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 to watch "In the Pipeline."

Laura Olson: or 717-787-4254. Erich Schwartzel contributed to this report.

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