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United Refining Co. v. Department of Environmental Protection

Commonwealth Court of Pennsylvania

June 12, 2017

United Refining Company, Petitioner
Department of Environmental Protection, Respondent

          Argued: April 4, 2017




         Petitioner United Refining Company petitions for review of an order of the Environmental Hearing Board (Board), dated July 7, 2016, which dismissed Petitioner's appeal of an oil permit issued by Respondent Department of Environmental Protection (Department) to Intervenor John D. Branch (Branch). Petitioner contends that the Board's decision is not supported by substantial evidence and violates Pennsylvania environmental law and Article I, Section 27 of the Pennsylvania Constitution, commonly referred to as the Environmental Rights Amendment. We now affirm.

         I. BACKGROUND

         The following facts are undisputed based upon the parties' stipulation of facts and the filings of record. Since 1902, Petitioner has owned and operated an 83-acre petroleum refinery in Warren, Pennsylvania (Property), which extends approximately 1.6 miles along the north shore of the Allegheny River. The subsurface below the Property includes the Warren 1st and Warren 2nd Sands, and the Glade and Clarendon Sands. The top of the Clarendon Sands is approximately 780 feet below the surface of the Property. Petitioner has constructed several aboveground storage tanks on the Property, including Tank 234 located on the northern portion of the Property. Tank 234 has the capacity to contain 3.6 million gallons of gasoline. Tank 234 has a steel floor, concrete ring wall, and an earthen dike designed to contain 110% of its contents. It sits on fill materials, soils, gravels, silt sands, and clays, and the bedrock is approximately 75 feet below the bottom of the tank. Petitioner inspects Tank 234 every four years, and it last inspected the tank in November 2014 and discovered no problems.

         Since 1990, Petitioner has installed over 100 monitoring wells on the Property. Petitioner has never drilled an oil or natural gas well on the Property, although the Department's records indicate that four oil or natural gas wells were previously drilled on the Property. In 2001, Petitioner discovered an oil plume below Tank 234, and the plume measured approximately 265 feet long by 180 feet wide at the time the parties entered into their stipulation. Petitioner has recovered in excess of 12, 500 gallons of oil from the plume. Petitioner has used crude oil at the Property but not in the area of Tank 234. There is no direct evidence of unplugged wells near or under Tank 234 or anywhere else on the Property, and Petitioner is unaware of any property damage, surface damage, or environmental harm caused by hydraulically fracturing wells in the Glade or Clarendon Sands in Warren, Pennsylvania.

         Branch has been in the oil and gas business for 31 years and in the drilling business for 15 years. He has drilled approximately 60 oil and gas wells within the City of Warren, Pennsylvania. On September 16, 2014, Branch submitted a permit application to the Department for authorization to drill an oil well-Well 61-in Warren, Pennsylvania. Pursuant to the application, Branch planned to drill Well 61 on a slant, with the top-hole location across the street from the Property and the bottom-hole location under the Property. At the time Branch submitted the permit application, he also submitted five other permit applications for wells located near the Property. Prior to the Department's approval of the permit for Well 61, Branch met with representatives of Petitioner to tour the plant and discuss his proposed drilling plans under the Property.

         On October 24, 2014, Petitioner expressed concerns to the Department regarding Branch's proposed Well 61 and other proposed wells closest to Tank 234, including a concern that fracking pressures could reach historic wells and be released through unplugged wells to the surface. On November 5, 2014, Branch responded to the Department regarding Petitioner's concerns. In so doing, Branch informed the Department that it was his opinion that any wells in the area that were not plugged with cement would likely already have been plugged naturally, as there is anywhere from 55 feet to 95 feet of gravel in the valley of Warren. To avoid risks in response to Petitioner's concerns, Branch stated that he would not frack in the Warren 1st or Warren 2nd formations and that he would utilize conductivity and video logs when he drilled the new wells and would avoid hydraulically fracturing in the vicinity of zones indicated by these logs as having excessive water. Branch stated that he and his team would closely watch the pressure gauges when hydraulically fracturing and, if the gauges indicated connection with another well, would cease operations immediately. Finally, Branch advised the Department that he would conduct hydraulic fracturing with smaller amounts of sand and water to control the length of the fractures. Branch also altered the proposed termination point of Well 61, so as to avoid the vicinity of the oil plume below Tank 234.

         The Department issued permits for the six wells on November 12, 2014, including the permit for Well 61.[1] One of the special conditions for the permits was that fracking operations would not be conducted in the Warren 1st or Warren 2nd formations. Thereafter, Petitioner appealed the issuances of the permits to the Board, identifying its concern that energy released by Branch's fracking could be conveyed through an unplugged well and result in damage to Petitioner and the surrounding community, including potentially a large-scale fire or explosion, as well as a release of oil into the water of the Commonwealth.

