Company, Corps at Odds Over Gas Permits

Pittsburgh Post-Gazette
10 August 2011
By Don Hopey,

Chesapeake Energy is complaining that new federal stream and wetlands encroachment permit requirements are holding up Marcellus Shale gas pipeline construction in Pennsylvania and delaying property owner royalty payments totaling more than $500,000 a day.

But the U.S. Army Corps of Engineers, which reviews pipeline projects that cumulatively impact more than an acre of streams or wetlands, denied that significant changes were made to the permit regulation when it was renewed July 1.

It also blamed the gas industry, and Chesapeake in particular, for submitting incomplete permit applications that delayed project approvals.

Chesapeake claims that 128 of the 300 wells it has drilled in northern tier counties are waiting on permits for connecting pipelines and that Pennsylvania has been targeted by the federal permit changes that will increase project review time from 45 days to almost 300 days.

The Oklahoma City-based company's complaints about "arbitrary and overly burdensome" regulations were detailed in a letter mailed at the end of July to more than 17,000 leaseholders in Bradford, Sullivan, Susquehanna, Tioga and Wyoming counties.

The letter, signed by David Spigelmyer, Chesapeake vice president for government relations, also urges the leaseholders to submit form letters to their members of Congress, saying the permit review changes are "unnecessary and are infringing on [your] ability to develop your mineral rights."

"We have responsibilities to our mineral owners to tell them why there's been a delay in their receiving royalty payments," Mr. Spigelmyer said in a phone interview Tuesday.

He also said the permitting delay puts the state at a competitive disadvantage when vying for drilling investment because without connecting pipelines, the gas companies can't move gas from the wells to customers.

The conflict is all about interpretation of the new general permit regulation, formally known as the Pennsylvania State Programmatic General Permit-4, which requires companies to detail the cumulative impacts of proposed pipeline construction on streams and wetlands for the length of the pipeline.

While some are short connector lines from wells to compressor stations, others can stretch for tens or hundreds of miles, especially in northern tier counties where there is no history of gas well development.

"What's at issue is the Corps wants to look at the cumulative impacts of a pipeline project from beginning to end and the industry wants to get permits based on impacts of each stream crossing," said Jeff Hawk, a Corps spokesman in the Pittsburgh District office.

Companies that want to install natural gas pipelines throughout the U.S. must apply for Clean Water Act encroachment permits if they cross or disturb streams or wetlands.

The pipeline companies send permit applications to the state Department of Environmental Protection, which determines if the proposed pipeline is a smaller Category One or Two project that can be issued a general permit by the DEP alone or a Category Three project that has larger impacts on streams and wetlands and must also pass review by the Corps.

Bill Seib, chief of the Corps' regulatory branch in the Baltimore District office that covers central Pennsylvania, said the federal encroachment permits have required regulatory agencies to look at the cumulative impacts of a pipeline project for 40 years.

But, he said, the state DEP has, in the past, focused on individual stream crossing impacts in granting permits.

Mr. Seib said the Marcellus Shale gas drilling industry projections predict between 1,000 and 2,000 new wells will be drilled annually in the state, and that each will require a pipeline to transport the gas to market.

But just 10 to 15 percent of all the pipeline projects submitted to the DEP are classified as Category Three projects, he said, and he doesn't expect that to change.

"The process for issuing linear projects [permits] has not changed. The industry says it has changed, but it has not," Mr. Seib said. "The problem is a lot of the applications we get are incomplete because they don't include the cumulative impact of a project. That's a problem, especially with Chesapeake, which doesn't like to explain where a pipeline is crossing a stream or where it's going."

Reviews of pipeline projects' effects on historical sites and endangered species, carried out by the state Historical and Museum Commission and the U.S. Fish and Wildlife Service, can also take time, Mr. Seib said.

He said the Corps' Baltimore office has 70 pending pipeline permit applications from Pennsylvania, but only five have been identified as "federally complete."

Once an application is judged complete, Mr. Seib said, the average processing time by the Corps' Baltimore District office is 26 days. He said he didn't know how many of those applications were from Chesapeake.


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