Babst Calland: West Virginia Office of Oil and Gas Proposes New Rule to Regulate Horizontal Wells

Babst Calland: West Virginia Office of Oil and Gas Proposes New Rule to Regulate Horizontal Wells

On June 28, 2012, the West Virginia Department of Environmental Protection (WVDEP), Office of Oil and Gas (OOG), proposed a new rule, 35 CSR 8, to regulate horizontal well development. This action by the OOG is the latest in a series of measures taken by West Virginia lawmakers in response to the growing natural gas industry. The proposed rule borrows largely from existing West Virginia regulations that apply to oil and gas wells generally, as well as standards, guidance and requirements recently issued by the OOG for specific aspects of horizontal well development. If adopted as proposed, the rule would introduce several noteworthy additions to the regulatory scheme affecting horizontal wells.

In August 2011, at the direction of Governor Earl Ray Tomblin, the OOG issued an emergency rule in response to concerns associated with horizontal well development. With respect to permit applications, the emergency rule prescribed specific requirements for the Erosion and Sediment Control Plan, Site Construction Plan, Well Site Safety Plan and Water Management Plan. The emergency rule also provided operational requirements to protect water quality and quantity, including casing and cementing standards, and provided for additional public notice procedures. In the same month, the OOG issued standards establishing more detailed practices for horizontal well casing and cementing and the Well Site Safety Plan. On December 6, 2011, the OOG issued written guidance explaining in more detail the Water Management Plans required for horizontal well permit applications. Also in December 2011, Governor Tomblin signed into law the comprehensive Natural Gas Horizontal Well Control Act (Act), and shortly thereafter the OOG issued standards for the design and construction of centralized pits. The proposed rule implements the Act and consolidates the various requirements and standards that apply specifically to horizontal wells.

In addition to integrating provisions from the Act, existing horizontal well standards and guidance, and existing oil and gas regulations, including the August 2011 emergency rule, the rule proposes several new or expanded requirements. For example, where an operator tests a water well at the request of the surface owner, the proposed rule requires the operator to sample for a significantly increased number of parameters. Additionally, the rule identifies casing and cementing standards and fracturing chemical disclosure obligations in greater detail. The proposed rule also obligates an operator to report total water use to the OOG within 90 days of fracturing. With respect to production reporting, the rule specifies that the amount of natural gas liquids, as well as

gas and oil, produced by each well must be included in the annual production report. The proposed rule also attempts to clarify the regulatory distinction between centralized versus permit-associated pits and impoundments, and provides more detailed requirements for centralized pits and impoundments that have a capacity exceeding 5,000 barrels.

Furthermore, the proposed rule formally codifies certain WVDEP practices with regard to the Water Management Plan as set forth in the OOG's December 6, 2011 memorandum. The rule dictates that the WVDEP will provide the operator, as part of the agency's approval of a Water Management Plan, both a minimum stream flow requirement at a specified U.S. Geological Survey-operated stream gauging station, and a minimum pass-by flow requirement that must be maintained immediately downstream of each withdrawal point. The rule further prescribes that an operator withdrawing from surface waters must install and maintain a "staff gauge or other suitable stream flow measuring device" to assure adequate pass-by flow downstream of withdrawal points.

The proposed rule sets forth other new or expanded requirements in addition to those described above. Despite the broad scope of the proposed rule, the OOG did not propose regulations addressing certain topics, such as the plugging of horizontal wells, as specifically required by the Act. Based on the statutory directives in the Act, the OOG is expected to propose additional regulations for horizontal wells within the next few years.

For more information about the proposed rule or the West Virginia oil and gas program, in general, please contact Anne C. Blankenship at 681-205-8955 or ablankenship@babstcalland.com, Lisa M. Bruderly at 412-394-6495 or lbruderly@babstcalland.com, or Joseph K. Reinhart at 412-394-5452 or jreinhart@babstcalland.com, or Meredith A. Odato at 412-773-8712 or modato@babstcalland.com.

Copyright 2012 • Babst, Calland, Clements and Zomnir, P.C. • Two Gateway Center, Pittsburgh, PA 15222 • 412-394-5400 • Administrative Watch is privately distributed by Babst, Calland, Clements and Zomnir, P.C., for the general information of its clients, friends and readers. It is not designed to be, nor should it be considered or used as, the sole source of analyzing and resolving legal problems. If you have, or think you may have, a legal problem or issue relating to any of the matters discussed in the Administrative Watch, consult legal counsel.

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