Acting within a week of the news that areas of southeastern Pennsylvania apparently sit atop yet another unconventional natural gas play, Governor Tom Corbett on June 30, 2012, signed into law a ban on drilling in the South Newark Basin to allow state regulators to evaluate the potential impacts of oil and gas operations in the area.

Included in a budget bill through the efforts of Southeast Pennsylvania legislators, the law could prohibit drilling in the area through 2017.

Last week, the United States Geological Survey (USGS) announced its estimates of undiscovered natural gas reserves in five subterranean basins along the East Coast, including a formation in the South Newark Basin, which underlies portions of eastern and southeastern Pennsylvania including parts of Bucks and Montgomery counties. Although smaller in area than the Marcellus Shale, certain key characteristics of the newly discovered formation are similar to its larger counterpart to the west, and thus could be tapped through the use of hydraulic fracturing and horizontal drilling.

Under the ban, state regulators would not be able to issue drilling permits for the basin until the state has the opportunity to evaluate possible environmental, fiscal, and other impacts of drilling in the potential host counties. Opponents of the moratorium argue that it is unconstitutional and runs counter to recently enacted amendments to the Pennsylvania Oil and Gas Act (known as Act 13) by treating Bucks and Montgomery counties differently from the remainder of the Commonwealth. They may have a point, as such studies were not undertaken in other areas of the Commonwealth that are seeing intensive drilling activity. The ban also applies in any county located within the basin until legislation is enacted authorizing that county to elect whether to impose an impact fee on gas wells pursuant to Act 13. Even if these preconditions are not met, the ban expires as a matter of law on January 1, 2018.

The moratorium received support from Bucks County legislators and municipalities that already were disappointed over Act 13 provisions that limit the extent to which county and local governments can control oil and gas activities within their borders through zoning. In any event, such areas appear to be subject to a “double moratorium,” as the area impacted by the provision is already subject to a Delaware River Basin Commission order that bans drilling anywhere in the lands drained by the Delaware River.

Although Act 13 expressly applies to unconventional drilling, it is not yet clear whether or in what ways Act 13—which is currently the subject of litigation brought by seven municipalities and the Delaware Riverkeeper—will apply to South Newark Basin counties after the moratorium is lifted.

If you have questions or concerns about the ban, contact Harry Weiss at 215.864.8129 or weiss@ballardspahr.com.


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