90696 Shale Gas Full Report-final

7/27/2019 90696 Shale Gas Full Report-final

1/139

Shale GasDeliberations, Findings,and Recommendations

ROUNDTABLE:

A U G U S T 2 0 13


2/139

The Shale Gas Roundtable cochairs and sta workedthought ully and diligently to assemble a high-level,diverse membership including 26 individuals romrelevant, interested constituencies. Roundtable memberswere recruited to serve because o the unique perspec-

tives and contributions each could bring to the e ort.A ull listing o Roundtable members can be oundon page 4.

In adopting this document, the Roundtable membersendorse that the nal report was built on constructivedialogue, was in ormed by sound research and in or-mation, and that the included recommendations meritconsideration by policymakers at all levels as they seekto e ectively and sa ely manage unconventional oiland gas development.

While the Roundtable has achieved general agreementon the reports value in in orming decision makers,individual Roundtable members may not agree onthe details o every recommendation. The nal reportrefects the care ul deliberations and ndings o theShale Gas Roundtable; it does not necessarily refectthe views o the members a liated organizationsor o the Institute o Politics.


3/139

Deliberations, Findings,and Recommendations

Shale Gas ROUNDTABLE:

James Roddey , Cochair Principal

ParenteBeard LLC

Jared Cohon , Cochair President Emeritus

Carnegie Mellon University

The Shale Gas Roundtable was created in the all o 2011 toexplore natural gas development in Southwestern Pennsylvania.The Roundtable operated by building and sustaining relation-ships among relevant regional stakeholders; identi ying criticalocus areas through dialogue, research, and collaboration;assessing those ocus areas; and developing recommendationsthat promote responsible regional shale gas development.Twenty- our civic leaders rom the private, nonpro t, and publicsectors served with us on the Roundtable. From the beginning,our process relied on broad stakeholder consultation, in-depthresearch, education on important issues, and respect ulconsensus building among our diverse members.

Our central question was this: As a region, how can we moste ectively and responsibly sa eguard our communities andenvironment, grow our economy, and manage unconventionaloil and gas development? Our members recognized the value

judgments and trade-o s inherent in at tempting to answerthis question and the balancing act that would be necessaryto make progress. Issues such as the use o natural gas, waterresources management, air quality impacts, in rastructuremaintenance, housing, and community quality o li e quicklyentered our conversations. Through a process o care ulreview and thought ul prioritization, we selected our areas orthe Roundtables attention: water management, conservationand unitization, research, and midstream development.

This nal report represents the culmination o our work.It contains eight core, overarching recommendations thatemerged rom our overall e ort and speci c recommendationswithin each o the our ocus areas. The report also includessubstantial background and educational in ormation in boththe main text and appendices.

In adopting this report, the Roundtable endorses its act-basedand consensus-driven process and the bene t o the resultingideas, particularly in terms o in orming the ongoing publicpolicy discussion in this region and in the Commonwealth.We believe that the included ideas and recommendationsdeserve consideration rom leaders at all levels as they evaluateand make decisions about Pennsylvanias ability to e ectivelyand sa ely manage unconventional oil and gas development.

As cochairs, we thank the members o the Roundtable ortheir valuable and signi cant contributions o time, energy,and knowledge. We commend their willingness to passionatelyrepresent their values and perspectives while always strivingor common ground and achievable progress. We also extendour appreciation to the many regional, state, and nationalstakeholders and leaders who shared their experience andinsights with us. Finally, we thank the Roundtable stamembers or their outstanding support and guidance.


4/139


5/139

Shale Gas ROUNDTABLE TABLE OF CONTENTS

Executive Summary ...................................................................................................... 7

Status o Unconventional Oil and Gas Development in Pennsylvania .......................... 20

Methods or Producing Unconventional Oil and Gas ........................................... 21

Overview o Pennsylvania Oil and Gas Activities and Resources .......................... 22

Oversight o Pennsylvanias Unconventional Development .................................. 23

Shale Gas Roundtable Background ............................................................................ 25

Mission ............................................................................................................... 25

Geographic Focus ............................................................................................... 25

Roundtable Members and Roles ......................................................................... 25

Roundtable Sta Support ................................................................................... 26

Building a Common Understanding (2011-12) ..................................................... 26

Getting It Right Framework and Recommendations Development (2012-13) ... 28

Core Roundtable Recommendations .......................................................................... 32

Unconventional Oil and Gas Research Fund Proposal ................................................. 36

Shale Gas Research Needs: Validating the Roundtables Assumptions ................. 36

Model Research Organizations ........................................................................... 39

Proposed Framework or the Shale Gas Research Fund ....................................... 41

Characteristics o the Shale Gas Research Fund ...........................................41

Geographic Scope ....................................................................................... 42

Focus o Research Activities ......................................................................... 43

Implementation Strategy and Next Steps ............................................................ 44

Modernization o the Pennsylvania Oil & Gas Conservation Law ................................ 45

Defnition o Key Concepts ................................................................................. 46

Applicability o the Conservation Law ............ .............. ............. .............. ............ 47

Administration o the Conservation Law ............................................................. 47

Rationalization o Drilling Units ........................................................................... 48

Integration o Units ............................................................................................ 49

Unitization Review System .................................................................................. 50

Availability o Unit In ormation ........................................................................... 51

Oil and Gas Lease Release Requirement .............................................................. 51

Temporary Regulations ....................................................................................... 52

Water and Unconventional Oil and Gas ...................................................................... 53


6/139

Background on the Intersection o Water and Shale Oil and Gas ......................... 53

Recent Government Actions on Water and Shale Gas ......................................... 54

Federal ........................................................................................................ 55

Pennsylvania ................................................................................................ 55

Key Issues in Regional Shale Gas Water Management ......................................... 57

Water Sourcing ........................................................................................... 57

Hydraulic Fracturing Chemical Disclosure ..................................................... 60

Erosion and Sedimentation .......................................................................... 61

Impoundments and Containers ................................................................... 62

Vehicle Tra fc or Water Transport............................................................... 63

Wastewater Treatment and Disposal ............ .............. .............. ............. ....... 64

Groundwater Protection .............................................................................. 68

Water-Related Violations ............................................................................. 71

Regional Water Management ...................................................................... 73

Water Monitoring ........................................................................................ 75

Midstream Development in Pennsylvania ................................................................... 77

Background on the Natural Gas Midstream System ............. .............. ............. ..... 78

Midstream In rastructure Oversight and Regulation ............................................80

Federal Midstream Management Framework ............. .............. ............. ....... 80

Pennsylvania Midstream Activities ............................................................... 81

Recommendations or Pennsylvanias Managemento Midstream In rastructure ................................................................................ 83

Conclusion ......................................................................................................... 88

Appendices ................................................................................................................ 89

Appendix A: Southwestern Pennsylvania Oil and Gas Activity Dashboard ........... 90

Appendix B: Regional Research Survey Results Summary, August 2012 ............... 99

Appendix C: Comparison o MSAC Water Recommendations and Act 13 ......... 104Appendix D: Pennsylvania Oil and Gas Regulatory and Decisions Structure ....... 109

Appendix E: Standards and Best Management Practicesor Shale Oil and Gas Development .................................................................. 116

Appendix F: Recommendations o the Report to the General Assemblyon Pipeline Placement o Natural Gas Gathering Lines ...................................... 129

Appendix G: Use ul Resources .......................................................................... 131

Shale Gas ROUNDTABLE TABLE OF CONTENTS (continued)


7/139

ExEcUTivE SUMMARyPennsylvania is several years into unconventional oil and gasdevelopmentthe early years o what some are calling amulti-decade shale energy boom. The regulatory environmentis shi ting, laws are being updated, and media and public atten-tion are high. The issues related to accessing this resource havebecome politically and emotionally charged, with a signi cantamount o misin ormation in the marketplace. While shale gasdevelopment presents a unique economic and energy opportu-nity or Pennsylvania and its surrounding states, developmento these resources also presents substantial challenges or ourregion in the areas o water resources management, air quality,in rastructure maintenance, housing, and community quality oli e, along with other environmental and public health impacts.

Shale ormations such as the Marcellus, Utica, and Burket arere erred to as unconventional resources due to the nontradi-tional methods utilized in producing oil and gas rom them.Unlike conventional gas ormations, shale gas is released romdeep deposits using techniques that include multi-well pads,directional drilling, and hydraulic racturing. In 2010, estimateso Pennsylvanias accessible natural gas reserves doubled asa result o the application o these technologies to the MarcellusShale ormation. The increase in Pennsylvania was a signi cantcontributor to the rise in total U.S. accessible reserves,accounting or about 20 percent o the overall increase thatyear. Although hydraulic racturing has been used since themiddle o the last century, it was only a decade ago whenits coupling with horizontal drilling and use in accessing deepshale deposits were piloted in Texass Barnett Shale andmore recently applied to the Marcellus Shale.

