municipal zoning regulation,” the PUCstated.

The dissenting vote came from Commissioner James Cawley,who objected to the commission’s outright rejection of theremaining objections.

The commission directed the PUC’s Office of AdministrativeLaw Judge to hold hearings on Sunoco’s zoning exemptionrequest to construct “buildings” around valve control and pumpstations. A favorable decision would allow Sunoco to bypasslocal zoning restrictions.

“The issue becomes whether the ‘build-ings’ are reasonably necessary for the con-venience or welfare of the public, meaningthey are exempt from local zoning ordi-nances,” the commission said. “We mustdecide whether it is in the convenience orwelfare of the public for Sunoco to enclosethe planned facilities with walls and roofs,even if those enclosures may conflict withlocal zoning ordinances.”

Mariner East is an existing oil pipelinethat Sunoco plans to retrofit to transportNGLs east from Marcellus Shale natural gasprocessing centers in western Pennsylvania.Sunoco is in the process of renovating theMarcus Hook facility to accommodate natu-ral gas products being shipped from theshale regions for export. The company isalso proposing a second pipeline, MarinerEast II, mirroring the existing pipeline. ■

February 2014 Page 17October 2014 Page 17

Shell holds second publicmeeting in Beaver County

The focus of the second public meeting on Shell’sAppalachian petrochemical project last month was to keepresidents informed on both pre- and post-construction

benefits as well as answer questions about air quality.The announcement of Shell’s proposed petrochemical facility

came in June 2011 and is still proposed as a project “under eval-uation.” However, on September 18 at Penn State’s Beaver cam-pus Shell representatives shared personal stories to better endearthe audience to the genuine mission to be a good neighbor to thepeople of Beaver County.

Shell projects were explained to be rooted in safety as well asbeing environmentally responsible. Randy Armstrong (shownabove), Director HSA Environmental Management, spoke to theregulatory approval and oversight process of obtaining environ-mental permits and shared findings of environmental impactstudies. Speaking to the best available technology criteria, hewent on further to explain cancer rates at the fence line as beingnegligible; listing all the known potential hazardous air pollu-tants, he reassured and answered mostly cancer concerns fromthe audience. On hand to provide an unbiased perspective regard-ing health concerns as well as concur with the study’s findingswere two independent toxicologists, one from UPMC and onefrom an independent firm in Ohio.

Being cautious as to not overstate project intentions, Shellrepresentatives did confirm they have already retained 10 con-tracts for ethane supply. It appears as though the project is mov-ing forward at the former Monaca site of Horsehead Industries.The petrochemical project if built will expand into a somewhatlarger footprint than the prior tenant held.

The proposed complex would be the first major U.S. projectof its type to be built outside the Gulf Coast region in 20 years.Locating the facility close to both supply and markets wouldreduce economic and environmental transportation costs and pro-vide regional plastic manufacturers with more flexibility, shortersupply chains and enhanced supply dependability.

If built, the facility would include: —An ethane cracker with an approximate annual average

capacity of 1.5 million metric tons of ethylene;—Three polyethylene units with a combined annual produc-

tion of approximately 1.6 million metric tons; and —Power and steam generation, storage, logistics, cooling

water and water treatment, emergency flare, buildings, and ware-houses.

Find out more: www.shell.us/aboutshell/projects-locations/appalachia/about-project.html. ■

Your vote counts—so use it!

An important election in Pennsylvania is rapidlyapproaching. It is critical we keep in mind those candi-dates who make energy and jobs a priority. Governor

Tom Corbett, with the support of the Republican legislature,has helped Pennsylvania become a leading energy producerin the country, by fighting against threatening federal regula-tions. He has, and will continue to, ensure coal and natural gasresources are key assets that lead to good jobs and lowerenergy bills throughout the state.

Having elected officials in Harrisburg and Washington, D.C.,who fight for these principles of limited government, low taxesand more jobs is critical to the future of our Commonwealthand nation. With several close races taking place this year,and so much at stake, every vote matters!

By visiting www.dosimages.pa.gov/pdf/OnlineVoterRegFormBlank.pdf, you can find a Pennsylvania voter registrationform. Please fill out and return it to your county Bureau ofElections, whose address is included on the form.

If you will be unable to make it to the polls on November 4,you can find an absentee ballot application at www.dosim-ages.pa.gov/pdf/AbsenteeBallotApplication.pdf. Submit thisapplication to your county Bureau of Elections no later thanOctober 28. You will then receive an official ballot in the mailthat must be completed and returned to the Election Bureauby October 31 for your vote to count. It is advised to submit anapplication well in advance of the 28 to allow time for mailingso the official ballot is received by October 31.

Make sure to get registered and have your voice heard byvoting this November 4!

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Title due diligence: Defining‘defensible title’ and confirmingthe quality of the seller’s assetsThe following is the first in a series of articles prepared by BabstCalland regarding title due diligence.

Given the region’s booming Marcellus and Utica shaleplays and the desire by E&P companies, both large andsmall, to tap into the area’s rich natural gas resources,

acquisitions and divestitures in the energy sector have been onthe rise. Large companies are often looking for ways to sell offnon-core assets in order to reinvest capital into their more prof-itable assets or they may be looking to swap leases in a particulararea in order to strategically unitize acreage. New or smallercompanies may be interested in purchasing the stock of an exist-ing company in hopes of developing the target company’s assetsand becoming a major player in the growing energy industry.During the second quarter of 2014, the region saw three large oiland gas transactions involving the purchase and sale ofMarcellus or Utica assets, valued at more than $2.9 billion—upfrom only one transaction worth $924 million in the first quarterof 2013 and six transactions worth $1.36 billion in the fourthquarter of 2013.1

With the increase in transactions in the Marcellus/Utica shaleregion, there has also been a correlative need for “due diligence”to investigate the quality and confirm the value of the asset orentity being purchased. The term “due diligence” has become acommon shorthand for referring to the buyer’s pre-closing exam-

ination of (i) the property being purchased,(ii) the seller’s records and (iii) the officialtitle records of the county where the assetsare located.2 To determine any hurdles tothe commencement of operations after clos-ing, the purchaser’s due diligence effortsmay also include analysis of environmentalmatters, review of permits related to the useand operation of the assets, and issues relat-ed to land use and zoning. A review of theseller’s corporate status and governancemay also be prudent.

