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West Virginia Regulators Coping With Growing Oil, Gas Permit Applications

With more than 1,000 horizontal shale well permits issued to date in West Virginia, and with only about 5% of unconventional oil and gas reserves under development there, state regulators are confronting a pile of paperwork that has created a backlog of pending permit applications and slowed production in some instances.

But the West Virginia Department of Environmental Protection (WVDEP) claims its fulfilling its regulatory obligations and says the volume of paperwork and new companies unfamiliar with its processes are naturally making its job more difficult as Marcellus Shale development accelerates and the play remains in early innings there.

"Because the oil and gas industry is booming, there are a lot of new people in that industry who may be unfamiliar with the Department of Air Quality's (DAQ) permit requirements," said WVDEP spokeswoman Kelley Gillenwater of one of its divisions and the air permits required to begin production. "As they learn the process, things should go more smoothly."

Although the agency does not break down the specific number of air permits, for instance, that exploration and production companies are waiting for, Gillenwater said an overwhelming majority of construction, modification, deterioration, administrative and general permits pending at the WVDEP have been submitted by the oil and gas industry.

The department was responding to an inquiry from NGI's Shale Daily following a September note to investors from Wunderlich Securities analyst Irene Haas. In it, she said one of the Appalachian Basin's most closely watched pads, the Stewart Winland in Tyler County, where Magnum Hunter Resources Corp. tested West Virginia's best Utica Shale well to date at a peak rate of 46.5 MMcf/d had three Marcellus wells shut-in (see Shale Daily, Sept. 25).

Haas said that’s because the company is waiting on a special air quality permit required by the state for equipment serving those wells to get wet gas into gathering lines, such as dehydration units and compressors (see Shale Daily, Oct. 8). The wells have been ready for sales for sometime now and they remained shut-in on Friday.

"We found out that [WVDEP] is being overwhelmed by the number of air permitting applications," Haas said, who after checking with other companies found that they apply for the air permits as early as a year in advance to avoid unexpected delays.

Gillenwater said the DAQ "is meeting its regulatory requirements for permit issuance timelines." And although the "DAQ has a lot of pending applications," she said, "that doesn't mean they are overdue."

When an oil and gas company applies for a drilling permit in the state, which is handled by the WVDEP's Office of Oil and Gas, it is advised through the permitting process that other permits may be required as well. Air quality permits, however, are not related to drilling. They are needed by an operator after the wells are in production, which means that if the air permit application is submitted before drilling gets under way, there shouldn't be much of a delay in getting the well flowing, Gillenwater said.

In Magnum's instance, the DAQ said its subsidiary Triad Hunter LLC had applied for a general permit on June 30, not realizing the pad did not qualify for it. The division told the company to withdraw that application and apply for an air permit, which it did on Oct. 1. Gillenwater said that the WVDEP has to issue a permit within 90 days of an application being deemed complete.

During the first six months of this year, WVDEP has issued more permits than it normally does in a year, while permit applications have doubled in the last year or so. As of Sept. 15, Gillenwater said 203 general, administrative, construction and other natural gas-related permits were pending at the department.

West Virginia is not alone in dealing with the additional regulatory duties being created by the oil and gas industry in Appalachia. In 2011, the Ohio Department of Natural Resources had about 35 full-time employees in its oil and gas division, today that number has grown to 120 and the agency is considering hiring more (see Shale Daily, July 8). The same is true in Pennsylvania, where just 64 people worked in the state Department of Environmental Protection’s Office of Oil and Gas Management, a number that has grown to 202 full-time employees even as more are expected to be hired (see Shale Daily, July 22).

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