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Steptoe & Johnson PLLC: Ohio General Assembly Enacts Energy Bill That Addresses Hydraulic Fracturing

By R. Neal Pierce

On May 24, 2012, the Ohio General Assembly enacted a comprehensive energy bill (Senate Bill 315) which addresses several provisions affecting the natural gas industry. The legislation has been forwarded to Governor John Kasich who is expected to sign the bill into law without delay. The new provisions will become effective ninety (90) days after the Governor's signature.

The bill makes several significant regulatory changes impacting horizontal natural gas and liquid production, including a provision requiring producers to report volume and chemical descriptions for all fluids used in the production process (including construction, drilling and hydraulic fracturing) and the total volume of recycled fluids used. The bill allows producers and service providers to designate individual chemicals or solutions used in well completion as trade secrets, but requires disclosure to medical professionals who are bound to keep the information confidential for any purpose not related to diagnosis or treatment of an individual affected by an incident related to well production operations. The Ohio House amended this portion of the bill to allow property owners or others claiming to be adversely affected by a chemical or solution to challenge its designation as a trade secret in the Franklin Circuit Court.

The legislation imposes additional requirements regarding water sampling and source disclosure. Operators will be required to take water samples within 1,500 feet of a proposed horizontal well and submit the results in their permit applications. Operators will also be required to disclose the source of water used in production operations and the rate and volume of water withdrawn. They will be required to submit quarterly reports on brine and wastewater disposal. New insurance requirements are also imposed. Owners of horizontal wells will be required to obtain liability coverage of a least five million dollars which must include "a reasonable amount" of coverage for an environmental endorsement. The bill stops short of making execution of a Road Use Maintenance Agreement a prerequisite to permit issuance, but requires an applicant to demonstrate it has made a good faith attempt to execute an agreement for the use of state, county, or township roads prior to permit approval.

The bill clarifies that Ohio Power Siting Board approval is not necessary for well lines, gathering lines, natural gas liquid lines, or processing facilities. FERC approved transmission lines were already exempted. It imposes new safety requirements for gathering lines transporting gas from horizontal wells.

The bill also addresses renewable energy standards and charges the Ohio Public Utilities Commission and Ohio Department of Transportation with analyzing the cost effectiveness of converting the state motor vehicle fleet to natural gas and reporting their findings by January 30, 2013.  

Neal Pierce brings more than 30 years oil and gas industry experience to the Steptoe & Johnson Energy Team. He focuses on energy law, Utica and Marcellus shale gas law, as well as conventional oil and gas law, working in the firm's Columbus, Ohio office.

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