From 2002 through 2012, 6,283 unconventional oil and gaswells were drilled in Pennsylvania on more than 2,700 wellpads. These wells produced a total o 3.7 trillion cubic eeto natural gas in that decade, with 85 percent o that totalproduced in 2011 and 2012. Approximately 35 percento these wells are located in the 10-county SouthwesternPennsylvania region.

In 2012, 57 percent o all wells drilled in Pennsylvania and90 percent o all wells drilled in Southwestern Pennsylvania

were unconventional. At the end o 2012, 57 percento all drilled unconventional wells in Pennsylvania wereproducing natural gas or market. Though unconventionalwells represented only 5 percent o the total producing wellsin the Commonwealth, they accounted or 90 percento Pennsylvanias total gas production in 2012.

The Commonwealths Department o Environmental Protection(DEP), through its O ce o Oil and Gas Management, is thestate agency primarily responsible or oversight o this sector.DEP issues permits; regulates water, air, and solid wasteimpacts; responds to complaints; and en orces compliancewith relevant state laws and regulations. While DEP hasthe largest responsibility, the Pennsylvania Public Utility

Commission, Pennsylvania Department o Conservation andNatural Resources, the U.S. Environmental Protection Agency,and several other state and ederal agencies have roles in themanagement o various aspects o the oil and gas industry.

Over the last several years, Pennsylvania has made substantiale orts to improve the management o unconventional oil andgas development, including, but not limited to, updating waterstandards or total dissolved solids, increasing permit ees tosupport regulatory sta ng needs, adopting the rst compre-hensive update o its Oil & Gas Act through Act 13 o 2012,and promulgating updated Chapter 78 environmental regula-

tions to implement Act 13.

ShALE GAS ROUNDTABLE OvERviEw

In response to the desire o regional, multi-sector leaders toelevate and in orm the regional energy dialogue, the ShaleGas Roundtable was created in the all o 2011 to ul ll athree-part mission related to unconventional oil and gasproduction, transport, and use:

Building and sustaining relationships among relevant cross-sector stakeholders to better support diverse regionalenvironmental protection, community quality o li e, andeconomic development goals

Identi ying high-priority ocus areas through consensus-building dialogue, extensive research, and shared goalsor the region

Assessing the ocus areas and developing ideas andrecommendations that promote the improved managemento and outcomes rom regional unconventional oil andgas development

The principles used to guide the Roundtables deliberationsand activities were as ollows:

Operating with integrity, inclusiveness, and accountability

Seeking the best possible balance between environmental/ community protection and shale gas development/ economic growth

Conducting a thorough and objective study o issues

Shale Gas ROUNDTABLE 7


8/139

Seeking the best available data to guide act-based dialogue

Incorporating stakeholder input with the help o members

Working closely with diverse decision makers to seek inputand counsel

The Shale Gas Roundtable cochairs and sta workedthought ully and diligently to assemble a high-level, diverse

membership o 26 individuals rom relevant, interestedconstituencies. Roundtable members were recruited to servebecause o the unique perspectives and contributions eachcould bring to the e ort. The Roundtables geographic scopeincluded the 10 counties o Southwestern PennsylvaniaAllegheny, Armstrong, Beaver, Butler, Fayette, Greene, Indiana,Lawrence, Westmoreland, and Washington. These countiesrepresent approximately one-third o the unconventional oiland gas permits issued, wells drilled, and gas produced inthe Commonwealth over the last 10 years. The 10-countyRoundtable ocus does not imply that unconventional oil andgas development is only a regional issue. Rather, the regionwas selected to maintain a manageable geography orrequent in-person member interaction on these issues.

The Roundtable members collectively determined theirdirection, process, and recommendations. In this work, theywere supported by the Institute o Politics at the University oPittsburgh. The Institute sta team, through neutral acilitationand unbiased research, established a productive rameworkor members to develop, discuss, and evaluate policy ideasand options. The activities o the Shale Gas Roundtable andthe services o the Institute o Politics were generously supportedby the Pittsburgh Foundation, the Heinz Endowments, andthe Richard King Mellon Foundation.

In adopting this document, the Roundtable members endorsethat the nal report was built on constructive dialogue, wasin ormed by sound research and in ormation, and that theincluded recommendations merit consideration by policymakersat all levels as they seek to e ectively and sa ely manageunconventional oil and gas development.

While the Roundtable has achieved general agreement onthe reports value in in orming decision makers, individualRoundtable members may not agree on the details o every

recommendation. The nal report refects the care uldeliberations and ndings o the Shale Gas Roundtable;it does not necessarily refect the views o the membersa liated organizations or o the Institute o Politics.

BUiLDiNG A cOMMON UNDERSTANDiNG(201112)

At the inaugural meeting o the Shale Gas Roundtable inSeptember 2011, members cra ted a work plan to guide theircollective e orts. That work plan was then implemented overthe subsequent six months. It included the ollowing components:

Completing an extensive literature review o laws, policies,regulations, scienti c studies, and advocacy materials relatedto unconventional oil and gas development in the region

Conducting and summarizing more than 120 benchmarkinginterviews with environmental organizations, industryassociations, landowner groups, researchers, and regulatorsand elected o cials rom the local, county, state, and ederallevels. These interviews were completed through site visitsto Colorado, New York, Ohio, Texas, and West Virginia.Interviews also were held with multi-sector leadership inHarrisburg and Washington, D.C.

Continuing outreach to individual Roundtable membersand to key stakeholders in Southwestern Pennsylvania tocollect as much in ormation as possible about regionalunconventional oil and gas development

Implementing a Shale Gas University to allow Roundtablemembers to participate in shared learning experiences.Educational modules eatured expert guest speakers ontopics ranging rom water management to utility regulationto the ull li e cycle o natural gas production, transport, anduse. Also included were eld tours o a compressed naturalgas ueling station, a centralized water treatment acility,

a drilling site, and areas o the region most impacted by oiland gas development. The Shale Gas University sessionsalso provided opportunities or relationship buildingand education on critical issues and were held as neededthroughout the entire course o the Roundtables work.

The Roundtable met regularly to share the ndings and resultsrom the above activities.



9/139

GETTiNG iT RiGhT FRAMEwORk ANDREcOMMENDATiONS DEvELOpMENT(201213)

The economic bene ts o unconventional resource developmentare o ten described as worthwhile as long as that develop-ment is done right. Roundtable members agree, but done

right o ten is not well-de ned. Through extensive review andin-depth discussion o the data that resulted rom the activitiesoutlined above, the Roundtable concluded that the necessaryingredients or a getting it right ramework are:

a strong, adaptive legal and regulatory system with adequateimplementation sta and resources;

aggressive development and industry adoption o best manage-ment practices and other operational per ormance standards;

investments in technological and operational innovation; and

care ully targeted and balanced research to in orm

the continual improvement o statutes, regulations,best management practices, standards, and technology.

I Pennsylvania and its surrounding states pursue excellencein these our areas, the Appalachian Basin could serve as anational model or getting unconventional upstream, mid-stream, and downstream development right. Speci cally, theRoundtable believes that Pennsylvania could best implementthis ramework by aiming progress at three interrelated goals:

Minimizing the acute and cumulative impacts o oil andgas activity on the environment, public health, and local

communities Minimizing sur ace disturbance rom oil and gas activity and

maximizing the e ciency o resource recovery and transport

Enhancing the regional use o natural gas and supportingopportunities or regional economic growth based on theull natural gas value chain

In early 2012, the Roundtable agreed that its attentions wouldbest be concentrated in the legislative, regulatory, and researchaspects o this ramework. This decision was based largelyon the degree to which other organizations and e orts werealready ocused on creating best management practices anddriving innovation.