The focus of this article is on the titleaspect of the due diligence process, i.e. con-firming that the seller actually owns theproperty being conveyed and that the buyeris receiving the agreed-upon quality of titleto such assets. The goal of the title due dili-gence process is not to point out everydefect in title, but to identify all issues thatrise to the level of a title defect as agreedupon by the parties. The purchase and saleagreement between the buyer andseller defines the buyer’s accept-able level of risk with regard tothe quality of title. Generally, theagreements do not require that the seller guarantee perfect title,but rather that which can likely be successfully defended in theevent of a post-closing lawsuit, i.e. “defensible title.” The buyerwill then design and carry out the process of reviewing the titleto the assets according to the terms of the agreement.

I. What is “defensible title?”Contrary to the standard of “marketable title” used in drilling

title opinions, the standard in acquisition title opinions or titledefect reports prepared in connection with due diligence is oftenless than marketable and commonly referred to as “defensibletitle.” Neither Pennsylvania case law nor statutory law provides adefinition for “defensible title,” but because it means somethingless than marketable title, it is important to first understand what“marketable title” requires. The definition for “marketable title”is title that “is free from liens and encumbrances and which areasonable purchaser, well informed as to the facts and theirlegal bearings, willing and ready to perform his contract, would,in the exercise of that prudence which businessmen ordinarilybring to bear upon such transactions, be willing to accept andought to accept.”3 In 1871, the Supreme Court of Pennsylvania inSwayne v. Lyon stated: “It has been well and wisely settled thatunder a contract for the sale of real estate, the vendee has theright not merely to have conveyed to him a good but an indu-bitable title. Only such a title is deemed marketable; for other-wise the purchaser may be buying a lawsuit, which will be a veryserious loss to him both of time and money, even if he ultimatelysucceeds.”4 Therefore, in contrast with marketable title, which isdefeated by the possibility of litigation, the standard for “defensi-ble title” does not guarantee that the buyer will not face thethreat of a future lawsuit, but that his title could be successfullydefended if litigation were to result.

Given that courts generally define “unmarketable title” as thatwhich could be subject to litigation, legal scholars in other juris-

Sarah M.Carter, Esq.

Brittany A.Roof, Esq.

Authors:

February 2014 Page 19October 2014 Page 19

dictions have suggested that the buyer and seller in a transactionfor the sale of oil and gas assets are akin to the plaintiff anddefendant in a lawsuit.5 As the plaintiff, the burden of proving atitle defect generally lies with the buyer, who must set forth thefacts necessary to establish the defect and then produce sufficientevidence to support the same. For example, if the due diligenceexamination reveals that a lease was executed by a stranger totitle, the buyer need only show that title is vested in “X” but thelease was executed by “Y.” Once the defect is established, theburden of disproving the defect shifts to the defendant seller. Inthis case, the seller may provide an unrecorded document, suchas an affidavit of heirship, indicating that “X” died intestate andthat “Y” is “X’s” only heir. Typically under the terms of the pur-chase and sale agreement, if the buyer cannot establish a primafacie “defect” or if the seller can successfully defend a buyer’sasserted defect, then title will be considered “defensible” and thebuyer cannot exclude the asset from the sale or seek a reductionin the overall purchase price due to the defect.

II. The purchase and sale agreement: How the buyer andseller define “defensible title”

The purchase and sale agreement (PSA) is what governs thestandards of the transaction, sets forth deadlines and procedures,and defines the level of risk that the buyer is willing to acceptwith respect to defects in the seller’s leasehold title. The primarygoal of the PSA is to establish an agreement between the partiesthat will ultimately aid in closing the deal. The subsequent titledue diligence process serves “to confirm that the seller has theownership and standing to convey the interest described in thePSA to the buyer.”6 As discussed above, the process is not meantto point out every conceivable defect in title, but only the itemswhich constitute defect(s) pursuant to the terms of the PSA.

Most often, “defensible title” is the standard employed in thecontext of lease acquisition.

What constitutes a “title defect” under the PSA may dependupon various factors, such as the location of the assets and thethreshold of risk that the buyer is willing to accept. For example,if the PSA governs the sale of assets in a jurisdiction with pub-lished “title standards,” such as Ohio, the title standards for thatjurisdiction will likely be incorporated into the definition of atitle defect. In jurisdictions without title standards, such asPennsylvania and West Virginia, it may be more common to finda broad definition of “defensible title” such as, “[title] that is freefrom such reasonable doubt that a prudent person engaged in thebusiness of the ownership, development, and operation of pro-ducing oil and gas properties with knowledge of all of the factsand their legal bearing would be willing to accept same.”7 ThePSA may also further define what constitutes a title defect bylisting several items that do not constitute defects and/or containa list of permitted encumbrances that will not hinder the sale andthat present an acceptable risk to the buyer. These items are gen-erally excluded from a title report or acquisition title opinion pre-pared for due diligence.

III. Application of the PSA and verifying the seller’s titleAfter the parties have agreed upon what constitutes “defects”

for purposes of the transaction, title due diligence is performedin order to determine the quality of the assets owned by the sell-er. This stage of the due diligence process is typically performedby the buyer or its counsel and is conducted within a set time-frame defined in the PSA (which generally ranges from 30 to 90days). The manner in which title due diligence review is con-ducted is generally based upon what type of information is avail-able to the buyer. If the seller previously obtained title opinions

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for the assets, the buyer may limit its due diligence to reviewingthe seller’s title opinions and possibly ordering and reviewingsupplemental abstracts, in order to update the opinions from theclosing date of the original opinion to the present day.Alternatively, the buyer may order new abstracts for the assetsthat may be limited in scope to confirm the force and effect ofthe lease and seller’s leasehold interest. The buyer’s counsel maythen produce acquisition title opinions or title defect reports

based on its review ofthe foregoing.

Based upon thedefects described in theacquisition opinions ordefect reports, the buyerwill in turn deliver“notices” of the titledefects to the seller.Depending upon theterms of the PSA, theseller may have a win-dow of time to “cure”reported defects and/ordispute the same prior toclosing. Additionally,depending on the valueand risks presented bythe defects, based on theterms of the PSA, theparties may attempt tore-negotiate the purchase

price, terminate the transaction, waive particular defects, or pro-ceed with the closing and work toward curing title defects post-closing. These aspects of the title due diligence process will bediscussed in greater detail in forthcoming articles prepared byBabst Calland. ■

