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July 22, 2016 Via email Amy Elliott, Chief Deputy Attorney General Director, Legal Review Section Pennsylvania Office of Attorney General 15th Floor, Strawberry Square Harrisburg, PA 17120 Re: EQB’s Final Rule revisions to 25 Pa Code Chapters 78a, Oil and Gas Wells, Subchapter C, Environmental Protection Performance Standards Dear Ms. Elliott: On behalf of the Pennsylvania Independent Oil & Gas Association (PIOGA), I am writing to express concerns about the legality of certain provisions of the above-referenced regulation, which was approved by the Environmental Quality Board (EQB) on February 3, 2016 and by the Independent Regulatory Review Commission (IRRC) on April 21, 2016. PIOGA is a nonprofit trade association comprising around 500 members, including producers engaged in the development and production of oil and natural gas from both conventional and unconventional formations in Pennsylvania. PIOGA member companies operate the majority of the Commonwealth’s natural gas wells, including those targeting the Marcellus and Utica shale. PIOGA members also include drilling contractors, service companies, manufacturers, distributors, professional firms and consultants, pipelines, end users and royalty owners – all stakeholders with interests in the environmentally responsible and successful development and production of Pennsylvania’s oil and natural gas resources. PIOGA participated in the development stages of this regulation as well as in the public comment and hearing processes after the regulations were proposed and then revised numerous times. The rulemaking package approved by the EQB and IRRC consisted of two chapters—one for conventional oil and gas operations (Chapter 78) and one for unconventional oil and gas operations (Chapter 78a). We understand that on Monday, June 27th, the Department of Environmental Protection (DEP) submitted this rulemaking package to your office for review pursuant to Section 204(b) of the Commonwealth Attorneys Act, 71 P.S. § 732-204(b), even though on the previous Thursday, June 23rd, the Governor signed SB 279 into law as Act 52 of 2016, which abrogates the revisions to Chapter 78. As a threshold matter, it appears that rather than comply with Act 52 and submit only Chapter 78a for review, DEP is waiting for the Attorney General to take the formal action of Pennsylvania: The Keystone to America’s Energy Future ® {B1701659.4}

objecting to the inclusion of Chapter 78 as improper form and not statutorily authorized. Accordingly, PIOGA requests that the Attorney General make those objections. Scope of Attorney General Review Section 204(b) provides that the Attorney General shall review Commonwealth agency regulations for form and legality before the regulations can become effective. The review is to determine whether the regulations are “in improper form, not statutorily authorized or unconstitutional.” Case law makes clear that the scope of review for determining whether the regulations are “not statutorily authorized” encompasses whether the regulations have been issued pursuant to proper procedure and are within the agency’s granted power. Rohrbaugh v PaPUC, 727 A.2d 1080, 1085 (Pa. 1999) (A regulation adopted pursuant to an agency’s legislative rule-making power “is valid and is as binding upon a court as a statute if it is (a) within the granted power; (b) issued pursuant to proper procedure, and (c) reasonable.” (citing Girard School District v. Pittenger, 481 Pa. 91, 94-95, 392 A.2d 261, 263 (1978) and K.C. Davis, 1 Administrative Law Treatise § 503, at 299 (1958)).1 As shown in DEP’s response to Response No. 8 of the Regulatory Analysis Form (RAF) for both the proposed and final-form rulemaking packages, Chapter 78a is being promulgated pursuant to grants of legislative rulemaking power to the EQB. Accordingly, if the requirements of the Commonwealth Documents Law,2 the Regulatory Review Act3 the Commonwealth Attorneys Act,4 or other applicable statutes (such as the various enabling statutes) have not been followed, the Chapter 78a regulations are not statutorily authorized. Similarly, provisions of the regulations that exceed, or are contrary to, the legislative grants of power or authority are not statutorily authorized. As explained below, this is the situation with the Chapter 78a regulations. Other provisions of the Chapter 78a provisions are unconstitutional because their enabling legislation has been declared unconstitutional, invalid and unenforceable by the Pennsylvania Supreme Court in Robinson Twp v. Com., 83 A.3d 901 (Pa. 2013), and has been enjoined. We appreciate your careful consideration of our legal arguments, which we believe provide a basis for the Attorney General to object to the promulgation of Chapter 78a as a whole and to the identified provisions of the Chapter 78a regulations as not statutorily authorized and unconstitutional.

1

The reasonableness of the regulations is not within the scope of the Attorney General’s review.

2

45 P.S. §§ 1102-1602 and 45 Pa.C.S. §§ 501-907.

3

71 P.S. §§ 745.1-745.14.

4

71 P.S. § § 732-101-732-506.

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I.

The rulemaking package was formulated contrary to clear statutory directives in violation of the Non-Delegation Doctrine and therefore is not statutorily authorized.

