THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY YAW, M. WHITE, MENSCH AND FONTANA, FEBRUARY 11, 2011

REFERRED TO ENVIRONMENTAL RESOURCES AND ENERGY, FEBRUARY 11, 2011  

AN ACT

Amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated

Statutes, consolidating the Oil and Gas Conservation Law with

modifications relating to definitions, standard unit order,

process, administration, standard of review, hearings and

appeals, establishment of units, integration of various

interests, lease extension and scope; providing for gas and

hazardous liquids pipelines; and making a related repeal.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 58 of the Pennsylvania Consolidated

Statutes is amended by adding parts to read:

PART I

PRELIMINARY PROVISIONS

(RESERVED)

PART II

(RESERVED)

PART III

UTILIZATION

Chapter

31.  (Reserved)

32.  (Reserved)

33.  (Reserved)

34.  Unconventional Oil and Gas Conservation

CHAPTER 31

(RESERVED)

CHAPTER 32

(RESERVED)

CHAPTER 33

(RESERVED)

CHAPTER 34

UNCONVENTIONAL OIL

AND GAS CONSERVATION

Subchapter

A.  Preliminary Provisions

B.  (Reserved)

C.  Establishment of Standard Units

D.  Procedure

E.  Effect of Order

F.  (Reserved)

G.  (Reserved)

H.  (Reserved)

I.  (Reserved)

J.  Miscellaneous Provisions

SUBCHAPTER A

PRELIMINARY PROVISIONS

Sec.

3401.  Short title of chapter.

3402.  Legislative intent.

3403.  Definitions.

§ 3401.  Short title of chapter.

This chapter shall be known and may be cited as the

Unconventional Oil and Gas Unit Establishment Act.

§ 3402.  Legislative intent.

The purposes of this chapter are:

(1)  To promote the development of unconventional oil and

gas resources of this Commonwealth in accordance with the

best principles and practices of oil and gas conservation

while reasonably protecting the correlative rights of the

person affected.

(2)  To provide for the protection of the environment.

§ 3403.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Coal and Gas Resource Coordination Act."  The act of

December 18, 1984 (P.L.1069, No.214), known as the Coal and Gas

Resource Coordination Act.

"Commission."  The Pennsylvania Public Utility Commission.

"Consenting party."  A person participating in a unit

established under this chapter who agrees or elects to

participate in a pro rata share of costs and production of a

well drilled on that unit in accordance with a joint operating

agreement.

"Control."  To own or to have the right to explore for,

develop, operate and produce oil or gas from the stratigraphic

interval proposed to be included in a unit.

"Correlative rights."  The rights of each owner of oil and

gas interests included or proposed to be included in a standard

unit or in land that constitutes stranded acreage to have fair

and reasonable opportunity to obtain a just and equitable share

of the oil and gas in the unit without being required to drill

unnecessary wells or incur other unnecessary expense to recover

the oil or gas or its equivalent. The term includes the owners

of oil and gas interests in properties adjacent to properties

included or proposed to be included within the unit.

"Department."  The Department of Environmental Protection of

the Commonwealth.

"Drill."  The drilling or redrilling of a well or the

deepening or plugging back of an existing well.

"Drill pad."  The area of surface operations surrounding the

surface location of a well or wells.

"Horizontal well."  A directional well that is drilled nearly

vertically to a certain depth and then angled out horizontally

or nearly horizontally to produce from and remain substantially

or entirely within a specific geologic interval until the

desired terminus of the well bore is reached.

"Hydraulic fracture."  A process to stimulate production in

oil and gas wells by inducing or propping fractures in oil and

gas bearing rocks using hydraulic pressure. The fluid mixtures

which are typically pumped down the well during this process

include water, sand and other specialty items.

"Joint operating agreement."  An agreement governing the

actions of all participants in an established standard unit or a

model agreement generally recognized in the extraction industry

and all schedules and exhibits pertaining thereto.

"Lateral."  The portion of a well bore that deviates from

approximate vertical orientation to approximate horizontal

orientation and all well bores beyond such deviation to total

depth or terminus.

"Nonconsenting party."  A person participating in an

established standard unit who elects not to participate in its

pro rata share of the costs of a well drilled upon that unit and

who will pay a risk avoidance under the joint operating

agreement.

"Perforated segment."  The entire perforated length of each

lateral well bore, as shown on a directional survey or

predrilled unsurveyed plan, projected vertically to the surface.