With the above ramework and goals in mind, the Roundtabledecided to select a small number o areas or comprehensiveexploration and ocused recommendations. A ter considerabledeliberation over 30 potential areas, the members prioritizedour areas or targeted attention:

Policy-relevant research: increasing the amount and enhancingthe perception o research on the impacts o unconventional oiland gas development and ensuring that the resulting knowledgeis used or the improvement o regulations and best practices

Conservation and unitization: developing a balanced proposalor modernizing the 1961 Pennsylvania Oil and Gas ConservationLaw to account or modern technologies and approaches, limitsur ace disturbance, avoid wasted oil and gas resources, andmove toward uni orm conservation rules or all unconventionalshale ormations

Water management: protecting water resources by identi yingimprovements in management and regulation in the areas owater sourcing, hydraulic racturing chemical disclosure, erosionand sedimentation, impoundments, vehicle tra c or watertransport, wastewater treatment and disposal, groundwaterprotection, water related violations, regional water management,and water monitoring

Midstream development (pipelines and related in rastructure): developing recommendations that minimize the environmentaland sur ace ootprints o midstream construction, improvepipeline sa ety, enhance coordination and planning o sitingdecisions, and provide increased opportunity or economicand community development

The Roundtables ull report contains extensive backgroundin ormation and recommendations or each o these our areasalong with a set o core recommendations that emerged romthe Roundtables discussions. All o the recommendations wereconstructed using a thorough and deliberative process to prioritize

and address critical issues or Southwestern Pennsylvania.

cORE REcOMMENDATiONS

Through examination o the our ocus areas, the Roundtable alsoidenti ed a set o broader, overarching recommendations that twithin its ramework:

The Commonwealth o Pennsylvania should increaseinvestments in improving the accuracy, unctionality,and transparency o its oil and gas data in rastructure.

DEP has made signi cant progress in its management o oil andgas data over the last several years, but additional investmentsin innovation and data transparency and utility are necessary.Increased investment in user- riendly, accurate, and real-timesystems will improve the e ciency o DEP-industry interactions,enhance research and data analysis capabilities, acilitate publicaccess to in ormation, and build public trust.



10/139


The Commonwealth should develop regulatory sta fngparameters and oil and gas annual reports. DEP alsoshould report annuallyand publiclyon its oil and gasactivities, including in ormation about the prior years progressand priorities or the upcoming year. The inclusion o transparentsta ng parameters (possibly including minimum inspector-to-well ratios, requency and number o well inspections, time

rame required or permit review and action, expectations ortimely responses to public and s takeholder complaints andinquiries, and other critical metrics) in this annual report wouldprovide a clearer picture o DEPs additional sta ng needs,i any, and demonstrate its continued ability to ully implementthe states oil and gas regulations.

The Commonwealth should restructure the Oil andGas Technical Advisory Board. While most DEP advisorycommittees are diverse and provide opportunities or cross-sector dialogue on policy and technical issues, the existingOil and Gas Technical Advisory Board (TAB) has ve members,

all with geologic and petrochemical backgrounds and mostwith industry ties (this structure is statutorily mandated in thecurrent Pennsylvania Oil & Gas Act). The administration andthe legislature should expand the Advisory Boards scopebeyond technical issues and diversi y the membership atthe earliest possible time.

The Commonwealth should continue to regularly evaluatethe ability o existing budget support and permit eesto support oil and gas regulation. As the administration andlegislature consider uture DEP budgets, they should regularlyevaluate the ability o budget support and permit ees to

adequately support DEP oil and gas operations. Currently,the oil and gas program is entirely unded by a combinationo new permit ees, impact ee revenue, nes, and civil penalties.With current low natural gas prices and slowed drilling, it isunclear i new permit ees will be able to sustain the necessaryoil and gas regulatory sta ng level.

The Commonwealth should participate in regular,comprehensive STRONGER reviews. DEP should regularlyparticipate in State Review o Oil and Natural Gas EnvironmentalRegulations, Inc. (STRONGER) reviews in order to bene t romindependent assessments o the states oil and gas regulations

and to identi y opportunities or additional improvement.A STRONGER review already is underway in 201314, and itmay take into account proposed regulations based on Act 13.

The ederal government, state government, and stake-holder groups should support e orts to increase balancedresearch on and rigorous monitoring o the possibleimpacts o unconventional oil and gas development. The Roundtables recommendation or an independent research

und, described below, represents a particularly compellingopportunity or progress in the understanding o oil and gasdevelopment impacts.

Government, industry, and regional universities shouldsupport NETL as the premier national unconventional oiland gas technology research hub and, through NETL, con-tinue to advance technology and operational innovations.The Appalachian Basin states are well-positioned to lead onoil and gas technology and operational innovations with theexcellent capabilities o local research universities and withthe U.S. Department o Energys National Energy TechnologyLaboratory (NETL) headquartered in Southwestern Pennsylvania.The ederal and state governments, along with diverse stake-holders throughout the basin, should seek stronger relationshipswith NETL in order to continue developing innovations that candiminish the environmental risks o unconventional resourceextraction, transport, and use.

DEP should strengthen engagement with and support ovarious cross-sector and industry e orts to develop BestManagement Practices. DEP should continue its engagementwith and support o various multi-stakeholder and industrye orts to develop best management practices (BMPs) and high-level per ormance standards. As appropriate, these practices/ standards should be considered or incorporation into uturerevisions o relevant regulations and guidance documents toensure continual improvement o industry operations.

UNcONvENTiONAL OiL AND GAS

RESEARch FUND pROpOSALShale gas development is complex and multi- aceted, witheconomic, environmental, public health, social, and technologicalcomponents. Robust and trustworthy research should be oneo the critical ingredients in decision making by the state andederal governments and other important stakeholders.

The Roundtable used various tools and approaches to explorethe research ocus area, including a higher education survey,interviews with key government policymakers, outreachto relevant stakeholders, and media/literature reviews.The ndings indicated that:

1. While substantial research has been completed or is underway, the amount o research activity on shale gas is lackingrelative to the knowledge needs o policymakers and thepublic. Further, this mismatch between needs and actualresearch o ten is due to a dearth o unding.



11/139

2. Research that has been completed or is underway o ten isperceived as biased due to the unding source or reviewprocesses used.

3. Research has not been well aligned with the in ormationor timing needs o regulatory sta , elected decision makers,or other civic leaders.

The Roundtable also investigated possible models to addressthe identi ed research de ciencies. Most potential modelsproved inadequate to overcoming the particular barriers oenhanced shale gas research. The one exception, however,was the Health E ects Institute (HEI), based in Boston. To asigni cant degree, HEIs nonpartisan approach, independentstructure, history, and activities in ormed the Roundtablemembers thinking on unconventional oil and gas researchissues and aided in the development o the proposal below.

Based on the demonstrated need or additional balancedresearch, the investigation o models, stakeholder input, and

the other in ormation gathered, the Roundtable recommendsthat a und be created to support rigorous and enhancedresearch to guide unconventional oil and gas development.The und would have the ollowing characteristics:

diverse unding streams (state and ederal governments,industry, and private philanthropy)

regularly updated multi-year strategic research plan

scienti cally rigorous (competitive unding awardsand peer review)

transparency o unding and o research outcomes

strong government and stakeholder relationships

supportive o in ormed policy and practice based onstate-o -the-art science

able to synthesize existing research or shorter-termconsumption by decision makers

adequacy o unding support and sta ng to implementa multi-year strategic research plan

In combination, these characteristics will help the researchund to maintain its ability to be nimble and responsive whilebeing deliberative, strategic, and scienti cally rigorous.

FUND GEOGRAphy

While the und could grow into a national e ort, the bestinterim start-up strategy is to ocus speci cally on geologicormations ound in the Appalachian Basin. Exact geographicdimensions o the basin vary, but the most commonly includedstates are New York, Pennsylvania, Ohio, and West Virginia.

These states share unconventional resources in the Marcellus,Utica, and other shale ormations. They have a shared historicalexperience with resource extraction and, in many ways, similarregulatory regimes.

At the end o 2011, the U.S. Secretary o Energy AdvisoryBoards Natural Gas Subcommittee endorsed the creation oRegional Centers o Excellence that would involve public interestgroups, state and local agencies, colleges and universities,and industry in basin-speci c best practice development.While this research und would have a slightly di erent mission,an Appalachian Basin scale would be consistent with the U.S.Department o Energys emphasis on regional, shale-basinde ned, and cross-sector approaches.

FOcUS OF RESEARch AcTiviTiES

A multi-sector und appears particularly well suited to supportresearch on the acute and cumulative environmental, ecological,public health, social, and community impacts o unconventional

oil and gas extraction, production, transport, and use. Theseare the most contentious areas that require increased attentionand skilled, impartial investigation.

FUND iMpLEMENTATiON STRATEGy

In order to begin the implementation o the research undproposal, planning already is under way or a process toestablish a multi-year unconventional oil and gas researchagenda that will include targeted, care ully timed, and policy-relevant research questions. This initial process and resultingagenda will, to the highest degree possible, con orm to the

characteristics o the und itsel .

It will be essential or diverse stakeholders to be able to trustthe rigor and independence o the process and the resultingagenda. The agenda cannot be viewed as being driven by onesector or one institution. Expert scienti c sta with experiencein collaboratively identi ying research questions, setting priorities,and establishing strategic research plans will be essentialingredients in the process. A scienti cally credible, impartialacilitator with a track record in this type o work and withexperienced sta would heighten the chances o success ullycra ting an agenda that can attract implementation unding.

