Business, Government Legal News from throughout WVGovernor’s Marcellus legislation criticized as ‘industry’s bill,' work remains

Governor’s Marcellus legislation criticized as ‘industry’s bill,' work remains

Though legislative leadership and the governor applauded their own work on drafting a Marcellus bill that represented a compromise between interested parties, many parties didn't swallow the bill as easily as industry representatives.

The difference in satisfaction was apparent – industry leaders said there were many things "taken" from them by the bill but acknowledged they were ready to support the bill. Both the Independent Oil and Gas Association and the West Virginia Oil and Natural Gas Association remarked they were in support of the governor's compromise bill.

Surface owner groups, environmentalists and some lawmakers called for disposing of the governor's bill and returning to the effort of the Joint Select Committee on Marcellus Shale's interim bill.

During floor speeches Wednesday, many of the lawmakers who rose up to support the bill borrowed such phrases as "not perfect," "a good start" and other indications that the bill was still in progress. Many said that both sides being upset about the bill probably means it was a good bill, but surface owners and environmentalists say they had far more reasons to be upset.

Tomblin said the bill "protects the environment and gives our surface owners more protections," but also "spur many more" jobs in the industry. However, it was clear the opinion of most lawmakers is that the bill is simply a start in regulating the booming industry.

"If any part of this bill doesn't work out, that's the right of the Legislature. That's why they come back every year," Tomblin said.

He later added, "I'm pleased with the bill the way it is."

Better than nothing?

The industry does not come out of the deal unscathed.

The bill increases fees by approximately 900 percent – from $400 per well to $10,000 for the first well on a pad and $5,000 per additional well on the same pad.

According to a University of Pittsburgh Study, the average cost of drilling a well is about is just over $7.6 million, including land acquisition and leasing, vertical drilling, horizontal drilling, hydraulic fracturing, completion and production to gathering. Using that figure, the permit fee represents just over one-tenth of 1 percent of the costs of a Marcellus operation.  

Money from the increased permit fees will put an additional 17 DEP inspectors and employees to work to help deal with the large horizontal drilling operations.

Under language in the bill, surface owners will now get a minimum of one week notice before operators survey the property, and owners get a copy of the permit and related filings. The public and surface owners will also be able to comment on permits upon an operator filing.

Disclosure of fracturing fluid additives to the DEP is also required in the bill.

The bill also requires operators to enter into an agreement with the Department of Highways to repair damage to roads and to post performance bonds for those roads before the DEP can approve their permits.

The bill also adds civil and criminal penalties for "bad actors" in the natural gas industry.

Lawmakers note shortcomings

Del. Tim Manchin, D-Marion, co-chairman of the Joint Select Marcellus Shale Committee, said he was upset about some of the changes, though he ultimately voted for the bill and even stood alongside Tomblin in celebrating the passage of the bill.

"I think that the committee came out with a very good bill," Manchin said. "I think that bill addressed all the major issues, short of perhaps forced pooling, that needed to be addressed."

Manchin said on the House floor that his committee had hoped for a special session, but not the way this one played out.

"As they say, be careful what you wish for, because you might get it," Manchin said. "We got a special session and we all know that there are imperfections in the special session process. There's never quite enough time."

Manchin said the bill was "particularly hard to evaluate" because the governor essentially rewrote most of the interim bill.

A requirement for horizontal drillers to report additional labor information, for example, was an issue Manchin said was "near and dear to my heart." That portion of the legislation was rewritten in favor of a study of gas industry employment.

"The oil and gas industry should look at the people of West Virginia as a long-term partner, a long-term business partner, if they're going to be here for a long time. They're talking about 30 to 50 years, then they should treat us like they would any long-term business partner," Manchin said. "That means they should come in and say ‘what do you need, what's in your best interest?' and strike a good business deal."

Manchin said in many respects, he has been disappointed with the industry's approach to the writing of the regulations, suggesting they go only for the "lowest common denominator."

Manchin also felt it was important to allow a good method for communities to have input on granting permits.

"Some might say, ‘well they shouldn't,' but I have a hard time ever accepting that I don't think that our people want that to be honest with you," Manchin said. "We wanted to put into the bill some considerations. A couple of those were that the DEP needs to take into consideration densely populated areas, the impact on traffic granting a permit may have on those people and as well as the effect on state parks, historical sites and other things."

The provision was stripped out of the bill by the governor's office.