There is no dispute that DEP – not the EQB – formulated the proposed rulemaking package approved by the EQB and IRRC, as that term is commonly understood.5 Indeed, DEP lists itself, not EQB, as the agency promulgating these regulations in Response No. 1 of the RAF for both the proposed and final-form rulemaking packages. The RAF also acknowledges that the EQB’s involvement in the formulation of the proposed rulemaking was limited to receiving information and having a presentation from DEP at a one-day meeting and then voting to adopt the proposed rulemaking package DEP had formulated. The RAF also does not show that the EQB had a role in formulating the substantial changes DEP proposed in its April 2015 Advance Notice of Final Rulemaking (ANFR). This DEP regulatory-formulation process presents a fundamental problem, one that for reasons unknown to PIOGA has gone unchallenged for many years. While this may have become standard operating procedure for DEP and EQB when promulgating DEP regulations, it is contrary to clear legislative directives. Repeated use of this procedure that is contrary to what is clearly directed by statutes does not render that process lawful or validate its use, and does not require the Attorney General to turn a blind eye to this unlawful procedure. DEP cites the following in Response No. 8 of the RAF as statutory authority for the proposed rulemaking package: ●Sections 3215(e), 3218(a), 3218.2(a)(4), 3218.4(c), and 3274 of the 2012 Oil and Gas Act, 58 Pa.C.S. §§ 3215(e), 3218(a), 3218.2(a)(4), 3218.4(c), 3274 ●Section 5 of the Clean Streams Law, 35 P. S. § 691.5 ●Section 105 of the Solid Waste Management Act, 35 P. S. § 6018.105 ●Section 5 of the Dam Safety and Encroachments Act, 32 P.S. § 693.5 ●Section 104 of the Pennsylvania Land Recycling and Environmental Remediation Standards Act, 35 P.S. § 6062.104 ●Sections 1917-A and 1920-A of The Administrative Code of 1929, 71 P. S. §§ 510-17, 510-20 The RAF for the final-form regulations cites the same authority as the RAF for the proposed regulations, and the following additional authority: ●Section 3202 of the 2012 Oil and Act, 58 Pa.C.S. § 3202 ●Sections 301 and 302 of the Radiation Protection Act, 35 P.S. § 7110.301 and 7110.302 ●Section 3 of the Unconventional Well Report Act, 58 P.S. § 1003 ●Section 1741.1-E of the act of July 10, 2014 (P.L. 1053, No. 126), 72 P.S. § 1741.l-E The simple definition of formulate is: “to create, invent, or produce (something) by careful thought and effort.” Merriam-Webster Online Dictionary, http://www.merriam-webster.com/dictionary/formulate. 5

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As shown below, all these provisions that are actual grants of legislative rulemaking power state clearly that this power is granted to the EQB, not DEP: ●Section 3274 of the 2012 Oil and Act, 58 Pa.C.S. § 3274: “The Environmental Quality Board shall promulgate regulations to implement this chapter.” ●Section 5 of the Clean Streams Law, 35 P. S. § 691.5(a): “The department, in adopting rules and regulations . . . .”; (b): “The department shall have the power and its duty shall be to (1) Formulate, adopt, promulgate and repeal such rules and regulations . . . as are necessary to implement the provisions of this act.” The Clean Streams Law defines “Department” as DEP, EQB or EHB “carrying out the provisions of” The Administrative Code of 1929.” As stated below, The Administrative Code of 1929 grants the legislative rulemaking power for DEP’s regulations to the EQB. ●Section 105 of the Solid Waste Management Act, 35 P. S. § 6018.105: “The Environmental Quality Board shall have the power and its duty shall be to adopt the rules, regulations . . . of the department [of Environmental Protection] to accomplish the purposes and to carry out the provisions of this act . . . .” ●Section 5 of the Dam Safety and Encroachments Act, 32 P.S. § 693.5: “The Environmental Quality Board shall have the power, and its duty shall be, to adopt such regulations . . . as are necessary and proper to carry out the purposes of this act.” ●Section 104 of the Pennsylvania Land Recycling and Environmental Remediation Standards Act, 35 P.S. § 6062.104(a): “The Environmental Quality Board shall have the power and its duty shall be to adopt and amend periodically thereafter by regulation Statewide health standards, appropriate mathematically valid statistical tests to define compliance with this act and other regulations that may be needed to implement the provisions of this act.” ●Sections 301 and 302 of the Radiation Protection Act, 35 P.S. § 7110.301 and 7110.302(a): “The Environmental Quality Board or its successor shall have the power and its duty shall be to adopt the rules and regulations of the department [of Environmental Protection] to accomplish the purposes and carry out the provisions of this act.” ● Section 1920-A(b) and (c) of The Administrative Code of 1929, 71 P. S. § 51020(b),(c) (emphasis added): (b) The Environmental Quality Board shall have the power and its duties shall be to formulate, adopt and promulgate such rules and regulations as may be determined by the board for the proper performance of the work of the department, and such rules and regulations, when made by the board, shall become the rules and regulations of the department. (c) The board shall continue to exercise any power to formulate, adopt and promulgate rules and regulations, heretofore vested in the several persons, departments, boards and commissions set forth in section 1901-A. of this act, and any such rules and regulations promulgated prior to the effective date of this act shall be the rules and regulations of the Department of {B1701659.4}