In the event of the use of a form of completion that does not

involve cementing and perforating, the term shall mean the

entire length of each lateral from penetration point of the

target reservoir to the terminus of the well bore.

"Plat."  A map, drawing or print showing the proposed or

existing location of a well or a unit.

"Royalty interests."  An interest in oil or gas or rights

expressly stated to be royalty interests, overriding royalty

interests or rights to participate in a share of production but

that do not provide a right to conduct exploration, drilling or

production.

"Standard unit."  A unit for the production of oil or natural

gas that is not more than 640 acres in area, plus 10% tolerance

for possible survey error or other acreage discrepancies, and

that, absent interference by an adjacent preexisting voluntary

unit, includes all interests in the oil and gas within the

boundaries of the proposed standard unit. Acreage in excess of

the 640-acre maximum and 10% tolerance may be included in a

standard unit if necessary to:

(1)  Avoid the creation of stranded acreage.

(2)  Prevent the loss of the use and benefit of potential

recoverable oil and gas.

(3)  More efficiently recover oil or gas.

"Stranded acreage."  Land that cannot be developed for

production of oil or gas from unconventional reservoirs because

of the 250 feet minimum setback requirements under this chapter

when applied to the boundaries of standard units.

"Unconventional reservoir."  A formation below the base of

the Elk Sandstone or its geologic equivalent stratigraphic

interval that contains or produces oil or gas that generally

cannot be economically produced at flow rates or in volumes

except by hydraulic fracturing, horizontal or multi-lateral well

bores or other techniques to expose the reservoir to the well

bore.

"Unit."  A consolidation of interests of persons actively

engaged in the business of extracting oil or gas from land owned

or leased by the persons within a defined geographic area to

facilitate the drilling of wells from one or more unconventional

reservoirs.

"Voluntary unit."  A unit created under a lease or other

voluntary agreement of the owners and lessees of all interests

in the oil or gas in the unit.

"Waste."  The unnecessary loss of potentially recoverable oil

or gas.

"Working interest owner."  An owner of the right to develop,

operate and produce the oil or gas sought to be produced, except

where specifically provided in a joint operating agreement

governing a standard unit.

SUBCHAPTER B

(Reserved)

SUBCHAPTER C

ESTABLISHMENT OF STANDARD UNITS

Sec.

3421.  Standard unit order.

3422.  Technical assistance.

§ 3421.  Standard unit order.

(a)  Authorization.--A person actively engaged in the

business of extracting oil or gas who owns or leases at least

65% of the oil or gas working interests in a proposed unit that

does not have a voluntary agreement to extract oil or gas from

the entire area may apply to the commission for an order to

establish a standard unit under this chapter to integrate the

interests controlled by another person actively engaged in the

business of extracting oil or gas who owns or leases the

remaining land in the proposed unit.

(b)  Approval.--If a person does not own or control at least

65% of the oil or gas working interests in a proposed standard

unit but demonstrates by written evidence that it has an

agreement with collaborating owners who control interests within

the proposed unit that total 65% of the unit, the person may

apply for the establishment of a standard unit.

(c)  Other interests.--Interests of a person actively engaged

in the business of extracting oil or gas that may be combined

under subsection (a) into a standard unit may include interests

of the other working interest owners and royalty interests.

(d)  Integration.--Upon the grant of an order by the

commission establishing a standard unit, all oil and gas

interests within the unit shall be integrated in accordance with

this chapter.

(e)  Scope.--This chapter shall apply to interests of owners

engaged in the business of extracting oil or gas.

§ 3422.  Technical assistance.

The Bureau of Topographic and Geologic Survey of the

Department of Conservation and Natural Resources shall provide

technical and other assistance to the commission as requested by

the commission.

SUBCHAPTER D

PROCEDURE

Sec.

3431.  Process.

3431.1.  Powers of commission.

3432.  Standard unit protest.

3433.  Standard of review.

3434.  Hearings and appeals.

3435.  Final action.

3436.  Appellate jurisdiction of Commonwealth Court.

§ 3431.  Process.

(a)  Filing.--An applicant for an order to establish a

standard unit under this chapter shall file the application with

the commission. The commission shall review the application for

completeness and notify the applicant of any deficiencies and

refer a completed application to the Office of Administrative

Law Judge within five business days of submission.