1 Press releases, U.S. Oil & Gas Deal Value and Volume Increased Substantiallyin the Second Quarter of 2014, PricewaterhouseCoopers LLP, July 30, 2014,www.pwc.com/us/en/press-releases/2014/q214-energy-ma-press-release.jhtml;U.S. Oil & Gas M&A Activity Reaches Highest First Quarter Volume in Morethan a Decade, PricewaterhouseCoopers LLP, April 30, 2014, www.pwc.com/us/en/press-releases/2014/us-oil-and-gas-m-and-a-activity.jhtml; InorganicOpportunities to Drive Growth and Increase Shareholder Value Fueled U.S. Oil& Gas M&A Activity in 2013, PricewaterhouseCoopers LLP, January 28, 2014,www.pwc.com/us/en/press-releases/2014/q4-energy-ma-press-release.jhtml. Notethat the PwC Quarterly Reports only analyze those announced U.S. transactionswith a value greater than $50 million. 2 IRA H. “STORMY” BRYANT III, DUE DILIGENCE FOR OIL AND GAS PROPERTIES: AHOME STUDY COURSE FOR CONTINUING PROFESSIONAL DEVELOPMENT 30 (AAPL,1994).3 Barter v. Palmerton Area School Dist., 581 A.2d 652, 654 (Pa. Super. Ct. 1990)(citing 77 Am. Jur. 2d Vendor and Purchaser § 131 (1975)). 4 Swayne v. Lyon, 67 Pa. 436, 439 (Pa. 1871) (emphasis added). See also Barter,581 A.2d at 654 (“A title is not marketable if it is such that the grantee may beexposed to the hazard of a lawsuit”).5 See KRAETTLI Q. EPPERSON ET AL., “Defensible Title” When Examining Oil andGas Interests: An Overview of the Law in Oklahoma (Nov. 4, 2009), available ateppersonlaw.com/wordpress/wp-content/uploads/2013/07/222DefensibleTitleOBA.pdf.6 BRYANT III, supra n. 2, at 31.7 ALLEN D. CUMMINGS & RANDY BROWNE, Meeting of the Minds on Title Defects,48 Rocky Mtn. Min. L. Inst. 27, § 27.07, 24 (2002).

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February 2014 Page 21October 2014 Page 21

FEMA makes token gestureon anti-fracking policy

The Federal Emergency Management Agency has decidedto make an exception to its recently imposed policy dis-qualifying most property owners with oil and gas leases

from a program that allows buyouts of flood-prone properties.Under its hazard mitigation assistance (HMA) program,

FEMA pays to acquire properties in flood zones or to reduceflood risks by razing or relocating structures. The property titleusually is turned over to local governments to use as open space.Without seeking public comment or stakeholder input, FEMAissued a policy in May that bars use of HMA funds for propertiesthat could eventually see horizontal drilling and hydraulic frac-turing, even if the leases do not allow for development on thesurface (September PIOGA Press, page 1). The agency claimsthat hydraulic fracturing and horizontal directional drilling “is apractice with currently unresolved environmental impacts andunknown open space compatibility.”

Participating at a roundtable in late August organized byPennsylvania Congressman Lou Barletta, PIOGA representativessaid the policy is essentially a regulation developed without anyopportunity for public input. Barletta urged FEMA to rescind thepolicy, which he said harms property owners who only want torelinquish surface rights while maintaining subsurface rights. APennsylvania Emergency Management Agency official also tookissue with the policy. He indicated there were eight propertyowners in northeast Pennsylvania whose applications for hazardmitigation assistance due to flooding were denied because of gasleases.

The attention caused the agency to relent—but just ever soslightly. In a September 25 letter, FEMA’s regional administratorsaid the policy would not be applied retroactively for anyapproved projects that have already reached the point of obliga-tion. In other words, FEMA will make an exception only for theeight Pennsylvania properties highlighted at the roundtable andonly because the properties had been approved for buyoutsbefore the anti-gas-development policy was imposed. The prop-erties were damaged by flooding in 2011.

The administrator indicated that any new eligible propertiesare subject to the no-fracking policy, so before the federal gov-ernment will pay for the land, property owners must “extinguishor appropriately restrict their surface and subsurface uses to com-ply with FEMA’s open space requirements.”

Barletta said in response: “This is tremendous news for prop-erty owners who only wanted to be able to exercise their rights touse their land as they intended. I am pleased that FEMA hasmade this decision; however, I still believe the entire policyshould be reversed so that all property owners will have similarfreedom moving forward.”

A FEMA representative at the roundtable in August commit-ted to a discussion with stakeholders, including industry. So far,that has not occurred. ■

Correction: In last month’s article we incorrectly referred toFEMA as the Federal Energy Management Agency.

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Cabot Oil & Gas Corp 6 9/18/14 115-21814* Susquehanna Bridgewater Twp9/18/14 115-21815* Susquehanna Bridgewater Twp9/18/14 115-21816* Susquehanna Bridgewater Twp9/11/14 115-21842* Susquehanna Springville Twp9/11/14 115-21843* Susquehanna Springville Twp9/11/14 115-21844* Susquehanna Springville Twp

Campbell Oil & Gas Inc 1 9/24/14 129-28868* Westmoreland Derry TwpCatalyst Energy Inc 8 9/2/14 083-56342 McKean Kane Boro

9/5/14 083-56341 McKean Kane Boro9/10/14 083-56334 McKean Kane Boro9/16/14 083-56336 McKean Kane Boro9/18/14 083-56387 McKean Kane Boro9/24/14 083-56335 McKean Kane Boro9/19/14 083-56295 McKean Lafayette Twp9/30/14 083-56296 McKean Lafayette Twp

Chautauqua Energy Inc 3 9/22/14 123-47594 Warren Sugar Grove Twp9/24/14 123-47595 Warren Sugar Grove Twp9/29/14 123-47596 Warren Sugar Grove Twp

Chief Oil & Gas LLC 14 9/23/14 113-20245* Sullivan Cherry Twp9/23/14 113-20246* Sullivan Cherry Twp9/1/14 113-20317* Sullivan Elkland Twp9/6/14 113-20220* Sullivan Elkland Twp9/7/14 113-20221* Sullivan Elkland Twp9/11/14 113-20278* Sullivan Fox Twp9/11/14 115-21630* Susquehanna Lathrop Twp9/12/14 115-21631* Susquehanna Lathrop Twp9/16/14 115-21772* Susquehanna Lathrop Twp

9/16/14 115-21773* Susquehanna Lathrop Twp9/6/14 115-21756* Susquehanna Springville Twp9/7/14 115-21755* Susquehanna Springville Twp9/8/14 115-21754* Susquehanna Springville Twp9/9/14 115-21753* Susquehanna Springville Twp

