On November 8th, Pennsylvanians elected former Attorney General Josh Shapiro as their next governor. Shapiro has been tough on energy producers during his time in the AG’s office. However, with no hard stance on fracking and seats in the Pennsylvania House of Representatives still up for grabs, many unanswered questions remain going into the new year.
Hydraulic fracturing, or “fracking,” has long been under fire for its potential effect on water quality and the environment. On the other hand, fracking has ensured that the United States has remained the top natural gas producer in the world.[1] Since the early 2000s, Pennsylvania has been a battleground between the economic benefits and the environmental drawbacks of fracking because it is covered by the Marcellus Shale formation. The Appalachian Basin, in which the Marcellus and Utica shale formations sit, accounts for over 30% of all U.S. dry natural gas.[2] This means that the state government’s policy toward fracking helps shape the country’s overall natural gas output.
Starting in the mid-2000s, producers commenced drilling unconventional wells in Pennsylvania, with 2011 being the most active year for drilling and for industry regulation. In 2012, Pennsylvania passed Act 13 of 2012, which authorized local governments to adopt impact fees (annual per-well fee paid by the operator) and allowed the state to preempt local environmental and zoning laws to create statewide standards for shale gas development.[3] Since then, the state’s Supreme Court has struck down several provisions in the Act, specifically provisions empowering local governments’ power to exclude fracking through zoning changes. After former Governor Tom Wolf took office, regulations on fracking continued to become stricter.[4] In 2021, the Delaware River Basin Commission voted to approve a ban on fracking areas that cover Pennsylvania, New York, New Jersey, and Delaware. Despite challenges from Pennsylvania lawmakers, the 3rd U.S. Circuit Court of Appeals upheld the decision in September 2022.[5]
A new governor, and potential democratic control over the state House of Representatives, has sparked some concern amongst natural gas producers in the area. But some political commentators say there may not be much to worry about. Despite his 2021 investigation and subsequent indictment of Energy Transfer[6] during his time as Attorney General, Shapiro has not called for an outright ban on fracking. Rather, Shapiro advocates for what he calls responsible fracking and energy production that is less harmful to the environment.[7]
Even though it is not an outright ban, there are still extensive regulations that Shapiro’s responsible fracking plan would impose. The plan would include expanding no-drill zones to 2,500 feet from the nearest building, requiring the disclosure of all fracking chemicals before they are used on site, regulating hundreds of miles of smaller pipelines, conducting a more comprehensive health response to the areas around fracking sites, and implementing the grand jury’s recommendations from the 2020 report following the Sonoco incident.[8] This would include investing in the research and development of zero-carbon technologies, such as nuclear, hydrogen, and carbon capture.[9] Additionally, on his campaign website, Shapiro promises to support the natural gas industry by protecting the existing jobs, but at the same time, notes a goal to reach net-zero emissions by 2050.[10] Shapiro also has not promised to lift the fracking ban in the Delaware River Basin.
Despite his ambitious green goals, Shapiro is not on board with all the initiatives of his predecessor, former Democratic Governor Tom Wolf. Last April, Pennsylvania joined the Regional Greenhouse Gas Initiative (RRGI).[11] The initiative’s goal is to reduce emissions by requiring fossil fuel power plants to purchase allowances to emit carbon dioxide, and the profits were to be used to reinvest in renewable energy, amongst other initiatives.[12] Shapiro has yet to commit to staying in RRGI.[13] While campaigning, Shapiro said he was not sure that the initiative was the most effective way to reduce environmental impact while protecting jobs and affordable energy prices in the state.[14]
At this point, it seems like one thing is sure, with questions as to which party controls the state House of Representatives and with a Republican-controlled state Senate, Shapiro will have to work with both sides of the aisle if he wants to achieve his campaign goals. Only time will tell what his true impact on the industry may be, but the energy sector’s eye will definitely be on Shapiro, and Pennsylvania, come January.
Article authored by Baylee Pearce, Zack Oliva, and Josh Abrams.
[1] International Natural Gas, U.S. Energy Information Administration, https://www.eia.gov/international/data/world/natural-gas/dry-natural-gas-production.
[2] Corrina Ricker and Warren Wilczewski, Shale natural gas production in the Appalachian Basin sets records in first half of 2021, U.S. Energy Information Administration (Sept. 1, 2021), https://www.eia.gov/todayinenergy/detail.php?id=49377#:~:text=The%20Appalachian%20Basin%20contains%20two,the%20first%20half%20of%202021.
[3] Act 13 of 2012, Department of Environmental Protection, https://www.dep.pa.gov/Business/Energy/OilandGasPrograms/Act13/Pages/default.aspx
[4]Chapter 78: controversial new drilling rules, State Impact Pennsylvania, https://stateimpact.npr.org/pennsylvania/tag/chapter-78/.
[5] Susan Phillips, Fracking ban in Delaware River Basin survives Pa. GOP lawmakers’ challenge in federal court, WHYY (Sept. 16, 2022), https://whyy.org/articles/fracking-ban-in-delaware-river-basin-survives-pa-gop-lawmakers-challenge-in-federal-court/.
[6] Sunoco LP’s general partner is owned by a subsidiary of Energy Transfer LP. Energy Transfer faced 48 criminal charges, most of them for illegally releasing industrial waste at 22 cities in 11 countries across Pennsylvania. Sunoco itself was the pipeline company that was connected to the incidents that precipitated these charges. See Michael Rubinkam, Pipeline developer charged over systematic contamination, AP News (October 5, 2021), https://apnews.com/article/business-pennsylvania-philadelphia-environment-crime-20c337b3e287091c7f7fb6f62156b6e1.
[7] Kate Huangpu, Pa. election 2022: Where governor candidates Mastriano, Shapiro stand on energy environment, Spotlight PA (Oct. 4, 2022), https://www.spotlightpa.org/news/2022/10/pa-election-2022-mastriano-shapiro-environment-rggi-fracking/.
[8] Angela Couloumbis, Democrat Josh Shapiro will be Pennsylvania’s next governor. It promises to be his biggest challenge yet., Spotlight PA (Nov. 9, 2022), https://www.spotlightpa.org/news/2022/11/pa-election-2022-results-josh-shapiro-governor-analysis/.
[9] Id.
[10] Josh Shapiro Releases Plan to Boost Pennsylvania’s Economy by Cutting Red Tape and Spurring Innovation, Shapiro for Governor (Jul. 25, 2022), https://joshshapiro.org/news/josh-shapiro-releases-plan-to-boost-pennsylvanias-economy-by-cutting-red-tape-and-spurring-innovation/
[11] Huangpu, supra note 7.
[12] Id.
[13] Id.
[14] Id.
Josh advises on title opinions, division order title opinions, and all aspects of complex upstream oil and gas and minerals transactions, including purchase and sale agreements and due diligence.
Zachary P. Oliva is a founding partner of Oliva Gibbs LLP. He focuses his practice in the areas of energy and corporate law. He is recognized as "Rising Star” for oil and gas law by Best Lawyers and Super Lawyers.