The Maryland House of Delegates passed two Marcellus Shale regulatory bills on Saturday, adding clarity to how lawmakers expect the Maryland Department of the Environment (MDE) to regulate oil and natural gas operators, as well as several aspects of their drilling activities.

The bills (HB 1123 and HB 1204) were both sponsored by Del. Heather Mizeur (D-Montgomery) and passed the House by votes of 94-41 and 88-49, respectively. The bills will now move on to the state Senate, but a vote had not been scheduled in that chamber as of Tuesday.

HB 1123 establishes a "presumptive impact area" within a 2,500-foot radius from a vertical wellbore. It also calls for operators to replace water supplies contaminated by oil and gas drilling, but the MDE cannot force operators to do so if they can prove the contamination was not a result of their activities or existed before they started drilling.

HB 1204 -- also known as the Marcellus Shale Safe Drilling Study Fee and Performance Bond Act -- calls for operators to post a surety bond of between $50,000 and $100,000 for each oil and gas well they drill and to keep liability insurance ($300,000/person, $500,000/incident) in case of an accident. Operators who acquired leases between Jan. 1, 2007 and Aug. 1, 2013 would also pay a $15/acre fee, the revenue from which would go to the state Oil and Gas Fund.

The measure would also require operators to:

The General Assembly is scheduled to adjourn its 90-day legislative session on April 9. If the legislators pass both bills and they are ultimately signed into law by Gov. Martin O'Malley, they would take effect on different dates, HB 1204 on June 1 and HB 1123 on Oct. 1.

Last year Mizeur led a failed attempt to freeze permitting in the Marcellus until 2013 while state agencies reviewed various studies on the play's development and hydraulic fracturing, including one being performed by the U.S. Environmental Protection Agency (see Shale Daily, March 25, 2011; Feb. 24, 2011).

Only two counties in Maryland -- Garrett and Allegany, which are in the western Panhandle -- overlie the Marcellus Shale, which the U.S. Geological Survey estimates could contain as much as 2.383 Tcf of technically recoverable natural gas.

In December an advisory panel formed by O'Malley recommended that the General Assembly impose a severance tax on gas production and a fee on gas leases (see Shale Daily, Dec. 14, 2011). The panel, composed of a broad range of stakeholders (see Shale Daily, July 22, 2011), is scheduled to recommend best practices for gas exploration and production by Aug. 1, and to submit a final report on Marcellus drilling by Aug. 1, 2014.