CNX Gas Co LLC 8 9/16/14 003-22297* Allegheny Findlay Twp9/16/14 003-22298* Allegheny Findlay Twp9/16/14 003-22299* Allegheny Findlay Twp9/16/14 003-22282* Allegheny Findlay Twp9/16/14 003-22300* Allegheny Findlay Twp9/16/14 003-22301* Allegheny Findlay Twp9/16/14 003-22302* Allegheny Findlay Twp9/16/14 003-22303* Allegheny Findlay Twp

D&M Energy LLC 2 9/12/14 053-30691 Forest Jenks Twp9/17/14 053-30692 Forest Jenks Twp

Dannic Energy Corp 4 9/10/14 121-45704 Venango Sugarcreek Boro9/16/14 121-45703 Venango Sugarcreek Boro9/19/14 121-45705 Venango Sugarcreek Boro9/24/14 121-45706 Venango Sugarcreek Boro

Devonian Resources Inc 5 9/3/14 053-30507 Forest Harmony Twp9/9/14 053-30505 Forest Harmony Twp9/15/14 053-30509 Forest Harmony Twp9/20/14 053-30508 Forest Harmony Twp9/25/14 053-30506 Forest Harmony Twp

Energy Corp Of Amer 7 9/16/14 059-26592* Greene Whiteley Twp9/16/14 059-26593* Greene Whiteley Twp9/17/14 059-26590* Greene Whiteley Twp9/17/14 059-26591* Greene Whiteley Twp9/18/14 059-26588* Greene Whiteley Twp9/18/14 059-26589* Greene Whiteley Twp9/19/14 059-26587* Greene Whiteley Twp

Enervest Opr LLC 8 9/2/14 083-56495 McKean Lafayette Twp

Spud Report:September

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.

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9/8/14 083-56500 McKean Lafayette Twp9/8/14 083-56502 McKean Lafayette Twp9/10/14 083-56498 McKean Lafayette Twp9/15/14 083-56501 McKean Lafayette Twp9/16/14 083-56497 McKean Lafayette Twp9/22/14 083-56496 McKean Lafayette Twp9/25/14 083-56499 McKean Lafayette Twp

EQT Production Co 15 9/5/14 059-26639* Greene Center Twp9/15/14 059-26597* Greene Morgan Twp9/15/14 059-26602* Greene Morgan Twp9/15/14 059-26607* Greene Morgan Twp9/15/14 059-26606* Greene Morgan Twp9/15/14 059-26609* Greene Morgan Twp9/6/14 059-26633* Greene Morris Twp9/6/14 059-26634* Greene Morris Twp9/22/14 059-26611* Greene Morris Twp9/9/14 059-26637* Greene Washington Twp9/18/14 059-26654* Greene Washington Twp9/26/14 065-27064* Jefferson Washington Twp9/26/14 065-27065* Jefferson Washington Twp9/26/14 065-27066* Jefferson Washington Twp9/26/14 065-27067* Jefferson Washington Twp

Hilcorp Energy Co 2 9/8/14 085-24690* Mercer Lackawannck Twp9/8/14 085-24693* Mercer Lackawannck Twp

Holden Oil & Gas 1 9/5/14 123-47617 Warren Watson TwpHoward Drilling Inc 5 9/2/14 083-56309 McKean Wetmore Twp

9/8/14 083-56308 McKean Wetmore Twp9/16/14 083-56310 McKean Wetmore Twp9/18/14 083-56318 McKean Wetmore Twp9/24/14 083-56317 McKean Wetmore Twp

Interstate Gas Mkt Inc 1 9/30/14 031-25653 Clarion Toby TwpKastle Resources Enterprises 1 9/15/14 039-25796 Crawford Beaver TwpKylander Oil Inc 2 9/24/14 123-47623 Warren Glade Twp

9/29/14 123-47624 Warren Glade TwpLendrum Energy LLC 4 9/2/14 053-30673 Forest Harmony Twp

9/9/14 053-30674 Forest Harmony Twp9/11/14 053-30675 Forest Harmony Twp9/18/14 053-30680 Forest Harmony Twp

MSL Oil & Gas Corp 5 9/2/14 083-56435 McKean Lafayette Twp9/4/14 083-56433 McKean Lafayette Twp9/15/14 083-56031 McKean Wetmore Twp9/20/14 083-56034 McKean Wetmore Twp

9/30/14 083-56035 McKean Wetmore TwpNorthwestern Well Svc Inc 2 9/8/14 053-30520 Forest Jenks Twp

9/17/14 053-30521 Forest Jenks TwpOz Gas Ltd 1 9/25/14 123-46903 Warren Triumph TwpPA Gen Energy Co LLC 6 9/10/14 081-21491* Lycoming McHenry Twp

9/11/14 081-21492* Lycoming McHenry Twp9/12/14 081-21493* Lycoming McHenry Twp9/13/14 081-21494* Lycoming McHenry Twp9/14/14 081-21495* Lycoming McHenry Twp9/15/14 081-21496* Lycoming McHenry Twp

Pecora Enterprises 7 9/2/14 083-56577 McKean Lafayette Twp9/5/14 083-56579 McKean Lafayette Twp9/10/14 083-56580 McKean Lafayette Twp9/12/14 083-56581 McKean Lafayette Twp9/19/14 083-56582 McKean Lafayette Twp9/24/14 083-56583 McKean Lafayette Twp9/26/14 083-56584 McKean Lafayette Twp

Range Resources Appalachia 14 9/10/14 003-22294* Allegheny Fawn Twp9/10/14 003-22295* Allegheny Fawn Twp9/10/14 019-22290* Butler Clinton Twp9/10/14 019-22245* Butler Clinton Twp9/10/14 019-22256* Butler Clinton Twp9/11/14 081-21050* Lycoming Anthony Twp9/12/14 125-27438* Washington Cecil Twp9/12/14 125-27439* Washington Cecil Twp9/12/14 125-27416* Washington Cecil Twp9/30/14 125-27199* Washington Robinson Twp9/30/14 125-26959* Washington Robinson Twp9/30/14 125-26962* Washington Robinson Twp9/30/14 125-27422* Washington Robinson Twp9/30/14 125-27450* Washington Robinson Twp

RE Gas Dev LLC 9 9/29/14 019-22293* Butler Connoquenessing 9/30/14 019-22294* Butler Connoquenessing 9/8/14 019-22291* Butler Lancaster Twp9/9/14 019-22292* Butler Lancaster Twp9/11/14 019-22301* Butler Lancaster Twp9/4/14 019-22274* Butler Penn Twp9/5/14 019-22275* Butler Penn Twp9/6/14 019-22276* Butler Penn Twp9/7/14 019-22277* Butler Penn Twp

