Shale Daily / NGI All News Access

Pennsylvania 'Highly Unlikely' to Get Millions From Water Deal

An official with the Pennsylvania Fish and Boat Commission (PFBC) said a recent media report that the commission was poised to rake in millions of dollars from a five-year deal to sell lake water for use in hydraulic fracturing (fracking) was exaggerated.

Nevertheless, the PFBC plans to use whatever revenue is generated from its April 13 contract with Williams Production Appalachia LLC to pay for seriously needed repairs to dams across the state.

Williams will be permitted to withdraw water for fracking from Donegal Lake, an 80-acre lake retained by a PFBC dam located in Westmoreland County. The lake is owned by the state and the PFBC maintains it for public recreation, namely fishing and boating.

Under the terms of the deal, Williams will pay $5 for every 1,000 gallons it withdraws from the lake, but must follow strict seasonal restrictions. The company will also pay a flat fee of $10,000 for each of the first two years of the five-year deal, followed by $10,300 for the third year, $10,600 for the fourth and $10,900 for the fifth.

"There is a possibility that we can make some money on this, but there is also a possibility that we won't make a lot," PFBC spokesman Eric Levis told NGI's Shale Daily on Wednesday. "It all depends on how much water we get."

Levis said he took issue with an Associated Press story on the contract, which suggested that the PFBC could make as much as $2.5 million a year.

"That $2.5 million figure is highly unlikely," Levis said. "Williams would have to withdraw the maximum amount of water every single day of the year. That's not going to happen. During the summer months, when it's very dry and the water levels are down, the amount of water they can withdraw is substantially less."

The seasonal restrictions spelled out in the deal stipulate that as long as there is a "visible and distinguishable flow" over the spillway, Williams is allowed to take 1.4 million gallons per day (mgd) from March 15 to May 14 and from July 1 to Oct. 15, provided the maximum instantaneous withdrawal rate does not exceed 1,000 gallons per minute (gpm).

But if there is no flow over the spillway, Williams will have to scale back the withdrawals to a rate of up to 172,800 gallons per day, at a maximum instantaneous withdrawal rate of 330 gpm. Williams must stop withdrawing water is the lake level goes lower than six inches below the top edge of the spillway.

Williams will also be allowed to withdraw water from Donegal Lake during the rest of the year, but only when water is flowing over the spillway and only at the 1.4 mgd rate. If there is no flow over the spillway the withdrawals must cease. The company will also be prohibited from withdrawing water during the first weekend of trout season -- which the PFBC said is the first Saturday and Sunday after April 11 every year -- unless it receives written permission by the PFBC.

The company must also recycle at least 90% of the flowback water from fracking that is attributed to the water withdrawn from Donegal Lake. The flowback must be shipped to a wastewater disposal facility licensed by the state Department of Environmental Protection.

Williams has the option of continuing the agreement for another five years. If the company elects to do so, the seasonal restrictions will continue but Williams will pay $6 for every 1,000 gallons of water. The flat annual fees will also increase, from $11,300 for the sixth year to $12,700 for the tenth.

The deal is nonexclusive, and does not give Williams the rights to any oil or gas deposits under Donegal Lake. The company is also prohibited from restricting public access to the lake and must submit a $75,000 security bond. Williams will be fined $5,000 for every day the company exceeds the withdrawal rate. The lake level will be measured by a pressure transducer mounted on the spillway or dam breast at a fixed elevation.

Levis said the PFBC doesn't receive any general fund money from the state of Pennsylvania, and relies exclusively on the sales of products like fishing and boating licenses.

"Fishing and boating are down across the country," Levis said. "As a result our sales have been flat or slowly declining. We're taking in less revenue than we have in the past, yet our cost for repairing these dams continue to increase. We have to look at alternative ways to raise revenue."

Another alternative is oil and gas leases. The PFBC announced it was seeking bids to develop and extract oil and gas from Rose Valley Lake in Lycoming County earlier this month (see Shale Daily, July 14). Levis said he anticipated that "one or two" gas leases would be up for consideration at the PFBC's next meeting in September.

"If we can make money from the withdrawal of the gas and through selling some of the water, then we can funnel this money toward the repair of these dams and bring these recreational facilities back to their communities," Levis said, adding that a large number of the PFBC's dams have been deemed hazardous and require $36 million in repairs.

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