THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY GEORGE, McILVAINE SMITH, BELFANTI, BRADFORD, CALTAGIRONE, CARROLL, COHEN, CONKLIN, D. COSTA, DeWEESE, GOODMAN, GRUCELA, HORNAMAN, JOHNSON, JOSEPHS, LEVDANSKY, MAHONEY, MUNDY, M. O'BRIEN, SCHRODER, SIPTROTH, K. SMITH, STURLA, THOMAS, YOUNGBLOOD AND YUDICHAK, JANUARY 20, 2010

REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY, JANUARY 20, 2010  

AN ACT

Amending the act of December 19, 1984 (P.L.1140, No.223),

entitled "An act relating to the development of oil and gas

and coal; imposing duties and powers on the Department of

Environmental Resources; imposing notification requirements

to protect landowners; and providing for definitions, for

various requirements to regulate the drilling and operation

of oil and gas wells, for gas storage reservoirs, for various

reporting requirements, including certain requirements

concerning the operation of coal mines, for well permits, for

well registration, for distance requirements, for well casing

requirements, for safety device requirements, for storage

reservoir obligations, for well bonding requirements, for a

Well Plugging Restricted Revenue Account to enforce oil and

gas well plugging requirements, for the creation of an Oil

and Gas Technical Advisory Board, for oil and gas well

inspections, for enforcement and for penalties," further

providing for the definition of "department," for protection

of fresh groundwater, for casing requirements and for

protection of water supplies; providing for hydraulic

fracturing chemicals disclosure; further providing for

bonding and for well plugging funds; preempting certain local

ordinances; and further providing for local ordinances.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definition of "department" in section 103 of

the act of December 19, 1984 (P.L.1140, No.223), known as the

Oil and Gas Act, is amended to read: 

Section 103.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Department."  The Department of Environmental [Resources]

Protection of the Commonwealth.

* * *

Section 2.  Section 207 of the act is amended by adding a

subsection to read: 

Section 207.  Protection of fresh groundwater; casing

requirements.

* * *

(e)  The department shall inspect each permitted well drilled

in the Marcellus Shale formation, during the phases of siting,

drilling, casing, cementing, completing, altering and

stimulating. The department shall allocate an appropriate

portion of the well permit fees to fund the inspection and may

increase the permit fees to meet an increase in the inspection

costs.

Section 3.  Section 208(c) and (d) of the act are amended to

read: 

Section 208.  Protection of water supplies.

* * *

(c)  Unless rebutted by one of the five defenses established

in subsection (d), it shall be presumed that a well operator is

responsible for the pollution or the diminution of a water

supply that is within [1,000] 2,500 feet of the oil or gas well,

where the pollution occurred within six months after the

completion of drilling or alteration of such well.

(d)  In order to rebut the presumption of liability

established in subsection (c), the well operator must

affirmatively prove one of the following five defenses:

(1)  The pollution [existed] or the diminution prior to

the drilling or alteration activity as determined by a

predrilling or prealteration survey.

(2)  The landowner or water purveyor refused to allow the

operator access to conduct a predrilling or prealteration

survey.

(3)  The water supply is not within [1,000] 2,500 feet of

the well.

(4)  The pollution or the diminution occurred more than

six months after completion of drilling or alteration

activities.

(5)  The pollution or the diminution occurred as the

result of some cause other than the drilling or alteration

activity.

* * *

Section 4.  The act is amended by adding a section to read: 

Section 208.1.  Hydraulic fracturing chemicals disclosure.

(a)  Notwithstanding a trade secret claim, a well operator

utilizing the hydraulic fracturing process to extract natural

gas from the Marcellus Shale formation shall disclose to the

department the complete list of the chemicals and chemical

compounds used in the fracturing fluid products. The list shall

include the Chemical Abstract Service registry number for each

constituent chemical, the concentration of each constituent

chemical and the formula for each chemical compound. The

department shall publish the list on its Internet website.

(b)  If the natural gas well operator fails to comply with

the requirements of section 208(c) and (d), the department may

not issue any permit to the operator and shall revoke an

existing natural gas well permit issued to the operator.

Section 5.  Sections 215(a), 601(a) and 602 of the act,

amended July 2, 1992 (P.L.365, No.78), are amended to read: 

Section 215.  Bonding.

(a)  (1)  Except as provided in subsection (d) hereof, upon

filing an application for a well permit and before continuing

to operate any oil or gas well, the owner or operator thereof

shall file with the department a bond for the well and the

well site on a form to be prescribed and furnished by the

department. Any such bond filed with an application for a

well permit shall be payable to the Commonwealth and

conditioned that the operator shall faithfully perform all of

the drilling, water supply replacement, restoration and

plugging requirements of this act. Any such bond filed with

the department for a well in existence on the effective date

of this act shall be payable to the Commonwealth and

conditioned that the operator shall faithfully perform all of

the water supply replacement, restoration and plugging

requirements of this act. The amount of the bond required

shall be in the amount of [$2,500] $150,000 per well for any

Marcellus Shale well utilizing hydraulic fracturing process

and $12,000 per well for at least two years following the

effective date of this act, after which time the bond amount

may be adjusted by the Environmental Quality Board every two

years to reflect the projected costs to the Commonwealth of

performing well plugging.