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Environmental Resources until such time as they are modified or repealed by the Environmental Quality Board. Administrative Code Section 1920-A(e) also directs that the EQB “shall advise [DEP and the DEP Secretary] on matters of policy.” There is no dispute that DEP’s proposed rulemaking package contains policy determinations, yet the EQB was not involved in their formulation. DEP does not hide the fact that it formulated the Chapter 78/78a proposed rulemaking package and that EQB’s involvement was limited to the receipt of information from DEP and voting to approve the proposed rulemaking package. And, as stated above, there is nothing in the RAF showing that the EQB had a role in formulating the substantial changes DEP proposed in its April 2015 ANFR; indeed, the ANFR plainly confirms the lack of EQB’s involvement: “The Department of Environmental Protection (Department) is soliciting comments on changes it is recommending to the Environmental Protection Performance Standards at Oil and Gas Well Sites proposed rulemaking published at 43 Pa.B. 7377 (December 14, 2013).” http://www.pabulletin.com/secure/data/vol45/45-14/597.html (emphasis added). The language emphasized in the Administrative Code quotes above shows that the General Assembly intended the EQB to be in charge of developing DEP’s regulations, not DEP or any other administrative body. This language and its clear underlying legislative intent, as well as Section 503 of the Administrative Code (explained below), also show that the General Assembly did not intend for EQB to have the power or authority to delegate its legislative rulemaking power and duty. None of the statutory grants of legislative rulemaking power and duty stated above also grants the EQB the authority to further delegate its powers and duties to any other administrative body, including DEP. It’s illogical to interpret the General Assembly’s specific grant of legislative rulemaking power to the EQB in the plain terms used in the Administrative Code as an authorization for EQB to further delegate that power to any other administrative body, particularly DEP, because clearly the General Assembly was and has been aware of the separate existence of DEP and the EQB and of the differences between them. In a case where the further delegation of agency legislative rulemaking authority was an issue, the Commonwealth Court concluded that it could not interpret “the statute as allowing DPW to delegate its responsibility,” pointing out that “an expression from the legislature” that the agency has the authority to make such a change in procedure and “a properly promulgated regulation implementing such authority” is necessary for a valid further delegation.6 The court noted that “[o]ur Supreme Court has established that an agency must have a properly promulgated regulation before it may implement a rule or a policy having a substantive effect.”7 PIOGA is unaware of any existing regulation promulgated by the EQB that authorizes DEP to carry out the EQB’s power and duty to formulate DEP’s proposed regulations. PIOGA is aware of a DEP “Policy For Development, Approval And Distribution Of Regulations” from 6

Hardiman v. Commonwealth, Dep't of Public Welfare, 550 A.2d 590; 595 (Pa. Commw. Ct. 1988).

7

Id. (quoting Pennsylvania State Board of Pharmacy v. Cohen, 448 Pa. 189, 200-01, 292 A.2d 277, 28283 (1972). {B1701659.4}

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July 19968 and a “Protocol for Presentation of Regulations Under the Regulatory Review Act” adopted by the EQB in October 1984,9 but neither document can be read as, or even purports to be, a delegation of EQB’s legislative rulemaking power to DEP. And even if either did, that would be legally insufficient per Hardiman.10 Other provisions of the Administrative Code support PIOGA’s argument. Section 503 requires the “departmental administrative bodies, boards, and commissions, within the several administrative departments” to “exercise their powers and perform their duties independently of the heads or any other officers of the respective administrative departments with which they are connected.” 71 P.S. § 183 (emphasis added). While Section 501 requires these administrative bodies to “devise a practical and working basis for cooperation and coordination of work” and allows an administrative body head to “empower or require” an employee of another administrative body “to perform any duty which he or it might require of the employes of his or its own” administrative body, this language is not a general authorization for further delegation of the power and duty of the administrative body or its head, or an authorization for abdication by the administrative body or head of exercising its statutorily granted power and duty. 71 P.S. § 181. No matter how long this DEP-controlled regulation formulation process has been going on, one thing is clear: This process does not comport with the General Assembly’s grants of legislative rulemaking power and duty to “formulate” DEP’s regulations to the EQB, and not to DEP. The many and varied interim changes by DEP to the proposed rulemaking – which even DEP characterized as “substantial” (April 2015 ANFR) – validate the General Assembly’s concerns with giving DEP free reign authority to formulate its own regulations and instead giving that authority to a different independent administrative body to act as a check and balance on the legislative rulemaking power through the development, guidance, direction and oversight of the separate administrative body. Any argument that involving the EQB in the regulatory formulation process is “inconvenient” or “unworkable” is irrelevant and, more importantly, untrue, as PIOGA understands that through the late 1980s the EQB had its own Executive Director and staff and actually functioned independently of DEP. Any such argument also cannot provide a legal justification for the exercise of power and duty in a manner contrary to the clear terms of the statutory grants. DEP staff could have developed the proposed rulemaking package with sufficient involvement, guidance, direction and oversight from the EQB to truthfully qualify the process as EQB formulation. But the process that has evolved for formulating DEP regulations – and the process that was all too evident in this rulemaking – gives DEP free reign to formulate a lengthy and burdensome rulemaking package without input, guidance, direction or oversight from the EQB. EQB approval of proposed regulations does not equate to formulation of the proposed regulations under any plain and ordinary meaning of that term. This free reign and 8

http://www.elibrary.dep.state.pa.us/dsweb/Get/Version-48647/012-0820-001.pdf .

EQB Member Guide, Appendix G – http://files.dep.state.pa.us/PublicParticipation/Public%20Participation%20Center/PubPartCenterPortalFile s/Environmental%20Quality%20Board/EQB%20Member%20Information%20Guide_2015.pdf . 9

10

PIOGA does not agree that the EQB could lawfully delegate its rulemaking authority to DEP through a regulation, because of the statutory language set forth above. {B1701659.4}

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disregard for other statutory requirements in the formulation of this rulemaking package is evident in DEP’s failure to consult11 with one statutory DEP board – the Oil and Gas Technical Advisory Board (TAB) – and one administratively created committee – the Conventional Oil and Gas Committee (COGAC) – concerning the formulation of this rulemaking package, as shown by the comments of these two bodies, which both recommended against moving forward to promulgate this rulemaking package.12 Nor can the laudable goal of “protection of the environment” provide legal justification for not developing and carrying out the formulation of proposed regulations in the manner directed by clear statutory grants of legislative rulemaking power and duty, and directives for consultation. Accordingly, PIOGA respectfully requests that the Attorney General (i) object to the rulemaking package submitted by DEP as not statutorily authorized because it was formulated solely by DEP to the exclusion, ignorance or disregard of the EQB’s statutory power and duty of formulation and (ii) determine that the appropriate remedy is withdrawal of the rulemaking package. II.