Manchin pointed to attempts to put in about 21 pages of well casing standards that were adopted from Pennsylvania law. Poor well casing is widely acknowledged as a potential source of water pollution.

"Our people have a fear," Manchin said. "They fear that we're going to pollute their underground water. They fear we're going to pollute their surface water."

Manchin said there had been standards that were vetted both by environmental and industry groups, but many of those rules were cut and left for rule promulgation process through the DEP.

"No matter what we do, no matter how strong are rules are, this is the industrialization of rural West Virginia," Manchin said. "If you don't believe me, go up there and sit on a hillside, on a knoll on a hayfield in Wetzel County and look around and see six Marcellus well sites around you."

Manchin made it clear that there was plenty of work remaining for the Legislature.

"There were some major revisions, more than just minor tweaks," he added. "I think in some areas it simply doesn't go far enough."

Del. Mike Mannypenny, D-Taylor, was less kind to the bill. He attempted to trash the governor's bill altogether and instead replace it the with the Joint Select Committee bill.

"It certainly better thought out than special session draft being rushed through the Legislature as if we have no choice except to do an exceptionally poor job respecting the property rights of the people of West Virginia," Manypenny said. "It sacrifices our land, our air, our water for a few bucks for the out-of-state oil and gas multinational companies, corporations."

The interim bill, Manypenny said was the only bill that was agreed upon by all sides.

"The governor's bill was cooked up in the back room by special interests and lobbyists which are not elected citizens of the state of West Virginia," Manypenny said. "We have a responsibility to do the right thing and pass a better Marcellus bill than the watered-down version of the interim bill."

Other legislators rebuked Manypenny's attempt to re-insert the bill, saying the governor's bill had the support to pass.

After passage of the bill with amendments, Manypenny said he had about 20 amendments he would have offered to the interim bill. Now, he said, in addition to those amendments, he plans to work toward bringing the bill back to the stricter requirements of the interim bill.

Surface owners, environmentalists concerned

The West Virginia Surface Owners' Rights Organization cites a number of problems with the Marcellus bill offered by the governor.

"We think the amendments improve the bill, but we remain disappointed that the governor and Legislature aren't willing to do more for surface owners to help them have their rights recognized and respected," said Julie Archer of WVSORO. "Considering the impacts of Marcellus shale drilling in particular, we feel like requiring the drillers to negotiate with us and give us some say seems to be the least the Legislature could do."

The bill, WVSORO points out, lacks incentives for drillers to work with surface owners in determining the location of well sites, roads and other drilling infrastructure. The Joint Select Committee on Marcellus shale had included some incentives, but as a position paper from WVSORO points out, all of those protections were removed by the governor's office.

Archer is one of many who say the governor's bill was drafted almost purely for the industry.

"There has been a lot of talk about providing ‘consistency' and ‘certainty' for the industry," Archer said. "The bill is full of inconsistencies and opportunities for the drillers to get waivers from minimum requirements and fails to provide surface owners with the protections they need and deserve."

The bill does allow the secretary of the Department of Environmental Protection, a position appointed by the governor, to lower the minimum protections included in the bill on a case-by-case basis. An amendment offered in the Senate did require that a regular reporting of exceptions made to the standard be provided in a report.

The bill only applies to horizontal wells in the state, but even horizontal wells that both use less that 210,000 gallons of water per month and disturb less than three acres of surface land do not apply.

Surface owners say they are concerned about the distance allowed from a well pad – 625 feet. Lawmakers also pointed that the 625 feet is measured from the center of the well, not the edge of the pad.

A very large well pad, Manypenny said, could come right up to your doorstep if the definition is to measure from the center of the well. A restriction of the center of a well pad to streams presents similar problems, he said.

Under the governor's revision of the interim bill, Manypenny said, a stream may run right through a well pad.

According to WVSORO, the bill also "waters down the existing presumption" that drilling activity is responsible for contamination of a water well. The presumption is limited to six months. The governor's bill increases the presumption from 1,000 feet to 1,500 feet, but is lower than the 2,500 feet offered by the interim bill.

The West Virginia Environmental Council issued similar issues with the bill. Air quality and drilling pit studies are put into the bill, but are not funded, a WVEC position paper criticizes.

The WVEC also criticized the bill for allowing companies with unlimited drilling operations to cover all of their operations with a $250,000 blanket bond.