Manchin Says State is 'Partner'

Governor speaks to hundreds of oil, gas executives gathered for annual meeting

Charleston Daily Mail
28 January 2010
By George Hohmann, Daily Mail Business Editor

Gov. Joe Manchin struck a conciliatory note with the oil and natural gas industry Wednesday, saying, "Markets and competition are tough enough. You don't need to have government make it tougher."

Manchin was the keynote speaker at the winter meeting of the Independent Oil and Gas Association of West Virginia.

The natural gas industry is being transformed by an increase in supplies from shale formations that have been known for years to contain natural gas. Geotechnical engineers and other specialists have figured out how to drill down into shale and then go sideways to open a much bigger area of the gas-bearing formation.

There's talk in the natural gas industry that the Marcellus Shale gas field - known in the business as a "play" - may contain 500 trillion cubic feet of gas. The Marcellus Shale extends from northeast Pennsylvania around Bedford through southwestern Pennsylvania, through the Northern Panhandle of West Virginia and into the central part of the state. It underlies 15 million acres.

Instead of worrying about running out of natural gas within 10 years - a prevalent discussion within the industry in the 1970s - the discussion now is about having up to 90 years of proven and potential supply.

"I know many of you are from other parts of the country," Manchin said to the nearly 700 industry executives gathered at the Marriott. He was alluding to the fact that several out-of-state companies, including Exxon Mobil Corp. and Norway's StatoilHydro, have snapped up properties in the Marcellus Shale in recent months.

"We appreciate you so much," Manchin said.

"I'm going into my sixth year as governor, and one thing I've tried to put out there is responsibility, continuity so you know what to expect and how it's going to be delivered," Manchin said.

The governor said he's been emphasizing "retail government," which he described as a government that says thank you, meets deadlines and treats you with respect.

"You don't go out with a cease-and-desist order, you go out with a helping hand," he said. If a situation isn't corrected then enforcement is appropriate, he said.

Companies that are looking for places to expand will find "you're going to have a partner at the end of the day you never bargained for, asked for or even wanted," Manchin said. "It's going to be government. You'd better pick a good partner. If you pick a partner with no vision, no stability, you're going to have problems. That's something we fight every day. The system doesn't think like you do with timelines, deadlines."

Although the increase in natural gas supplies has created excitement about what it may mean for jobs and West Virginia's economy, the prospects for expansion bring concerns, too - especially about the treatment of water used in the drilling process. Earlier this month, the state Department of Environmental Protection announced the release of a guidance document and permit addendum that it said is designed to better manage water use and disposal by the oil and gas industry when drilling in the Marcellus Shale.

The DEP said the document "addresses the need for well operators to be diligent about protecting the state's waters."

Manchin said, "We're working on the water situation. I know this could be your biggest impediment. This is the big thing with the EPA," he said, referring to the federal Environmental Protection Agency.

"We're doing everything we can to help you in this industry," he said. "You don't need 'gotcha! government.' How can you do it right if you don't know what must be done? We're trying to get some clarity. We have a company from South Korea in the filtering business. We're talking to everyone we can to find some help."

Manchin did not bring up two industry sore points:

* Chesapeake Energy, one of the nation's largest natural gas producers, last year canceled plans for a regional office in Charleston after it was surprised by a huge punitive damage award and then found out that West Virginia offers no automatic right of appeal. In his State of the State address earlier this month, Manchin praised the state Supreme Court for working on rules that are intended to ensure the right of appeal.

* Pennsylvania, which has a large portion of the Marcellus Shale play and has already attracted industry investment, does not have a severance tax on natural gas.

West Virginia does. A recent Penn State study estimated that because Pennsylvania has no severance or property tax, wellhead revenue there is about 11 percent higher.

Although Manchin didn't specifically mention the severance tax, he did point out that during his administration the food sales tax, business franchise tax and corporate income tax have been lowered. "For every adjustment for business you have to make an adjustment for consumers," he said. "You have to have a balance."

Manchin concluded, "We want you to do well. Call me if you don't think you're being treated right. I want to make sure 'retail government' works for you."

He received a standing ovation.

Contact writer George Hohmann at busin...@dailymail.com or 304-348-4836.