(b)  Voluntary unit.--An order of the commission shall not be

required for working interest owners or standard units to

establish a voluntary unit under a lease or other agreement.

(1)  Lessees that provide the establishment of voluntary

units may proceed under the terms of their leases and no

proceedings under this chapter shall be required.

(2)  A lessee may file to establish a unit under this

chapter. If the application is approved, this chapter shall

supersede the terms of the leases relating to pooling and

utilization with respect to the lands included in the unit.

(c)  Application.--A standard unit application shall be in a

form approved by the commission and shall include:

(1)  Information regarding all working interest owners

proposed to be included in the standard unit that are

controlled and that are not controlled by the applicant.

Working interests shall include all leases, mortgages,

judgments and other liens and encumbrances of record upon any

interest in the proposed unit. The list shall include:

(i)  The name and address of each owner of an

interest proposed to be integrated.

(ii)  The type of interest held by each owner.

(iii)  The extent of the interest held.

(2)  A plat that:

(i)  Depicts the boundaries of the proposed standard

unit, the total acreage and the location and acreage of

each tract included in the proposed standard unit.

(ii)  Identifies the location of all initial proposed

wells and laterals.

(iii)  Identifies the stratigraphic interval proposed

for integration.

(3)  A statement of the allocation of interests in the

proposed standard unit.

(4)  Proof that notice of the filing of the standard unit

application has been given to the following:

(i)  The owners of interests not controlled by the

applicant that are proposed to be included in the

standard unit.

(ii)  The owners of all land adjacent to the proposed

standard unit.

(5)  Proof of notice of the filing of the standard unit

application. The notice shall identify all parcels and parts

of parcels proposed to be included using the existing tax and

property records of the county.

(6)  A statement of the estimated well costs that

includes an industry form for authorizing expenditures with

detailed tangible and intangible drilling costs.

(7)  A joint operating agreement with an attached

proposed lease and all relevant schedules.

(d)  Review.--Applications shall be referred to the Office of

Administrative Law Judge for review within five days of a

determination that the application is complete.

(e)  Protests.--

(1)  A protest shall be filed within 20 days of the

filing of the application. If no protest is filed within 20

days of the filing of the application, the application shall

be deemed approved and a notice shall be transmitted to the

commission. If the commission takes no action on the

application within 30 days of its filing, the application

shall be deemed approved and a letter closing the docket

shall be filed.

(2)  The commission may reject the application if it

fails to meet the requirements of section 3433 (relating to

standard of review). If a protest is filed within 20 days of

the filing of the application, the administrative law judge

shall schedule a hearing to be held within 20 days of the

close of the protest period. The hearing may be held at a

later date if the applicant and protestants agree to an

extension of time.

(3)  Following the hearing, the staff shall prepare a

recommendation for submission to the commission. A

recommendation may include proposed amendments to the

application or joint operating agreement or conditions to

protect correlative rights. The recommendation and

certification of the evidentiary record shall be forwarded to

the commission.

(f)  Decision.--The commission shall rule on protested

applications within 45 days of the hearing.

§ 3431.1.  Powers of commission.

(a)  Authority.--The commission may promulgate regulations

and policy statements and issue orders to carry out its duties

under this chapter.

(b)  Temporary regulations.--The commission may promulgate

regulations in order to promptly implement this chapter. The

regulations shall be deemed temporary regulations and shall

expire no later than two years following their adoption. The

temporary regulations shall not be subject to:

(1)  Sections 201, 202 and 203 of the act of July 31,

1968 (P.L.769, No.240), referred to as the Commonwealth

Documents Law.

(2)  The act of June 25, 1982 (P.L.633, No.181), known as

the Regulatory Review Act.

(c)  Expiration of authority.--The authority of the

commission to adopt temporary regulations under subsection (b)

shall expire two years from the effective date of this

subsection. Regulations adopted after this period shall be

promulgated as provided by law. Permanent regulations shall be

published within 12 months following the effective date of this

section.

(d)  Compliance.--Every person subject to the provisions of

this chapter shall comply with the regulations and orders of the

commission and their terms and conditions.

(e)  Employees.--The commission may appoint employees,

attorneys, consultants and other individuals as necessary to

carry out the purposes of this chapter. Employees under this

subsection shall serve at the pleasure of the commission.

(f)  Fees and costs.--The commission shall adopt a reasonable

filing fee for applications under this chapter. Additional

process costs of the Office of Administrative Law Judge may be

assessed on the application.