In parallel with the agenda-setting process, a detailed plan orthe implementation o the agenda through a multi-year, cross-sector und will be constructed. Longer-term emphasis will beon securing stability and predictability or the research undthrough multi-year unding commitments, regular stakeholdercommunications, hiring ull-time sta , establishing researchand review committees, and eventually dra ting requests orproposals based on the strategic research agenda.



12/139

MODERNizATiON OF ThE OiLAND GAS cONSERvATiON LAw

In long-standing Pennsylvania law, the rule o captureprovides that ownership o a natural resource is determinedby who captures the resource rst. This legal paradigmresulted in the early, ine cient extraction o Pennsylvaniasoil reserves. Through over-drilling to capture the oil resource,well operators depressurized oil reservoirs, stranded numerousbarrels o oil, and littered the landscape with wells. The Oil &Gas Conservation Law, which was originally adopted to satis yPennsylvanias membership requirements or the InterstateOil & Gas Compact Commission, was designed to moree ectively and e ciently manage oil and gas reservoirs.

However, the Conservation Law has not been updated since1961. It is the last portion o a three-part Pennsylvania oil andgas legal structure to be updatedboth the Oil & Gas Act(Act 13) and the Coal & Gas Resource Coordination Act havebeen revised within the last several years. The 1961 PennsylvaniaConservation Law uses outdated depth restrictions, whichin turn generate distinct regulatory systems or the Utica,Marcellus, and other shale ormations.

The Shale Gas Roundtable has developed a balanced proposalor modernizing the Conservation Law and ensuring a standard-ized regulatory structure through all unconventional ormations.This ramework can be used to in orm a comprehensive updateo the Conservation Law or, in the interim, components o theramework could be legislated separately.

The Roundtables considerations in cra ting this proposal

included the ollowing:

The Commonwealth should not have di erent conservationrules or di erent shale layers.

The 1961 law did not anticipate horizontal drilling, multi-wellpads, or large-volume hydraulic racturing, and any updateshould take these advances into account.

It is in the best interest o the Commonwealth to limit thedensity o well pad development. Fewer pads equal eweracres o sur ace disturbance, less in rastructure build outincluding gathering pipelines, and likely ewer potential

environmental impacts. Land and mineral rights owners have complicated relation-

ships with each other and with the natural gas resource. TheCommonwealth should approach any update with care ulattention paid to the ability o all stakeholders to construc-tively participate in the unitization process.

Natural gas is an important economic asset o theCommonwealth. With substantial extraction already underway, the Commonwealth should make every e ort to increasethe e ciency o resource recovery and to prevent wastethrough stranded gas/acreage.

The ramework below aims to provide uni orm conservationrules that account or modern oil and gas developmentapproaches and that prevent unnecessary environmentalimpacts and wasted resources.

AppLicABiLiTy AND ADMiNiSTRATiONOF ThE cONS ERvATiON LAw

Modernized provisions in the Conservation Law should applyto all unconventional reservoirs as de ned by Act 13. Giventhat the original act will likely be amended instead o replaced,1961 provisions that remain relevant to either conventionalor unconventional gas development should be retained.

The Department o Environmental Protection (DEP) would carryout the unctions outlined in these recommendations, includingthe review o proposed units and integration requests. Operatorsare accustomed to state unit review and approval processes inmany other oil and gas-producing states. The aim is not to createnew bureaucracy but to enable DEP to ably manage the additionalConservation Law responsibilities in strong alignment withexisting environmental regulations. DEP would be required todesign a unit ling process that enables operators to clearlydemonstrate their ul llment o the established requirementsand acilitates timely decisions. Recently instituted state permitreview and decision guarantees (assuming accurate/complete

applications) would apply to DEP unit reviews. In order to payor the additional sta necessary to conduct unit and integrationreviews, DEP would be enabled to charge ees or integrationrequests and unit proposal lings.

RATiONALizATiON OF DRiLLiNG UNiTS

The Conservation Law should govern the logical organizationo drilling units in order to minimize sur ace disturbance andmaximize the e ciency o extraction and transport o oil andnatural gas.

The Commonwealth should not legislatively de ne minimumand maximum unit sizes, number o pads per unit, or numbero wells per unit. Instead, DEP would be charged with developinga maximum ratio o sur ace disturbance to unit size and require-ments that the unit be e ectively drained. For example, i thelegislation required exactly 400-acre units with one pad per unit,the operator would need three pads to drain 1,200 acres. Whati , instead, the operator could design a 1,200-acre unit anddrain it with two pads? Or, what i the operator could drain an



13/139

800-acre unit with one pad and drain the adjacent 400-acreunit rom a pad on the 800 acres? A ratio tool and require-ments or e ective drainage would allow fexibility to DEPand operators in e ectively managing the gas reservoir,avoiding stranded gas, adapting to technological and bestpractice advances, rationalizing units, and limiting sur acedisturbance. These unit parameters should be evaluated or

revisions every three years to account or advancing technologyand operational practices.

Operators would be encouraged to propose multiple unitsto DEP in one ling. Such an approach would allow or morecomprehensive conservation by allowing industry and theCommonwealth to work toward development that limitssur ace impact and improves e ciency over multiple unitscovering a larger geographic area.

Based on racture propagation data and area geology, operatorsshould be required to propose setback distances between theunit boundary (boundary with leases/land not included in thatunit) and any well laterals. This approach prevents subsur acetrespass and protects adjacent mineral rights owners. It alsoprotects operators rom cross- racturing each others laterals.

iNTEGRATiON OF UNiTS

In most cases, operators would control all leases in a proposedunit. DEP would not have jurisdiction over which leases oracreage are included in the proposed unit, only over whetherthe operators are meeting sur ace disturbance and e ectivedrainage requirements.

In many other oil and gas-producing states, when operatorsare not able to secure leases or all o the acreage in a proposedunit, compulsory integration o non-consenting rights ownersis an important component o conservation law. In Pennsylvania,ull compulsory integration is currently available below theOnondaga Limestone via the 1961 Oil & Gas ConservationLaw. Given the aim o minimizing sur ace impacts andavoiding waste, such compulsory integration does e cientlyand e ectively serve these goals. At a minimum, Pennsylvaniashould consider enabling company integration and existinglease integration:

Company-on-company compulsory integration: The capabilityto request integration should be available to personsde ned as operators. This will provide a remediation toolin the event that operators are e ectively blocking theintegration o e cient units.

Existing lease integration: I an operator has the right todevelop multiple, contiguous, held-by-production leases

separately, the operator should be able to request integrationo those leases into a unit or the purposes o oil and gasdevelopment via horizontal drilling (unless expressly prohib-ited by an existing lease). A similar provision is ound withinPennsylvania Senate Bill 259, which passed the Senate andthe House o Representatives in June 2013.

Seventy percent o the acreage in a proposed unit should beunder the control o the operator be ore any type o integrationrequest can be led. The operator should demonstrateand document its attempts at good aith negotiation be orea request can be considered. A ee would be associated withling any type o integration request, which would serveto discourage such requests and provide additional revenueto support DEPs unit review unctions.

AvAiLABiLiTy OF UNiT iNFORMATiON

DEP should develop requirements or ormatting and datainclusions in unit proposal and nal unit lings. A statewideelectronic ling system or unit proposals and declarationsshould be designed and implemented. The resulting mapsand data should be publicly accessible via an online portal.There would be a need to ensure that the new ling systemintegrates with other DEP, Department o Conservation andNatural Resources, Pennsylvania Natural Diversity Inventory(PNDI), and Pennsylvania Spatial Data Access (PASDA) datasystems. The current county-level paper ling system or nalunit declarations should be retained to remain consistentwith Pennsylvania title practices.

OiL AND GAS LEASE RELEASE REqUiREMENTUpon the expiration o an oil and gas lease, the operatorshould, within 30 days a ter a request by the rights owner,execute, acknowledge, and deliver or cause to be recorded,a quitclaim o all interest in and to the resources covered bythe oil and gas lease. Such a request can only be led andonly requires a response i the lease is no longer in the primaryterm and the lease is not held by production. This requirementacilitates the cleaning o title upon lease expiration andimproves the marketplace or acreage then available to beincluded in uture units.

TEMpORARy REGULATiONS

DEP should be allowed to issue temporary regulations tospeed implementation o the modernized Conservation Lawuntil permanent regulations can be promulgated and approved.Temporary regulations should be in place a maximum otwo years.