The rulemaking process did not comply with the Regulatory Review Act and the Commonwealth Documents Law and therefore the rulemaking package is not statutorily authorized.

During this rulemaking process DEP failed to comply with provisions of the Regulatory Review Act (RRA) and EQB with the Commonwealth Documents Law (CDL) that provide the means for our state’s notice-and-comment rulemaking and regulatory review process to work as intended by the terms of the statutes: ●RRA Section 5(a)(5), 71 P.S. § 745. 5(a)(5) – DEP provided no forms with the proposed or final-form rulemaking packages. This is unlawful and improper, a failure to comply with a clear statutory requirement that has no exception. The requirement to include a “statement of legal, accounting or consulting procedures and additional reporting, recordkeeping or other paperwork, including copies of forms or reports, which will be required for implementation of the regulation” has a sound basis and addresses a real and substantial problem. In an opinion discussing the purposes of

As this term is commonly understood: “1. tr.v. 1: to have regard to: consider; 2a: to ask the advice or opinion of b: to refer to ; 2. in.v. 1: to consult an individual; 2: to deliberate together: confer; 3: to serve as a consultant.” http://www.merriamwebster.com/dictionary/consult . 11

12

TAB March 11, 2014 comments to EQB, http://www.irrc.state.pa.us/docs/3042/COMMENTS_PUBLIC/3042%2003-1814%20OIL%20AND%20GAS%20TECHNICAL%20ADVISORY%20BOARD.pdf ; TAB January 6, 2016 comments to EQB, pp. 1-2; and COGAC January 4, 2016 report to EQB, pp. 1-2. {B1701659.4}

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the notice-and-comment rulemaking and regulatory review process, our Supreme Court quoted with approval what it described as the “often-quoted comments” of the United States Court of Appeals for the District of Columbia Circuit: The phenomenon . . . is familiar. Congress passes a broadly worded statute. The agency follows with regulations containing broad language, open-ended phrases, ambiguous standards and the like. Then as years pass, the agency issues circulars or guidance or memoranda, explaining, interpreting, defining and often expanding the commands in the regulations. One guidance document may yield another and then another and so on. Several words in a regulation may spawn hundreds of pages of text as the agency offers more and more detail regarding what its regulations demand of regulated entities. Law is made, without notice and comment, without public participation, and without publication in the Federal Register or the Code of Federal Regulations. Northwestern Youth Services, Inc. v. Com., Dept of Public Welfare, 66 A.3d 301, 314 (Pa. 2013) (emphasis added) (quoting Appalachian Power Co. v. EPA, 208 F.3d 1015, 1020, 341 U.S.App.D.C. 46 (D.C. Cir. 2000)). DEP’s PNDI Policy, which DEP is promulgating in this rulemaking package (and is also addressed below), is a prime example of extra-regulatory reach by DEP – using a policy statement not subject to the regulatory review process to impose requirements on regulated entities,13 requirements that in turn depend upon decisions and determinations not subject to public review, discussion and comment. Because of these decisions and determinations, DEP’s codification of its PNDI Policy into its regulations does not end its extra-regulatory reach (as shown below). DEP’s explanation for failing to comply with this clear requirement appears to be that it cannot know the content of its various technical guidance documents (TGDs), guidelines, instructions, etc to implement the regulations until the approved final-form regulation language is known. This excuse does not bear up under the slightest scrutiny. The RRA wisely requires TGDs, guidelines, instructions, etc to accompany proposed regulations so that the regulated community, the public, the General Assembly oversight committees and, of course, IRRC staff, all have the benefit of having the information necessary for a complete understanding of the regulatory proposals. Only with all the required information will the process work as intended by the General Assembly. In PIOGA’s current litigation against DEP to enforce the Section 3215(c) injunction by our Supreme Court in Robinson Twp, DEP has admitted that it has enforced the provisions of the PNDI Policy as regulatory requirements: “Admitted that DEP requires well permit applicants to complete the form entitled “Coordination of a Well Location with Public Resources” (DEP Form No. 5500 –PM – OG0076) (“Public Resources Form”) and to comply with DEP’s Policy for Pennsylvania Natural Diversity Inventory (“PNDI”) Coordination During Permit Review and Evaluation (DEP Document No. 0210200-001) (“PNDI Policy”).” DEP Answer to PIOGA Petition for Review (January 28, 2016), 321 MD 2015, ¶23 (emphasis added); also: Section § 3215(c) “provides authority for requiring well permit applicants to complete the Public Resources Form and to comply with the PNDI Policy.” Id., ¶ 24 (emphasis added). 13