§ 3432.  Standard unit protest.

(a)  Parties with standing.--Parties with standing to protest

a proposed standard unit application are the following:

(1)  The owners of a working interest subject to

integration in the standard unit who have not entered into a

voluntary agreement with the applicant.

(2)  The owners of oil and gas in land directly adjacent

to but outside the proposed standard unit.

(3)  The owners of interests in potentially stranded

acreage who have not entered into a voluntary agreement with

the applicant.

(4)  The owner of the mineral rights that are proposed to

be integrated.

(b)  Notice.--Applicants shall employ reasonable methods to

determine the identity of persons entitled to notice as follows:

(1)  An applicant shall send a notice of the filing of a

standard unit order application to all persons with standing

to object.

(2)  All notices shall state the date intended for the

filing of an application.

(3)  Notices shall be sent via United States certified

mail with return receipt requested or other mail or delivery

service providing a proof of delivery.

(4)  Notices shall be sent at least five business days

before the filing of a standard unit application.

(5)  An applicant may arrange for personal service of a

notice required under this chapter if proof of service is

provided.

(6)  Notices to persons who cannot be identified or

located shall be given in accordance with the requirements of

Pa.R.C.P. No. 430 (relating to service pursuant to special

order of court. publication).

§ 3433.  Standard of review.

(a)  Standard of review.--The commission shall order the

establishment of the proposed standard unit if the applicant

shows by a preponderance of the evidence that the plan for the

establishment of the unit will minimize surface disruption or

impact to property or other environmental impact and:

(1)  prevent the unnecessary loss of the use and benefits

of potentially recoverable oil or gas to a person or the

Commonwealth; or

(2)  protect the rights of owners of oil or gas interests

in a manner that ensures the fair and reasonable ability to

obtain an equitable share of oil and gas.

(b)  Determination.--In making a determination under

subsection (a), the commission may consider whether the

establishment of the unit will permit the optimal development of

oil and gas resources in this Commonwealth consistent with the

protection of the health, safety, environment and property of

its citizens.

(c)  Protests.--Protests to applications for a standard unit

may be filed only for the following reasons:

(1)  The application fails to comply with the

requirements of this subsection.

(2)  The terms of the proposed joint operating agreement,

including royalty payments, are not reasonable or the

applicant failed to act in good faith.

(3)  An owner or lessor of a working interest proposed to

be integrated into the unit has or will have the capacity and

resources and plan to develop their respective acreage

outside the proposed unit in a manner that is consistent with

oil and gas conservation principles. In determining whether a

protest under this paragraph shall result in denial or

modification of the application as to the acreage subject to

the objection, the commission shall consider the following:

(i)  The timing of the proposed development of the

applicant and the protestant.

(ii)  The investment of the parties in their

respective acreage.

(iii)  The impact of the inclusion or exclusion of

the contested parcel on the long-term development plans

of the applicant and the objector.

(iv)  The scope of the proposed development of the

applicant and the protestant.

(v)  The type of commitments each applicant is

willing to make to develop the contested land.

(vi)  Whether inclusion of the acreage that is the

subject of the protest meets the objectives of section

3402 (relating to legislative intent).

(vii)  Any other relevant factors the commission

reasonably determines to be appropriate.

(4)  The proposed standard unit fails to protect the

correlative rights of an owner of adjacent oil or gas

interests, the owner of potentially stranded acreage or the

integrated mineral owner. This objection must be filed by the

owner.

(d)  Other protests.--Protests by persons other than those

specified with standing or authorized under section 3432(d)

(relating to standard unit protest) shall not be considered.

(e)  Averments.--Averments of a party relied upon by the

commission in evaluating a protest under this section shall be

made part of the joint operation agreement.

(f)  Expansion.--The commission may order expansion of

proposed standard units to avoid the potential for stranded

acreage.

§ 3434.  Hearings and appeals.

(a)  Nature of proceedings.--Proceedings at all hearings

shall be conducted in accordance with this chapter and rules

adopted by the commission.

(b)  Proposed findings and conclusions.--Before submission of

a recommendation to the commission, the parties are entitled to

a reasonable opportunity to submit for consideration:

(1)  proposed findings and conclusions to be included in

the recommendations submitted to the commission; and

(2)  supporting reasons for the proposed findings or

conclusions.

