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Charleston, W.Va.

W.Va. Legislative Update
On November 16, 2011, the Joint Select Committee on Marcellus Shale (the "Committee") reported a 121 page bill governing horizontal wells that utilize 210,000 gallons of water or more per month or that involve surface disturbance of 3 acres or more. The final version of the bill was posted to the West Virginia Legislature's website on November 18, 2011 (the "Bill"). The Bill is based in large part on Senate Bill 424 as passed by the Senate during the 2011 Regular Session, but was further modified by the adoption of 33 amendments by the Committee.

A shortcoming of the new bill is that the myriad of amendments distract from what is most important to the long term interests of the State of West Virginia and its citizens: the establishment of a set of laws and regulations that can be interpreted and enforced consistently. Such legislation would serve to reduce uncertainty and create a sense of stability, thereby encouraging employers to invest in West Virginia projects that yield jobs for West Virginians and generate tax revenue for the State. These amendments are undermining the opportunity to address through targeted and specific legislation legitimate concerns, including (1) the protection of water supplies, (2) the use and disposal of waters of the State, and (3) the use, maintenance and repair of county roads for natural gas exploration and development.

Amendments inhibiting the ability to quickly enact legislation include the following provisions:
  1. Expanded well location restrictions that preclude drilling within 100 feet of any "watercourse," lake, pond or reservoir, or 200 feet from a "wetland," or 300 feet from a naturally producing trout stream, or 1,000 feet from a surface water or groundwater source of a public water supply. These limitations are not supported by science and are not necessary based on the broad base of experience obtained through decades of natural gas drilling operations;
  2. Requiring the Secretary of the DEP to suspend a well work permit upon a notice from the Division of Highways that an operator has been found in violation of a letter of certification related to using public roadways without any due process protections;
  3. An exclusion to preemption language for the "traditional power of local government to regulate zoning and land development of gas activities as well as other aspects, such as the time and the place of operations to protect the health, safety and welfare of the general public through local ordinances and enactments." This exclusion would virtually cancel the preemption language;
  4. Expanding the rights of surface owners, including making an offer of compensation before construction begins and giving surface owners the right to recover attorneys fees. Expansion beyond existing law does not remedy the issues created by drilling and completing horizontal wells in shale formations. Current law provides adequate rights to surface owners' compensation under 22-7-3;
  5. Establishing detailed casing and cementing standards, on a cookie-cutter, one-size-fits-all basis, rather than allowing regulators to perform the work of shaping standards that will work for the particular facts involved in each drilling scenario. Natural gas drilling operations involve complex engineering practices that can vary from well to well and formation to formation. Establishing a single statutory standard simply ignores the realities of drilling operations. The standards should provide for adequate flexibility to implement new and improved techniques that fulfill the policy.
Governor Tomblin has yet to announce whether he will call a special session to consider legislation governing horizontal well development. We can all hope that legislation will be developed to address the truly important issues, leaving the extraneous matters for consideration at another time.
Beginning with the January 2012 issue, Marcellus Fairway: The Play Today will be distributed under a new name: The Shale Play Today. This new title better reflects the scope of the information we provide to you, our readers, on a monthly basis.

In the News
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Pa. Senate Passes Comprehensive Marcellus Shale Bill  

by Barry A. Naum 

Harrisburg, Pa. 

 

On November 15, 2011, the Pennsylvania Senate passed S.B. 1100, a fairly comprehensive legislative effort aimed at increasing governmental oversight of the development and production of Marcellus Shale resources. This measure, if adopted by the Pennsylvania House and approved by Governor Corbett, would impose significant new regulations and requirements on natural gas producers related to, among other things, well permitting, reporting, environmental and drinking water protection and conservation, transportation, bonding, regulatory, and regulatory and civil penalties. The bill is currently under consideration before the Pennsylvania House of Representatives.

Chief among the issues presented by S.B. 1100, however, is the introduction of "shale impact fees," which have been contemplated in Pennsylvania for months. Under the S.B. 1100 proposal, these impact fees would be assessed, beginning retroactively as of January 1, 2011, at $50,000 for the first year of a well's production and decreasing by $10,000 each subsequent year until settling at $10,000 for years 11 through 20 of a well's productive life. The majority of the proceeds from these impact fees (i.e., 55%) would primarily go to the local Marcellus Shale region counties and municipalities for use in funding a wide realm of activities, including transportation infrastructure, emergency preparedness, water and wastewater preservation, and reclamation, environmental and conservation initiatives, and even tax reductions and housing programs. The remainder of the impact fee revenues would be designated for statewide environmental, transportation, and water and wastewater infrastructure initiatives. For wells in operation before January 1, 2011, S.B. 1100 would also impose a one-time assessment fee of $20,000 that would similarly fund a statewide "Natural Gas Energy Development Program" formed by S.B. 1100 that is intended to promote natural gas-fueled transportation throughout the Commonwealth.

 

Read the full article on our website.

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Local Drilling Bans Update  

by Kevin M. Eddy 

Pittsburgh 

 

On November 8, 2011, three municipalities in western Pennsylvania put direct democracy to the test with referendums that would essentially ban natural gas drilling in their communities. Two of the referendums were overwhelmingly defeated while one succeeded with overwhelming support.

 

Read the full article on our website.

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Useful Resource:  

Baker Hughes Rig Counter 

 

Baker Hughes has been compiling rig count data since 1944, and that information is now housed online. Click here to view historical or current rig counts.

 

 

Kevin M. Eddy

Marcellus Shale Team Member

 

Kevin M. Eddy (Pittsburgh)

Kevin is a litigator who regularly represents energy and energy support companies in the courts throughout Pennsylvania and New York. He has handled disputes ranging from breach of contract, regulatory matters, product liability, insurance, coverage, environmental, toxic torts, quiet title, royalty and lease litigation. Kevin also has broad labor and employment experience representing companies in disputes with employees. Click here to view Kevin's full professional biography. 

 

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Responsible Attorney: Michael J. Basile