API Destroys Justification for Proposed DRBC Fracking Ban

Tom Shepstone
Shepstone Management Company, Inc.

The American Petroleum Institute (API) has delivered a major legal blow to the proposed DRBC fracking ban by setting out the many legal flaws to the thing.

API just delivered its comments on the proposed DRBC fracking ban. You can find their announcement and links to the comments, as well as a 42MB appendix setting out every conceivable technical problem, here. It’s fantastic work and indicates a real commitment by API to fighting this unjust political action. The in-depth analysis is very smart, reinforces comments made by frustrated landowners and explains points we’ve made repeatedly here. The key parts, as I see them, are highlighted in this version. They speak for themselves and follow:

Map from API Comments – Appendix

The DRBC proposed regulations are unnecessary and, in many ways, duplicative and/or conflicting with Pennsylvania Department of Environmental Protection (“DEP”) oil and natural gas regulations, and do not respond to a legislative mandate or clearly demonstrate factual need…

According to its mission, the DRBC must be committed to integrating environmental and economic needs in its decision to amend its Special Regulations to prohibit HVHF in shale and other rock formations. We would argue that the Commission has failed to meet this aspect of its mission. The preamble to the DRBC proposal fails to incorporate any economic information for consideration by the commenting public on what could be lost by a continued prohibition on oil and natural gas development in the basin or conversely, what could be gained economically from a less aggressive approach. In response, API is providing several levels of economic information…

Appendix A to this letter … provides more specific analysis of the economic picture and potential opportunities lost in six basin counties, if the DRBC finalizes the proposed prohibition regulations. Based on an oil and natural gas development estimate of 40 wells drilled per year in the six counties combined, with no prohibition, the economic benefit to the Commonwealth is quantified conservatively at $250 million annually ($6.2 million per well times 40 wells). This potential benefit does not include the:

i) lease bonus payments and royalties which would go directly to the landowner (estimated as a bonus payment per acre of between $500 and $2,500);

ii) unconventional gas well impact fee paid by the operator to the six basin counties (estimated to be over $125 million for the producing life of the 40 wells drilled annually);

iii) the DEP permit fees (estimated at $1.5 million for the 40 wells over a conservative ten-year period of payment); and

iv) a conservative estimate of state income tax paid by individuals and corporations as a result of increased oil and natural gas development activity and associated royalty and lease bonus income, wages, and corporate profits…

Chart from API Comments – Appendix

In the proposed rulemaking, the Commission relies heavily on two specific studies to support its claims of the risks and vulnerabilities associated with HVHF and thus, the proposed prohibition – these include the U.S. Environmental Protection Agency’s (“EPA’s” or “Agency’s”) hydraulic fracturing water resources study (initiated in 2010) and the New York Supplemental Generic Environmental Impact Statement (“SGEIS”)…

[EPA] references several studies which support the fact that the possibility of fluids rising from fracturing operations into the shallow water table is highly unlikely: 

“…due to the very low permeabilities of shale formations; this means that hydraulic fracturing operations are unlikely to generate sufficient pressure to drive fluids into shallow drinking water zones…” 

“Some natural conditions could also create an upward hydraulic gradient in the absence of any effects from hydraulic fracturing. However, these natural mechanisms have been found to cause very low flow rates over very long distances, yielding extremely small vertical fluxes in sedimentary basins. These translate to some estimated travel times of 100,000 to 100,000,000 years across a 328 ft (100 m) thick layer with about 0.01 nD (1 . 10−23 m2) permeability…” 

“In deep, low-permeability shale and tight gas settings and where induced fractures are contained within the production zone, flow through the production formation has generally been considered an unlikely pathway for migration into drinking water resources…

Chart from API Comments – Appendix

API found the methodology used to conduct the NYSDOH public health review flawed. The conclusions lacked reproducibility, and the process of how the Agency arrived at their conclusion was not transparent… Overall, NYSDOH did not consider how the risk mitigation and management activities recommended in the SGEIS would have reduced or eliminated potential exposures. Regardless of the failings of NYSDOH review, the review is now dated and should not be a primary resource for the DRBC in its decision-making on health implications of its current proposal. 

