A state audit of the Department of Environmental Protection’s regulation of the oil and gas industry revealed inconsistent enforcement, disorganization and poor record management.
Auditor General Eugene DePasquale began the audit immediately after taking office in January 2013. It covers the beginning of 2009 through the end of 2012 and identifies eight problems, with 29 recommendations for solutions.
“DEP is underfunded, understaffed and inconsistent in how it approaches shale gas development,” said DePasquale releasing the audit at a Capitol press conference Tuesday morning. He said the audit indicates that Pennsylvania wasn’t prepared to adequately monitor the Marcellus drilling boom that started in 2007.
“We’ve been playing catch-up ever since then,” DePasquale said.
The audit includes a 27-page response from DEP, which did not concur with any of the audit’s eight findings. Yet, the agency did agree with most of the auditors’ recommendations for improvement.
“To a great extent, the audit report reflects how the Oil and Gas Program formerly operated, not how the program currently functions,” DEP’s response states.
During the audit period, DEP did not consistently order oil and gas well operators to fix water supplies the department found were impaired by their operations. Auditors reviewed 15 such cases and found DEP issued an official order in just one of them.
“DEP has a statutory mandate to issue an administrative order when it determines that an operator has adversely impacted a water supply,” the audit states. “Despite this mandate, in many cases, DEP chose instead to seek voluntary compliance and encouraged operators to work out a solution with affected parties.”
DEP replied that the law only requires it to issue an order when an operator refuses to fix the water supply problem.
Patrick Creighton, a spokesman for the Marcellus Shale Coalition, an industry group, said in an email the group’s members understand state regulations obligate them to address water supply issues when they arise.
“In these rare cases, our members are committed to working with state regulators to swiftly address the matter and believe the current process is effective,” he said.
The audit, which cites Times-Tribune investigations into water contamination, faulted DEP for consistently failing to respond to drinking water quality complaints within the 45-day deadline as required by law. The agency’s Williamsport office, which regulates oil and gas operations in all of eastern Pennsylvania, made the deadline in only 34 percent of cases. The Pittsburgh office, which regulates the southwest, resolved complaints in 45 days 76 percent of the time.
DEP’s letters to these complainants included unclear language, lab test results too difficult for the average person to interpret and a pamphlet on interpreting water tests from Penn State University not tailored specifically for oil and gas.
DEP said it is writing a standardized letter format, Penn State is a “preeminent authority in the oil and gas field,” and 45 days is too short for some investigations, particularly when it must do isotopic testing to determine where stray methane comes from. Auditors then asked the Legislature to review the 45-day time frame.
The audit also states DEP’s administrative system, which uses a mix of paper and electronic records, is not effective at ensuring the department follows up on resident complaints, inspects all shale wells on time and creates a public, transparent record of its actions. In several cases, auditors found it difficult to locate inspection, complaint and enforcement records. DEP countered that auditors simply didn’t understand its systems, which are constantly improving, and its reliance on paper records and what it called “human element” do not prevent effective regulation.
Observing the press conference was Patrick Henderson, Gov. Tom Corbett’s top energy aide.
DEP has responded to Marcellus drilling activities by hiring new well inspectors in 2010, using an earmark from natural gas drilling impact fee revenue to underwrite regulatory efforts and enacting a fee hike on Marcellus well permits in June to generate nearly $5 million in new revenue, Mr. Henderson said.
The revenue will be used to hire additional staff in the Office of Oil and Gas Management for inspections, policy and program writing and permitting, DEP said.
“I think they (DEP) are sufficiently staffed,” Henderson said.
Rep. Ron Miller, R-93, Jacobus, chairman of the House Environment and Energy Committee, said the department’s funding is adequate, and the agency has made major strides since the end of the audit period.
“I’m disappointed in the audit itself, because it seems to be confrontational and political instead of just being educational and helpful,” he said.
Efforts to reach senate environment committee chair, Sen. Gene Yaw, R-23, Williamsport, were not successful.
The minority chairs of the senate and house environment committees, Sen. John Yudichak, D-14, Nanticoke, and Rep. Greg Vitali, D-166, Havertown, agreed with Mr. DePasquale that the agency needs more funding and to hire more inspectors.
Vitali pointed out that the state’s general fund contributions to DEP peaked in 2008 and 2009 at $229 million, then declined to $127 million in 2013 and 2014 before a slight bump to $139 million in the most recent budget. He also tracks full employees, which are down to 2,729 this year after a high of 3,079 in 2007 and 2008, he said.
“There are consequences to budget cuts year after year,” he said. “When you continue to cut staffing levels, there’s a price to pay.”
Yudichak said an extraction tax should be the source for this extra funding.
“At this juncture, even with the bump in this year’s budget, it doesn’t get DEP where it needs to be,” he said. “The administration has made a mistake in not making a reasonable severance tax.”
John Hanger, who was DEP secretary from September 2008 through January 2011 and made an unsuccessful bid for governor this year, said DEP must go beyond Mr. DePasquale’s recommendations to restore the public’s trust, including increasing the number of employees in the Office of Oil and Gas Management from 184 to around 300 and creating a new office with the sole purpose of overseeing citizen complaints.
“I think it needs completely new leadership and a new structure,” he said.