(c)  Action by commission.--If the commission determines that

an applicant failed to make a good faith effort to reach a

voluntary agreement to establish a unit comprised of land owned

or leased by a business actively engaged in the extraction of

oil or gas for control of all unleased oil and gas interest

owners and all working interests to be integrated into the unit,

the commission may exclude the property subject to that

determination from the proposed unit and the applicant shall

have the option of proceeding with the unit as modified or of

withdrawing its application for the unit.

§ 3435.  Final action.

The decisions of the commission shall constitute the final

action of the commission with respect to the matters subject to

the hearing.

§ 3436.  Appellate jurisdiction of Commonwealth Court.

Appeals from decisions of the commission shall be heard by

the Commonwealth Court. The court shall consider appeals on the

record of the proceedings before the commission and shall apply

a narrow certiorari review standard.

SUBCHAPTER E

EFFECT OF ORDER

Sec.

3441.  Establishment of units.

3442.  (Reserved).

3443.  Integration of working interests.

3444.  Additional considerations.

3445.  Joint operating agreement.

§ 3441.  Establishment of units.

(a)  Establishment.--Upon the grant of an order establishing

a standard unit, all oil or gas interests within the unit shall

be integrated in accordance with this chapter.

(b)  Stratigraphic intervals.--Standard units created under

this chapter:

(1)  Shall be specific as to the stratigraphic intervals

sought to be explored and produced by the applicant.

(2)  May be created in stratigraphic intervals in lands

already subject to voluntary units or to involuntary units

established under this chapter. To incorporate in whole or in

part a prior voluntary or involuntary unit of which the

applicant does not control at least 65% of the interests, the

prior units may not contain a well capable of producing from

that stratigraphic interval and no active drilling permit

exists for such a well, and, upon the creation of a unit

under this chapter within any part of a preexisting voluntary

or involuntary unit producing from a different stratigraphic

interval, the voluntary or involuntary unit shall not be

applicable to the portion of the specific stratigraphic

interval that is subject to the new standard unit. Otherwise,

the prior unit shall continue in effect as originally

created.

(c)  Location of involuntary unit.--Nothing in this chapter

shall prohibit the commission from establishing a standard unit

which is located around or, in whole or in part, within a

voluntary unit of which the applicant controls at least 65% of

the interests producing from the same formation or stratigraphic

interval. An objection to a proposed allocation of royalty or

other payment from that unit may be adjusted as necessary to

promote fairness among all interest holders.

(d)  Perforated segments.--A standard unit may be established

on lands upon which a well exists, except no perforated segment

of a well drilled under a later unit shall be less than 500 feet

from any perforated segment in the same stratigraphic interval

existing on the date of its establishment.

(e)  Contiguous units.--Upon the agreement of the working

interest owner of at least 65% of the cost-bearing interests in

two or more contiguous units, wells may be drilled within 250

feet from the adjacent boundaries of those units and production

shall be allocated among the units as agreed by the working

interest owner.

(f)  Royalties and interests.--Royalties and interests shall

be apportioned and paid to royalty interest holders based upon

the relative surface acreage of the interests in each unit as

set forth in the commission's order unless all of the owners of

integrated interests expressly agree in writing to deviate from

this chapter and adopt a different allocation method. Nothing in

this section shall alter the application of the rule of

apportionment of royalties as to oil and gas leases partially

included in any unit established under this chapter.

(g)  Stranded acreage.--If an application results in stranded

acreage and 65% of the interests in the stranded acreage is

timely filed as a protest to the application, the commission may

order any of the following:

(1)  Incorporation of the stranded acreage into the unit.

(2)  Granting the protesters an exception to allow the

land to be developed for oil and natural gas production

without regard to the mandatory 250 feet setback requirements

under this chapter.

§ 3442.  (Reserved).

§ 3443.  Integration of working interests.

(a)  Working interest.--A working interest owner within the

approved standard unit who has not entered into a voluntary

agreement with the applicant may elect to be treated as one of

the following:

(1)  A nonconsenting party subject to the terms of the

joint operating agreement for the unit, entitling him to a

proportionate share of profits after being assessed a risk

fee apportioned among all nonconsenting parties at the rate

of 300% of their proportionate share of all of the costs

incurred by the designated operator.

(2)  A consenting party subject to the terms of the joint

operating agreement for the unit, requiring him to contribute

a proportionate share of the costs of preparing, drilling,

completing and operating the well at the time of his election

under this subsection and entitling him to a proportionate

share of profits.

