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Many Not Thrilled With West Virginia's New Marcellus Law

One day after HB 401 -- also known as the Natural Gas Horizontal Wells Control Act --garnered overwhelming support in both houses of the West Virginia legislature (see Shale Daily, Dec. 15), advocates for the shale gas industry, surface owners' rights and the environment told NGI's Shale Daily on Thursday that the bill isn't all they had hoped for.

"Maybe that does make for a good law," West Virginia Oil and Natural Gas Association (WVONGA) Executive Director Corky DeMarco said. "We didn't get anything out of the bill. There was nothing in there that was necessarily a bone to throw to the industry. We didn't get anything except higher fees and higher bonding, but we weren't necessarily hurt by the bill."

DeMarco said one major rankle within the industry is the $10,000 permitting fee operators will now have to pay for the first well drilled on a pad and $5,000 for each additional well. He said the higher fees represented a 1,400% increase over the current fee schedule.

"We could have tried to kill the bill, but we've been trying to pass a bill for three years," DeMarco said. "Having a 60-day session makes it even more cumbersome. But we've got a chance to move forward. We now have something that provides for certainty and clarity."

Julie Archer, spokeswoman for the West Virginia Surface Owners' Rights Organization (WV-SORO), agreed that HB 401 was an improvement over current regulations, but not for affected landowners.

"The surface owners really got left out again," Archer said. "We are really disappointed that the governor and the legislature didn't do more to help surface owners have their rights recognized and respected by the drillers. There's been a lot of talk about providing certainty and consistency for the industry, but the landowners aren't getting much certainty out of this."

Archer said surface owners are concerned that the secretary of the state Department of Environmental Protection (DEP) would have the authority to issue operators variance and well setback requirements. Under HB 401, setbacks will be 250 feet from existing water wells and 625 feet from an occupied structure.

"But that's one of the areas where the drillers can get a variance," Archer said of setbacks. "So the landowners don't really have the certainty that it's going to be 625 feet. And that's measured from the center of the well pad. Well pads can be huge and there's no guarantee that the well is going to be in the center of the pad."

DEP Secretary Randy Huffman said he didn't plan on issuing many variances.

"My intent and my expectation is that I would be very conservative," Huffman said Thursday. "A variance would imply an exception to the law, and I think that when you're making an exception to what the legislature has prescribed, even if they give you the authority to do so, it needs to be for good reason. It needs to be solid from an engineering and design standpoint, and it needs to be considerate of the surface owner."

Then there's the issue of landowners receiving compensation for damage brought by well operations.

"The new law just says [operators] have to come and make you and offer on damages," Archer said. "It doesn't say they have to negotiate with you or that part of the agreement has to be where the wells sites and access roads are going to go."

Archer said the bill proposed by the Joint Select Committee on Marcellus Shale -- the 10-member, bipartisan committee that crafted much of the regulatory basis for HB 401 -- did a better job of addressing landowners' concerns, but conceded that WV-SORO wasn't thrilled with that bill, either (see Shale Daily, Nov. 22).

"But then [Gov. Earl Ray Tomblin] came out with his bill, and it had no incentives," Archer said. "And the legislature didn't amend any back in. The leadership in the House of Delegates said the Senate, the governor and the industry wouldn't support the bill [if it contained the incentives], and they said they weren't going to fight for them."

Jim Sconyers, chairman of the West Virginia chapter of the Sierra Club, also decried the process used to get HB 401 passed.

"It was very undemocratic and disappointing," Sconyers said. "The governor appointed a select committee to come up with a bill that both houses would support. And then he put their pretty nice bill aside, ignored it and made his own creation. The governor calls it a compromise, but the bill he rejected from his own committee was already a compromise. This bill compromised the compromise."

Sconyers said it was egregious that HB 401 did not adequately address air quality, although the bill calls for the DEP secretary to report to the legislature by July 1, 2013 if additional air quality regulations are needed.

"In the beginning of the Marcellus boom, all of the concern was about water," Sconyers said. "But now we're starting to realize that this whole exploitation of the resource is turning into a huge air pollution issue too. Casing and cementing were also taken out of the bill and left to rulemaking in the DEP. That may or may not be a disaster since the DEP is notoriously pro-industry."

But Sconyers conceded that the bill was better than nothing.

"In general, I think the environmental community feels this is progress," Sconyers said. "There are some protections in place that weren't there before. And you now actually have to pay real money to get a permit to drill a Marcellus Shale gas well in West Virginia. Most people are saying it's a start; let's hope we can make it better as time goes by. I think there will be efforts to plug some of the loopholes and fill in some of the omissions right away next month when our regular legislative session convenes."

The West Virginia legislature will convene Jan. 11 for its next 60-day session. DeMarco said the industry is circling Jan. 11 on the calendar as well.

"We're still interested in unitization," DeMarco said. "Whether there is appetite in the legislature to listen to anything as it relates to Marcellus or horizontal drilling, I don't know. I think they are happy that the industry didn't try to kill the bill or put up roadblocks, but they're worn out. There may be a couple of things that we may put together. But if the legislators say they're through with the Marcellus for awhile, then I guess we'll have to go back to the drawing board."

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