MEMORANDUM

 

TO:                 Michael Skiffington

                        Regulatory Coordinator

 

FROM:           Eric A. Gregory

                        County Attorney

 

DATE:           December 2, 2015     

 

RE:                 King George County Board of Supervisors’ Public comments concerning DMME’s Proposed Gas and Oil Regulation

 

Please accept the following comments submitted on behalf of the King George County Board of Supervisors: 

 

Comment concerning DMME Proposed Gas and Oil Regulation

 

The King George County Board of Supervisors supports DMME's Proposed Virginia Gas and Oil Regulation (4 VAC 25-150) published on September 23, 2015, as an improvement upon the present regulation; however, the regulation must recognize and incorporate further amendments as submitted herein to better address public safety and environmental concerns.  The King George County Board of Supervisors reiterates and affirms its comments submitted in response to DMME’s Notice of Intended Regulatory Action and notes that the regulation does not satisfactorily incorporate or address those comments.  To that extent, the DMME should revisit those comments and take appropriate action to further amend the regulation in accordance therewith.    

 

The Proposed Regulation seeks to ensure gas and oil regulation reflects current industry best practices; to expand disclosure of ingredients used in gas and oil well stimulation and completion on permitted and future gas and oil operations in the Commonwealth; and, to determine if current regulatory requirements are sufficient to properly regulate drilling in different geographical areas of the Commonwealth.  In its analysis of the proposed Gas and Oil Regulation, the Virginia Department of Planning and Budget recognized that the benefits of the proposed changes likely exceed the costs. 

 

Although the Proposed Regulation improves upon the presently applicable regulation in these important areas, the proposed regulation (1) fails to address or provide for potential impacts upon water quality and quantity concerns in the Eastern Virginia Groundwater Management Area; (2) fails to appropriately recognize the authority and role of local governments in exercising land use and zoning authority; (3) fails to recognize and properly memorialize the authority of the Virginia Department of Environmental Quality in the regulation and oversight of state waters, tributaries, and groundwater; and, (4) fails to provide for adequate financial assurance to provide for compliance with The Virginia Gas and Oil Act, specifically §§ 45.1-361.31 and 45.1-361.32 of the Code of Virginia.  

 

The King George County Board of Supervisors submits these comments for the following reasons and may supplement these comments in the future: 

 

1. The Virginia Department of Planning and Budget’s Economic Impact Analysis recognizes that the benefits of the proposed Gas and Oil Regulation likely exceed the costs for all proposed changes and should therefore be adopted and expanded consistent with these comments.  In its Economic Impact Analysis, the Virginia Department of Planning and Budget (DPB) concluded that drilling for gas or oil in Tidewater Virginia “requires special consideration due to its potential impact on the Chesapeake Bay’s sensitive environmental balance and the lack of information on the potential impact of drilling on this balance since any gas or oil drilling has yet to be performed in this area.”  DPB further concluded that (i) the proposed Gas and Oil Regulation’s additional reporting costs are expected to be small, (ii) their changes will enhance groundwater protection, (iii) the proposed amendments are unlikely to significantly impact the use and value of private property, and (iv) they are unlikely to affect real estate development costs.  With this in mind, the DMME should, at minimum, affirm and adopt the proposed regulation without reducing industry requirements in any way.  DPB’s analysis, however, does not go far enough in considering or recognizing other impacts, such as, potential negative impacts on property values as a result of industrialization associated with oil and gas drilling, potential negative impacts upon local revenues due to reductions in tourism, reductions in real property values due to ground water impacts.     

 

1. The Virginia Gas and Oil Regulation should be amended to recognize the fragility of the Eastern Virginia Groundwater Management Area (EVGMA), present and future impacts upon water quantity and quality, and require additional safeguards to prevent harm to the EVGMA.  In 2013, the United States Geological Survey (USGS) and the Virginia Department of Environmental Quality published a USGS study[1] of the hydrologic conditions of the Potomac Aquifer in Virginia and parts of Maryland and North Carolina because “the aquifer’s internal hydraulic connectivity and overall hydrologic function have not been well understood.  Furthermore, concern has arisen due to ground water level declines, aquifer flow gradient reversals, and potential saltwater intrusion.  The USGS study was to aid in groundwater-management planning and decision-making; however, certain portions of the study were incomplete, particularly “across the Northern Neck and Middle Peninsula where only the shallowest part of the aquifer is known, and include structural aspects such as faults, basement bedrock, and the Chesapeake Bay impact crater.” 

 

In 2015, the General Assembly passed legislation (see Chapter 613 of the Virginia Acts of Assembly) establishing the Eastern Virginia Groundwater Management Advisory Committee to examine concerns associated with the present and long term sustainability of the EVGMA.  Specifically the Advisory Committee will examine (i) options for developing long-term alternative water sources, (ii) issues concerning water demand, (iii) sustainable ground water management, (iv) future groundwater permitting criteria, and other policies and procedures to enhance the effectiveness of ground water management in the EVGMA. 

 

Given the issues driving the formation of the Advisory Committee, the challenges associated with present and long-term management of, and the sensitivity of ground water resources within the EVGMA, and recognizing the large amounts of water necessary to conduct gas and oil drilling activities, particularly those associated with hydraulic fracturing, the Gas and Oil Regulation should be amended to address and mitigate impacts upon ground water resources within the EVGMA.  Further study is necessary to better understand the Potomac Aquifer and its hydrology before informed decisions can be made concerning its management, particularly with regard to potentially significant withdrawals and other impacts from industrial oil and gas mining and hydraulic fracturing activities.    