14/139


wATER AND UNcONvENTiONAL OiLAND GAS REcOMMENDATiONS

In the spring o 2012, the Shale Gas Roundtable began to col-lect and analyze data or a regional scan o water-related issuesrelevant to shale gas extraction, transport, and use. Based onthe in ormation gathering and stakeholder dialogue processes,the Roundtable also was able to construct a set o recommen-dations ocused on preventing potential water-related impactso unconventional oil and gas development. The Roundtabledeveloped recommendations in the categories provided below,with a risk-based li e-cycle approach to managing water impacts.

wATER SOURciNG

Pennsylvania should sign the pending memorandum ounderstanding that supports the Ohio River Valley WaterSanitation Commissions (ORSANCO) study o water quantityregulation in the Ohio River Basin and also actively engagein the Commissions orthcoming studies.

DEP should incorporate the recommendations in the UpperOhio Basin fow study into its water management programsand update its policy to refect this recent research. TheSusquehanna River Basin Commissions new policy, basedon a similar study, creates classes o streams based on theirsensitivity to water withdrawals and limits withdrawalswhen they are likely to have ecological impacts. DEP shouldconsider similar actors when managing water in the UpperOhio Basin.

The potential bene ts o using abandoned mine wateror hydraulic racturing operations are well documented.The technology necessary to use this water largely exists,and the most signi cant barrier remains potential liability.As such, the General Assembly should adopt PennsylvaniaSenate Bill 411, or similar legislation, to encourage the useo abandoned mine water in well development. The U.S.Environmental Protection Agency (EPA) and possibly theU.S. Congress should consider also addressing operatorliability concerns under ederal law.

A water quantity li e-cycle analysis or shale gasdevelopment should be supported and conducted at theearliest possible time to in orm the public and uture water

quantity regulation. The dra t Chapter 78 Water Management Plan (WMP)

provisions should be enacted, including the extensiono certain existing Susquehanna River Basin Commissionwater withdrawal rules to the Ohio River Basin. DEP shouldully leverage the expertise o department water sta inWMP reviews, compliance monitoring, and en orcement(in collaboration with oil and gas sta ).

hyDRAULic FRAcTURiNG chEMicALS

The Roundtable recognizes DEP or its strong e orts atacilitating public transparency o racturing chemicals andits pressure to update the FracFocus.org plat orm to moreadequately communicate needed in ormation. DEP shouldcontinue to evaluate methods or improving the accessibilityand utility o collected chemical in ormation, with commen-

surate pressure on FracFocus.org to improve and innovatein order to meet Pennsylvanias needs in this regard.

Industry, ederal and state governments, and academiashould prioritize the development o biodegradable greenracturing fuids. A green racturing fuid would minimizethe potential harm to natural gas workers and the potentialenvironmental damage that could result rom sur ace spillsor underground migration o racturing chemicals or fowback water. In the interim, the use o DNA or isotopictracers in the racturing fuid mixture may improve theability to monitor underground fuid migration.

EROSiON AND SEDiMENTATiON

In the design and review o oil and gas Post-ConstructionStormwater Management Plans, DEP should require whole-site plans that take into account not only the well padsbut the access roads and pipelines that service a particulardevelopment location.

iMpOUNDMENTS AND cONTAiNERS

DEP should evaluate various natural gas wastewater storagetechniques, including mobile containers and centralizedimpoundments, to determine best practices or management

o these fuids. This evaluation should use a li e-cycleapproach that estimates potential environmental and sa etyrisks associated with each o the available storage techno-logies. In particular, DEP should continue to monitor potentialacute emissions problems with open impoundments.

vEhicLE TRAFFic/wATER TRANSpORT

In addition to the new uni orm rules in the dra t Chapter 78revisions, DEP should continue to seek methods that acilitateand incentivize the use o resh water pipelines or watertransport (possibly including a requirement that water trans-portation plans be included in the Water Management Plan).

While Excess Maintenance Agreements (EMA) typically havebeen su cient tools to ensure in rastructure repairs, theCommonwealth should evaluate whether the 30-year-oldbonding rates should be increased to better protect localmunicipalities rom EMA de ault.



15/139

wASTEwATER TREATMENT AND DiSpOSAL

The Commonwealth should transparently de ne and codi ythe categories o waste produced by unconventional oil andgas development and the di erences among drilling, fowback, and produced waters. The lack o ormal de nitionsadds unneeded complexity and uncertainty to disposaldata and should be remedied through uture legislation

and regulation. DEP should consider requesting that operators include

their water mani est tracking data in their biannual wastereporting and that the resulting data be made availableor public consumption. The ability to ollow all wastewaterrom well site to disposal location could improve publicaith in the handling o these materials.

Many wastewater treatment technologies leave residualby-products a ter the water is reclaimed. Additional govern-ment attention and industry/academic research should beaimed at the appropriate disposal and/or bene cial reuse

o these by-products. DEP should evaluate current and uture wastewater

regulations by their ability to move toward zero dischargeo natural gas-related wastewater in avor o recycling,reuse, and underground injection.

DEP should proactively engage with U.S. EPA in a dialogueabout the e ectiveness and management o the Under-ground Injection Control and Wastewater Pre-Treatmentprograms, which are currently administered by EPA. Also,EPA recently completed a comprehensive risk analysis orClass 1 hazardous materials injection wells. EPA and/or the

Commonwealth should consider conducting a similar analysisor Class 2 oil and gas brine disposal injection wells.

GROUNDwATER pROTEcTiON

Enhanced research and monitoring are needed to establishbaseline groundwater conditions and gauge possible cumu-lative impacts o unconventional oil and gas developmenton groundwater. Act 13 provided impact ee monies to theCommonwealth Financing Authority in order to und state-wide initiatives that can help to collect baseline water qualitydata on private water supplies. This program and othersshould be supported and expanded.

The Pennsylvania General Assembly should pass House Bill343, or similar legislation, which would establish constructionstandards or new private water wells. Legislators also shouldconsider adding technical and nancial assistance provisionsthat aid homeowners in the evaluation, maintenance, andre urbishment/replacement o existing private water wells.

DEP should undertake e orts to standardize rigorouspre-drilling water testing parameters, methodologies,land owner noti cation procedures, and reporting require-ments. Consistent parameters or post-drilling monitoringand sampling processes also should be developed.

Regular inspection o sites is necessary to ensure industrycompliance with DEP cementing and casing standards.

In anticipation o uture well re-stimulation activities, theCommonwealth should develop requirements or checkingthe continued strength and stability o the original cementingand casing. As noted in the Core Recommendations, it willbe essential that DEP sets transparent goals and possessesthe resources and sta to meet its inspection obligations.

Due to groundwater in ltration concerns, Chapter 78 shouldbe amended to prohibit on-site disposal o drill cuttings romthe horizontal phase o drilling operations or solid wastesrom hydraulic racturing o unconventional wells.

wATER-RELATED viOLATiONS

DEP should invest in improvements to the violation databasesystems. Violations should be better categorized to improveunderstanding o the nature o the violation, its actual orpotential severity o impact, DEPs en orcement actions,and the operators response to the violation (as requiredby Act 13). DEP should consider annually summarizing andreporting on violation activityand progress in remedyingviolations and preventing uture incidents.

DEP also should remove redundant violation records or singleincidents so that the public and policymakers can moreclearly evaluate violations activity.

REGiONAL wATER MANAGEMENT

As delineated in the water sourcing section, the Common-wealth should support and actively engage in the ongoingORSANCO water quantity studies.

In 2009, a regional e ort led by the Regional WaterManagement Task Force endorsed the creation o a waterplanning division at the Southwestern PennsylvaniaCommission (SPC). That e ort, which is under way, isdesigned to improve the cohesion o water monitoring,planning, investment, and technical assistance within a

10-county Ohio River Basin area. While SPC plans to initiallyocus its primary attention on stormwater, shale gas watermanagement issues provide urther impetus or this work.The region should support the growing role o SPC inplanning or the uture o Southwestern Pennsylvaniaswater resources.



16/139

The Chapter 78 dra t rulemaking states that DEP willcollaborate with the Susquehanna River Basin Commission,the Delaware River Basin Commission, and the Great LakesCommission on water monitoring and regulation o oil andgas activities. While Southwestern Pennsylvania does nothave a direct corollary agency, DEP should consider outreachto and partnership with both ORSANCO and SPC on Ohio

River Basin water resources management. Such collaborationswould allow DEP to have natural water partners within thisregion o a similar type to those that already exist in Centraland Eastern Pennsylvania.

Local communities should consider the potential bene ts odeveloping and maintaining a Source Water Protection Planor drinking water sources. DEP should continue to encouragelocal jurisdictions to complete such plans and provide technicalassistance to support the planning processes.

