What to Watch in 2013

January 7, 2013
Todd D. Kantorczyk
MGKF Special Alert

ENERGY
Marcellus Shale: 2013 Fracing Trends
TODD D. KANTORCZYK

We are likely to see a number of key legal developments in 2013 that will affect the natural gas industry in Pennsylvania. 2012 saw Pennsylvania enact comprehensive amendments to the Oil and Gas Act, otherwise known as Act 13, that industry hoped would provide clarity on a number of significant issues raised in conjunction with the growth of the natural gas industry in the Commonwealth, including:

  1. enhanced environmental protections tailored to the horizontal drilling and hydraulic fracturing operations used to unlock gas from the Marcellus Shale;
  2. imposition of an "impact fee" designed to compensate local municipalities where Marcellus Shale exploration and production occur, while also funding statewide agencies and programs; and
  3. uniformity of local zoning as applied to the natural gas industry.

A group of municipalities and other groups, however, have so far been successful in blocking full implementation of the zoning and impact fee provisions on state constitutional grounds through litigation, and the Pennsylvania Supreme Court is poised to rule on the matter (Robinson Twp. v. Commonwealth of Pennsylvania) in early 2013. A ruling declaring these provisions of Act 13 unconstitutional could send the issues back to Harrisburg for more legislation, while a ruling the other way could shift the battles to the Public Utility Commission and PADEP. Regardless, the enhanced environmental protections of Act 13 remain valid and PADEP has taken initial steps to revise its regulations consistent with Act 13. Litigation associated with Marcellus Shale operations is not limited to zoning and fee issues, and a number of pending cases could be decided ranging from air, waste, water and other permitting decisions to toxic tort claims alleging personal and property damage caused by hydraulic fracturing. All of this is taking place against a backdrop of low gas prices that threaten to stall the overall growth of the industry in Pennsylvania, and which may affect the legal approach to all these issues in 2013.