Instead, API urges the Commission to review the 2017 assessment conducted by the Colorado Department of Public Health and Environment (“CDPHE”) and its utilization of a process that was transparent, reproducible, and scientifically defensible. The review included a systematic review of the literature, assessed study quality, and included a screening assessment of potential exposures and health effects. CDPHE concluded, based on its systemic review, that the risk of harmful health effects associated with oil and natural gas development is low…

As a final comment on the necessity for sound science in this deliberative process, on February 1, 2018, New Jersey Governor Phil Murphy held a press conference in Phillipsburg, New Jersey located immediately across the Delaware River from Easton, Pennsylvania. His announcement was simply that he would cast the New Jersey vote in favor of the proposed DRBC rulemaking prohibiting hydraulic fracturing. His declaration was inappropriate and premature. This, considering the public comment period on the proposal remained open until March 30, 2018 and only two of the six public hearings (including one teleconference) had taken place at the time. In each session, the public was specifically instructed at the start of each meeting by the DRBC Hearing Officer that all statements were videotaped and recorded for the Commissioners (none of whom were in attendance) to view before the close of the formal comment period and for inclusion in a final Response to Comment document…

The federal government creates framework environmental laws that often prescribe regulatory minimum thresholds for states to follow. For example, the Clean Water Act (“CWA”) applies to oil and natural gas operations, particularly where water resource protection, and in certain cases, restoration is concerned.

The CWA allows for the establishment of the National Pollutant Discharge Elimination System (“NPDES”), which, in most states, regulates how oil and natural gas operators manage stormwater and other wastewater discharges from their sites. Operators must seek coverage under construction and operating permits; prepare compliant Stormwater Pollution Prevention Plans (“SWPPP”); and implement best management plans (“BMPs”) and controls (including routine inspections and testing of upstream discharge points) to prevent impacts to receiving water bodies.

Specifically, in Pennsylvania, stormwater discharges are permitted through PA’s ESCGP-2 general permits. The NPDES program further requires permits and engineering and other controls (including routine inspections and testing) for any discharge of wastewater from oil and natural gas sites. Further, a separate provision of the CWA, the Oil Spill Prevention, Control, and Countermeasures (“SPCC”) Regulation requires oil and natural gas operators to prepare SPCC plans, implement controls, and establish BMPs to prevent impacts to receiving water bodies from tanks and other structures that hold oil on site…

Because the Commission’s authority to issue regulations derives solely from the Delaware River Basin Compact (“Compact”), and the Compact does not give the Commission authority to prohibit hydraulic fracturing, the proposed regulation should be rejected…

Chart from API Comments – Appendix

The Compact between New York, New Jersey, Pennsylvania, Delaware, and the United States arose from long-running litigation over the allocation of water along the Delaware River. “In order to meet its increasing need for supplies of public water, New York City in 1929 began to plan the diversion of the waters of the Delaware River.” Badgley v. City of New York, 606 F.2d 358, 362 (2d Cir. 1979). New Jersey promptly “commenced an original suit in the U.S. Supreme Court against the State of New York . . . to enjoin and restrain any diversion of the waters of the Delaware River . . . .”

…The Court’s resulting order precluded New York from diverting from the Delaware River and its tributaries more than a set amount of water daily, required New York to install “an efficient plant for the treatment of sewage” before any diversion would be allowed, set limitations on the concentration of waste in waters returned to the Delaware River, and required New York to release additional water into the Delaware River if its depth fell below set levels in New Jersey… In this way, the Supreme Court “intended to establish a comprehensive scheme of river regulation, all-inclusive as to all matters concerning the manipulation of the flow of the undiverted portions of the waters of the Delaware River.”

…Further formalizing their relationship, in 1961 New York, New Jersey, Pennsylvania, and Delaware entered the Compact, providing for, among other things, the creation of the Commission…

Ultimately, the Compact relies on the “regulation of stream flows toward the attainment of those goals.”

…(“[T]he consent of Congress transforms the States’ agreement into federal law under the Compact Clause.”), the “focus [is] on the text” of an interstate compact “to determine the scope of . . . authority” conferred…

As the Supreme Court has made clear, “[s]tatutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.”

…The Commission’s present assertion of authority to prohibit hydraulic fracturing rests on its general authority in the Compact over “projects,” … and its specific authorization to engage in pollution control… Neither source supports a prohibition on hydraulic fracturing.”