Rice Drilling B LLC 2 9/10/14 125-27327* Washington N Bethlehem Twp9/10/14 125-27328* Washington N Bethlehem Twp

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

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Page 26 The PIOGA Press

Russ Holden Well Svc 4 9/11/14 123-47653 Warren Watson Twp9/17/14 123-47655 Warren Watson Twp9/22/14 123-47656 Warren Watson Twp9/25/14 123-47654 Warren Watson Twp

Seneca Resources Corp 5 9/4/14 083-56543* McKean Norwich Twp9/7/14 083-56542* McKean Norwich Twp9/12/14 083-56545* McKean Norwich Twp9/15/14 083-56519* McKean Norwich Twp9/16/14 083-56544* McKean Norwich Twp

Snyder Bros Inc 9 9/4/14 005-31181* Armstrong East Franklin Twp9/2/14 083-56323 McKean Hamilton Twp9/5/14 083-56473 McKean Hamilton Twp9/10/14 083-56475 McKean Hamilton Twp9/12/14 083-56471 McKean Hamilton Twp9/17/14 083-56474 McKean Hamilton Twp9/23/14 083-56472 McKean Hamilton Twp9/26/14 083-56054 McKean Lafayette Twp9/30/14 083-56055 McKean Lafayette Twp

Southwestern Energy Prod Co 9 9/10/14 115-21821* Susquehanna Franklin Twp9/9/14 115-21791* Susquehanna New Milford Twp9/10/14 115-21332* Susquehanna New Milford Twp9/10/14 115-21333* Susquehanna New Milford Twp

9/13/14 115-21510* Susquehanna New Milford Twp9/13/14 115-21511* Susquehanna New Milford Twp9/23/14 115-21570* Susquehanna New Milford Twp9/23/14 115-21571* Susquehanna New Milford Twp9/23/14 115-21728* Susquehanna New Milford Twp

SV ABS Interest Wetmore Proj 2 9/8/14 083-56470 McKean Wetmore Twp9/15/14 083-56467 McKean Wetmore Twp

Talisman Energy USA Inc 4 9/17/14 015-23070* Bradford Columbia Twp9/17/14 015-23071* Bradford Columbia Twp9/18/14 015-23072* Bradford Columbia Twp9/18/14 015-23073* Bradford Columbia Twp

Trimont Energy LLC 4 9/27/14 053-30575 Forest Harmony Twp9/8/14 121-45662 Venango Allegheny Twp9/12/14 121-45664 Venango Allegheny Twp9/18/14 121-45666 Venango Allegheny Twp

Universal Resources Holdings 5 9/9/14 123-47219 Warren Sugar Grove Twp9/12/14 123-47220 Warren Sugar Grove Twp9/18/14 123-47223 Warren Sugar Grove Twp9/24/14 123-47222 Warren Sugar Grove Twp9/29/14 123-47221 Warren Sugar Grove Twp

WB Prod Mgmt Co 1 9/25/14 121-45746 Venango Cornplanter TwpWeldbank Energy Corp 2 9/1/14 123-47643 Warren Mead Twp

9/5/14 123-47642 Warren Mead TwpWilmoth Interests Inc 5 9/4/14 123-47620 Warren Sheffield Twp

9/10/14 123-47622 Warren Sheffield Twp9/15/14 123-47621 Warren Sheffield Twp9/22/14 123-47560 Warren Sheffield Twp9/26/14 123-47561 Warren Sheffield Twp

Xite Energy Inc 1 9/9/14 121-45644 Venango Cornplanter TwpXTO Energy Inc 5 9/15/14 019-22264* Butler Connoquenessing

9/15/14 019-22265* Butler Connoquenessing 9/15/14 019-22266* Butler Connoquenessing 9/23/14 019-22298* Butler Donegal Twp9/23/14 019-22299* Butler Donegal Twp

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

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PIOGA President & Executive Director Lou D’Amico wasamong the representatives of several Pennsylvania indus-tries testifying about concerns over the U.S. Fish &

Wildlife Service (FWS) effort to list the northern long-eared bat(NLEB) as an endangered species. The field hearing by the U.S.House Natural Resources Committee took place September 8 inHarrisburg.

The bat’s population insome areas of its rangehas been severely impact-ed by the fungal diseasewhite-nose syndrome(WNS). Under an endan-gered listing, the primarytool for regulators is habi-tat protection. However,many contend that offer-ing federal habitat protections to the bat would cripple the econo-my and cost jobs while having no effect on the spread of white-nose syndrome.

“The Service...admits that oil and gas exploration and devel-opment activities do not have population-level effects on theNLEB, even when combined with the effects of all other landdevelopment activities throughout the NLEB’s range,” D’Amicotold the committee. He described the agency’s efforts to list thebat as a “fiasco,” adding, “I am amazed that the Service contin-ues down the path to an endangered listing for the NLEB in spiteof its own conclusions that objectively point the other way.”

Sierra Club ordered to pay $6.4 millionfor ‘frivolous’ litigation

Afederal judge’s decision to force the Sierra Club to reim-burse $6.4 million in attorneys’ fees for filing a “frivo-lous” Clean Air Act (CAA) citizen suit has legal experts

predicting that defense attorneys will seek to impose the rarelyused penalty on environmental groups more often.

Law360 reports that U.S. District Judge Walter S. Smith Jr. onAugust 29 ordered the Sierra Club to pay the fees after the envi-ronmental organization lost its suit accusing Energy FutureHoldings Corporation of committing CAA violations.

The Texas judge said the Sierra Club’s complaint that an elec-tric generation station released illegal levels of particulate matterpollution was “frivolous, unreasonable or groundless,” and—in adeparture from decades of rulings about attorneys’ fees in citizensuits—said the Sierra Club never should have brought the suitand owed the company $6.4 million in fees.

One analyst told the legal reporting service Law360 thatJudge Smith’s ruling is nothing less than a huge win for the utili-ty industry. The award may cause defendants to think twicebefore simply settling a case and could also make environmentalgroups more selective about what cases they pursue.

In the decades since the CAA and Clean Water Act came intoexistence, attempts by defendants to recoup legal fees have beenfew and far between because the law makes it difficult for plain-tiffs to be held liable for them.

Law360 reported that Eric Groten of Vinson & Elkins LLPlikened citizen suits to “asymmetric warfare,” where the citizengroups could count on getting their attorneys’ fees paid, but thedefendant had both litigation costs and litigation risks drivingsettlement.

“I don’t mean to personalize this to the Sierra Club, but theSierra Clubs of the world were basically encouraged to file law-suits anywhere and everywhere because at the very least theycould extract settlement value that equaled or exceeded anyexposure they had in those cases. Most companies make the eco-nomic decision to settle because it’s usually cheaper than litiga-tion,” he said.

