Business, Government Legal News from throughout WVGovernor’s Marcellus shale bill unveiled

Governor’s Marcellus shale bill unveiled

Just before commencement of the long-awaited special session on Marcellus shale regulation in West Virginia, Gov. Earl Ray Tomblin released a tweaked version of joint House and Senate legislation for the body's approval.

The bill contains much of the same language as the interim bill and outlines a plan for an industry that has largely been operating under conventional drilling standards and emergency rules issued by the governor this summer.

Permit fees, a contentious point for those in the industry, remained at $10,000 per first well and $5,000 per well drilled from the same pad.

The bulk of the bill addresses drilling operations that are drilled by a horizontal drilling method and disturb more than three acres of surface, excluding roads, pipelines or gathering lines. Operations using more than 210,000 gallons of water per month are also included.

Drilling sites that were established prior to the effective date of the "Horizontal Well Act" will not be subject to any of the new requirements.

Employment

One of the primary differences in the bill presented by Tomblin and the effort produced by the Joint Select Committee on Marcellus shale is related to employees of Marcellus operations. The interim committee's version of the bill mandated reporting of jobs data, while the governor's bill calls for the issue to be studied.

The study is to include a review of jobs created, salaries, West Virginia residents employed, total economic impact and recommendations for establishing an "overall workforce investment public education agenda."

The interim bill would have required employers to report similar data to the Division of Labor.

The bill retains the salary of $40,000 for oil and gas supervisors and $35,000 for inspectors. The inspector must be a West --------------

Shifting responsibilities

The governor's office also tweaked language in the bill to give more authority the Department of Environmental Protection. The governor's bill would allow the DEP to make adjustments to changing technologies in the process of drilling and casing a well.

The Oil and Gas Inspectors Examining Board is repealed by the bill, transferring functions of the board to the Division of Personnel and the DEP.

The bill will place management of road issues caused by the heavy machinery and traffic generated by drilling activity to the Division of Highways. Operators will be required to reach an agreement with the DOH prior to beginning drilling operations.

The bill would require the DEP to establish a website that contains filing and electronic notice of the filings. The DEP is also charged with studying possible health impacts related to air quality as well as studying impoundment and pit safety.

The bill would also require a monthly report from the DEP to the governor's office on the time between permit requests and permit issue dates. Delays in permitting have been a cause of concern for numerous extractive industries nationwide.

Surface owners and other affected parties

Those concerned about drilling in their area will also be given 30 days for filing comments on drilling permits, as opposed to the currently required 15 days. Notice of fracturing operations, deep well objections, shallow well objections and other comment periods are extended by 15 days as well.

When drillers file their application for a permit, it will also include approximate depth to be drilled, formations involved, the entire casing program, information on plugging or conversion of existing wells, a soil and erosion control plan and a well site safety plan.

Well locations also may not be:

-         Within 250 feet of existing water wells

-         Within 625 feet of another well and certain agricultural structures

-         Within 100 feet of any perennial stream, water body or wetland

-         Within 300 feet of a naturally producing trout stream

-         Within 1,000 feet of a public surface water or groundwater intake

Drillers may not send employees onto a surface owner's property to conduct plat surveys without at least 72 hours notice under the governor's bill. The surface owners must also be given copies of all applications and approvals the Horizontal Well Act requires.

Surface owners will also be given notice prior to operations that could result in seismic activity, and within seven days of commencement of drilling activity.

The surface owner will also be given copies of the proposed well site, roads or impoundments that will be on the property.  

Some Marcellus operations withdraw a significant amount of water for hydraulic fracturing of the shale. The governor's bill seeks to address this by requiring a water management plan from each operation.

The water management plan must include anticipated withdrawal volume and length of time, type and source water, and 48 hours notice prior to withdrawal.

Drillers must also demonstrate their water management plan is safe to aquatic life.

Disclosure of additives used in fracturing fluid as well as additives used in completion of fracturing operations much also be provided. Disclosure of fracturing fluid contents has been a controversial issue nationally. Some drillers claim their mixtures are proprietary, while opponents suggest they must know the contents to know if the fracturing is contaminating water sources.

The disclosure language was also included in the interim committee's version of the bill.

The bill gives the DEP authority to deny permits to any operation that could be hazardous to safety, damage publicly owned land or resources, fails to protect fresh water supplies, or fails to provide a soil erosion and sediment control plan.

Drill cuttings, leftover remnants of solid material removed from the borehole where drilling is occurring, must also be disposed of in a landfill unless the DEP approves of on-site management. It also outlines requirements for adopting best management practices, plugging wells and minimizing fire hazards or other harmful conditions.

Operators who create pits or impoundments that hold more than 210,000 gallons of water will also be regulated by the DEP.

Once drilling is completed, the bill requires drillers to reclaim the site of a pad with a single well within six months of completion. "Partial reclamation" on sites with multiple wells is to begin upon completion of the well pad.

A "partial reclamation" means drillers must grade or terrace and plant or seed the surface disturbed that is not required for drilling, completing or producing the horizontal wells.

The bill also requires operators to offer the surface owner compensation for damages in the form of a surface use and compensation agreement. In the newly crafted "Oil and Gas Horizontal Well Production Damage Compensation" area of the legislation, certain conditions for surface owner reimbursement are outlined.

Under the bill, the surface owner would have rights to lost income or expenses caused by drilling, market value of crops, including timber prevented from reaching market, damage to any water supply, repair to personal property and the land value lost due to the surface disturbance.

The bill also gives the DEP authority to require emergency supplies of water, temporary water supplies and permanent water supply replacement in the event of contamination.

Drillers must also obtain a $50,000 performance bond to ensure compliance with the new regulations. If there are multiple wells drilled, the operator can instead obtain a blanket bond of $250,000 to cover all wells.

Tweaks to the language

The bill also changes the state definition of a deep and shallow well. Though Marcellus rigs drill to great depths, the state still defines the well as a shallow well because it sits atop the Onondaga foundation.

The governor's bill will allow drilling up to 100 feet into the Onondaga for non-production purposes without threatening the status of shallow well definition.

Special consideration

The governor's bill, like the bill that was produced by the legislature, also includes precautions for drilling in karst formations. These are areas where the ground below is cavernous, which presents concern for migration of pollutants across water supplies.

The bill also calls for a review of regulatory practices to determine if further study is needed before drilling karst regions.