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.