MiDSTREAM DEvELOpMENTREcOMMENDATiONS

Midstream in rastructure includes pipelines, processing acilities,compressor stations, and related in rastructure or transportingnatural gas rom well sites and preparing that gas or market.As o December 2012, 57 percent o Pennsylvanias spudunconventional wells were producing gas, a number that atleast partially refects the lack o adequate pipeline in rastruc-ture to bring these wells into production. In the last six monthso 2012, 683 wells were producing that had not been in theprevious six-month period, possibly indicating the scale orecent midstream investment.

This ongoing development o a gathering and transmissionnetwork or Pennsylvanias unconventional wells caught theRoundtables attention or multiple reasons:

Building pipelines includes both substantial sur ace distur-bance (both temporary and permanent) and constructionactivities that have environmental risks such as erosionand sedimentation, invasive species introduction, orestragmentation, and stream crossings and encroachments.

While incidents have been rare, the sa ety o pipelinesystems will continue to be a public concern.

Air quality and climate change impacts rom compressorstations and methane leakage are possible.

The pipeline system is a delivery mechanism to get shaleresources rom production to end users. As the markets orthese resources continue to develop within the Common-wealth, the locations o midstream in rastructure can, at times,be either a help or a hindrance to users cost-e ective access.

Pipeline rights o way become airly permanent aspectso the landscape, and midstream planning will continueto interact with other local economic and communitydevelopment planning.

Any development ine ciencies that add to the costs o the overallsystem could possibly be passed on to consumers/ratepayers.

The natural gas midstream system has a wide range o potentialimpacts on landowners, the environment, public health, the localand state economy, and the individual consumer. As midstreamin rastructure in Pennsylvania continues to expand to serve newproducing wells, the short-term and long-term consequenceso this development will require care ul monitoring and manage-ment with the best interests o the public in mind.

In order to promote midstream development, which is environ-mentally protective and economically bene cial, the Roundtablerecommends that the Commonwealth and interested stakeholderspursue a suite o important goals, including the ollowing:

Cra ting legislative and regulatory provisions that, inthe public interest, encourage the e fcient developmento intrastate midstream in rastructure

The Commonwealth should actively seek opportunities to improvethe e ciency o intrastate midstream in rastructure development,possibly including the sharing o pipeline capacity to transportproduced gas. In addition to sharing in rastructure, suchcoordinated systems could jointly take advantage o existingrights o way that may be available and even co-locate withother utilities or natural gas-related in rastructure.

While joint e orts could be challenging because the newtransmission would have to account or the diverse needs andlease-holdings o multiple operators, approaches such as thesecould serve the public interest by limiting sur ace disturbanceand preventing the construction o unnecessary or duplicativelines. Identi ying opportunities or increased e ciency alsocould decrease the total costs o in rastructure development,in turn positively infuencing consumer rates.

Creating and leveraging opportunities or enhancedcommunication between midstream operators andother key stakeholders

In the near uture, the Public Utility Commission (PUC) and DEPshould consider partnering to convene three in-depth workshopsto guide thinking on midstream issues in the Commonwealth:

1. Environmental and community impacts: A targeted discussionon present and uture potential issues o concern regardingpipeline in rastructure. Industry; landowners; municipal andcounty o cials; and environmental, conservation, and sports-mens groups would be natural participants. What are thehigh-priority concern areas? How are companies proactively



17/139

addressing them? Are the appropriate state regulatory toolsavailable to manage those areas o concern?

2. Economic and regulatory e ciency: A multi-part dialoguewith an initial ocus on supporting increased e ciency oin rastructure development. The multiple state and ederalagencies that regulate aspects o midstream developmentshould participate to discuss their own e orts at collaborativeoversight and at improving the e ciency o interactionswith industry.

3. Building midstream and downstream connections: A uniquee ort to create a dialogue among those who produce,transport, and use natural gas and related productsin Pennsylvania. An initial conversation could includeparticipants such as exploration and production companies,midstream operators, local distribution utilities, powergeneration companies, transportation sector representatives,and manu acturing companies. The goal would be to identi ypoints o agreement and disagreement that have implicationsor Pennsylvanias management o its energy port olio.

These conversations would be aimed at cross-sector relationshipbuilding and the identi cation o critical oppor tunities andchallenges in the improvement o midstream policy and regulation.Due to the diverse interests and aspirations o the participants,the Commonwealth agencies are particularly well suited toserve as neutral conveners. I any or all o the discussions proveuse ul, additional ollow-up sessions ocused on more speci cissues are possible.

Ensuring the availability o the necessary expertise

and resources or state midstream permitting, planning,and inspection agencies

Sta ng and resource issues or DEP are addressed at lengthin the Core Recommendations. As midstream activity increases,the PUC also should regularly monitor and report on thesu ciency o its resources, sta , and technical capabilitiesto meet ederal and Pennsylvania public sa ety regulationand inspection requirements or midstream development.

Maintaining the protective adequacy o pipeline sa etyregulations, especially as larger volume, higher pressure

gathering and transmission systems are being constructed

Current Pennsylvania law incorporates ederal pipeline sa etyregulations by re erence and enables the PUC to implementthem. Any changes to those ederal regulations, then, willautomatically trans er to Pennsylvania as well. Given thisarrangement, Pennsylvania should continue to proactivelyengage with other states and with the ederal government toaid in shaping and strengthening any potential sa ety updates.

Minimizing and avoiding sur ace disturbance, orest rag-mentation, and other impacts on sensitive ecological areas

Most states, including Pennsylvania, lack regulatory power orthe review o intrastate pipeline siting determinations. However,since intrastate lines cannot be sited using eminent domainpower, individual property owners can impact siting decisionsthrough easement negotiations with midstream operators. Inthe absence o state review, multiple avenues are available tothe Commonwealth and to operators in minimizing the environ-mental ootprint o midstream in rastructure:

The Roundtables proposed modernization o the Oil & GasConservation Law could be one o the strongest tools avail-able to the Commonwealth in avoiding sur ace disturbanceand orest ragmentation. The Conservation Law rameworkis designed to rationalize units and prevent the constructiono unnecessary well pads to extract the resource. Fewer padsshould translate to less pad-related in rastructure, includinggathering lines and access roads.

DEP and other relevant state and ederal regulatory agenciesshould consider creating a voluntary pre-constructionconsultation process, wherein developers would have theability to discuss the proposed placement o new midstreamin rastructure, particularly large transmission pipelines, andplans to minimize the impacts o that development. Theutility and mechanics o such a process could be one othe discussion points or the second workshop outlined above.

Ecological impacts also can be reduced through the increaseduse o siting decision support tools, which some operatorsalready employ to great e ect. These tools include mitigationbanking and the identi cation and use o low-impact utilitycorridors where in rastructure can be clustered to avoid othermore sensitive areas.

The rst recommendation in this section, regarding improvede ciency to avoid unnecessary in rastructure, also could bean important method or minimizing the sur ace ootprinto the pipeline system.

Monitoring and responding to the implications ocumulative pipeline placement decisions on the needso communities and citizens, on the potential or Penn-

sylvania consumers to use gas produced within thestates borders, and on the uture use and value o land

County commissioners and other local government o cials,while having limited midstream regulatory power, should beconsulted throughout the midstream development process asimportant partners in protecting public sa ety and ensuringthat operators are aware o and can adapt to local economic,land use, and community plans.



18/139

During these consultations, operators and local o cialsalso should review economic development considerationsrelated to pipeline placement. Opportunities may exist orinnovative supply approaches along pipeline paths to eedvarious downstream users o natural gas, oil, and naturalgas liquids. In a related vein, midstream operators could havean important role in supporting the expansion o consumer

access to a ordable natural gas service, particularly in ruraland underserved areas.

cONcLUSiON

The Roundtable recognizes that enacting these core andocus area (research, conservation and unitization, water,and midstream) recommendations will require serious consider-ation and action by a broad group o decision makers. Somerecommendations will need legislative action or ull implemen-tation; others can be addressed through policy or regulatory

actions by ederal, state, and local agencies; and some caneven be voluntarily pursued by regional stakeholders. In mostcases, speci c Roundtable recommendations identi y whichactors can pursue implementation.

A primary goal o this report is to in orm the ongoing publicpolicy discussion in this region and in the Commonwealth.As such, the Roundtable will continue to share its recommen-dations with state and ederal o cials, local civic leaders, andother relevant regional stakeholders to spread awareness othe reports contents and key ndings ndings that canassist Pennsylvania in improving environmental, public health,

and economic outcomes or local communities impacted byunconventional oil and gas development.