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The RRA clearly requires TGDs, guidelines, instructions, etc based upon the agency’s proposed regulations becoming effective.14 There is no credible reason why this cannot be done. The TGDs, guidelines, instructions, etc may need to be modified to reflect changes in the regulations made as a result of the comment and review process, and such modification is clearly what the RRA requires – not the development of forms outside the formal comment and review process under the RRA and the CDL and thus separated from the consideration as an integral part of the whole rulemaking package. ●RRA Section 5(a)(4), 71 P.S. § 745. 5(a)(4) – DEP’s cost analyses for both the proposed and final-form regulations improperly attributed zero to many sections of the regulations and generally significantly understated the compliance costs.15 It is simply incredible for DEP to maintain that many sections of the regulations carry no compliance costs. ●RRA Section 5(a)(10.1 thru 12.1), 71 P.S. § 745. 5(a)(10.1-12.1) – DEP conducted none of the required small business impact and flexibility analysis, but simply contrasted conventional from unconventional operational differences that have nothing to do with the size of the company. There is not one exemption or less intrusive alternative for small businesses in either subchapter.16 As one example of the failure to consider alternatives for small businesses, Section 78a.66 (spill reporting and remediation) improperly requires small (over 42 gallons) spills of brine, a relatively harmless substance, to be remediated under an enhanced Act 2 process, with added conditions for reports and submissions to DEP on a timeline that is not imposed on any other industry or entity in Pennsylvania – and when the Act 2 process is voluntary for any other industry or entity in Pennsylvania. The costs of such a process far exceed any environmental benefit and improperly impose burdens on small businesses without the consideration required by the RRA for alternatives. IRRC’s April 14, 2014 comments confirm this failure to comply: “While we appreciate the effort put forth by EQB to meet its ‘small business’ obligations under the RRA, we agree [with the commentators who do not believe that the EQB has met this statutory requirement] that more information is needed in the RAF.”17

The RRA defines “proposed regulation” as “[a] document intended for promulgation as a regulation which an agency submits to the commission and the committees and for which the agency gives notice of proposed rulemaking and holds a public comment period pursuant to the act of July 31, 1968 (P.L.769, No.240), referred to as the Commonwealth Documents Law.” 71 P.S. § 745.3 (emphasis added). 14

15

PIOGA March 14, 2014 comments, Section IV, pp.6-7, http://www.irrc.state.pa.us/docs/3042/COMMENTS_PUBLIC/3042%2003-17-13%20PIOGA.pdf (erroneously labeled “March 17, 2013”); Marcellus Shale Coalition (MSC) March 28, 2016 comments, pp.5-6, http://www.irrc.state.pa.us/docs/3042/COMMENTS_FINAL/3042%2003-2816%20MARCELLUS%20SHALE%20COAL.pdf . 16

Id., Section V, p.8.

17

http://www.pabulletin.com/secure/data/vol44/44-17/900.html, Comment No.9.

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●CDL Section 1202, 45 P.S. § 1202 – The CDL requires that modifications to the text of a proposed regulation “which enlarge its original purpose” as initially published must be republished as a proposed regulation. The EQB violated the CDL by not republishing as proposed regulations the substantial changes to the proposed regulation in its April 2015 ANFR, because these changes enlarged the original purpose of proposed rulemaking. PIOGA acknowledges that the scant Pennsylvania case law concerning this CDL requirement supports a restrictive view of this requirement.18 However, the substantial changes and new requirements19 per the ANFR pale in comparison to the changes involved in Brocal and Community Services Management. While the informal ANFR process provided an opportunity for interested members of the public and the regulated community to comment on these substantial changes – a key consideration in Brocal and Community Services Management – by not republishing these changes as proposed regulations along with the regulatory analysis (RAF) required by the RRA, DEP and EQB deprived the Standing Committees and IRRC and their staff of supporting information the agency is required to provide in a timely manner for all proposed regulations – complete responses to the RAF accompanying the proposals, for a complete understanding of the proposals. So both the character of the ANFR changes and the whole context of this rulemaking process are unlike the changes and context in in Brocal and Community Services Management. These differences require a re-examination of the meaning of the CDL phrase “enlarge its original purpose” if the regulatory review process is to function as intended by the plain meaning of the applicable statutes. Allowing this rulemaking to become final, despite the significant and substantial legal failings identified herein, will show agencies that they can similarly disregard without adverse consequences the “requirements” of the applicable statutes in their rulemakings. DEP’s and EQB’s failures to comply with these RRA and CDL requirements for the proposed regulations failed to provide all interested members of the public, the regulated community, the Standing Committees and IRRC and their staff, with the knowledge and information in the timely manner required by the RRA necessary for a complete understanding of the regulatory proposals – a prerequisite for informed comments. Neither IRRC’s finding of “no enlargement of purpose” under the CDL nor IRRC’s approval of the final-form rulemaking package as “in the public interest” can cure or render moot the clear violations of the RRA and CDL requirements identified above that prevented the regulatory review process from working as intended in plain and simple terms by the General Assembly. Nor can IRRC’s procedure of requiring defects in RRA requirements for proposed regulations to be addressed when the final-form regulations are submitted cure or render moot 18

Brocal Corp. v. Com., Dept. of Transp., 528 A.2d 114, 118-120 (Pa. 1987); Community Services Management Corp. v. Dept. of Public Welfare, 482 A.2d 1192 (Pa. Commw. Ct. 1984). These include: (i) new definitions for '”other critical communities” and “public resource agency”: (ii) expansion of requirements re “area of review”; (iii) elimination of temporary storage pits; and (iv) mandatory use of the Act 2 remediation process. 19

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the clear violations of the RRA and CDL requirements identified above. There can be no reasonable dispute that providing supporting information with proposed regulations is qualitatively and significantly different than providing support information for the first time with final-form regulations. PIOGA notes that IRRC’s approval order does not even attempt to provide an explanation why the substantial failures to comply identified above, at a minimum vis-à-vis the proposed regulations, are not fatal to the rulemaking. Accordingly, as (i) DEP failed to comply with mandatory requirements of the RRA and CDL and (ii) IRRC’s response to these failures did not cure the failures, the rulemaking package submitted by DEP is procedurally and substantively flawed and therefore not statutorily authorized and cannot become final. PIOGA respectfully requests that the Attorney General make these objections and determine that the appropriate remedy is withdrawal of the rulemaking package. III.

