The Register-Herald, Beckley, West Virginia

Today's Front Page

September 21, 2011

Gas drillers oppose $10,000 permit fee

By Vicki Smith Associated Press

MORGANTOWN — The latest permit fees that West Virginia legislators have proposed for Marcellus shale gas wells would be the highest in the region and would hinder the state’s ability to compete, the leaders of two industry groups said Tuesday.

Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said he and his members were blindsided last week by the proposal that they pay $10,000 for the first well on a site and $5,000 for each subsequent well.

“The last discussion was $5,000 and $1,000 for additional wells,” DeMarco said. “This is a concern for us.”

Charlie Burd, executive director of the West Virginia Independent Oil and Gas Association, said his group has long supported reasonable increases, but the current proposal “certainly caught us a little off guard.”

“These numbers ... seem excessive,” he said. “They dramatically hurt smaller, independent operators who are trying to maintain viability in the current market.”

Operators now pay just a few hundred dollars for a permit. That leaves the state Department of Environmental Protection’s Oil and Gas office — whose inspection program is funded through the permit fees — with a $1 million budget shortfall. The proposal from the special House-Senate panel could generate $2.5 million a year for the DEP, enough to hire up to 15 additional staffers.

During interim meetings in Charleston last week, state Sen. Doug Facemire indicated the proposal had industry’s support.

Facemire didn’t immediately return a telephone message Tuesday, but DeMarco said no one on the legislative committee asked him what he thought of the new rates.

In neighboring Pennsylvania, he noted, operators pay $3,000 to $4,000 a permit.

“If that was the level that was suggested for West Virginia, I don’t think we’d have a problem,” he said. “... To make us less competitive creates some real angst among my members.”

The DEP needs money for more inspectors, DeMarco acknowledged, but he suggests that instead of relying on permit fees, legislators consider funding those jobs with some of the $90 million a year the gas industry pays in severance taxes.

Drilling is in overdrive as companies rush to tap the vast reserves of the Marcellus shale field that underlies most of the state.

Reaching the mile-deep deposits requires deep, horizontal drilling and hydraulic fracturing technologies that the industry says are safe. Critics, however, worry about water pollution, road damage and other issues, and legislators are struggling to find common ground on effective regulation.

They hope to have a comprehensive bill by year’s end, but the permit fee is not the only hurdle.

The panel has also approved provisions increasing bond requirements, enhancing public notice of drilling and compensating the owners of surface land where operators drill their wells.

Operators are concerned about what they consider unnecessary evaluations of air emissions and the notion there could be a public hearing on every permit request,

“There’s all kinds of problems with this thing,” DeMarco said.

Burd said oil and gas operators are also being singled out in a provision that would require them to report where their out-of-state employees come from and how much they’re paid. No other industry is required to do that, he said.

Coal miners often travel long distances for work. Teachers in West Virginia border counties often take better-paying jobs in neighboring states. Casino employees in the Eastern and Northern Panhandles employ residents of other states as well as West Virginians. In Parkersburg, where Burd lives, workers travel back and forth between Ohio and West Virginia for work.

“Lots of companies rely on workers from outside the state to fill their roles,” Burd said, “and the oil and gas industry is no different.

“The committee intends to have a bill,” he said. “Whether or not that bill is one that can be made acceptable to the regulators, to the environmental groups and to the industry remains to be seen.”

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