Federal Lawsuit Challenges Water-Resource Commission’s Authority over Natural Gas Exploration in Pennsylvania

sboxermanFeatured Expert Column – Environmental Law and Policy

By Samuel B. Boxerman, Sidley Austin LLP with Joel Visser, Sidley Austin LLP

Delaware River Basin Commission (“DRBC”) in federal court in Pennsylvania seeking a declaratory judgment that the DRBC lacks authority to review and approve activities associated with natural gas exploration and development.  Wayne Land and Mineral Group, LLC v. Delaware River Basin Commission, Case No. 16-897 (M.D. Penn.).  WLMG owns the surface and mineral rights to 180 acres of land in Wayne County, Pennsylvania, 75 of which are located in the Delaware River Basin.  WLMG asserts that a declaratory judgment is necessary because the DRBC’s self-imposed moratorium on reviewing permit applications for oil and natural gas development related to hydraulic fracturing effectively prevents the landowners from otherwise seeking judicial review of the scope of the DRBC’s authority.

The Delaware River Basin encompasses 13,539 square miles in Pennsylvania, New York, New Jersey, and Delaware. In 1961 the Delaware River Basin Compact was signed by the federal government and each of the four states to provide coordinated water-resource management activities in the basin.  The Compact established the DRBC to “develop and effectuate plans, policies, and projects related to the water resources of the basin.”  Compact § 3.1.  The Compact also states that “[n]o project having a substantial effect on the water resources of the basin shall hereafter be undertaken by any person, corporation, or governmental authority unless it shall have been first submitted to and approved by the commission….”  Id. § 3.8.  The DRBC has construed this requirement broadly and requires approval for a wide range of activities.  Failure to seek and obtain DRBC review for a project could subject a project developer to civil penalties of up to $1,000 per day.

Delaware River Basin

The DRBC has asserted authority over all oil and gas exploration and development in the basin.  On May 19, 2009, in response to increased natural gas development using hydraulic fracturing in the Marcellus Shale, the Executive Director of the DRBC issued determinations requiring approval of the full DRBC prior to commencing any new natural gas exploration or development activities within the Basin.  Determination of Carol R. Collier, Executive Director, DRBC (May 19, 2009); Supplemental Determination of Carol R. Collier, Executive Director, DRBC (June 14, 2010).  A year later, on May 5, 2010, the DRBC voted to commence a new rulemaking process to develop regulations to address hydraulic fracturing activities in the basin.  Minutes, Delaware River Basin Commission: Meeting of May 5, 2010.  At the same time, the DRBC voted to “postpone the Commission’s consideration of well pad dockets until [hydraulic fracturing] regulations are adopted.”  Ibid.  While it appeared that the postponement would be temporary when the DRBC proposed regulations on December 9, 2010, it still has not finalized regulations to address hydraulic fracturing.  As a result of the DRBC’s inaction and refusal to consider applications for oil and gas exploration and development, there has been a de facto moratorium on new natural gas activities for more than six years.

WLMG’s lawsuit challenges the DRBC’s broad assertion of jurisdiction over all oil and natural gas activities in the basin.   WLMG argues that natural gas exploration and development projects have no direct nexus to the management of the basin’s water resources.  Specifically, WLMG asserts that it would rely on off-site sources operating in accordance with all applicable state and local laws to obtain water and to treat wastewater associated with natural gas exploration and development.  WLMG seeks a declaration that under these circumstances, its natural gas activities would not constitute a “project” under the terms of Compact and that the DRBC, therefore, lacks jurisdiction over the project.  Instead, natural gas activities would be conducted in accordance with Pennsylvania’s extensive regulations for hydraulic fracturing activities.  This case bears watching, as an order for the Plaintiff could open an as yet untapped area of the Marcellus for development.

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