Regulatory provisions based upon Sections 3215(c) and (e) of Act 13 are not statutorily authorized and unconstitutional.

In its landmark December 2013 decision in Robinson Twp, the Pennsylvania Supreme Court held Sections 3215(c) and (e) unconstitutional because they were not severable from unconstitutional Section 3215(b)(4). Accordingly, the court enjoined their application and enforcement as part of an invalid well permitting “decisional process.” There can be no reasonable dispute that the Supreme Court unambiguously enjoined the application of Section 3215(c). Having enjoined Section 3215(b)(4), a majority of four Justices explained: [W]e have already recognized that Section 3215(b)(4) . . . is a key part of the Section 3215(b) scheme. It would appear that the General Assembly did not intend for the setback provision to operate without allowing industry operators to secure waivers from the setbacks. Absent the enjoined Section 3215(b)(4), the remaining parts of Section 3215(b) — which the citizens do not challenge on appeal — are incomplete and incapable of execution in accordance with the legislative intent. Having held that Section 3215(b)(4) is unconstitutional, we conclude that the remaining parts of Section 3215(b) are not severable. Accordingly, application of Section 3215(b) is enjoined. Moreover, insofar as Section 3215(c) and (e) are part of the Section 3215(b) decisional process, these provisions as well are incomplete and incapable of execution in accordance with legislative intent. Application of Section 3215(c) and (e) is, therefore, also enjoined.20 Justice Baer concurred with this conclusion, stating: "Given that I would strike Section 3215(b)(4) and (d), I further agree with the lead opinion that the entirety of subsection (b), as well as subsections (c) and (e) would be 'incapable of execution' and must be enjoined." Id. at. 21 20

Robinson Township, 83 A.3d at 999 (Part V) (emphasis added).

21

Id. at 1009 (Baer, J., concurring).

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PIOGA is presently engaged in a declaratory judgment action against DEP to enforce the Supreme Court’s Section 3215(c) injunction with respect to the existing well permitting decisional process.22 In a December 2015 decision denying DEP’s preliminary objections to PIOGA’s declaratory judgment petition for review, the Commonwealth Court stated that “our Supreme Court has already found that provision [Section 3215(c)] to be unconstitutional and enjoined its application in Robinson Township.”23 In PIOGA’s declaratory judgment litigation, DEP argues for the first time that it has statutory authority separate and apart from Section 3215(c) to promulgate regulations authorizing DEP to oversee and control – through the well permitting decisional process – coordination of the protection of public resources identified in Section 3215(c), despite DEP’s unilateral reliance upon Section 3215(c) and its predecessor provision in the 1984 Oil and Gas Act, 58 P.S. § 205.605(c) (repealed) for this authority. DEP’s position in the PIOGA litigation has informed its position in the rulemaking submitted for review, as DEP has changed its statutory authority for the final form regulation “public resource coordination” provisions to conform to its litigation position, i.e., Section 3215(c) is not the sole authority24 but, even if it is and was enjoined, there is other statutory authority. But Section 3215(c) has been DEP’s unilateral authority for its PNDI Policy25 and the authority DEP relied upon to support its proposed regulation “public resource coordination” provisions. DEP even went so far as to revise its applicable forms – the ones PIOGA is challenging in the declaratory judgment litigation – to state this new-found authority.26 Despite DEP’s new-found authority for its final-form Chapter 78a “public resource coordination” provisions asserted first in litigation and then in this rulemaking package, it is clear that the statutory authority DEP has unilaterally relied upon for its PNDI Policy (but 22

321 MD 2015.

23

PIOGA v. Commonwealth, 135 A.3d 1118, 1121 n.3; see also 1127, 1130 (Pa. Commw. Ct. 2015). PIOGA and DEP motions for summary relief are awaiting decision from the Commonwealth Court following oral argument on June 8, 2016. “Admitted that 58 Pa.C.S. § 3215(c) provides authority for requiring well permit applicants to complete the Public Resources Form and to comply with the PNDI Policy.” DEP Answer to PIOGA Petition for Review (January 28, 2016), 321 MD 2015, ¶ 24. 24

25

http://www.elibrary.dep.state.pa.us/dsweb/Get/Document-95198/021-0200-001.pdf (May 2013), pp. 6, 16 and 19. “DEP has updated its ‘Instructions for Completing an Application for a Permit to Drill or Alter and Oil or Gas Well’, Document No. 800-PM-OOGM001; ‘Coordination of a Well Location with Public Resources Form’, Document No. 8000-PM-OOGM0076 (Public Resource Form); and ‘Coordination of a Well Location with Public Resources Instructions’, Document No. 8000-PMOOGM0076, most recently in January 2016 to eliminate confusion and set forth applicable statutory authority related to threatened and endangered species and species of special concern and the authority for the public resource requirements. See http://files.dep.state.pa.us/OilGas/BOGM/BOGMPortalFiles/OilGasReports/2015/ OilGasForms.pdf.” DEP brief in support of answer to PIOGA motion for judgment on the pleadings (March 30, 2016), 321 MD 2015, at 5, n.5. 26

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improperly with respect to so-called “species of special concern”), which DEP is seeking to codify into its regulations in Section 78a.15(c), is limited to Section 3215(c).27 Accordingly, the following provisions of the Chapter 78a regulations based upon Section 3215(c) are not statutorily authorized and unconstitutional: ●Section 78a.1 definitions – “common areas of a school’s property”, “other critical communities”, “Pennsylvania Natural Diversity Inventory—PNDI”, “PNDI receipt”, “Playground”, “Public resource agency” and “Wellhead protection area”. ●Section 78a.15(f) ●Section 78a.15(g) PIOGA respectfully requests that the Attorney General make this objection and determine that the appropriate remedy is removal of these provisions. IV.

