The Register-Herald, Beckley, West Virginia

Balancing Act

February 24, 2011

Regulating a new industry

What will be the future of natural gas development in the state?

A lot of West Virginians, from industry executives to environmentalists, are anxiously waiting on just what West Virginia legislators are going to do about the future development of natural gas in West Virginia.

While the industry isn’t new to the Mountain State, development of the Marcellus shale and the techniques used to extract it are still not regulated as heavily. Randy Huffman, secretary of the West Virginia Department of Environmental Protection, said regulating the large-scale Marcellus shale operations is a lot different from regulating conventional oil wells.

“We have a regulatory framework in place that really was designed around conventional shallow gas well drilling,” Huffman said. “The Marcellus activity is a significantly different kind of industry because there’s much more surface impact, much more surface activity.”

Additionally, Huffman said, drillers are on site longer, and their footprint is larger. He said the DEP is currently fairly limited in their ability to regulate the industry.

“We can keep the lid from coming off of it in the short term, but we’re really not equipped either from a regulatory or from a staffing standpoint to regulate it, in my opinion, the way it needs to be regulated,” Huffman said.

That is why the DEP has requested to approximately double the current roster of oil and gas staff — currently limited to 17.

A commonly cited statistic in the debate for regulation has been that statewide, there are 17 inspectors for 58,000 active wells. Huffman said while they do need more inspectors, those numbers are a little misleading.

“That’s a little bit of a misnomer in that once the well is drilled, completed and been reclaimed, there may never be a need to go back on it,” Huffman said.

He added that where conventional drills lasted a few months, some Marcellus wells have continued activity that require on-site visits for two to three years, and “new sites are being developed all the time.”

The DEP, Huffman said, is primarily concerned about the water management, fee increases to pay for increased oversight and “beefing up” the permit process to include measures geared toward large-scale drilling sites.

As far as issues with groundwater contamination and some other problems raised by others, Huffman said horizontal drilling and hydraulic fracturing is “not new” and has been done for sometime.

“We just haven’t seen the kind of problems that people are raising as issues,” Huffman said. “This fracking is taking place at such depths, we don’t really have a concern or evidence of reason to be concerned over groundwater at a couple hundred feet being impacted by hydraulic fracturing taking place at eight or nine thousand feet.”

Many citizens have come forth with examples of contaminated groundwater. Various individuals have attributed natural gas or other harmful chemicals in their water supply to the industry.

Some have complained of natural gas entering their wells and causing their water to become flammable, as observed in the documentary “Gasland,” about the environmental damage caused by the industry. There are other explanations as to why wells may become contaminated with natural gas.

“People complain a lot about gas in their wells and stuff like that, but in West Virginia that is a fairly common thing,” said Tim Carr, West Virginia University geology professor.

Carr said that before a nearby gas well can be blamed, the contamination needs to be investigated. Thermogenic natural gas is often found in wells and septic systems.

He said the industry needs to be managed, but the benefits can’t be ignored.

“It can be a tremendous benefit to the state, on the order of the coal industry. It also can be a tremendous management challenge, similar to the coal industry,” Carr said. “It needs to be properly regulated. It’s a two-edge sword.”

Paul Ziemkiewicz, director of the West Virginia Water Institute, said the entire Marcellus industry is fairly new, and therefore lawmakers can’t expect to find much institutional experience in guiding their policy decisions.

“The whole play is so new, there’s not much institutional experience,” he said. “If you talked to the industry a couple of years ago, wastewater was going to go into underground injection.”

Ziemkiewicz said now, the industry isn’t really looking at underground injection. If lawmakers had jumped on regulating that method, they would be behind. He added that aspects of drilling, such as the lack of a fixed discharge point, exempt it from measures in the Clean Water Act, creating additional challenges.

Gary Zuckett, the executive director of the West Virginia Citizen Action Group, warned lawmakers that the current code for the oil and gas industry in West Virginia “has no teeth” and a “litany of problems.” He called the industry, as currently regulated, a “brewing disaster linked to our insatiable thirst for energy.”

“It’s a quiet disaster that’s happening here in West Virginia,” Zuckett said. “It’s happening right under our nose and the DEP can’t effectively deal with it because they don’t have enough inspectors or funding.”

The industry has not been entirely opposed to regulation. Scott Rotruck, vice president of Chesapeake Energy said there was a lot of opportunity in the downstream products of the industry, and good regulation was a part of the industry’s future.

“The Marcellus shale can lead to a whole lot of downstream opportunities in West Virginia,” Rotruck said. “What do we need to do that? We need a regulatory system that’s well-funded, that’s well-staffed and recognizes the unique challenges of the Marcellus shale.”

Douglas Malcolm, the owner/operator of D.C. Malcolm Inc., a drilling company in Charleston, said the legislators need to “draw a sharp line” between smaller operators and larger drillers.

“We hear so much about the large Marcellus operations in the northern part of the state, but there is another side to the natural gas industry that is struggling hard,” Malcolm said. “... Both of these bills contain provisions that are going to directly affect conventional operations and could be devastating if implemented as they are proposed.”

Mike McCown, president of the Independent Oil and Gas Association of West Virginia, reminded lawmakers that the oil and gas industry paid out $200 million in state taxes and created 35,000 high-paying jobs. Marcellus shale drilling will create 7,000 new jobs and provide $300 million in salaries, McCown said.

He said if legislators are not careful about drafting legislation, the industry may move north.

“We can drive industry away from the state by making regulations and increasing taxes and increasing permit fees that would push us across the state line,” McCown said.

Kevin L. Hartleroad, vice president of operations at Stalnaker Energy in Glenville, said fewer permits were issued in 2010 than 2007. He called the natural gas boom a “misperception” and warned that further regulation would only further cripple an “industry in crisis” due to low natural gas prices.

“That’s not getting any better. Don’t kill the coal and gas industry,” Hartleroad said. “We are not your enemy.”

Charles Wilfong, president of the West Virginia Farm Bureau, has similar concerns about the industry but said he also wants to see property rights protected.

“We want to make sure we have energy sources in this state that can be utilized to lessen our dependence on foreign energy. We want it done right,” Wilfong said. “We want to be sure that a big part of the economic future of West Virginia isn’t stifled by going too far on restrictions of our industries.”

Steve Conlon, a honey producer, told lawmakers at a House judiciary hearing that it was clear there was a problem being caused by the natural gas industry.

“Country people don’t drive for six hours to speak for a minute and a half if there’s no issue,” Conlon said, referring to the time limit on speakers. “There are major issues. If you believe we need no more regulation, you probably believe it’s OK to leave home for the weekend and leave six or eight teenagers behind. The gas guys in the gas fields need to be watched.”

Denise Poole, of West Virginia Sustainable Living, said drillers are already tapping the Marcellus shale, without heavily needed regulations.

“What we really want is one really good bill. If this legislature can not pass one good bill this session...” Poole said. “The worst thing that can be done is to put it to a study. That would mean that they would continue to drill the Marcellus without regulation.”

— E-mail: tkuykendall@register-herald.com

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