Shale Panel Offers Blueprint for Future
96 recommendations range from impact fees to higher fines
Pittsburgh Post-Gazette
23 July 2011
By Laura Olson, Harrisburg Bureau
HARRISBURG -- From impact fees to pooling gas rights, boosting fines to
rewarding natural gas use, the governor's Marcellus Shale Advisory
Commission stuffed dozens of wide-ranging suggestions into its report
Friday.
Those 96 recommendations are aimed at encouraging gas companies to
invest in Pennsylvania, protecting environmental resources and helping
local governments manage the industry that is remaking their
communities.
Top recommendations made by the Marcellus Shale Advisory Commission:
• Enact a drilling impact fee that offsets "uncompensated" costs to
local governments.
• Double civil penalties for violations and increase bonding fees held
in case a well is abandoned.
• Establish construction standards for private water wells and increase
the distance for which a driller is presumed liable for contamination.
• Require the state Public Utility Commission to oversee gathering
lines and increase safety standards for pipelines in low-density areas.
• Update state law to make the Marcellus Shale eligible for "pooling."
That process allows for mineral resources at a certain depth to be
added against the owner's wishes into a larger drilling unit.
They ranged from specific updates -- setting the number of feet between
wellpads and streams, and doubling the fines for companies that break
the rules -- to general directions for legislators to review the
business climate, analyze spill-containment methods and create a
permanent advisory panel.
The report's directions were equally broad on the closely watched issue
of an impact fee, urging simply that any fee be directed toward helping
local governments with "uncompensated" costs from drilling activity.
And on another controversial issue, the panel gave limited instructions
for "modernizing" state law to allow drillers to access gas within
Marcellus Shale even against a landowner's wishes. That process, known
as pooling, currently is allowed under certain conditions to extract
gas more efficiently, but draws fiery opposition from those who see it
as impinging on property rights.
One commission member said the goal of the 120-day fact-finding process
was to create an outline of potential changes to how the state oversees
gas drilling.
"The governor appointed this commission to give him best practices, to
use as a base line in negotiating with the Legislature," said David
Sanko, who represented the state's township supervisor association on
the panel. "I think this plan has laid a nice blueprint for that. Many
of those things do have to be worked out."
The governor won't be responding until next week at the earliest: his
spokesman said he'll "digest" it and review it with his staff.
It didn't take long for reaction to pour in from outside groups: the
drilling industry commended the report, local government officials
declared victory, and even some environmental groups touted proposed
oversight changes.
"Overall it's a positive thing that the commission took place and
existed," said Matt Pitzarella, spokesman for Range Resources. "But it
shouldn't be seen as the end all be all, because the technologies are
always going to outrun any new provisions."
Others in the industry were more effusive in their praise for the
commission's recommendations.
"We're excited about the report," said Kevin West, managing director
for external affairs at the Downtown-based EQT Corp. energy company.
The Pennsylvania Independent Oil and Gas Association, which maintains a
small lobbying staff in Harrisburg, is working on a response to the
recommendation that outlines what it views as a fair impact fee plan,
said Al Catanzarite, the association's vice president of public
outreach. He said the association's response would be one that
"addresses specific and defined impacts," and also funnels money back
only to communities where actual drilling is taking place.
Environmentalists who represented the Chesapeake Bay Foundation,
Pennsylvania Environmental Council, the Nature Conservancy and Western
Pennsylvania Conservancy on the commission gave a mixed assessment of
the final report.
"We consider the report to be a meaningful first step toward improving
Pennsylvania's oversight of shale gas extraction, but additional
improvements must be accomplished as the debate shifts to the General
Assembly," the organizations said in a joint release.
Other environmental activists who were not included in the process,
however, criticized the 137-page document, saying it was exactly what
they feared from a panel that they viewed as stacked with industry
executives.
"From day one, we knew that the advisory commission is nothing more
than a stalling tactic," said Erika Staaf of the advocacy group
PennEnvironment.
But now that report is out of the commission's hands and on the
governor's desk. It's up to Gov. Tom Corbett and lawmakers to deem
which provisions will move forward, and which will see further tweaks
as they're transformed from suggestions to legislation.
