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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

COMPREHENSIVE OIL AND GAS REGULATIONS LONG OVERDUE  Posted: October 12, 2005
Kentucky Resources Council, Inc.
Post Office Box 1070
Frankfort, Kentucky 40602
(502) 875-2428 phone
(502) 875-2845 fax
e-mail: fitzKRC@aol.com
www.kyrc.org

October 12, 2005

Ms. Susan Bush, Commissioner
Department for Natural Resources
Environmental and Public Protection Cabinet
#2 Hudson Hollow
Frankfort, KY 40601

Re: KRS 353.500

Dear Commissioner:

I am writing out of grave concern and no small sense of frustration that the Environmental and Public Protection Cabinet has to date failed to comply with the mandate of the 2003 Kentucky General Assembly to promulgate a comprehensive set of regulations governing the environmental and public health impacts of all aspects of the oil and gas industry, including exploration, production, development and transmission.

During the 2003 legislative session, the oil and gas industry sought to preempt local county regulation of any aspect of oil and gas exploration and development, in a direct effort to prevent Letcher County from regulating the ecological and human impacts of the placement of gathering lines on private property and public lands.

After much negotiation, KRS 353.500 was adopted, providing for eventual preemption of local government regulation over aspects of the oil and gas industry in return for a commitment by the Department and a mandate from the General Assembly for timely development of a comprehensive state regulatory program over oil and gas development.

Specifically, the General Assembly mandated that:

the department shall promulgate regulations relating [to all aspects of oil and gas exploration, production, development, gathering, and transmission] and take all actions necessary to assure efficient oil and gas operations and to protect the property, health, and safety of the citizens of the Commonwealth in a manner consistent with KRS Chapter 353[.]

KRS 353.500 (2003).

A time certain of six months was placed on the development of the regulations for gathering lines, and it was assumed by all parties that the other regulations would follow within a year or so thereafter.

In the intervening two years since the Department was mandated to adopt a comprehensive set of regulations governing all aspects of oil and gas exploration, development and transmission, the Cabinet appears to have made no tangible or visible effort to complete the task in a reasonable time certain. It certainly does not appear to have been a priority, and instead the agency has been expending time and resources to streamline mine permits and to adopt new regulatory programs under the Clean Water Act.

This lapse has left both landowners and the environment at continued risk of and exposure to unnecessary damage and property loss even as the Cabinet is fully aware that the pace of oil and gas development has continued to accelerate. The agency has publicly acknowledged that higher market prices for natural gas and oil have caused and will continue to cause increased drilling activity in the state. The Director of the Division of Oil and Gas Conservation predicted some 1,500 new oil and gas wells expected. Recently, Chesapeake Energy has announced an “aggressive expansion of Appalachian natural gas production,” according to an October 6, 2005 AP article. Yet despite this acknowledgment that there will be a significant increase in oil and gas exploration, with an attendant increase in land-disturbing activity associated with the increased exploration and production, the Cabinet has not moved forward to complete a task mandated over two years ago. As the agency studies the delegation of new regulatory programs governing protection of water resources, it would behoove the agency to finish the job dictated by the legislature under existing law.

The current regulatory framework has significant gaps in protection of landowners and the environment. While regulations have been developed to implement the requirement of KRS 353.5901(1) that an operator submit an operations and reclamation proposal for tracts where there has been a complete severance of the surface to be disturbed, no comparable set of regulations has been developed to assure that in leasehold situations or where the oil or gas operator owns the land in fee, damage to air, land and water resources is minimized and reclamation of the land occurs. For example, where surface coal mining and reclamation operations are required to meet rigorous requirements concerning sediment control, minimization of off-site hydrologic disturbance, and restoration of lands to productive capacity, oil and gas operations often construct roads without proper sediment controls, and leave lands as unreclaimed sources of sediment and other pollutants.