19/139

Shale Gas

Deliberations, Findings,and Recommendations

ROUNDTABLE:D E T A I L E D



20/139

STATUS OF UNCONVENTIONAL OIL AND GASDEVELOPMENT IN PENNSYLVANIAPennsylvania is several years into unconventional oil and gas development the early years of whatsome are calling a multi-decade shale energy boom. The regulatory environment is shifting, laws arebeing updated, and media and public attention are high. The issues related to accessing this resourcehave become politically and emotionally charged, with a significant amount of misinformation in themarketplace. While shale gas development presents a unique economic and energy opportunity forPennsylvania and its surrounding states, development of these resources also presents substantialchallenges for our region in the areas of water resources management, air quality, infrastructuremaintenance, housing, and community quality of life, along with other environmental and public healthimpacts.

The Marcellus Shale is the most well-known and actively producing formation in the northeasternUnited States. It underlies a 95,000-square-mile tract from West Virginia through Pennsylvania and intosouthern New York and includes sections of Ohio, Virginia, and Maryland. The Marcellus Shale rangesfrom a depth of zero feet in central Pennsylvania to more than 9,000 feet below the surface in parts ofsouthwestern and northeastern Pennsylvania. 1 It ranges in thickness from about 250 feet in easternPennsylvania to only a few feet thick in Ohio and is typically about 50 feet thick along the Ohio River. 2

As Table 1 demonstrates, the Marcellus Shale is the largest shale gas play in the United States and isconservatively estimated to contain approximately 84.2 trillion cubic feet (Tcf) of technically recoverablenatural gas. The Utica Shale, another Appalachian Basin formation, is currently estimated to be the fifthlargest shale gas play in the United States. 3

Table 1: Top Five Shale Plays in United States 4

Shale Formation Location Shale GasResources

(Tcf)Marcellus PA, MD, NY,

OH, WV, VA84.2

Haynesville LA, TX 65.7Eagle Ford TX 50.2Shublik AK 38.4

Utica PA, OH 37.3

1 Pennsylvania Department of Conservation and Natural Resources. Marcellus Shale.http://www.dcnr.state.pa.us/topogeo/econresource/oilandgas/marcellus/marcellus_faq/marcellus_shale/index.htm2 Ibid.3 U.S. Geological Survey National Assessment of Oil and Gas Resources Team. Map of Assessed Shale Gas in the United States.2012. http://pubs.usgs.gov/dds/dds-069/dds-069-z4 Ibid.



21/139

Shale Plays in the Lower 48 States 5

METHODS FOR PRODUCING UNCONVENTIONAL OIL AND GASTraditional vertical wells have been drilled into shale for more than 50 years. The wells, although long-lived, have been low producing because of the low permeability and porosity of shale formations ascompared to conventional gas reservoirs such as sandstone formations. These shale formations,including the Utica and Burket as well as the Marcellus, are now referred to as unconventional shaleresources due to the methods used to produce oil and gas from them.

Unlike conventional gas, shale gas is released from its deep deposits by using multi-well pads, directionaldrilling, and hydraulic fracturing. Operators drill vertically to the desired depth and then horizontallythrough the shale layer. This directional drilling capability allows operators to cluster multiple wells onone well pad. Hydraulic fracturing is a well completion technology where first the horizontal portion ofthe well casing is perforated, typically with explosive charges. A fluid mixture, including fracturingchemicals and sand proppants, is then injected under high pressure to fracture the formationsurrounding the perforations. Fracturing fluid contains specially designed chemical combinations to

keep the well flowing freely and to prevent the buildup of corrosive materials inside the well bore. Theproppants are generally sand, resin-coated sand, or ceramic. After hydraulically fracturing a well, somefluid will flow back to the surface but much of the fluid and proppant remains trapped in the formation,

5 U.S. Energy Information Administration (EIA). Lower 48 Shale Plays. May 9, 2011.http://www.eia.gov/oil_gas/rpd/shale_gas.pdf



22/139

keeping the fractures open and enhancing gas recovery. 6 Although hydraulic fracturing has been usedsince the middle of the last century, it was only a decade ago when its coupling with horizontal drillingand use in accessing deep shale deposits were piloted in Texass Barnett Shale and more recentlyapplied to the Marcellus Shale.

Diagram of the Hydraulic Fracturing Process (graphic not drawn to scale)7

OVERVIEW OF PENNSYLVANIA OIL AND GAS ACTIVITIES AND RESOURCESAs of 2011, more than 26 percent of the energy consumed in the United States was produced throughthe burning of natural gas. 8 As a percentage of total domestic production, unconventional natural gasproduction has risen steadily from near zero in the 1990s to 23 percent in 2010. 9 Estimates ofrecoverable U.S. natural gas reserves also have increased, rising by 12 percent in 2010 to 317.6 Tcf,primarily due to advances in directional drilling and hydraulic fracturing technologies that have allowedextraction from previously inaccessible shale-based resources. 10 In 2010, estimates of Pennsylvaniasaccessible natural gas reserves doubled as a result of the application of these technologies to the

6 University of Colorado Natural Resource Law Center, Intermountain Oil and Gas BMP Project.http://www.oilandgasbmps.org/resources/fracing.php7 Graphic by Al Granberg. What Is Hydraulic Fracturing? ProPublica /Creative Commons.http://www.propublica.org/special/hydraulic-fracturing-national8 EIA. Energy Perspectives 1949-2011. September 2012. http://www.eia.gov/totalenergy/data/annual/perspectives.cfm9 EIA. U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Proved Reserves, 2010. August 2012. pgs.11 & 20.http://www.eia.gov/naturalgas/crudeoilreserves/pdf/uscrudeoil.pdf 10 Ibid, pg.2.



23/139

Marcellus Shale formation. 11 The increase in Pennsylvania was a significant contributor to the rise in U.S.accessible reserves, accounting for about 20 percent of the overall U.S. increase that year. 12

From 2002 through 2012, 6,283 unconventional oil and gas wells were drilled in Pennsylvania on morethan 2,700 well pads, producing a total of 3.7 Tcf of natural gas. 13 One estimate projects that at least

60,000 wells will be needed to produce oil and gas from just the Marcellus Shale formation by 2030.14

Approximately 35 percent of the more than 6,000 unconventional drilled wells are located in the 10-county Southwestern Pennsylvania region. 15 In December 2012, all but two of Pennsylvanias 70operating drill rigs were reported as gas rigs, representing nearly 16 percent of the nations gas rigs atthat time. 16

In 2012, 57 percent of all wells drilled in Pennsylvania and 90 percent of all wells drilled in SouthwesternPennsylvania were unconventional, though they still cumulatively represented only five percent of thetotal producing wells in the Commonwealth. 17 Fifty-seven percent of drilled unconventional wells wereproducing by the end of 2012, accounting for 90 percent of Pennsylvanias total gas production in that

year.18

Please see the Southwestern Pennsylvania Unconventional Oil and Gas Dashboard in Appendix Afor more detailed figures on permits issued, wells drilled, rigs in operation, producing wells, and otherrelevant indicators of oil and gas activity.

OVERSIGHT OF PENNSYLVANIAS UNCONVENTIONAL DEVELOPMENTUnder the authority of the Pennsylvania Oil and Gas Act, the Commonwealths Department ofEnvironmental Protection (DEP) is the primary state agency responsible for oversight of unconventionaloil and gas development. DEP regulates these activities through its offices of Oil and Gas Management;Water Management; and Waste, Air, Radiation and Remediation. DEP issues permits; regulates water,air, and solid waste impacts; responds to complaints; and enforces compliance with state law andregulations. While DEP oversees most aspects of this industry, the U.S. Environmental Protection Agency(EPA) regulates wastewater pretreatment and underground injection control within the Commonwealth.

Under an extensive 2011 DEP reorganization, the administration created a new Office of Oil and GasManagement led by a deputy secretary. District Oil and Gas Operations (field operations) now report tothis office in Harrisburg to ensure consistency in regulation, including permitting, inspections, andcompliance activities. The Bureau of Oil and Gas Planning and Program Management also is located inHarrisburg and is an important component of the new office. This bureau is responsible for developing

11 Ibid.12 Ibid.13 Kelso, Matt. Trends in PA Data for Unconventional Wells. FracTracker. October 29, 2012.http://www.fractracker.org/2012/10/trends-in-pa-data-for-unconventional-wells . See also Southwestern Pennsylvania Oil andGas Dashboard in Appendix A.14 Johnson, Nels, Pennsylvania Energy Impacts Assessment. The Nature Conservancy. Nov. 2010. pg.13.http://www.nature.org/media/pa/pa_energy_assessment_report.pdf 15 Summary data from Shale Gas Roundtable Dashboard based on data from Pennsylvania Department of EnvironmentalProtection, Pennsylvania Public Utility Commission, Carnegie Museum of Natural History, Baker Hughes, EnergyDigger.com, andRigData. (see Appendix A)16 Ibid.17 Ibid.18 Ibid.