…Under the Compact, a “project” is “any work, service or activity which is separately planned, financed, or identified by the commission, or any separate [public or private] facility undertaken … for the conservation, utilization, control, development or management of water resources…” Hydraulic fracturing is plainly not “for” the listed purposes that define a “project” covered by the Compact and, by extension, the Commission’s authority. That those purposes are a key feature of defining “projects” is clear from the Compact’s consistent usage of the term, which demonstrates a focus on water management projects such as diversion, treatment, and the like rather than regulation of oil and natural gas operations that happen to use water that may or may not originate from the Delaware River…

Indeed, among “projects,” the Compact elsewhere lists “dams, reservoirs and other facilities.”

…This strict focus on water management comports with the Commission’s underlying duty to “develop and effectuate plans, policies and projects relating to the water resources of the basin.” 

…At bottom, “[t]he main purpose of the Compact is to regulate the allocation of water from the Delaware River among the four states that are parties to the Compact.” … The Compact’s terms must be read in light of this “central purpose.” … In that light, the Compact’s reference to “projects” — which the Compact dictates must be directed “for” certain water management purposes, …cannot extend to private hydraulic fracturing operations for gas production simply because the operations may use water from the basin. A contrary reading would permit the Commission to regulate seemingly any activity within the basin, an absurd result at odds with the well-defined focus of the Compact…

By contrast, the individual State signatories of the Compact have independently and extensively regulated oil and natural gas operations, including hydraulic fracturing, within their borders…

In addition to illustrating the stark difference in regulatory scope exercised by the Commission and the signatory States over oil and natural gas operations, the existence of competing State regulations raises a fundamental question of sovereignty. Reading the Compact to reverse the Commission’s longstanding practice with respect to “projects” and allow the Commission to supplant the signatory States’ oil and gas regulations conflicts with “[t]he background notion that a State does not easily cede its sovereignty” that “inform[s] [the] interpretation of interstate compacts.” Tarrant, 569 U.S. at 631. The Compact’s definition of “projects” falls well short of the clear statement necessary to strip away a State’s sovereign authority within its borders…

Pursuant to Article 5 of the Compact, the Commission “may undertake investigations and surveys, and acquire, construct, operate and maintain projects and facilities to control potential pollution and abate or dilute existing pollution . . . .” Compact, Section 5.1. This authority mirrors—and, indeed, includes—the Commission’s authority over “projects” that is textually and contextually restricted to Commission-led water management projects. Indeed, this focus comports with the litigation history that led to the Compact, as the Supreme Court ordered construction and maintenance of “an efficient plant for the treatment of sewage” prior to any diversion by New York, and set limitations on the concentration of waste in waters returned to the Delaware River.

The Commission may also “assume jurisdiction to control future pollution and abate existing pollution in the waters of the basin, whenever it determines after investigation and public hearing . . . that the effectuation of the comprehensive plan so requires.” Compact, Section 5.2. But that authority is likewise limited. After the required public hearing, the Commission “may classify the waters of the basin and establish standards of treatment of sewage, industrial or other waste . . . .” Compact, Section 5.2 (emphases added). To these ends, the Commission can “adopt . . . rules, regulations and standards to control such future pollution and abate existing pollution, and to require such treatment of sewage, industrial or other waste . . . . .” Compact, Section 5.2 (emphasis added). This language authorizes Commission water management activities aimed at reducing pollutants released into the Delaware River through specified means restricted to—again mirroring the Supreme Court’s predecessor requirements— “standards” and “treatment” of waste…

The plain language of Article 5 therefore fails to authorize a blanket prohibition on any operation, much less oil and gas operations otherwise distinct from the Compact’s central purposes…

The signatory States’ independent regulation of oil and gas operations, including hydraulic fracturing, reinforces this reluctance, and leaves the Commission solely within the means of pollution control detailed in the Compact. Because the prohibition in the proposed regulations is not included, the Commission lacks the authority to proceed. Therefore, the proposed prohibition on HVHF should be rejected as exceeding the Commission’s authority under the Compact and decisional precedent from the U.S. Supreme Court.

These arguments are very compelling and will make it very difficult for the DRBC fracking ban to be sustained in court, which is where this thing is headed. The basis for the legal challenge is firmly set. Take notice, too, of the foundation laid for a takings lawsuit if necessary, not to mention one revolving around the sham hearings Phil “the Panderer” Murphy exposed by participating in the Delaware Povertykeeper’s stupid pet trick during the hearings.