Key sections of the Chapter 78a regulations are contrary to provisions of Chapter 32 of Act 13 and are therefore not statutorily authorized.

The provisions of Chapter 78a that are contrary to provisions in Chapter 32 of Act 13, as explained below, are not statutorily authorized. ●Section 78a.2 – The scope of Chapter 32 of Act 13 is limited to oil and gas wells. As Chapter 78a is promulgated under Chapter 32 of Act 13, DEP has no authority to strike Section 78a.2 (Scope) or to expand the scope of Chapter 78a beyond the drilling, operation and alteration of wells. ● Section 78a.51 (d) – This provision misconstrues Act 13’s Section 3218(a) water replacement standard28 and is void for vagueness. As a matter of statutory construction, “exceeded” as used in Section 3218(a) means “worse than,” not “better than,” as shown by the fact that the only other place in Act 13 where the General Assembly used the term and concept of “exceed” is in Sections 3304(b)(7)(ii) & (8)(ii) related to exceeding noise standards.29 This usage clearly meant worse than those standards. Although Section 3304 is now enjoined per Robinson Township, it provides a clear example of the General Assembly’s usage of the term to mean “worse than.”

27

See note 24 above.

“The department shall ensure that the quality of a restored or replaced water supply meets the standards established under the act of May 1, 1984 (P.L.206, No.43), known as the Pennsylvania Safe Drinking Water Act, or is comparable to the quality of the water supply before it was affected by the operator if that water supply exceeded those standards.” (Emphasis added). 28

Section 3304(b)(7)(ii): “the noise level does not exceed a noise standard of 60dbA at the nearest property line or the applicable standard imposed by Federal law, whichever is less;” Section 3304(b)(8)(ii): “The noise level of the natural gas processing plant building does not exceed a noise standard of 60dbA at the nearest property line or the applicable standard imposed by Federal law, whichever is less.” 29

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Moreover, DEP’s regulations in 25 Pa. Code Chapter 109 (safe drinking water) consistently use the term “exceed” to refer to water that does not meet – and is therefore worse than – the relevant safe drinking water standard. Given this predominant and consistent regulatory usage of the term, there is no legitimate basis for DEP’s “interpreting” the same term in Section 218(a) of Act 13 to mean the complete opposite. DEP also admitted at the February 3, 2016 EQB meeting that this Chapter 78a provision is one of several that it will not implement as written, and requires TGDs to explain and clarify the new obligations created under this provision.30 Rules that cannot be understood or implemented as written are void for vagueness. ●Sections 78a.58 and 78a.67 – Section 3273.1 of Act 13 provides express exemptions related to permitting, bonding and other requirements under the Solid Waste Management Act (SWMA) and the Non Coal Surface Mining Act (Noncoal SMCRA). Sections 78a.58 (onsite processing) and 78a.67 (borrow pits) improperly alter and limit these exemptions by adding requirements that areas subject to these exemptions nonetheless comply with standards in DEP’s regulations in 25 Pa. Code Chapter 77, adopted pursuant to the Noncoal SMCRA. This is contrary to the exemption provided in Act 13 for all obligations under the Noncoal SMCRA, not just for Noncoal SMCRA permitting requirements. As the Chapter 78a provisions identified above are not statutorily authorized, PIOGA respectfully requests that the Attorney General make these objections and determine that the appropriate remedy is removal of these provisions. V.

Sections 78a.1 and 78a.15 violate the Commonwealth Documents Law and are therefore not statutorily authorized.

Section 78a.15 (f)(iv) violates the CDL31 because its operation circumvents the notice and comment rulemaking on an ongoing basis by creating binding norms through an ever-changing PNDI database, a database that is populated by different agencies, people and methods that do not include notice and comment rulemaking procedures.32 30

DEP’s Deputy Secretary, Office of Oil and Gas Management, stated [103:3]: We certainly agree that the parameters that need to be rectified in the event that water supply has been affected by oil and gas activities – they will be identified by the department and that parameters that are otherwise elevated that were not caused by oil and gas activities do not need to be fixed during the course of a water supply restoration … but I … want to commit to you and other members of the board that this concept of not fixing what you didn’t break and identifying methods of restoring water supplies with replacement supplies, such that homeowners aren’t left worse off, is something that we’re committed to working with stakeholder to develop the appropriate guidance for … I certainly wish that we would have had an opportunity to more fully discuss it as we had other issues throughout the multi-year process.

31

45 P.S. § 1201.

32

See PIOGA March 14, 2014 comments, Section III, pp. 4-5, http://www.irrc.state.pa.us/docs/3042/COMMENTS_PUBLIC/3042%2003-17-13%20PIOGA.pdf {B1701659.4}

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Accordingly, PIOGA respectfully requests that the Attorney General make these objections and determine that the appropriate remedy is removal of these provisions. VI.

Sections 78a.1 and 78a.15 violate the Non-Delegation Doctrine and are therefore not statutorily authorized.