24/139

policy and regulations for the management of oil and gas activity in the Commonwealth. For additionalinformation on the DEP oil and gas regulatory structure and decision making process, please seeAppendix D.

Act 13 (House Bill 1950), introduced by Representative Brian Ellis, was the first comprehensive overhaul

of Pennsylvanias 1984 Oil and Gas Act. It was signed into law on February 14, 2012. The legislationprovides for an unconventional gas well impact fee, the administration of that fee, and the distributionof the subsequent fee revenue. Additionally, the legislation addresses regulation and permitting of theindustry, matters related to local zoning, and improved environmental safeguards. DEP is currentlypromulgating rules that will implement Act 13 through updated Chapter 78 regulations. The DEP Oil &Gas Technical Advisory Board reviewed this rulemaking in early 2013, and the proposed regulations willbe examined by the Commonwealths Environmental Quality Board in August 2013.

Act 13 divides impact fee revenue between state agencies and local governments to offset the impactsof gas drilling on infrastructure and the environment. A fixed amount of the impact fee revenue is first

distributed to county conservation districts, DEP, the Pennsylvania Public Utility Commission, thePennsylvania Fish and Boat Commission, the Pennsylvania Emergency Management Agency, the Officeof the State Fire Commissioner, and the Pennsylvania Department of Transportation. 19 Of the remainingrevenue, 60 percent is funneled back to the counties and municipalities that are being impacted bydrilling and production. 20 The final 40 percent of revenue is allocated for the Marcellus Legacy Fund,which, when combined with fund transfers from the Oil & Gas Lease Fund, is distributed to a variety ofareas, including local bridge improvement funds, the environmental stewardship fund (GrowingGreener), and PENNVEST, with some additional funding for parks, recreation, and open space. 21 ThePublic Utility Commission has collected and distributed impact fee revenues for 2011 and 2012. Pleasesee Appendix A for details on these annual disbursements and county-by-county allocations within

Southwestern Pennsylvania.

In addition to establishing the impact fee, Act 13 also codified and altered the original Oil and Gas Actand instituted or modified a range of environmental provisions. The legislation increases well setbacksfrom drinking water sources, requires operators to produce Water Management Plans, enhanceshydraulic fracturing chemical disclosure, requires 24 hours of notice to DEP before any critical stage inthe drilling process commences, and imposes strict site containment standards. Act 13 also requiresmore reporting and general information from operators and provides DEP with additional inspectionand enforcement powers. The updated environmental provisions went into effect on April 14, 2012.

Pennsylvania has invested substantial effort in improving the management of its unconventional oil and

gas development over the last several years, including but not limited to updating water standards fortotal dissolved solids, increasing permit fees to support regulatory staffing needs, adopting the firstcomprehensive update of the Oil & Gas Act through Act 13 of 2012, and promulgating updated Chapter78 environmental regulations to implement Act 13.

19 Act 13 of 2012, HB 1950 2314c.120 Act 13 of 2012, HB 1950 2314d21 Act 13 of 2012, HB 1950 2315a.1



25/139

SHALE GAS ROUNDTABLE BACKGROUNDMISSIONIn response to the desire of multi-sector high-level leaders to elevate and inform the regional energy

dialogue, the Shale Gas Roundtable was created in the fall of 2011 to fulfill a three-part mission relatedto unconventional oil and gas production, transport, and use:

Building and sustaining relationships among relevant cross-sector stakeholders and civic leadersto better support diverse regional environmental protection, community quality of life, andeconomic development goals

Identifying high-priority focus areas through consensus-building dialogue, extensive research,and shared goals for the region

Assessing the focus areas and developing ideas and recommendations that promote theimproved management of and outcomes from regional unconventional oil and gas development

The principles used to guide the Roundtables deliberations and activities were:

Operating with integrity, inclusiveness, and accountability Seeking the best possible balance between environmental/community protection and shale gas

development/economic growth Conducting thorough and objective study of issues Seeking the best available data to guide fact-based dialogue Incorporating stakeholder input with the help of members Working closely with diverse decision makers to seek input and counsel

GEOGRAPHIC FOCUSThe Roundtables geographic scope included the 10 counties of Southwestern Pennsylvania Allegheny,

Armstrong, Beaver, Butler, Fayette, Greene, Lawrence, Indiana, Washington, and Westmoreland. Thesecounties represent approximately one-third of the unconventional oil and gas permits issued, wellsdrilled, and gas produced in the Commonwealth over the last 10 years. The 10-county Roundtable focusdoes not imply that unconventional development is only a regional issue. Rather, the region wasselected to maintain a manageable geography for frequent in-person member interaction on theseissues. The Roundtable recognizes that the state and federal governments will play the largest roles inconsidering and implementing its recommendations.

ROUNDTABLE MEMBERS AND ROLESThe Roundtable cochairs and staff worked thoughtfully and diligently to assemble a high-level, diverse

membership of 26 individuals from relevant, interested constituencies. Roundtable members wererecruited to serve because of the unique perspectives and contributions each could bring to the effort. Afull listing of Roundtable members can be found on pages 3-4.

In adopting this document, the Roundtable members endorse that the final report was built onconstructive dialogue, was informed by sound research and information, and that the includedrecommendations merit consideration by policymakers at all levels as they seek to effectively and safelymanage unconventional oil and gas development.



26/139

While the Roundtable has achieved general agreement on the reports value in informing decisionmakers, individual Roundtable members may not agree on the details of every recommendation. Thefinal report reflects the careful deliberations and findings of the Shale Gas Roundtable; it does notnecessarily reflect the views of the members affiliated organizations or of the Institute of Politics.

ROUNDTABLE STAFF SUPPORTThe Shale Gas Roundtable was housed at and staffed by the Institute of Politics at the University ofPittsburgh. The Institute is not an advocacy or a public education organization; it is a nonpartisan entityresponding to critical regional needs as defined by its policy committees. The Institute of Politics,through neutral facilitation and unbiased research, establishes productive frameworks for diverse high-level stakeholders to develop, discuss, and evaluate policy ideas and options.

The Institute of Politics staff team did not have a predetermined outcome in mind or established policyagenda for the Shale Gas Roundtable. Instead, the staff provided any necessary services as theRoundtable members collectively determined their own direction, process, and recommendations. The

activities of the Shale Gas Roundtable and the services of the Institute of Politics were generouslysupported by the Pittsburgh Foundation, the Heinz Endowments, and the Richard King MellonFoundation.

BUILDING A COMMON UNDERSTANDING (2011-12)The inaugural meeting of the Roundtable was held in September 2011. Agenda items included thedevelopment of a work plan, an overview of shale gas development in the region, and an in-depthdiscussion of goals and interest areas. The resulting work plan was implemented over the subsequent sixmonths and included the following:

Conducting an extensive literature review of laws, policies, regulations, scientific studies, and

advocacy materials related to unconventional oil and gas development in the region Investigating and summarizing benchmark information from other oil and gas producing states Interviewing relevant multi-sector leaders in Harrisburg and Washington, D.C. Continuing outreach to individual Roundtable members and to key stakeholders in

Southwestern Pennsylvania to collect as much information as possible about regionalunconventional oil and gas development

Implementing a Shale Gas University to allow Roundtable members to participate in sharedlearning experiences. Educational modules featured expert guest speakers on topics rangingfrom water management to utility regulation to the full life cycle of natural gas production,transport, and use. Also included were field tours of a compressed natural gas fueling station, acentralized water treatment facility, a drilling site, and areas of the region most impacted by oiland gas development. The Shale Gas University sessions also provided opportunities forrelationship building and education on critical issues and were held as needed throughout theentire course of the Roundtables work.

Meeting regularly to share the findings and results from the above activities



27/139


28/139

Regulatory Accountability of operators subcontractors Adaptability of regulation to evolving technology and operations Capacity of local governments and counties to have adequate numbers of trained staff for

functions such as the clerk of courts and department of emergency services Fracturing chemical disclosure Inadequacy of staffing and budget resources for state regulatory agencies Lack of basic science and data upon which to base sound regulation and policy Lack of tools for large-scale comprehensive development planning Local and state severance taxes, impact fees, and other revenue streams Need for improved communication among government, industry, and key stakeholders Role of local, state and federal governments in regulation and monitoring Unitization, spacing, conservation, and integration rules for the efficient development of oil

and gas

GETTING IT RIGHT FRAMEWORK AND RECOMMENDATIONS DEVELOPMENT(2012-13)The economic benefits of unconventional resource development are often described as worthwhile aslong as that development is done right. Roundtable members agree, but done right often is not well-defined. Through extensive review and in-depth discussion of the data that resulted from the activitiesoutlined above, the Roundtable concluded that the necessary ingredients

Documents

90696 Shale Gas Full Report-final