Permit for drilling under oil refinery upheld

People seeking to block oil and gas drilling permits generally describe worst-case scenarios. Even so, this one stands out.

On the banks of the Allegheny River in Warren, about 190 miles upstream from Point State Park, a small, conventional oil and gas operator has started to drill a well slantwise under an oil refinery.

Opponents of the project fear that when the well is drilled to its total depth and fracked 800 feet below the surface it will disturb a possible, but undocumented, abandoned well. The well is suspected of feeding a plume of oil that has accumulated under a 3.6 million-gallon gasoline holding tank, creating the conditions for “catastrophic damage,” including an explosion or water contamination.

Those words of alarm come not from worried neighbors but from the oil refinery itself. United Refining Co. shared its objections with regulators before the state Department of Environmental Protection issued the drilling permits in 2014.

The refinery then appealed the permits granted to driller John D. Branch, who has drilled and fracked about 60 wells in the city of Warren.

“This doesn’t make any sense to take the potential risk that exists here,” the refinery’s environmental compliance officer Timothy Ruth testified. “Drill someplace else.” Not enough proof Earlier this month, the state’s Environmental Hearing Board sided with the DEP and Mr. Branch, ruling that United Refining did not meet the burden of proof necessary to show that DEP acted unreasonably in issuing the permits.

United Refining had to prove that damage to the oil plume and gasoline tank are likely to occur and to explain how. Its evidence also had to be more persuasive than the evidence presented by DEP and Mr. Branch, which demonstrated that the permits were appropriate and drilling operations were unlikely to cause harm.

The refinery did not meet that standard, the board found, despite raising concerns that the board said it shared.

For example, United Refining provided only speculative, not direct, evidence of an unplugged well that refinery officials believe is replenishing the 265 foot-by-180 foot oil plume.

“Although the appellant raised legitimate concerns about the decision to allow drilling under an active oil and gas refinery in a location approximately 300 feet from a 3.6 million-gallon gasoline storage tank, there was insufficient expert testimony to demonstrate actual risks associated with the drilling,” Thomas W. Renwand, the hearing board’s chief judge, wrote in a July 7 decision.

The refinery’s expert witness, Mr. Ruth, a geologist, acknowledged that he is not an expert in drilling or fracking, which is used to coax fossil fuels from surrounding rock.

The experts in those specialties

— northwest oil and gas district manager Craig Lobins for DEP and Mr. Branch for himself — testified the planned well would not affect the storage tank even if the series of hypothetical connections envisioned by the refinery went wrong. If anything, the new well could relieve pressure underground in a way that would likely pull oil away from the plume.

They also noted Mr. Branch drilled and fracked a well in 2014 that is a similar distance from the tank and plume without incident.

“I would never drill the well, never frack the well if I had the slightest thought that anything would ever happen,” Mr. Branch testified.

Insufficient analysis?

United Refining urged the hearing board to consider whether DEP satisfied a broader policy mandate to protect Pennsylvania’s environment and its citizens’ health and safety.

“Is it in the best interests of the commonwealth to treat this permit application as we do all others?” the refinery’s attorney wrote. “Or, is this the one case of 41,000 that requires a different analysis and outcome?”

The board picked up on that message and criticized DEP for issuing the permits after minimal communication with United Refining about its concerns and, “inexplicably, without visiting the site.”

DEP issues thousands of oil and gas permits a year and follows a standard procedure for processing them that is “probably sufficient” in most cases, the board said.

“However, this case is unique,” Judge Renwand wrote, and the department, the refinery and the driller “would have greatly benefited from a more collaborative process than that which was utilized here.

“We cannot help but think that if the department had conducted a more robust permitting application process and involved Mr. Ruth and United Refining Co. in discussing and addressing the company’s very legitimate concerns, a resolution might have been reached that was acceptable to all,” Judge Renwand wrote.

Environmental Hearing Board decisions can be appealed to the Commonwealth Court. United Refining’s attorney Barry Klenowski said the company is considering its options but he otherwise declined to comment.

United Refining and Mr. Branch are also involved in separate litigation over the disputed ownership of the oil and gas rights beneath the refinery’s property.

Mr. Branch has so far only drilled and set the well’s conductor casing, DEP spokeswoman Melanie Williams said. He has not yet drilled the well to its total depth, nor has he fracked it, but may begin that work after notifying the department, she said.

Mr. Branch’s attorney Jean Mosites of Babst Calland could not say if he plans to continue developing the well. She welcomed the board’s decision.

“We’re obviously happy with the result,” she said, “and it was the right result because they did not have any evidence and were not able to meet their burden to show that there was any risk from this particular well.”

Deadline issues

She also noted there is an unfortunate disconnect between the time it takes the Environmental Hearing Board to adjudicate an appeal and the lifespan of a drilling permit, which expires a year after it is issued unless drilling begins.

Mr. Branch initially had permits to drill — and United Refining appealed — six wells under the refinery property, but all but one of the permits expired during the appeal process.

He was able to preserve the permit for one well by beginning drilling. It is the closest of the proposed wells to the tank underlain by the oil plume.

An attorney for the environmental group PennFuture said the case illustrates a problem with a different kind of deadline. The 45-day window in which DEP is directed by law to issue a well permit after it receives a complete application makes it difficult for permit reviewers to give extra scrutiny to applications that may deserve it.

The time limit, coupled with constraints on the agency’s resources, “virtually prohibits them from doing a thorough environmental assessment,” said George Jugovic Jr., who served as regional director of DEP’s southwest regional office before becoming chief counsel at PennFuture.

“The agency should have both the flexibility and the burden to take a more detailed look at that particular permit,” he said. “The statute doesn’t allow them really to do that.”