Sections 78a.15(f)(1)(iv) and the new definition of “other critical communities” also violate the Non-Delegation Doctrine by allowing unknown persons who populate and manage the PNDI, database to impose ever-changing obligations on permit applicants.33 DEP does not manage or populate the PNDI database, but seeks to impose obligations on well permit applicants to review whatever species appears on a PNDI receipt, when that can change at any time without notice because multiple agencies populate it by different methods, none of which include regulatory notice and comment. Applicants would be required to engage in consultations with agencies that do not otherwise have any authority to impose obligations related to so-called “species of special concern,” which is neither a separate, distinct category of listed species or a threatened or endangered species. DEP is not authorized to delegate to unknown persons the authority to impose well permit obligations by populating a database through a non-regulatory process with species that may then happen to appear on a PNDI receipt. Accordingly, PIOGA respectfully requests that the Attorney General make these objections and determine that the appropriate remedy is removal of these provisions. VII.

Additional Provisions Lack Statutory Authority and are therefore not statutorily authorized.

Act 13 provides well-defined and carefully detailed obligations to provide notice of well permit applications to landowners, water purveyors, municipalities, gas storage operators and owners of coal interests. Act 13 also delineates precise opportunities for certain categories of persons to comment or object to permit applications before such permits are issued by the Department. See Sections 3212 (a) and 3212.1. ●Section 3211 (b.1) of Act 13 prescribes notification requirements with respect to operators having to provide well site plats to various entities in advance of submitting a permit application. These are a surface landowner where the well is located, the municipality in which the well will be drilled, municipalities within 3,000 feet of a well bore, municipalities adjacent to the well, surface landowners and water purveyors whose water supplies are within either 1,000 feet (conventional) or 3,000 feet (unconventional) (erroneously labeled “March 17, 2013”); Pennsylvania Grade Crude Oil Coalition (PGCC) October 12, 2015 comments to IRRC, p. 11,n.12, http://www.irrc.state.pa.us/docs/3042/COMMENTS_FINAL/3042%2004-14-16%20PGCOC.pdf ; and PGCC April 7, 2016 comments, p. 2, n.1, http://www.irrc.state.pa.us/docs/3042/COMMENTS_FINAL/3042%2004-07-16%20PGCOC.pdf . Section 78a.1 (Definitions) : “Other critical communities” — (i) species of special concern identified on a PNDI receipt, including the following . . .” 33

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of the vertical well bore, gas storage operators, and coal seam owners. Section 3211 (b.2) requires proof of these notifications to be sent to the Department with the permit application. ●Section 3212 (a) and (b) provide coal operators and surface owners (who do not also own the subsurface) with the right to file objections to permit locations based upon alleged violations of Section 3215 which section includes and addresses well location restrictions and all of the public resources well location restriction enabling provisions. ●Through Sections 3212 (a) and 3212.1, only two entities or categories of persons are authorized, in the course of the well permit application process, to either “object” to or “comment” on well permit applications. o The first category is surface landowners on whose tract the well will be located. They are authorized to object to such permits with the objection grounds limited to alleged violations of Section 3215 restrictions or that information in the application is untrue in any material respect. o The second category is the municipality where the tract of land upon which the unconventional well will be drilled is located. Only municipalities of this type or description in the group of municipalities required to be notified pursuant to Section 3211 (b) are authorized to “comment.” This deliberate and comprehensive legislative scheme makes it quite clear that no other notice or comment avenues are to be created by rulemaking. Each of these notice and comment opportunities has been provided by Act 13, which also requires permit issuance within 45 days of the permit application submission. Without any legislative direction or authority, the Department is proposing an entirely new well permit application process that would require additional notice to new entities, offering additional opportunities to comment on well permit applications, and would impose this new pre permit process on all well permit applicants under the guise of protecting impacts to “public resources.” ●Section 78a.1, as applied in Section 78a.15(f), would add municipalities, school districts and water purveyors to the list of “public resource agencies,” creating new obligations for well permit applicants to provide notice to such “agencies.” This contrived definition of agencies, beyond the state and federal agencies that are authorized by their enabling statutes to protect the public natural resources of the Commonwealth, is well outside the scope of EQB’s authority. And this revision is contrary to the express purpose of Act 13 to promote the optimal development of oil and gas resources. ●Section 78a.52a (Area of Review) also imposes obligations without statutory authority. DEP does describe any authority to require well operators to identify active, inactive, orphan, abandoned and plugged wells prior to commencement of drilling. It refers to the State Review of Oil and Natural Gas Environmental Regulations (STRONGER), which found the Department’s program to meet or exceed relevant standards in 2013. STRONGER, even if it recommended changes in DEP’s program, is not a source of regulatory authority. This subsection is also void for vagueness because DEP admitted at the February 3, 2016 EQB meeting that it will not implement it as written and that it

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requires extensive and detailed technical guidance documents to clarify the obligations created under this new subsection. ●Section 78a.65 (d) (site restoration) imposes obligations on small well sites under 5 acres that conflict with existing regulations and permits developed under Pennsylvania Clean Streams Law. Under 25 Pa. Code 102.8(n), wells permitted under Chapter 78 need not comply with expensive and intrusive PCSM calculations and BMPs required under 25 Pa. Code 102.8(g). The revisions in Chapter 78a conflict with those existing provisions in Chapter 102. The subsection is also void for vagueness because the DEP has repeatedly informed members of the public that small well sites will not have to comply with Section 102.8(g) but declined to make necessary clarifications in the final rule. Accordingly, as the Chapter 78a provisions identified above are not statutorily authorized, PIOGA respectfully requests that the Attorney General make these objections and determine that the appropriate remedy is removal of these provisions. Please contact me if you have any questions concerning these legal arguments or if you want additional information. Sincerely,

Kevin J. Moody General Counsel Pennsylvania Independent Oil & Gas Association 212 Locust Street, Suite 300 Harrisburg, PA 17101-1510 717-234-8525 [email protected]

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