Red Flags Raised Over Gas Wells
DEP secretary issues warning at Marcellus shale conference
at Duquesne University
Pittsburgh Post-Gazette
4 May 2010
By Don Hopey
Pennsylvania needs tougher regulations for Marcellus shale gas
drilling, aggressive, independent enforcement, and a severance tax on
the gas extracted, according to state Department of Environmental
Protection Secretary John Hanger.
And yesterday would not be soon enough to get all of that done and
"done right" to protect the state's water resources, said Mr. Hanger in
a forceful keynote speech opening the Marcellus Shale Policy Conference
at Duquesne University on Monday.
"Let me be clear: Self-regulation doesn't work. That's not
contestable," Mr. Hanger told the audience of about 250, including a
significant number of gas industry representatives. "We've made
mistakes before. We have to get this right or the costs will overwhelm
the benefits."
Citing environmental damage done by Pennsylvania's early history of
unregulated coal mining, the oil well disaster and widening slick in
the Gulf of Mexico and the 29 dead miners at the Upper Big Branch mine
in West Virginia, Mr. Hanger challenged state legislators, regulators
and the natural gas industry not to allow those kinds of mistakes to
happen again.
"Rules matter. The philosophy of the staff matters. And what is needed
is the right rules and the right staff with the independence to enforce
those rules," Mr. Hanger said. "Also needed are companies with the
right culture that want to do things the right way. We have some of
those, as well as some at the other end and some in the middle."
He said there's no such thing as "zero impact drilling" and said he
will push for stronger regulations to protect Pennsylvania's rivers and
creeks from extremely salty well wastewater pollution, tougher and more
comprehensive well construction standards, rules limiting toxic air
pollution from wells and compressor pumping stations, and bigger bonds
to cover capping of wells when they stop producing.
Each well pumps 2 million to 8 million gallons of chemically treated
water underground and under high pressure to fracture the shale rock
and release the gas. About 1,400 Marcellus shale wells have been
drilled to date and tens of thousands more are expected.
"The bonding regulations are pitiful -- $2,500 a well or $25,000 for
all the wells a company drills in the state," Mr. Hanger said,
provoking a couple of chuckles from the audience. "Well the joke will
be on us when the first company leaves Pennsylvania. Right now, clearly
the rational economic decision would be forfeit the bond and walk away."
He said Gov. Ed Rendell strongly supports a 5 percent severance tax on
gas taken from the Marcellus shale formation, which lies 5,000 to 8,000
feet deep under three-quarters of Pennsylvania and parts of New York,
Maryland, Ohio and West Virginia, a total of 95,000 square miles.
Twenty-eight natural gas producing states have a severance tax, but
last week the Pennsylvania Independent Oil and Gas Association,
representing more than 700 companies and individuals, sent a letter to
Mr. Rendell and members of the general assembly saying it opposed a
severance tax.
"The industry pays a severance tax in every other state, in Alabama and
Texas and West Virginia and Oklahoma, and in private they know they
should pay one here," Mr. Hanger said. "Its position is indefensible.
The Marcellus is so attractive that companies from around the world,
from Japan, Norway, France, and the U.K, are coming. Billions of
dollars are coming. The tax shouldn't be the highest but it shouldn't
be the lowest."
The two-day conference is sponsored by Duquesne University and the
Pennsylvania Environmental Council, which intends to release a
blueprint for effective regulation of the drilling industry later this
year. The PEC said it will release a policy report and recommendations
based on information developed at the conference, which concludes today.
Estimates of the amount of extractable gas it contains have risen from
25 trillion cubic feet a year ago to up to 75 trillion cubic feet today
and there are now 73 companies operating in the Marcellus shale field.
Kent Moors, director of the Energy Policy Research Group at Duquesne's
Graduate Center for Social and Public Policy, said the state's failure
to make good Marcellus shale drilling policy decisions will result in
the costs being borne by local municipalities, including infrastructure
impacts, especially destruction of roads, price inflation and impacts
on agricultural land and water.
"Water prices will increase and drilling may cause industrial
facilities to close. It's a rising tide that won't raise all boats,"
Dr. Moors said in his keynote address. "It must be met head on,
transparently and collaboratively. It can't be rammed down the throats
of the locals."
On a six-person panel discussing "unresolved" Marcellus shale issues at
the conference, Kathryn Klaber, president of the Marcellus Shale
Coalition, an industry lobbying group, said state regulations need to
be "dusted off and modernized" but emphasized the competitive nature of
the gas drilling industry and its economic benefits for the state. She
said a study commissioned by the coalition found the gas well industry
would create 107,000 new jobs in Pennsylvania this year and spend $4
million per well.
She rejected a suggestion by another member of the panel, Charles
Christen, director of operations at the Center for Healthy Environments
and Communities, in the University of Pittsburgh's Graduate School of
Public Health, that Pennsylvania impose a moratorium on Marcellus shale
development, like New York has done, until regulatory, legislative and
severance tax decisions are made.
Don Hopey: dhopey@post-gazette.com or 412-263-1983.