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Apr 19

4/19/11 Municipal regulations giving gas drillers headaches, bills – Attorney John Smith mentioned

Municipal regulations giving gas drillers headaches, bills
Tuesday, April 19, 2011
By Erich Schwartzel, Pittsburgh Post-Gazette

The natural gas wells in Cecil look a little different than those found across the border in Mount Pleasant.

The Cecil wells have sound barriers that surround the rig, and the ponds that store water left over from operations come with netting designed to keep out birds and wildlife.

The differences between the Washington County locales, two of the state’s most industry-active townships, are the result of a 2-year-old state Supreme Court decision. The court put power to regulate the natural gas industry into the hands of the communities where drillers are tapping the Marcellus Shale rock formation for the lucrative natural gas stored deep underground.

Across the state, board supervisors and town solicitors are drafting ordinances that rein in an industry that in turn sees the multitude of small-town regulations as unnecessary and costly hurdles that delay operations.

The prospect of individual ordinances in a state with so many municipalities has already started playing out in Western Pennsylvania.

On Wednesday, council members in Murrysville are expected to vote on a proposal to regulate the seismic testing that’s used to find natural gas locked thousands of feet underground. If passed, the ordinance would require companies to obtain a $500 permit before beginning seismic activities.

“There’s probably about 30 municipalities that we’ve worked with in the past year on crafting ordinances,” said Matt Pitzarella, the director of public affairs at Range Resources, a Fort Worth, Texas-based energy company that opened an office in Southpointe to oversee its massive Marcellus operations.

The ordinance issue has taken a more dramatic turn in Mount Pleasant, where the board of supervisors is working to draft a “conditional use ordinance” that would treat each rig with unique regulations. A site near a school might require more stringent sound mitigation, for example, than a site located miles from the nearest resident.

Residents fear a strict ordinance will discourage an industry that’s provided jobs and royalty checks to the community for more than six years. With a third-party mediator presiding, the board is to meet with the township’s dominant driller, Range Resources, again later this month.

The push toward localized regulation has been an adjustment for the natural gas industry, which in the first several years of the Marcellus Shale boom followed “one size fits all” guidelines across Pennsylvania.

“Huntley Inc. v. Borough Council of Oakmont” changed all that when the state Supreme Court ruled in 2009 that state guidelines don’t necessarily supercede local regulation.

The decision has forced local municipalities to look to states like Texas for a precedent, said John Smith, the attorney from Smith Butz LLC in Southpointe, who helped craft the Cecil ordinance and is working on the Mount Pleasant one.

“They’ve got a 10- to 15-year head start on us,” he said.

It’s also been a hurdle for an industry that has rushed to tap the untold amount of natural gas since 2004, often through a supply chain model that plots out details of rig construction and excavation years in advance.

“I know where a gallon of water that we have today is going to be 21/2 years from now,” said Mr. Pitzarella, at Range Resources.

Across the state, drillers are most concerned about “unpredictability in operations,” said Danielle Boston, the director of public outreach at the Pennsylvania Oil and Gas Association.

The ordinance-writing process can be laborious, especially since the councils crafting the regulations typically meet just once a month. In Mount Pleasant, the process has been going on for 18 months.

That lengthy time frame has led some companies to devote manpower to the local level, filling Washington County with the kind of lobbyists once found in only Washington, D.C.

Range Resources has brought on two company representatives in the past three years who specialize in firehall politics: working with school boards, supervisors and county commissioners. The men — one is a lawyer, both are military veterans — recently set up a booth at the Pennsylvania State Association of Township Supervisors.

Aside from the costs of adding a couple of new workers, keeping track of hundreds of local regulations is an extremely expensive prospect for the natural gas industry.

Ross Pifer, a Penn State law professor tracking shale development, said it was only inevitable that the local ordinance issue would move to the courtroom as companies fight the additional layer of regulation.

“You have an industry here where it’s not really realistic to operate under 2,000 different sets of requirements,” he said. It doesn’t help that Pennsylvania has the third-highest number of municipalities in the country.

Across the Marcellus Shale, local ordinance drafting has been “gaining a lot of steam over the past few months,” said Mr. Pifer. Range Resources’ Mr. Pitzarella said that new push was driven in part because the drafting is a “cash cow” for local lawyers and solicitors who see a lot of billable hours in the drawn-out writing process.

Mr. Smith’s ordinance work in Mount Pleasant has been pro bono since March, but the lawyer fees cut both ways.

Asked how his large company brings itself up to speed with nitty-gritty, decades-old community law, Mr. Pitzarella had one answer: “Attorneys,” he said. “You use a lot of attorneys.”

Erich Schwartzel: eschwartzel@post-gazette.com or 412-263-1455.
First published on April 19, 2011 at 12:00 am

Permanent link to this article: http://smithbutzlaw.com/municipal-regulations-giving-gas-drillers-headaches-bills-attorney-john-smith-mentioned/