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West Virginia Gubernatorial Candidates Mostly Vague on Marcellus Plans

With West Virginia's Marcellus Shale industry still in its infancy and state regulators saying they need additional staff and funding to adapt to the burgeoning drilling business, more than a dozen candidates are seeking to be elected later this year to a 14-month term as governor of the Mountain State.

West Virginians will go to the polls Oct. 4 in a special election prompted by the resignation last November of Gov. Joe Manchin, who was elected to fill the U.S. Senate seat vacated by the death of Robert Byrd last June. Earl Ray Tomblin, who had been West Virginia's state Senate president, became governor with Manchin's resignation.

Fourteen individuals have registered to run for the office. Democratic candidates include Tomblin, Acting Senate President Jeff Kessler, West Virginia Secretary of State Natalie Tennant, state Treasurer John Perdue and Speaker of the West Virginia House of Delegates Richard Thompson; Republican candidates include former West Virginia Secretary of State Betty Ireland, state Sen. Clark Barnes, Putman County District Attorney Mark Sorsaia, state Delegate Mitch Carmichael and former state Delegate Larry Faircloth.

Tomblin has said he views the Marcellus as an economic development opportunity for West Virginia, with the potential to restart the state's manufacturing industries and stymie its persistently high unemployment rate (10.3% in January, and as high as 18.3% in some areas, according to the U.S. Bureau of Labor Statistics). In his state of the state address earlier this year, Tomblin said coal continues to be a key to West Virginia's prosperity, but he also urged state residents to embrace the opportunities that would come from natural gas drilling in the Marcellus Shale (see Shale Daily, Jan. 14).

West Virginia could reap more than $6 billion from the Marcellus, according to Perdue, who plans if elected to return a portion of those proceeds to taxpayers through a tax break or a dividend check. Perdue has also proposed a freeze on utility rates in the state.

Kessler has proposed using some Marcellus Shale dollars to create a rainy day fund for education improvements and provide tax relief to businesses and individuals.

'I want the state to take a portion of the increased severance dollars from the anticipated boom we are expecting from the Marcellus and put it in a fund where you can't touch it for 20 years...we would be able to put money aside, save it for our future diversification, pay down all of our long-term obligations and get those taken care of and then have that money available for workforce development of our future generations," Kessler recently told the Parkersburg, WV, News and Sentinel. West Virginia's severance tax rate is 5% of the gross value of production.

In the early days of the unusual campaign, other candidates haven't made specific proposals related to the Marcellus. Tennant has said that by managing the Marcellus, West Virginia can build a new energy economy, create thousands of new jobs and increase revenues for local communities; Ireland says she would partner with universities and the federal government "to build meaningful research and development of the Marcellus Shale that are both beneficial and environmentally responsible"; Sorsaia says he is "committed to a legislative agenda that would compensate the surface owners for the burdens that they will have to bear" during development of the Marcellus.

Recent reserves estimates show about 25 Tcf to be underlying the Marcellus in West Virginia (see Shale Daily, Jan. 24). According to Department of Environmental Protection (DEP) figures, over the last four years the number of horizontal well permits has skyrocketed from 50 in 2007 to a high of 500 in 2009, with more than 400 permits sought in the state last year.

But the state's legislature during its recently concluded 2010 regular session and an extended budget session failed to approve increased funding for additional DEP oil and gas inspectors, despite requests from DEP and Tomblin (see Shale Daily, March 21). DEP had proposed increasing horizontal drilling permit fees to $10,000 from the current $650 paid by all drillers to fund the additional inspectors (see Shale Daily, Feb. 11).

The House of Delegates also failed to bring to a vote a bill (SB 424) that would have changed West Virginia's regulation of Marcellus Shale drilling (see Shale Daily, March 15). In response, some delegates have proposed a moratorium on natural gas drilling permits until the state passes new regulations on drilling -- an idea which hasn't yet received significant support in the legislature. Tomblin has indicated that he does not support a moratorium, as has DEP Secretary Randy Huffman. "If I ever felt the industry was so far out in front of our ability to properly regulate it, then I would consider such a thing," Huffman told Beckley, WV's Register-Herald newspaper. "I just don't think we are there at this point."

Thompson wants the legislature called into a special session dealing exclusively with Marcellus issues, "because it has a tremendous potential but also a tremendous risk to our citizens," according to the Martinsburg, WV Journal. Kessler has also indicated that he would support a special session this year to address Marcellus regulations. Tomblin has said he won't call a special session because the differences between House and Senate versions of SB 424 was so great.

Voters will attempt to whittle down the field of candidates in a primary election scheduled to be held May 14. Whatever the outcome of the special election, the newly elected governor is expected to be inaugurated by Nov. 15, exactly one year after Tomblin took the oath of office.

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