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Gas Industry Opposes Lawmakers' Plan for New Regs

Vicki Smith
Associated Press
November 18, 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 called 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, 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?"