(b)  Election.--The election under subsection (a) shall be

exercised by returning a signed election form to the working

interest owner and the Commonwealth within 14 calendar days of

the date of the order establishing the unit. A working interest

owner who fails to make an election under this subsection shall

be treated as a nonconsenting party under subsection (a)(1).

(c)  Limited nature of election.--A working interest owner

shall be subject to the terms, conditions, rights and

obligations specified in the joint operating agreement. The

election shall apply only to the well for which the election is

made, with any further elections to be governed by the joint

operating agreement.

§ 3444.  Additional considerations.

(a)  Additional matters.--Additional matters subject to an

order of the commission under this chapter shall be governed by

a joint operating agreement. An applicant may file a proposed

joint operating agreement for the unit as part of the

application for a standard unit order on a form approved by the

commission. The following shall apply to an agreement under this

subsection:

(1)  A party controlling at least 15% of the working

interests in the unit may propose additional drilling. No

party owning or controlling less than 65% of interests in the

unit may propose the drilling of more than one well in a

calendar year.

(2)  A lease attached to the joint operating agreement

shall be the lease currently in use by the applicant.

(3)  The cash and royalty provided under the lease shall

be as provided under this chapter. The royalty shall be

treated as a cost shared pro rata among all consenting and

nonconsenting parties to the joint operating agreement.

(4)  A risk avoidance penalty as provided under this

chapter.

(5)  Parties to the joint operating agreement shall have

the right to take their gas in kind. Should a consenting or a

nonconsenting party not elect to take its share of gas in

kind, the operator of the unit shall have the right to market

the share of production along with the operator's production

in accordance with the terms of the joint operating

agreement. In no event may the nonoperator be entitled to

receive an amount in excess of the amount received by the

operator for its share of production. The joint operating

agreement shall include an oil and gas balancing agreement.

No working interest owner transporting oil or gas from a well

in which the working interest owner has an interest shall be

deemed a utility.

(b)  Aggrieved party.--A party aggrieved by terms proposed by

the applicant in a joint operating agreement filed with the

application may protest as provided in this chapter.

(c)  Withdrawal.--An applicant may withdraw its application

within ten days after an order.

§ 3445.  Joint operating agreement.

(a)  Applicants and lessors.--A standard unit under this

chapter shall be operated in accordance with the terms of the

applicable leases, as modified by an order issued by the

commission, if the only interest holders in the unit are the

applicant and lessors.

(b)  Other units.--All other standard units established under

this chapter shall be operated under the terms of applicable

leases, as modified by commission order and under the terms of

the joint operating agreement. The consenting and nonconsenting

parties may alter the terms of the joint operating agreement

only by unanimous consent or by filing a petition with the

commission for amendment. The commission shall approve or deny

the amendment within 90 days of the date of filing. An amendment

adopted by unanimous consent shall be filed with the commission.

SUBCHAPTER F

(Reserved)

SUBCHAPTER G

(Reserved)

SUBCHAPTER H

(Reserved)

SUBCHAPTER I

(Reserved)

SUBCHAPTER J

MISCELLANEOUS PROVISIONS

Sec.

3491.  Certain rights preserved.

3492.  Trade secrets.

3493.  Applicability.

3494.  Well setback.

3495.  Voluntary establishment of a standard unit.

3496.  Drilling permit not required.

§ 3491.  Certain rights preserved.

(a)  Policy statement.--Voluntary units implemented in

accordance with the terms of executed oil and gas leases for the

bona fide purpose of promoting the development of unconventional

natural gas resources are declared to be necessary and

reasonable for the development of unconventional gas resources

in accordance with reasonable conservation principles and to

reasonably protect affected correlative rights. Units created

under a voluntary unitization agreement are declared to be per

se reasonable and subject to modification only in accordance

with the terms of the applicable leases or the express terms of

this chapter.

(b)  Common law rights.--Except as expressly provided under

this chapter and in orders issued by the commission, this

chapter does not supersede any common law rights of any person

before or after the effective date of this chapter recognized by

the courts of this Commonwealth.

(c)  Successors in interest.--All rights related to units

created under this chapter and all leases integrated in the

units, in whole or in part, shall be binding upon the heirs,

successors and assigns of all parties, including a party taking

title to the property as the result of judicial sale, mortgage

foreclosure, tax sale or by other operation of law and shall be

binding upon and shall run with the land. No action by an owner

of any interest in a lien, judgment, mortgage or other

encumbrance shall extinguish or impair the establishment of a

standard unit under this chapter.