         The Honorable Thomas W. Renwand, Chief Judge and Chairman of the Board, conducted a hearing at which the parties presented their stipulation of facts and the testimony of Timothy Ruth (Ruth), a geologist and employee of Petitioner; Craig Lobins (Lobins), a professional geologist who is employed by the Department as the Northwest District Oil & Gas Manager; and Branch. Following the hearing, the Board issued an adjudication, dated July 7, 2016, dismissing the appeal relating to Well 61 and upholding the permit issued by the Department for Well 61.

         In addition to findings based upon the facts summarized above, the Board made findings based upon the testimony received during the hearing. For instance, with regard to the geology, the Board found that there are various layers of bedrock between 75 and 750 feet below the surface of the Property, and that fracking would take place at various depths between 750 and 850 feet below the Property. Well 61 would be located a little less than 300 feet from Tank 234, the distance between Tank 234 and where the hydraulic fracturing would occur in Well 61 is approximately 300 to 360 feet, and the fractures would travel 150 feet horizontally and would be 600 to 800 feet below the surface of the Property. With regard to the oil plume, the Board found that it consists of multiple components and is likely from multiple sources.

         With regard to the testimony of Lobins, presented on behalf of the Department, the Board found that Lobins was very familiar with conventional well drilling and instances where conventional wells fracked into abandoned oil and gas wells. Lobins issued the permit for Well 61, was aware that Branch planned to use a slant drilling technique, and had no problem with the use of that technique. Furthermore, Lobins testified that the fracking of Well 61 would break away from Tank 234 and would be too far underground to impact Tank 234, the plume, or the Property. He opined that, because no fracturing would occur in the Warren 1st or Warren 2nd formations and because fractures would stay in the zones being fractured, there would be no effects on Tank 234 or the plume. The Board also found that both Lobins and Branch testified that the drilling of Well 61 is unlikely to create fractures impacting the plume or Tank 234, communicate with any undocumented wells, impact groundwater, or impact the surface.

         Based on its findings, the Board concluded that Petitioner had not met its burden to prove by a preponderance of the evidence that the Department abused its discretion by acting unreasonably and/or in violation of the laws of the Commonwealth when issuing the permit. In so doing, the Board explained that it dismissed Petitioner's appeal on the basis that Petitioner had not met its burden of proof because Petitioner failed to present sufficient expert testimony to demonstrate actual risks associated with the drilling.

         II. ANALYSIS

         On appeal to this Court, [2] the issues are as follows:[3] (1) whether the Board incorrectly applied the burden of proof; (2) whether the Board erred in concluding that the Department's issuance of the permit for Well 61 was reasonable and in accordance with the law; and (3) whether issuance of the permit violates Article I, Section 27 of the Pennsylvania Constitution.[4]

         At the outset, we note that Petitioner's overarching theme in this appeal is that the Department's approval of the permit for Well 61 is at odds with the purposes of what is commonly referred to as the Oil and Gas Act, 58 Pa. C.S. §§ 3201-3274, which Petitioner characterizes as assuring safe oil and gas development. Petitioner even suggests that "this is not a case . . . that requires a close reading of statutory language or an analysis of legislative intent." (Petitioner's Br. at 19.) While Petitioner asserts that the permit violates the purposes of the Oil and Gas Act by threatening the health and safety of the environment, its personnel and facilities, and the surrounding residents, Petitioner does not assert that issuance of the permit actually violates a substantive provision of the Oil and Gas Act.

         Pursuant to Section 3211(e.1) of the Oil and Gas Act, 58 Pa. C.S. § 3211(e.1), the Department may deny a permit for an oil or gas well for any of the following reasons:

(1) The well site for which a permit is requested is in violation of any of this chapter or issuance of the permit would result in a violation of this chapter or other applicable law.
(2) The permit application is incomplete.
(3) Unresolved objections to the well location by the coal mine owner or operator remain.
(4) The requirements of section 3225 (relating to bonding) have not been met.
(5) The department finds that the applicant, or any parent or subsidiary corporation of the applicant, is in continuing violation of this chapter, any other statute administered by the department, any regulation promulgated under this chapter or a statute administered by the department or any plan approval, permit or order of the department, unless the violation is being corrected to the satisfaction of the department. . . .
(6) The applicant failed to pay the fee or file a report under section 2303(c) (relating to administration), unless an appeal is pending. . . .

         If none of the six statutory reasons for denial exist, then the Department is required to issue the permit within 45 days. Section 3211(e) of the Oil and Gas Act, 58 Pa. C.S. § 3211(e). Third parties, such as Petitioner, have a right to appeal to the Board the Department's issuance of a permit. Section 4 of the Environmental Hearing Board Act, Act of July 13, 1988, P.L. 530, 35 P.S. § 7514. The Board must determine whether a party appealing the issuance of a permit has demonstrated its case by a preponderance of the evidence. See 25 Pa. Code § 1021.122(a). Petitioner had the burden before the Board to show by a preponderance of the evidence that the Department acted arbitrarily or abused its discretion when it issued the permit for Well 61. See 25 Pa. Code § 1021.122; Pa. Trout v. Dep't of Envtl. Prot., 863 A.2d 93, 105 (Pa. ...

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