Emerging Technology Disrupters in Oil, Gas and Data

O'Reilly Report Cover

Last week I learned that WellWiki.org was profiled in O’Reilly’s Oil, Gas and Data report. Written by Daniel Cowles, the O’Reilly report covers a variety of emerging technology disruptors. The report was handed out to attendees at the Strata + Hadoop World big data conference in London.  Below is an excerpt…

O'Reilly Report Page 16

What If Words Meant Things?

In an earlier post, I asked: Has the DEP has complied with Act 15 of 2010?

Specifically, Act 15 required: 1) well operators to file initial Marcellus Shale production reports covering the preceding calendar year with the Pennsylvania Department of Environmental Protection (DEP) on or before August 15, 2010; 2) subsequent semi-annual reports to be filed with the DEP on or before February 15 and August 15 of each year; and 3) the DEP to make these reports publicly accessible on the department’s internet website beginning November 1, 2010.

However, contrary to the requirements of Act 15, the DEP never published a report covering the “preceding calendar year” (meaning 2009). Nor did the department publish reports covering the subsequent semi-annual period of January 1, 2010, to June 30, 2010. Act 15 required both reports to be submitted by operators to the DEP by August 15, 2010, and for these reports to be published by the department by November 1, 2010.

In light of these apparent violations of Act 15, I emailed the DEP on April 18, 2012 to inquire about the matter. Yesterday, I received a response from Kurt Klapkowski, the Director of the Bureau of Oil & Gas Planning and Program Management within the Office of Oil and Gas Management in the Department of Environmental Protection.

It turns out that according to the DEP, the meaning of “preceding calendar year” is open to interpretation. Below is an excerpt from the email response:

Section 212(a.1) required that the initial Marcellus production report be filed on or before August 15th, 2010 and that it include production data from the preceding calendar year.  The Department interpreted this language to mean that the initial Marcellus report was to include production data from the preceding 12 month period.  This would include the two preceding semiannual periods (07/01/2009 through 12/31/2009 and 01/01/2010 through 06/30/2010).  The next Marcellus production reports due on February 15, 2011, would include only data from that preceding semiannual period (07/01/2010 through 12/31/2010).

I wondered, is “calendar year” an ambiguous term, one open to several plausible interpretations? Not according to the Internal Revenue Service: “Calendar Year — A calendar tax year is 12 consecutive months beginning January 1 and ending December 31.” Wikipedia offers a similar conclusion: “Generally speaking, a calendar year begins on the New Year’s Day of the given calendar system and ends on the day before the following New Year’s Day.”

Perhaps Pennsylvania is on a unique “calendar system”? Actually, no. Like most of the Western world, Pennsylvania follows the Gregorian calendar. For instance, the Pennsylvania Department of Revenue appears to agree that a calendar year starts on January 1. Similarly, the Pennsylvania Code uses the term “calendar year” some 300 times. However, its meaning must be sufficiently obvious and taken for granted, as no where in the first 20 results could I find a definition of the term. Apparently, readers are assumed to know a calendar year when they see one.

In short, it is difficult to find any support for the DEP’s decision to “interpret” the term “calendar year” to meaning anything other than January 1 to December 31.

But what of the DEP’s actual interpretation? According to the Director, the DEP interpreted “preceding calendar year” to mean “production data from the preceding 12 month period. This would include the two preceding semiannual periods (07/01/2009 through 12/31/2009 and 01/01/2010 through 06/30/2010).”

However, basic mathematics together with a review of the legislative history of Act 15 of 2010 suggest that this interpretation has no credibility whatsoever.

Prior to becoming law, Act 15 of 2010 was known as Senate Bill 297. It was introduced by Pennsylvania Senators Yaw, Baker, Pileggi, Rafferty, Wonderling, Browne, Costa, O’Pake, Alloway, Vance, Earll and Smucker on February 24, 2009 and referred to the Senate’s Environmental Resources and Energy Committee. The Bill was amended by the committee on May 5, 2009, at which point it went up for consideration. On June 8, 2009, upon third consideration, the Senate passed the Bill by a vote of 47-0.

The Bill then went to the Pennsylvania House where it was referred to the House’s Environmental Resources and Energy Committee. On January 26, 2010, the House considered an amended version of the Bill, and on March 10, 2010, upon third consideration, the Bill was passed by a vote of 195-0. At this point it went back to the Senate for re-consideration, where it was passed again, this time by a vote of 50-0 on March 16, 2010. Finally, Senate Bill 297 was presented to then Pennsylvania Governor Ed Rendell, who signed the Bill into law on March 22, 2010, at which time it became known as Act 15 of 2010.

How could a law enacted on March 22, 2010, possibly intend for the term “preceding” to refer to the time period July 1, 2009 to June 30, 2010 — as the latter months of this time period had not yet even occurred at the time of the Bill’s passage, and therefore, had no way of “preceding” the legislation? Quite obviously this was not what the Act intended.

In short, it appears that the DEP has failed to comply with Act 15 of 2010. The July 1, 2009 to June 30, 2010 time period neither precedes the passage of Act 15 of 2010, nor qualifies as a calendar year. As a result of these failures, it is not possible to accurately calculate the production of Marcellus-related natural gas back to January 1, 2009, as required by Act 15.