In May of this year, the Environmental Quality Commission reviewed oil and gas drilling issues, and made a series of recommendations, including recommendations on increasing bonds, identifying and excluding “bad actors” from the industry, and encouraging the agency to “advance oil and [gas] drilling practices and technologies to operate safely and protect the environment.” KRC is unaware that the agency has taken meaningful steps to respond to these recommendations to date.

I respectfully request that the agency redouble efforts to promulgate, within a time certain, a comprehensive set of regulations filling the current regulatory gaps by requiring that fee and leasehold operations provide operations and reclamations plans, and further that the agency review and improve on the existing regulations for operations and reclamation plans.

The Council believes that a meaningful set of regulations will provide:

a. Public notice of intent to seek a permit to explore or drill, both mailed to the surface landowner and adjoining neighbors, and published in a local paper of general circulation a notice describing the project, the expected timeline for completion, and a map showing the affected areas. This notice shall be published at least once a week for three (3) consecutive weeks before commencement of any site disturbance.

b. Proof of ownership or other right of entry onto the property on which the well is to be constructed or operated. Where the right-to-enter is contested, the Council believes firmly that the agency has no business issuing a permit in such an instance, but rather must await an adjudication by a court of competent jurisdiction of the validity of the instrument(s) upon which right-of-entry is alleged to rest.

c. Submittal of an operations and reclamation plan including:

(i) A narrative description of the location of all areas to be disturbed, including the location of all well sites, roads, waste management areas, tank batteries and gathering lines. Accompanying this narrative description shall be a map in sufficient detail and certified by an appropriate qualified engineer, geologist or land surveyor, depicting the location of the land of all of these disturbances or facilities and prominent natural features;

(ii) An description of the methods to be employed to protect surface and groundwaters and to prevent contamination of land resources from all potential environmental consequences oil and gas operations, including the construction, use, conversion and closure of oil and gas exploration and production operations, and all related facilities, including pipelines, compressor stations, wellhead areas, tank batteries, oil/water separators, holding, drilling and production pits, and other areas on which are sited structures or facilities or where the land surface is disturbed incident to such operations;

(iii) A proposal to prevent erosion and sedimentation from all disturbed areas, and to control all fluids used or generated from the drilling;

(iv) The plan should include a discussion of all known and suspected pollutants or contaminants (constituents of concern), and how those wastes, pollutants and contaminants will be managed to protect human health and the environment, including:

1) drilling wastes (including drilling fluid and drill cuttings) - constituents of concern include TSS, PAHs associated with diesel fluids, and free oil. Chemical constituents of concern include benzene, toluene, ethylbenzene, phenol, phenanthrene, napthalene, methylnapthalene, and methyl-phenanthrene, as well as numerous other PAHs that are oncogenic agents or cancer-promoting compounds. Where stock barite is used, metals concentrations are of concern, and information concerning the levels of mercury, cadmium, and other metals should be required. See: discussion concerning waste characterization, 60 Fed. Reg. 9428 (February 17,1995).

2) Produced water - discussion of the composition and appropriate sampling to support the discussion, should be included, for parameters such as TSS, oil and grease, volatile organics, semivolatile organics, metals, conventional and nonconventional pollutants, and radionuclides (particularly Ra-226). Industry data supplied to EPA as part of the Cook Inlet Study indicated the presence of the 13 priority metals and significant amounts of priority organics in produced water that had been treated to remove oil and grease. Organics included benzene, napthalene, phenol, toluene, 2-propanone, ethylbenzene, and xylene. Additionally, testing by EPA identified as of concern TSS, oil and grease, barium, chlorides, ammonia, magnesium, strontium and iron.

3) Well treatment, workover and completion fluids - information on the composition of these fluids must be developed, including such typical constituents as acetone, benzene, ethylbenzene, xylene, toluene, napthalene, TSS, boron, calcium, cobalt, iron, manganese, molybdenum, tin, vanadium, and yttrium.