The Sierra Club indicated it would appeal the decision. ■

In written testimony, PIOGA highlighted the FWS statementthat “[e]ven if all habitat-related stressors were eliminated orminimized, the significant effects of WNS on the northern long-eared bat would still be present.”

“The key factor at issue is disease, not oil and gas operationsor other activities,” PIOGA stated. “A listing that leads to arecovery plan which concentrates on the designation and protec-tion of critical habitat as it relates to oil and gas development andother activities is contrary to the express purpose of the ESA[Endangered Species Act], which is to conserve species.”

PIOGA urged the agency to work with other public and pri-vate entities to identify other methods of helping recover thebat’s population.

The federal agency hopes to make a decision on the listing bynext April. ■

PIOGA testifies at congressional hearing on bat protections

February 2014 Page 29October 2014 Page 29

OSHA announces newrequirements for reportingsevere injuriesBy Debbie Chiz NovakowskiNOVA Safety and Health Consulting, Inc.

On September 11, the U.S. Department of Labor’s,Occupational Safety and Health Administration (OSHA)announced a final rule on recordkeeping. The updated

recordkeeping rule expands the list of severe injuries thatemployers must report to OSHA. All employers covered by theOccupational Safety and Health Act, even those who are exemptfrom maintaining injury and illness records, are required to com-ply with OSHA’s new severe injury and illness reporting require-ments.

As of January 1, 2015, under the revised rule, all employerswill be required to notify OSHA of:

1. All work-related fatalities within eight hours. 2. Work-related in-patient hospitalizations of one person. 3. Amputations or loss of an eye within 24 hours.Previously, OSHA regulations required an employer to report

only work-related fatalities and in-patient hospitalizations ofthree or more employees. Under the previous rule, hospitaliza-tion of three or more employees due to a work-related injury wasconsidered catastrophes. As far as reporting single hospitaliza-tions, amputations or loss of an eye, it was not required under theprevious rule.

OSHA says such incidents can be reported by:

1. Calling the agency free and confidential number at 800-321-OSHA (6742).

2. Calling the closest OSHA area office during normal busi-ness hours.

3. Using the new online form that will soon be available atwww.osha.gov/report_online.

The recordkeeping rule and a variety of resource material areavailable at www.osha.gov/recordkeeping2014. ■

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Page 30 The PIOGA Press

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PIOGA visits PJM

PJM Interconnection hosted thePIOGA Pipeline and GasMarket Development

Committee on September 10 to a tourof their state-of -the art control room.Twenty six participants were led to abuilding on the Norristown campus,where a very impressive Northeastelectric grid was displayed alongwith base load and intermittent gen-eration resources that roll up to aminute-by-minute MW display .Given the available technology, thisparticular site is monitored by a six-person team.

After treating us to lunch, we wereable to discuss gas and electric coor-dination issues with PJM employeesrepresenting the operations, marketand planning departments. PJMInterconnection coordinates the con-tinuous buying, selling and deliveryof wholesale electricity through theenergy market. In its role as marketoperator, PJM balances the needs of suppliers, wholesale cus-tomers and other market participants as well as monitors marketactivities to ensure open, fair and equitable access.

The committee is always looking for member input. For more

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David Souder, Director Operations Planning, PJM Interconnection, and Michael Bryson,Executive Director System Operations, discuss what changes to expect from future generationfuel mix portfolio.

October 2014 Page 31

Federal study finds no evidence that hydraulic fracturing contaminates water

Afederal study has found no evidence of migration of nat-ural gas or fluids from hydraulic fracturing in severalsouthwest Pennsylvania Marcellus Shale wells, debunk-

ing the myth that fracking causes groundwater contamination.The field study by the Department of Energy’s National

Energy Technology Laboratory (NETL) monitored the hydraulicfracturing of six horizontal Marcellus wells in Greene County.Researchers found that fracture growth ceased more than 5,000feet below drinking water aquifers and that there was nodetectable upward migration of gas or fluids.

To look for signs of gas or fluid migration, NETL researchersplaced perfluorocarbon tracers in fracturing fluids used in theMarcellus wells and monitored three existing UpperDevonian/Lower Mississippian wells above the shale wells. Nosigns of the tracers were found in the gas or produced water fromthe conventional wells, nor did pressures or production levelschange in these wells, the NETL reported. Any change in pres-sure or production would have led researchers to suspect com-munication between the Marcellus and the UpperDevonian/Lower Mississippian formations.

During hydro-fracturing, researchers detected microseismicsignals using downhole geophones. All signals recorded were atleast 2,000 feet beneath the Upper Devonian/LowerMississippian gas field, and more than 5,000 feet below drinkingwater aquifers, according to the NETL’s 80-page report releasedon September 15. Gas samples from the Upper Devonian/LowerMississippian gas field were collected two months beforehydraulic fracturing, and up to eight months afterward. Similarly,researchers monitored the shallow gas well for fluid migration

for up to five months after fracturing activities.Released the same day as the NETL report was a study pub-

lished in The Proceedings of the National Academy of Sciencesthat also concluded hydraulic fracturing was not the cause ofgroundwater contamination by methane in Pennsylvania andTexas. Instead, the study points the finger at well integrity.

Researchers with the Nicholas School at Duke Universitylooked at seven hydraulically fractured wells in Pennsylvania andone in Texas, and used chemical analysis to link the methane inthe groundwater to the gas in the wells and determine where inthe extraction process the gas leaked into the aquifer.

The study is not without its problems—one being the assump-tion by researchers that well integrity was to blame for methanein the aquifers, even though they did not look into whether thewells in question had experienced mechanical integrity problems.Still, the researchers conceded there was no evidence of methanefrom deep formations migrating up to contaminate water.

“[O]ur data do not suggest that horizontal drilling or hydraulicfracturing has provided a conduit to connect deep Marcellus orBarnett Formations directly to surface aquifers,” the Duke reportsaid.

In the face of increasing evidence to the contrary, when willanti-drilling activists stop making unfounded claims thathydraulic fracturing causes water contamination? ■

Page 32 The PIOGA Press

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PIOGA member news

Titusville Area Shale Strategic Plan completed

Titusville Community Development Agencies in partner-ship with the City of Titusville recently completed theTitusville Area Shale Strategic Plan. Funded through the

Pennsylvania Department of Community & EconomicDevelopment Discovered and Developed in PA Program (D2PA),the planning process involved a comprehensive review of thepotential impacts and opportunities presented by the Utica Shalegas play.

