Gas Industry Opposes Lawmakers' Plan for Marcellus Regulations
Associated Press
18 November 2010
MORGANTOWN, W.Va. -- Two groups that represent natural gas drillers say
permit fees a legislative subcommittee is proposing for Marcellus Shale
wells are astronomically high and "an absolute deal-stopper" that could
discourage or even cripple the fast-growing industry.
The West Virginia Oil and Natural Gas Association and the state's
Independent Oil & Gas Association also object to proposed
restrictions on drilling locations that they believe are based on
opinion and speculation rather than science -- or simply cut and pasted
from laws on the books in other states.
"I stopped reading when I got to 'the waters of the commonwealth,'"
said Corky DeMarco, executive director of WVONGA.
Pennsylvania and Virginia are commonwealths. West Virginia is a state.
The 90-page draft bill presented to members of a joint judiciary
subcommittee earlier this week would impose four permit fees ranging
from $5,000 to $15,000 per well, as well as individual performance
bonds of $25,000 per well.
The permit fees include $15,000 for the initial application, $10,000 to
modify an existing permit, $5,000 for annual renewals and a $15,000
reclamation fee that would be required before any permit is issued.
"That level of permitting is an absolute deal-stopper. It could shut
the industry down in the state," IOGA director Charlie Burd said.
The fees are "astronomical increases" over the roughly $600 drillers
now pay for conventional shallow well permits, Burd said, and many
times what other states charge drillers of the deep, unconventional
Marcellus wells.
The Marcellus Shale field is a vast, mile-deep natural gas reserve
underlying most of West Virginia, Pennsylvania, New York and portions
of Ohio. It is believed to hold trillions of cubic feet of gas, but
breaking it free from the rock requires horizontal drilling and
water-intensive hydraulic fracturing technologies.
Environmentalists and property owners want legislation to prevent
problems with water pollution, erosion and road destruction, among
other things, while industry wants regulation it considers both
affordable and manageable.
Burd and DeMarco say what lawmakers are planning is neither.
Delegate Bill Wooton, a Raleigh County Democrat who co-chairs the
subcommittee, did not immediately return messages about the legislation.
The bill, which does not yet have a named sponsor, will be reworked
between now and January, when lawmakers convene for their regular
60-day session, said legislative lawyer Joe Altizer. It will also have
to be reconciled with a bill being crafted by the state Department of
Environmental Protection.
The committee bill resembles the DEP bill in several ways: Both require
comprehensive water management plans, including lists of chemicals to
be used, and both would require companies to replace water they
contaminate. Both also require erosion and sediment-control plans,
reclamation and replanting of disturbed lands, and the lining of large
open pits, or impoundments, to prevent salt and chemicals from leaching
out.
But the committee's version tackles some issues the DEP didn't,
including the spacing of wells, road protection and the performance
bonds, which industry says would be a hardship on smaller companies.
Lawmakers also address the complex issue of mineral rights,
recommending a process that could be used to force owners in a
geologically defined pool of gas to give those rights up.
Both industry groups support the concept of forced pooling, which would
require gas companies to compensate people if they can drain their
reserves by drilling nearby. But DeMarco says the devil is in the
details, and the industry wants more discussion.
What most concerns the industry are the permitting fees.
DEP Secretary Randy Huffman has said he needs more revenue to expand
his staff of inspectors, who can't keep pace with the proliferation of
new Marcellus wells. But the DEP bill left dollar amounts blank, saying
those would be determined later.
DeMarco says gas companies expected "substantially greater" fees than
they now pay, but not what lawmakers are proposing.
They also expected they'd have to post bonds to help protect and repair
roads, and meet reporting requirements on water withdrawal, use and
disposal.
They expected to have to list chemicals in their fracking water, he
said, and they expected to have to post the names and phone numbers of
the responsible parties at every well site so an inspector knows who to
call.
"We understand their reasoning for all that," DeMarco said. "But are we
really trying to develop this industry in the state of West Virginia,
or are we trying to hamstring it before it gets developed?"