Shale: The Regulatory Ripple Effect

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"PA PUC wants to be 'state agent' for federal pipeline oversight?"

The Pennsylvania PUC regulates five industries, and development of the Marcellus Shale promises to radically impact all but one—telecommunications.

When drilling companies can't recycle or inject wastewater, regulated water treatment plants are the only other option for disposal. Getting materials to and from drill sites requires hundreds of regulated trucks traveling on local roads. With increased local supplies, which could soon make Pennsylvania a net exporter, natural gas-fired power plants and distribution companies will have to rethink supply contracts to comply with regulations requiring utilities to buy the cheapest fuel on the market.

That's forcing the PUC to decide how much it should indirectly regulate nat gas development, an industry it doesn't regulate directly. So far, its answer is: as little as possible. When they speak in public, PUC commissioners are quick to note they don't want an "empire." Since taking on the issue in March, the PUC has held two hearings to gather testimony from dozens of stakeholders, but asked state lawmakers for only a small increase in authority—the right to enforce federal safety standards on nat gas pipelines.

The current drilling boom guarantees a pipeline boom. By one count, more than 550 Marcellus Shale wells in Pennsylvania are currently capped, awaiting gathering lines to connect to the pipeline grid covering the continent. These lines will be different than existing lines, larger and higher pressure; but from a regulatory standpoint, the state isn't prepared to handle the increase. Of the 31 gas-producing states, Pennsylvania and Alaska are the only ones that don't regulate gathering lines, letting the U.S. Pipeline and Hazardous Material Safety Administration handle them.

At PHMSA's request, the PUC wants to become the "state agent" for federal pipeline oversight, but that distinction isn't all-encompassing. PHMSA doesn't inspect gathering lines in extremely rural areas and the PUC doesn't plan to either, even though many Marcellus Shale pipelines will pass through these areas.

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