Marcellus Gas Legislation Ready for Review
West Virginia lawmakers are ready to act on wide-ranging rules for
Marcellus shale natural gas drilling.
Charleston Gazette
20 February 2011
By Lawrence Messina
CHARLESTON, W.Va. -- West Virginia lawmakers hope to focus this week on
a single, catchall bill for developing the Marcellus shale natural gas
field.
The legislation up for review seeks to address industry needs,
environmental concerns, and the rights of mineral and surface owners.
The proposal would cover everything from applying for needed permits
and drawing boundaries for drill sites to storing the large volumes of
water needed to extract the gas.
Operators face $10,000 permit fees in the bill, along with paying $100
annually for the water storage impoundments. The measure also increases
potential civil penalties, from a maximum of $2,500 to one of $10,000.
The provisions that may spur the most debate would allow for forced
pooling. This would compel an owner with a minority share of a gas
reserve to agree to its development -- with compensation -- if the
other owners are already on board. That would change the current
practice, known as rule of capture, which can exclude owners from
drilling agreements and leave them uncompensated.
Much of the 207-page bill tweaks or rewrites existing state law. It
also includes a number of new sections, including one addressing the
unconventional drilling practices employed by Marcellus developers.
House committees have held hearings throughout the session to field
comments from state officials, operators, surface and mineral rights
owners, environmentalists and other interested parties. A House
Judiciary subcommittee crafted the wide-ranging bill up for review,
releasing copies Friday.
The Marcellus shale holds trillions of cubic feet of trapped natural
gas, according to industry estimates, making it one of the richest
developable reserves on the planet. The massive rock formation is
buried a mile underground, beneath a region that includes much of West
Virginia.
A recent industry-funded study said that more than 2,800 Marcellus
wells have already been permitted under existing policies. It also
found operations under way in 45 of the 55 counties, though operations
have largely focused on northwestern West Virginia, where the rock's
thickness and the pressure of the trapped gas appears best for drilling.
Tapping the Marcellus shale requires drilling horizontally under the
ground, and can involve drilling in multiple directions beneath a
single well site. Operators extract the gas though hydraulic
fracturing, or fracking, by cracking the rock with a large-volume mix
of water, sand and chemicals.
Both the cost of developing wells and the potential payoff are in the
billions of dollars. The legislation recognizes this scale in its
language.
"It is the policy of this state to ensure that natural resources are
harvested in an environmentally sound manner and in a manner that
benefits the people and the economy of the West Virginia through the
hiring of fully trained, local workers for the drilling, transport and
processing of this important natural resource,'' the bill also reads.
The proposed rules include various boundary lines for wells: At least
2,500 feet away from a surface water source and at least 1,000 feet
from a below-ground source that serves a public water system, when they
involve horizontal drilling and fracking.
Wells generally must be planted at least 1,000 feet from any existing
building, unless its owner agrees to waive that.
Operators seeking permits must write plans to control erosion and
manage the water needed for fracking. They cannot withdraw water from
either surface or underground sources "at volumes beyond what the
waters can sustain,'' the bill proposes.
They must also ensure that wells don't release fracking fluids into any
nearby water sources.
Operators must list for regulators the chemicals mixed with water for
fracking within 30 days of completing the well involved.
Landowners living within 5,500 feet of a well can request that
information as well.
The bill requires operators to share copies with affected surface
owners when they apply for a well or water impoundment permit.
Operators must notify owners at least 15 days in advance before coming
onto their land to survey or stake out sites for wells, roads or
anything else that would require breaking ground.
Owners can suggest alternate sites for proposed wells, pipelines,
access roads and holding ponds. Operators can ignore than advice but
must record why.
The state Oil and Gas Conservation Commission, which already oversees
forced pooling arrangements for other wells, would do so for Marcellus
operations under the bill. Forced pooling would apply if the unwilling
owner holds no more than 15 percent of the gas tracts proposed for
development.
In such cases, compelled owners have several options for compensation.
They could sign off on the terms already reached by the other, willing
owners. They could gain an ownership interest in the operation, and
help cover the costs in exchange for profit shares. They could gain an
interest and avoid paying toward the costs, but would see revenues only
after the operator recoups 125 percent to 150 percent of what it
invested.
The bill would also bar an operator from forcing the unwilling surface
owner to host the well site.
Lawrence Messina covers the statehouse for The Associated Press.