Marcellus Shale – Update

Marcellus Shale gas drilling and fracking continue to be in the spotlight.  Last minute changes to Senate Bill 259 made during the recent budget negotiations have prompted environmental and oil and gas royalty owner groups alike to observe that the legislation seriously weakens the negotiating rights for certain landowners holding mineral rights.  Governor Corbett signed Senate Bill 259 into law on July 9, 2013 as Act 66, now known as the “Oil and Gas Lease Act.”  Act 66 provides that where a drilling company has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontal drilling unless such drilling is expressly prohibited by a lease.  Where multiple contiguous leases are developed, in the absence of an agreement by all affected royalty owners, the production shall be allocated to each lease in such proportion as the operator reasonably determines to be attributable to each lease.  The changes which favor drilling companies could force the heirs to traditional drilling leases executed decades ago to accept horizontal shale gas drilling.  The result has been analogized to “forced pooling” in which a drilling company can force landowners to accept drilling if many surrounding landowners have agreed to leases.

Meanwhile, many are wondering whether the recent appointment of Judge Correale Stevens to the Pennsylvania Supreme Court will result in the Court’s issuance of its decision in the Robinson Township case in which the Pennsylvania Commonwealth Court held to be unconstitutional, Chapters 32 and 33 of Act 13 providing for preemption of local ordinances and regulation, including environmental laws and municipal ordinances, affecting Marcellus Shale gas drilling.  Judge Correale Stevens was appointed by Governor Corbett to fill the seat left vacant by the resignation of Justice Joan Orie Melvin.

The Pennsylvania Democratic State Committee recently adopted a resolution calling for an open ended ban on fracking. It is unlikely that the resolution will gain traction with the Republican controlled Senate and House of Representatives.  A United States Environmental Protection Agency (“EPA”) official recently announced that a study of the threat to drinking water from fracking will not be complete until 2016 although a preliminary report could be released in late 2014.  Opponents of fracking contend that the process results in pollution of the Commonwealth’s water supply.

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