 

At minimum, the regulation should require the disclosure of water sources utilized for drilling and hydraulic fracturing activities and the proper treatment and disposition of waste or produced water from those activities so that waste or produced water does not impact the already fragile EVGMA.  Such disclosures should include an analysis of impacts upon ground water, the Potomac Aquifer, and other affected users. 

 

1. Virginia’s Gas and Oil Regulation should recognize the authority and role of local governments in exercising land use and zoning authority, as authorized by the General Assembly and recognized by the Attorney General of the Commonwealth of Virginia.  On May 5, 2015, the Attorney General of the Commonwealth of Virginia issued an opinion concluding that Virginia local governments have the authority to prohibit oil and gas drilling in their jurisdictions through duly enacted zoning ordinances.  The Attorney General further opined that local governments may enact zoning restrictions on such activities if and to the extent that they are reasonable in scope and are not inconsistent with the Gas and Oil Act or DMME regulations. 

 

The Gas and Oil Regulation should explicitly recognize and respect local government authority and more appropriately involve local governments in the permitting and regulatory enforcement process.  For instance, instead of merely notifying the local government of an application for a permit to conduct gas and oil drilling activities in the jurisdiction, the local government should be invited to actively participate in the permit application and review process.  If a permit is issued, there should be a mechanism by which local governments may notify DMME of a permittee’s violation of a local ordinance or a provision of the Gas and Oil Act or Regulation.  This mechanism must hold permittees accountable for compliance with local ordinances.   

 

1. The Virginia Gas and Oil Regulation should be amended to reflect and memorialize the provisions of the Memorandum of Agreement entered into by DMME and the Virginia Department of Environmental Quality (DEQ) in June 2014.  In June 2014, DMME and DEQ entered into a Memorandum of Agreement to (i) recognize the potential for unique environmental challenges and issues presented by oil or natural gas development in the Virginia coastal plain that includes Tidewater Virginia; (ii) acknowledge the distinctive characteristics and unique complexity of the coastal plain aquifer system, including the Potomac Aquifer, which supplies water for approximately half of Virginia’s population and is used to meet a variety of needs including drinking water, agricultural use and industrial use; (iii) ensure a transparent and comprehensive process for assessing and mitigating any potential risks to the environment or public health in the development of oil or natural gas resources in Tidewater Virginia; (iv) provide a mechanism for discussing, resolving and memorializing how to address those instances that would require permits from both DEQ and DMME, and to  stipulate the authority, roles and responsibilities of the agencies in the oversight and regulation of gas and oil drilling within Tidewater Virginia. 

 

Recognizing that the Memorandum of Agreement sets forth a positive framework for inter-agency cooperation in the regulation of gas and oil drilling in Tidewater Virginia, but that the Agreement is subject to alteration, amendment, or rescission at any time, it is imperative that its provisions be made more resilient and therefore, the Gas and Oil Regulation should be amended to incorporate the provisions of the Agreement.   

 

1. The Virginia Gas and Oil Regulation should be amended to strengthen the bonding and financial security provisions in the Gas and Oil Act to augment minimum requirements to ensure compliance with all laws and regulations pertaining to permitted activities.  Section 45.1-361.31 of the Virginia Gas and Oil Act requires that permit applicants must give bond with surety acceptable to the Director of DMME to ensure compliance with all laws and regulations pertaining to permitted activities and the furnishing of reports and other information required by the Gas and Oil Board or the Director of DMME.  At their request, permit applicants may submit blanket bonds in the amount of (i) for one to fifteen wells, $25,000; (ii) for sixteen to thirty wells, $50,000; (iii) for thirty-one to fifty wells, $75,000; and (iv) for fifty-one or more wells, $100,000.  Section 45.1-361.32 provides for a fund to cover costs associated with the plugging and restoration of acreage associated with or impacted by the abandonment of gas and oil wells or damages associated therewith. 

 

Given the real and potential impact of abandoned gas or oil wells, the potential negligence associated therewith, and the costs associated with mitigation of environmental impacts, bonding and financial securing requirements should be increased, with particular regard to those required for gas or oil wells permitted in Tidewater Virginia to address potential costly ground and surface water impacts.  Present bonding requirements are inadequate and should be expanded to address and provide for potential costs incurred by local governments in dealing with abandoned wells. 

 

This proposal is reasonable and well justified, particularly when considering the Virginia Department of Planning and Budget’s Economic Impact Analysis and its conclusion that the benefits of DMME’s proposed regulation likely exceed the costs and that additional reporting costs on regulated operators are expected to be small.  Given the minimal impacts of expanding the Gas and Oil Regulation, increasing bonding and financial security provisions should not have a negative impact upon the industry. 

 

1. Section 4 VAC 25-150-365 should be further amended to require the prior disclosure of chemicals utilized during the gas and oil drilling and hydraulic fracturing to local emergency management and first responders so that they may adequately prepare for a potential hazard.  The proposed Section 4VAC25-150-365 requires operators to disclose chemical ingredients utilized in the hydraulic fracturing process and notes that such disclosures may be shared by the DMME director with local government officials for purposes of responding to an emergency.  This provision, however, is inadequate in that it only addresses disclosures in the event an emergency occurs but by that time, it may likely be too late to properly prepare for and respond to an emergency situation that has already occurred or is developing in real time.  For these reasons, disclosures must be shared ahead of time with local emergency management personnel and Section 4VAC25-150-365 should be further amended to require such disclosures. 

 

 

 

 

 

 

 

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[1] Sediment Distribution and Hydrologic Conditions of the Potomac Aquifer in Virginia and Parts of Maryland and North Carolina, Scientific Investigations Report 2013-5116, U.S. Department of the Interior, U.S. Geological Survey, prepared in cooperation with the Virginia Department of Environmental Quality, E. Randy McFarland (2013).