The oil and gas industry is not new to Titusville, and the com-munity is preparing to welcome the industry “back to where it allstarted” in 1859, when Edwin Drake first struck oil. A centuryand a half later, the community is preparing for the possibility ofa second energy boom. Learning from what other Pennsylvaniamunicipalities and counties have experienced with the Marcellusplay, as well as communities in other states, Titusville has identi-fied steps that should be addressed locally, regionally and/or atthe state level—by both the public and private sectors—to attractviable oil and gas companies to the area.

Within the completed plan, strategies, initiatives, projects, andrecommendations are identified in the specific areas of infra-structure, transportation, housing and lodging, local governmentservices, the business community, the environment, health andsafety, education and workforce, and planning and development.Ideas included identifying additional locations for rail sidingsand transload facilities, pipeline locations, CNG fueling stations,rural gasification, enhanced workforce training programs andfacilities, identifying and pursuing ancillary businesses, enhanc-ing the environment, identifying and plugging undocumented

wells, maintaining and continuing to enhance public educationand awareness programs, and maintaining and enhancing med-ical services.

Jim Becker, executive director of the Titusville Redevelop -ment Authority stated, “We are very pleased with this project andthe information compiled in this study. We have lots to do, andplan to move forward quickly on the key recommendations.Shale gas development can be a game changer for our region!”

For additional information contact Titusville RedevelopmentAuthority at 814-827-3668 or shaleinfo@tcda.org.

ARG employees complete two yearswithout lost-time injury

American Refining Group employees achieved a significantsafety milestone and made company history in August when theycompleted two consecutive years without a lost-workdayinjury—that is, there were no injuries at the Bradford facility thatcaused an employee to miss a day of work. Prior to this remark-able stretch, ARG employees had previously accomplished theelusive feat of reaching one year without a lost-workday injuryfrom January 8, 2011, through January 9, 2012. This means ARGhad remained lost-time-injury free for 36 out of the previous 42months.

ARG Vice President of Environmental Health and SafetySteve Sherk said that completing one year without a lost-timeinjury is a difficult achievement for refineries. According toinjury statistics on U.S. refineries compiled by the AmericanFuel Petroleum Manufacturers for 2013, 56 out of 112 refinerieshad at least one lost workday. Looking at the AFPM statistics for2012 and 2013, only 31 refineries reached two years without alost-workday injury.

“Our vision is that we will continually strive for an incident-free environment for our employees and our community. Basedon the two one-year periods without a lost-time injury, it’s evi-dent that ARG employees are committed to making ARG a saferplace to work,” Sherk said.

cfacts celebrates 30 years

cfacts (Credit-Facts, Inc.), headquartered in Pittsburgh sinceits inception, is celebrating 30 yeara in business on October 24.cfacts provides a full complement of title and closing products toa diverse group of customers nationwide.

Remaining strong for three decades through some extremelytumultuous times in the industry is no small feat. William Eritz,President, observes, "Of course there are many factors that haveenabled cfacts to continue to move forward and stay competitive.The key to our success has been a positive employee environ-ment supported by a strong team of dedicated employees. As aresult, this combination has led to the highest level of service andsatisfaction to our customers."

cfacts was founded in 1984 by Sandy and Ed Miller, who hada vision of working closely with banks to ensure the consumer'sexperience in mortgage lending was smooth and stress free. Atthat time, cfacts was a local business working with the variousbanks in Western Pennsylvania. The Millers had a dream andbegan expanding cfacts into surrounding states, eventuallybecoming a national title and closing company. Contact cfacts at800-233-4747 or visit www.cfacts.com. ■

February 2014 Page 33October 2014 Page 33

Reliable Resources®…from exploration to marketCivil & Environmental Consultants, Inc. (CEC) provides

comprehensive industry-focused consulting services thatadvance client strategic business objectives. CEC is recognizedfor providing innovative design solutions and integratedexpertise in the primary practice areas of civil engineering,environmental engineering and sciences, ecological sciences,waste management, and water resources.

A multi-disciplined Natural Gas Industry Consulting Groupis derived from CEC’s practices to strategically focus on thebusiness challenges and drivers of the industry. This diverseteam is a conduit to the industry’s latest thinking and advance-ments, allowing CEC to provide clients with concise, timelyinformation and regulatory updates to facilitate informed deci-sion making. CEC helps natural gas companies with newpipelines and production wells; impoundments and dams;pipeline replacements, relocations and retirements; and com-pressor stations, storage fields and processing plants.

Named the 2013 Engineering Company of the Year by theNortheast Oil & Gas Awards, CEC has a proven track recordof providing sound technical solutions that balance the require-

ments of compliance, risk management and the business

needs of clients. CEC instills trust through a reputation built onpersonal business relationships, the practical knowledge ofsenior leadership and a culture of integrated services.

CEC was founded by four individuals in Pittsburgh in 1989.Today, CEC is an expanding company with offices nationwideand more than 650 employees. Shale gas development has ledto a number of those people becoming a part of our company,and we take pride in our employment of talented local experts.Over the years, CEC has expanded service offerings andopened regional offices with a focus on performance, deliveryand client satisfaction, allowing our clients to put their primaryfocus on operations.

Shortly after becoming involved in the developingMarcellus Shale play natural gas market, CEC set out to play amore active role in the industry by joining associations andparticipating in dialogue that would help shape the industry’sdirection. Today, CEC actively works to further the advance-ment of the industry and helps to develop best managementpractices guideline documents. The experienced managers andprincipals at CEC are involved in the outreach and advocacyefforts of industry trade groups to stay in front of emergingissues.

In this fast-paced industry, we make a personal commitmentto be responsive and to move our clients’ projects forward,more directly, the first time. CEC is your reliable resource fordesign solutions in an expanding energy industry. Find outmore at www.cecinc.com or call 800-365-2324.

PIOGA Member Profile

Profile your company

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 the company. • Describe the products and services you offer specifically

for the oil and gas industry. Do you have a product in particu-lar that sets your company apart from the competition?

• Tell how the business been positively impacted by the oiland gas industry. Have you expanded, added employees,opened new locations?

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

and provided as a Word document. Use minimal formatting—bold and italic fonts are OK, as are bulleted or numbered lists.The submission is subject to editing for length, clarity andappropriateness.