Not all were controversial. Much of the report was approved
unanimously, particularly recommendations regarding police and fire
response to well emergencies and environmental protection. The panel
said emergency information should be posted at all drilling sites,
response plans should be standardized, and more training should be
offered through the fire commissioner.
In addition to requirements for setbacks and bonding, more wastewater
tracking and more frequent updates to neighbors and local officials
during the drilling process were applauded by observers.
With some recommendations, there's much room for lawmakers to make
their mark. The impact fee item does not include any direction on how
much should be charged per well or how it should be assessed over time.
They suggested that the fee "include a correlation between the amount
of the fee and costs incurred," but Mr. Sanko and others on the
commission have acknowledged that calculating those exact costs has
been difficult.
That fee also "should recognize the ongoing nature of certain impacts,"
and must not encourage companies to abandon their current partnerships
with local governments, the report said.
Meanwhile, legislative leaders say they want to see a fee that includes
funds for statewide environmental programs and other projects. "There
are real needs in the commonwealth, and it may not all be where
drilling is taking place," Senate President Pro Tem Joe Scarnati,
R-Jefferson, said earlier this week.
There also will be legislative pushback on a provision to standardize
local zoning laws, a change drillers have sought to help smooth out
differences among thousands of municipal codes. The panel said local
regulations should not "unreasonably impede" gas development, similar
to phrasing that Mr. Scarnati drew criticism for in his impact fee plan.
"That [provision] must come out," said Senate Minority Leader Jay
Costa, D-Forest Hills.
But the vague descriptions giving that legislative leeway make some of
the items hard to decode, said John Hanger, who headed the state
Department of Environmental Protection under Gov. Ed Rendell. "Two to
three sentence recommendations is not enough to capture the details of
many of these recommendations," Mr. Hanger said.
He was critical of language regarding incentives for switching public
vehicle fleets to use natural gas, saying those should have been more
aggressive.
The report suggests the creation of "Green Corridors," where natural
gas fueling stations would be clustered. It also recommends including
natural gas as a Tier 2 alternative fuel source under the state
Alternative Energy Portfolio Standards Act. That would allow utilities
to purchase natural gas to count toward the 18 percent of their power
that must come from alternative sources by 2020.
That was one of a handful of recommendations that the environmental
advocates who served on the panel cited as items they did not support.
They raised concerns that there was no prohibition against additional
surface impacts in future state forest land leasing, and that a
suggestion to use money from those leases for infrastructure projects
could deplete state conservation funds.
The biggest outcry came on the suggestion of pooling of gas rights,
which the report portrayed as a method to ensure that the drilling
process maximizes gas output and minimizes surface disturbances.
Pennsylvania already has a conservation law, which allows for mineral
resources at a certain depth below the Marcellus Shale to be "pooled"
against the owners' wishes into a larger drilling unit. The company
wouldn't pay a leasing bonus, but would be required to pay a royalty on
the gas extracted.
The report suggests that current law be amended to include the
Marcellus and other shale deposits as eligible to be pooled. It also
emphasized that property rights would need to be addressed as part of
that policy debate, referencing concerns from opponents, including the
governor, who say pooling infringes on the rights of landowners to make
decisions.
Corbett spokesman Kevin Harley said the governor continues to oppose
forcing someone to allow drilling under their property.
But he added that Mr. Corbett is willing to look at a version that
would allow for "company-to-company" pooling in situations where
landowners in one area have leased to several drillers, impeding
development.
Still, that provision, which Mr. Scarnati called a "fatal flaw," will
face a steep challenge from both parties in the Legislature.
"It's eminent domain, and you really have to have incredibly strong
reasons to impose eminent domain," Mr. Costa said.
ON THE WEB: For more on the report, visit post-gazette.com to watch "In
the Pipeline."
Laura Olson: lolson@post-gazette.com or 717-787-4254. Erich Schwartzel
contributed to this report.
To see a copy of the report or for more information, visit:
http://www.portal.state.pa.us/portal/server.pt/community/marcellus_shale_advisory_commission/20074