§ 3492.  Trade secrets.

(a)  Right to privacy.--Confidential proprietary information

or trade secrets submitted by parties during proceedings under

this chapter may not be disclosed by the commission or any other

parties privy to such information or secrets. The information

may be submitted under seal for review by the administrative law

judge only and shall be exempt from the act of February 14, 2008

(P.L.6, No.3), known as the Right-to-Know Law.

(b)  Violations.--A violation of this section shall

constitute a violation of this chapter and also a violation of

12 Pa.C.S. Ch. 53 (relating to trade secrets), for which relief

may be sought by an aggrieved party under and in accordance with 

the terms of 12 Pa.C.S. Ch. 53.

§ 3493.  Applicability.

(a)  Sandstone extractions.--This chapter shall apply to all

wells drilled after the effective date of this chapter into and

producing from unconventional oil and natural gas reservoirs

below the base of the Elk Sandstone or its geologic equivalent

stratigraphic interval in this Commonwealth other than coal bed

methane.

(b)  Vertical wells.--The only provision of this chapter that

shall apply to vertical wells is the 250 feet setback

requirement from lease or unit lines and from other wells

seeking production from the same stratigraphic interval. In the

event of a preexisting vertical well on land subject to an

integrated unit proceeding, a setback of 250 feet around the

bore of that well shall be maintained in all operations upon a

unit created under this chapter. The acreage within that setback

area shall not be acreage within the unit. For horizontal wells,

the 250 feet setback requirement from lease and unit lines

imposed under section 3421(c) (relating to standard unit order)

shall apply to wells drilled after the effective date of this

chapter.

§ 3494.  Well setback.

No perforated segment of any well drilled to be produced from

an unconventional reservoir shall be located at any point less

than 250 feet from the boundary of:

(1)  a lease not included in a proposed voluntary unit or

unit applied for or established under this chapter;

(2)  a voluntary unit formed for the well; or

(3)  any unit applied for or established under this

chapter for the well.

§ 3495.  Voluntary establishment of a standard unit.

An order of the commission shall not be required for the

voluntary establishment of a standard unit.

§ 3496.  Drilling permit not required.

The commission may not require an applicant to obtain a

drilling permit to qualify for the establishment of a standard

unit.

Section 2.  Repeals are as follows:

(1)  The General Assembly declares that the repeal under

paragraph (2) is necessary to effectuate the addition of 58

Pa.C.S. Ch. 34.

(2)  The act of July 25, 1961 (P.L.825, No.359), known as

the Oil and Gas Conservation Law, is repealed.

Section 3.  The addition of 58 Pa.C.S. Ch. 34 is a

continuation of the act of July 25, 1961 (P.L.825, No.359),

known as the Oil and Gas Conservation Law. The following apply:

(1)  Except as otherwise provided in 58 Pa.C.S. Pt. III

Ch. 34, all activities initiated under the Oil and Gas

Conservation Law shall continue and remain in full force and

effect and may be completed under 58 Pa.C.S. Ch. 34. Orders,

regulations, rules and decisions which were made under the

Oil and Gas Conservation Law and which are in effect on the

effective date of section 2(2) of this act shall remain in

full force and effect until revoked, vacated or modified

under 58 Pa.C.S. Ch. 34. Contracts, obligations and

collective bargaining agreements entered into under the Oil

and Gas Conservation Law are not affected nor impaired by the

repeal of the Oil and Gas Conservation Law.

(2)  Except as set forth in paragraph (3), any difference

in language between 58 Pa.C.S. Ch. 34 and the Oil and Gas

Conservation Law is intended only to conform to the style of

the Pennsylvania Consolidated Statutes and is not intended to

change or affect the legislative intent, judicial

construction or administration and implementation of the Oil

and Gas Conservation Law.

(3)  Paragraph (2) does not apply to the addition of the

following provisions:

(i)  The following definitions in section 3403:

(A)  "Nonconsenting party."

(B)  "Unit."

(ii)  Section 3421(a) and (c).

(iii)  Section 3431.1(a) and (c).

(iv)  Section 3433(c)(2) and (3).

(v)  Section 3434(c).

(vi)  Section 3441(c).

(vii)  Section 3443(a) introductory paragraph.

Section 4.  This act shall take effect immediately.