• Include the company logo or a photo. Images must behigh-resolution (300 dots/pixels per inch or higher) and in anygraphics format. Identify any people or products in a photo.Send image files separately, not embedded 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.

dsteffy@newprospect.comCell: (412) 667-9817

www.newprospect.com

NEW PROSPECT COMPANY

Office: (724) 742-1122Fax: (724) 742-4703

NEW PROSPECT COMPANY120 MARGUERITE DRIVE, SUITE 201 • CRANBERRY TOWNSHIP, PA 16066

DANIEL R. STEFFYNE Business Development ManagerEngineering, Completions and Drilling Consultants

Page 34 The PIOGA Press

DEP regulations: Continued from page 1

Subchapter C rulemaking affecting surface operations.Rough drafts of the split regulations were provided at the

meeting (available on DEP’s website at www.portal.state.pa.us/portal/server.pt/community/oil_and_gas_technical_advisory_board_(TAB)/18260). The two drafts are not significantly differ-ent at this point.

Kurt Klapkowski, director of DEP’s Bureau of Oil and GasPlanning and Program Management, explained, “There reallyaren’t a whole lot of things that on their face only apply to eitherconventional or unconventional wells.” The different versions—now being referred to as Chapter 78 for conventional wells andChapter 78A for unconventional—will be the basis for futurechanges as regulators determine whether some rules should applyto one side of the industry or the other.

On the status of the Chapter 78 Subchapter C rulemaking as awhole, after reviewing approximately 25,000 public comments,officials indicated they have made a few decisions so far onwhich parts of the draft rules to revise. For example, proposedregulations on well site security, temporary abovegroundpipelines and gathering pipelines will apply to unconventionaloperations only. DEP also will revise a proposal regarding thesteepness of pit slopes for conventional operations after concernswere raised that the new rule would actually lead to bigger pits.Additionally, instead of requiring that all buried tanks beremoved from well sites, the department will establish construc-tion and maintenance standards for the tanks.

A presentation from the meeting outlining these and otherrevisions under consideration can be downloaded from the webaddress above.

DEP officials indicate they intend to provide TAB with a draftfinal-form rule in late 2014 or early next year. An advancednotice of final rulemaking will follow in March, with a 30-daycomment period. The draft final rulemaking is expected to bepresented to the Environmental Quality Board late in 2015. Theregulations would then take effect in spring 2016.

Recorded webinars of the TAB meeting can be found atwww.portal.state.pa.us/portal/server.pt/community/Webinars/21506/Oil_and_Gas/1615487. ■

New from Universal Bacteria Specialist: An environmentally friendly biocide with 1,450 ppm FACs.

ENVIROLYTE biocide offers you a safe, biodegradable alternative to toxic biocides for controlling bacteria in crude oil production and processing.

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Find out more at www.universalbacteria.com

or call 281.342.9555

E.P.A. Reg. No. 87636-2

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“PA Independent Oil and Gas Association”

October 2014 Page 35

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

Oil and Natural Gas Development ServicesOil and Natural Gas

Development Services

Meadville PAHouston PAWaverly NY

Visit us online at: www.moody-s.com

Groundwater & Environmental Professionals Since 1891Groundwater & Environmental Professionals Since 1891

Page 36 The PIOGA Press

Natural Gas Futures Closing PricesAs of October 9

Month PriceNovember 2014 3.857December 3.940January 2015 4.031February 4.017March 3.950April 3.730May 3.700June 3.738July 3.755August 3.773September 3.769October 3.796

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 Direct Energy Business, 304-464-1176

Oil & Gas Trends

Pennsylvania Rig Count

February 2014 Page 37October 2014 Page 37

Purchasers of Penn Grade & Utica Crude Oil

77 N. Kendall Ave.Bradford, PA 16701

814-368-1200

www.amref.com

Dan PalmerCrude Relationship Mgr PA / NY

814-368-1263dpalmer@amref.com

ISO 9001:2008 Certified

Supplying Quality Lubricants Refined UsingPenn Grade Crude Oil

Page 38 The PIOGA Press

New PIOGA members — welcome!

ArTech Group, LLC10627 Hartslog Valley Road, Huntingdon, PA 16652724-537-8324www.artechgroupllc.comProfessional Firm

CGC PipelineP.O. Box 52, Clearbrook, MN 56634918-762-2352www.cgcpipeline.comService Provider

Leech Tishman Fuscaldo & Lampl, LLC525 William Penn Place, 28th Floor, Pittsburgh, PA 15219412-261-1600www.leechtishman.comProfessional Firm

Twin Eagle Resource Management820 Ridgeview Drive, Pittsburgh, PA 15228713-855-3874Service 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!

Serving the Oil & Gas Industry for over 90 years.

MRC CORPORATE OFFICE

Austintown, OH 330-799-1100 Bradford, PA 814-368-8145 Buckhannon, WV 304-472-3565 Carrollton, OH 330-627-0259 Columbus, OH 614-475-4033 Corbin, KY 606-523-9640 Horseheads, NY 607-739-8575 Hurricane, WV 304-562-5724 Indiana, PA 724-349-6823 Williamsport, PA 570-748-5276 Norton, VA 276-679-6452 Wooster, OH 330-264-0077

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.Thomas M. Bartos, ABARTA EnergyStanley J. Berdell, BLX, Inc.Rob Boulware, Seneca Resources CorporationCarl Carlson, Range Resources - Appalachia, LLCMike 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, LLCJoy Ruff, Dawood Engineering, Inc.Stephen Rupert, Texas Keystone, Inc.Jake Stilley, Patriot Exploration CorporationBurt 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 Energy

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 39October 2014 Page 39

PIOGA EventsSearch Engine Optimization Webinar for PIOGA Members

October 22. Info: www.pioga.org/events/category/pioga-events

PIOGA Conventional Producer RoundtableNovember 10, Ramada Greensburg Hotel & ConferenceCenterNote change from November 3Info: www.pioga.org/events/category/pioga-events

PIOGA Winter MeetingFebruary 24-24, Seven Springs Mountain Resort, ChampionInfo: www.pioga.org/events/category/pioga-events

PIOGA Summer Picnic & Golf OutingSpring TBA, Wanango Golf Club, RenoInfo: www.pioga.org/events/category/pioga-events

PIOGA Pig Roast, Equipment Show & SeminarJuly 28-29, Seven Springs Mountain Resort, ChampionInfo: www.pioga.org/events/category/pioga-events

18th Annual Divot Diggers Golf OutingTam O’Shanter of Pennsylvania, HermitageInfo: www.pioga.org/events/category/pioga-events

Eastern Oil & Gas Conference and Trade ShowOctober 27-28, Monroeville Convention Center, MonroevilleInfo: www.pioga.org/events/category/pioga-events

Industry EventsPlatts 7th Annual Appalachian Oil & Gas

October 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

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

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