Reality Check on the Auditor General’s Report on DEP’s Oversight of Oil and Gas Operations

by Blank Rome LLP
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The expected chorus of politically driven indignation is raining down in response to the Auditor General’s report released this Tuesday on the DEP’s performance in monitoring potential impacts to water quality from shale gas development, 2009-2012.

I’m in the process of digesting the Report which is lengthy (118 pages), along with the DEP’s 27-page response which, per standard procedure, is appended to the Report itself.  A few things strike me as notable though off the bat.

First, of the 15 “case studies” of water complaints the Auditor General looked at, 4 of the 15 were unrelated to oil and gas operations at all.  That’s 27% of the investigation that had nothing to do with what was supposedly being investigated.  Of the remaining 11 matters, 10 had full water replacement or restoration from the responsible operator.  That’s a 91% rate of success on resolution.  The 11th matter has a water replacement plan under review right now by the DEP.  That raises the resolution rate to 100% of the matters reviewed by the Auditor General.

In another case the Auditor General highlighted, where animals had supposedly died, the matter was determined to be unrelated to oil and gas operations.

Second, the Auditor General also focuses quite a bit on the DEP’s technology and personnel capabilities, alleging shortages and deficiencies.  But it was under the Rendell and Hanger regime that 183 bodies were axed from the DEP in the 2009-2010 budget, mostly impacting IT (information technology) and clerical functions.  Also, the report conveniently ignores completely the brand new oil and gas fee program that the administration brought into fruition.  The fee increases on shale wells will result in revenue of $4.7 million.  This will support new technology, including things like electronic review, mobile digital inspections, reporting system upgrades, and modernized forms and databases.  It will also support the hiring of about 25 new personnel, many of whom will be inspectors.

Third, I would agree with the Auditor General that the General Assembly should review whether the current 45-day clock for resolution of water impact investigation is realistic.  Earlier this year we wrote about Fred Baldassare’s report that methane from deep shale formations, like the Marcellus, has been found as a natural condition in the shallow drinking water aquifer system of the Northeastern Pennsylvania region.  One takeaway for me on that report, and my own experience as DEP Secretary, is that these investigations are long and complicated and putting unrealistic time frame expectations on them is not a good thing.

Lastly, despite the Auditor General’s and the chorus’ protestations to the contrary, the Report is a shot at the dedication and efficaciousness of hard working DEP personnel, especially inspectors.  In one particular case for example, the Auditor General rips an inspector for being too “conciliatory” where that inspector had successfully achieved compliance and a restored water supply and the DEP issued a fine of over $145,000 to boot.

Of course the Auditor General’s Report will, unfortunately, be used as a political football.   It will most certainly be referenced in this year’s gubernatorial race and perhaps in one down the road by the Report’s author.  As veteran Harrisburg reporter Don Gilliland put it in his insightful article about the Report in this morning’s Patriot News: “[t]here is a long tradition in Pennsylvania of audits being vehicles for the political ambition of the Auditor General, and [this] promised investigation of the Department of Environmental Protection’s oversight of Marcellus Shale drilling is no exception.”

I will continue my review of the Report and the DEP’s responses and I may chime in with more as time goes by.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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