4) The plan should also identify whether the proposal will use any of the production treating chemicals identified as potentially present in oil production operations, including biocides, (aldehydes, formaldehyde mixtures, ethoxy quaternary and dicocoamine, cocodiamine salt, amine and others), scale and corrosion inhibitors, coagulants, H2S scavengers, emulsion breakers, paraffin inhibitors, gas treating chemicals (including methanol, glycols), stimulation acids and workover fluids, and shall describe the management and disposal of these fluids.

5) Pipeline condensates and pigging wastes from pipelines

6) Manometers (where elemental mercury is used, there has been demonstrated a significant potential for releases).

(iii) The construction, operation and maintenance practices for all pits and tanks should be included within the operations and reclamation plan, and the operator should describe that distance from the pit bottom to the seasonal high groundwater table, and those measures to be taken to assure that the pit contents do not adversely impact ground or surface waters.

(iv) A plan to coordinate the timing of the operation to accommodate seasonal uses of the land by the surface owner;

(v) A plan to minimize the impact on the other uses of the land by the surface owner, including the use of timber, houses, barns, ponds, crops, and other improvements and

(vi) A revegetation plan addressing restoration of disturbed areas to pre-operation levels of productivity, and of a diverse, effective, permanent vegetative cover.

(vii) A description of measure to be taken to control airborne emissions of hazardous air pollutants during well stimulation and production;

d. Notice to the surface landowner in the event that transfer of a well is proposed, since the authority to conduct such operations may be personal to the permittee, and further because the landowner should have the right to review and determine the sufficiency of the transfer documentation.

e. Notice to and coordination of line location and equipment and pipeline crossing of public roads with local governments.

f. Mandatory setbacks, including a prohibition against location of an oil or natural gas well within three hundred (300) feet of any building used as a primary residence without the written consent of the property owner of that building.

g. A requirement that at all times during the construction, and operation of oil or natural gas wells, the person owning or operating such wells shall at its own expense maintain in force a general comprehensive liability insurance policy. The coverage represented by such a policy or policies shall cover any bodily injury, death and property damage due to the activities of the operator.

h. A requirement that each operator shall submit for approval and implement a continuous program of emergency response preparedness and training which addresses the following:

(i) Emergency plans. Each operator shall, in addition to implementation and training on a SPCC plan, establish written procedures to minimize hazard resulting from a blowout or other emergency. At a minimum, procedures shall provide for the following:

1) Receiving, identifying, and classifying notices of events that require immediate response by the operator.

2) Establishing and maintaining adequate means of communication with appropriate fire, police, and other public officials.

3) Prompt and effective response to a notice of each type of emergency, including gas, fire, explosion or natural disaster near or involving a building with the regulated natural gas pipeline or related facility.

4) Availability of personnel, equipment, tools, and materials, as needed at the scene of emergency.

5) Actions directed toward protecting people first and then property.

6) Emergency shutdown and pressure reduction in any section of the operator's well, gathering line or pipeline system necessary to minimize hazards to life or property.

7) Making safe any actual or potential hazard to life or property.

8) Notifying appropriate fire, police and other public officials of natural gas pipeline emergencies and coordinating with them, both planned responses and actual responses during an emergency.

i. The operations and reclamation proposal should require the applicant to collect sufficient baseline surface and groundwater quality and quantity information to support a determination as to whether the operations have caused adverse effects to surface or groundwater resources.

A comprehensive regulatory program is needed to protect the legitimate expectations of landowners and the public that the full costs of development and production will be borne by the producer and not shifted to the surface landowners, lessors or downstream neighbors. These comments are necessarily preliminary in nature, and may be supplemented as the agency proceeds towards a regulation.

I urge your agency to move expeditiously to implement regulations to satisfy the regulatory mandate in KRS 353.500 and the 2003 legislation. Absent timely action, significant additional damage will be inflicted on the land, air and water resources of this Commonwealth; damage made that much more tragic because it could be avoided through timely and effective regulatory action.

Cordially,

Tom FitzGerald Director

cc: Scott Smith, EPPC


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