(2)  In lieu of individual bonds for each well, an owner

or operator may file a blanket bond, on a form prepared by

the department, covering all of its wells in Pennsylvania as

enumerated on the bond form. A blanket bond shall be in the

amount of [$25,000] $240,000 for at least two years following

the effective date of this act, after which time the bond

amount may be adjusted by the Environmental Quality Board

every two years to reflect the projected costs to the

Commonwealth of performing well plugging. No blanket bond is

available for wells drilled in the Marcellus Shale formation.

(3)  Liability under such bond shall continue until the

well has been properly plugged in accordance with this act

and for a period of one year after filing of the certificate

of plugging with the department. Each bond shall be executed

by the operator and a corporate surety licensed to do

business in the Commonwealth and approved by the secretary.

The operator may elect to deposit cash, certificates of

deposit or automatically renewable irrevocable letters of

credit from financial institutions chartered or authorized to

do business in Pennsylvania and regulated and examined by the

Commonwealth or a Federal agency which may be terminated at

the end of a term only upon the financial institution giving

90 days prior written notice to the permittee and the

department or negotiable bonds of the United States

Government or the Commonwealth, the Pennsylvania Turnpike

Commission, the General State Authority, the State Public

School Building Authority or any municipality within the

Commonwealth, or United States Treasury Bonds issued at a

discount without a regular schedule of interest payments to

maturity, otherwise known as Zero Coupon Bonds, having a

maturity date of not more than ten years after the date of

purchase and at such maturity date having a value of not less

than $25,000, with the department in lieu of a corporate

surety. The cash deposit, certificate of deposit, amount of

such irrevocable letter of credit or market value of such

securities shall be equal at least to the sum of the bond.

The secretary shall, upon receipt of any such deposit of

cash, letters of credit or negotiable bonds, immediately

place the same with the State Treasurer, whose duty it shall

be to receive and hold the same in the name of the

Commonwealth, in trust, for the purpose for which such

deposit is made. The State Treasurer shall at all times be

responsible for the custody and safekeeping of such deposits.

The operator making deposit shall be entitled from time to

time to demand and receive from the State Treasurer, on the

written order of the secretary, the whole or any portion of

any collateral so deposited, upon depositing with him, in

lieu thereof, other collateral of the classes herein

specified having a market value at least equal to the sum of

the bond, and also to demand, receive and recover the

interest and income from said negotiable bonds as the same

becomes due and payable. Where negotiable bonds, deposited as

aforesaid, mature or are called, the State Treasurer, at the

request of the owner thereof, shall convert such negotiable

bonds into such other negotiable bonds of the classes herein

specified as may be designated by the owner. Where notice of

intent to terminate a letter of credit is given, the

department shall give the operator 30 days' written notice to

replace the letter of credit with other acceptable bond

guarantees as provided herein and, if the owner or operator

fails to replace the letter of credit within the 30-day

notification period, the department shall draw upon and

convert such letter of credit into cash and hold it as a

collateral bond guarantee.

* * * 

Section 601. Well plugging funds.

(a)  All fines, civil penalties, permit and registration fees

collected under this act are hereby appropriated to the

Department of Environmental [Resources] Protection to carry out

the purposes of this act.

* * *

Section 602.  Local ordinances. 

Except with respect to ordinances adopted pursuant to the act

of July 31, 1968 (P.L.805, No.247), known as the Pennsylvania

Municipalities Planning Code, and the act of October 4, 1978

(P.L.851, No.166), known as the Flood Plain Management Act, all

local ordinances and enactments purporting to regulate oil and

gas well operations regulated by this act are hereby preempted

and superseded to the extent the ordinances and enactments

regulate the method of oil and gas well operations. No

ordinances or enactments adopted pursuant to the aforementioned

acts shall contain provisions which impose conditions,

requirements or limitations on [the same features] the method of

oil and gas well operations regulated by this act or that

accomplish the same purposes as set forth in this act. The

Commonwealth, by this enactment, hereby preempts and supersedes

the regulation of oil and gas wells as herein defined to the

extent the ordinances and enactments regulate the method of oil

and gas well operations. Nothing in this act shall affect the

traditional power of local government to regulate other aspects

of oil and gas activities such as the time and the place of

operations through local ordinances and enactments.

Section 6.  This act shall take effect in 60 days.