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Pennsylvania Lawmakers Seek Changes to Marcellus Law

The majority of Pennsylvania's Marcellus Shale drilling law is just starting to go into effect, but two state lawmakers are already proposing tweaks, one small and one large.

Sen. Chuck McIlhinney, a Republican from the southeastern corner of the state, wants to exempt counties without unconventional wells from the statutes in the law, called Act 13. The change is meant to keep his home turf of Bucks County -- where an operator wants to drill a non-Marcellus test well -- from being restricted by zoning provisions in the law.

Turm Oil Inc. has applied to the Pennsylvania Department of Environmental Protection (DEP) to drill a 7,500-foot well in Nockamixon, a township in Bucks County. While the region is not believed to be conducive to Marcellus development, the company is likely interested in exploring the potential of the Lockatong or Stockton shale formations.

"If the law can be changed so that Nockamixon can have the same ability zone that it had prior to Act 13, that would be a good thing for Nockamixon," township solicitor Jordan Yeager told NGI's Shale Daily. "I'm not convinced... this would accomplish that."

Act 13 defines an "unconventional formation" as any shale below the base of the Elk Sandstone. While the Lockatong and Stockton are above the Elk in Bucks County, the proposed well is as deep as some Marcellus wells in other parts of the formation and would likely involve completion activities similar to Marcellus wells.

So Bucks County believes it slipped through the cracks of Act 13, Yeager said, because it is not eligible for Marcellus Shale impact fee revenues but could still see shale activities and potentially lose some of its abilities to zone development within local townships.

Even if the DEP approves the application, Turm Oil won't be able to begin drilling immediately because Buck County is within the Delaware River Basin, where a de facto moratorium on exploration and development is in place (see Shale Daily, Nov. 21, 2011).

McIlhinney did not return several calls for comment.

Across the state and across the aisle, Sen. Jim Ferlo, a Pittsburgh Democrat, is proposing amendments that would completely overhaul key provisions of Act 13.

The law "leaves our state poorly protected from the impacts of the natural gas drilling industry," he wrote. "The impact fee will not appropriately compensate the state for the local effects on our roads and social services, or pay for the damage done to our environment. The public safety and environmental protection sections fail on both accounts. The local zoning preemption leaves too little power in the hands of local elected officials and the residents who bear the brunt of well rig activity and endless truck traffic.

Ferlo wants to replace the annual impact fee with a 25 cent/Mcf severance tax adjusted according to the price of natural gas. All revenue up to $200 million would be distributed according to the current formula -- generally speaking: 60% at the local level and 40% to specific statewide programs -- with any additional money going into the general fund.

The amendment would increase setbacks, bonding levels and criminal penalties beyond the increases already included in Act 13. Ferlo also wants to change how industry trade secrets are handled by the state, particularly for emergency responders, an issue that didn't come up during the crafting of the law but is now a hot topic (see Shale Daily, April 16).

The revision would eliminate the entire section of Act 13 that restrict local zoning. That change is unlikely to resolve disputes around local authority, especially because the Pennsylvania Supreme Court ruled in a pair of landmark cases in 2009, that while local governments can zone where drilling occurs, they can't conflict with state regulations.

Finally, the proposal would impose a two-year moratorium on additional leasing in state forests. The Pennsylvania Department of Conservation and Natural Resources believes additional leasing is unlikely while prices are depressed (see Shale Daily, March 7).

Ferlo unsuccessfully proposed many of these changes during final deliberations over the bill, and claimed at the time "this will be a battle royale that will be continued."

The 147 oil and gas rigs in operation in the Marcellus Shale for the week ending April 27 mark a 3% increase over the 143 rigs that were operating during the same week one year ago, according to NGI's Shale Daily Unconventional Rig Count. It is also an eight-rig increase from last week, but is a 5% decrease from the 155 rigs that were operating in the play a month ago.

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