[Senate Hearing 112-223]
[From the U.S. Government Publishing Office]
S. Hrg. 112-223
MARCELLUS SHALE GAS
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
TO
EXAMINE MARCELLUS SHALE GAS DEVELOPMENT AND PRODUCTION IN WEST VIRGINIA
__________
EAST CHARLESTON, WV, NOVEMBER 14, 2011
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington MIKE LEE, Utah
BERNARD SANDERS, Vermont RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan DANIEL COATS, Indiana
MARK UDALL, Colorado ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota DEAN HELLER, Nevada
JOE MANCHIN, III, West Virginia BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Capacasa, Jon, Director, Water Protection Division, Region 3,
Environmental Protection Agency,............................... 14
Capito, Hon. Shelley Moore, U.S. Representative, 2nd District of
West Virginia.................................................. 5
Coleman, James L., Task Leader, Marcellus Shale Gas Resource
Assessment, U.S. Geological Survey, Department of the Interior. 18
Cugini, Anthony, Director, National Energy Technology Laboratory,
Department of Energy........................................... 7
Dettinger, G. Kurt, General Counsel, Office of the Governor,
Charleston, WV................................................. 30
Facemire, Doug, State Senator, West Virginia Legislature,
Gassaway, WV................................................... 49
Garvin, Donald S., Jr., Legislative Coordinator, West Virginia
Environmental Council, Buckhannon, WV.......................... 69
Huffman, Randy C., Secretary, West Virginia Department of
Environmental Protection, Charleston, WV....................... 33
Manchin, Hon. Joe, U.S. Senator From West Virginia............... 1
Manchin, Tim, Delegate, West Virginia Legislature, Fairmont, WV.. 36
Rahall, Hon. Nick, U.S. Representative, 3rd District of West
Virginia....................................................... 4
Rotruck, Scott, Vice President, Corporate Development, Chesapeake
Energy Corporation, Oklahoma City, OK.......................... 62
West, Kevin, Managing Director, EQT Corporation, Pittsburgh, PA.. 66
Witt, Tom S., Director, Bureau of Business and Economic Research,
Professor of Economics, College of Business and Economics, West
Virginia University, Morgantown, WV............................ 58
APPENDIX
Additional material submitted for the record..................... 85
MARCELLUS SHALE GAS
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MONDAY, NOVEMBER 14, 2011
U.S. Senate,
Committee on Energy and Natural Resources,
East Charleston, WV.
The committee met, pursuant to notice, at 10 a.m. on the
7th Floor Courtroom of the Robert C. Byrd Federal Courthouse,
300 Virginia Street, East Charleston, West Virginia, Hon. Joe
Manchin presiding.
OPENING STATEMENT OF HON. JOE MANCHIN, U.S. SENATOR FROM WEST
VIRGINIA
Senator Manchin. I'd like to call the hearing to order. I
want to thank, first of all, all of you for being here,
everybody. I appreciate it very much.
I'd like to introduce to you the staff that we have with us
today. I'll introduce, first of all, my staff and our DC office
staff and our West Virginia staff.
With me from DC I have Robert Diznoff. Robert is my Energy
Council. Robert if you'll raise your hand in the front here.
Robert is a Charleston native. So we're glad to have him. His
law degree is from the University of Miami and he was born and
raised in Charleston, West Virginia.
I have also here with me, Kelley Goes who is our State
Director.
We've got Sara Payne. There's Sara, right over there, our
Assistant Director.
Also Travis Mollohan. Travis is our Field Director.
With us from Washington from the staff as far as the Energy
Committee, I have Allyson Anderson. She's our Senior
Professional Staff. Allyson if you raise your hand there.
Allyson has 5 years on the committee. She's a petroleum
geologist. We're happy to have her.
Kelly Krye, where's Kelly? She just went. OK, Kelly just
went down. She's our Science Policy Fellow. She's an
oceanographer with a Ph.D., from Boston University.
Abigail Campbell, Abigail, there. Abigail is a Staff
Assistant. She's finishing her master's degree in International
Relations from the War College.
So I want to thank everybody for being here. Also with me I
have as on the panel is Congressman Nick Rahall and
Congresswoman Shelley Capito and Congressman David McKinley
will join us shortly.
I'd like to welcome the members again of my colleagues from
Congress. I'm glad that all of them are able to be with us
today.
I would also like to thank all of the distinguished
witnesses who have come to speak on the important issue of
Marcellus Shale gas development in West Virginia. Of course,
thanking all of you who have a stake in this issue from the
business folks, our local community officials and constituents
who have made time to be here today.
Today's hearing is an extension of the good work the U.S.
Senate Energy Committee has been doing on the shale gas
development. The purpose of the hearing is to examine Marcellus
shale gas development and production in West Virginia. My
friend, Chairman Jeff Bingaman, has held 2 natural gas hearings
this year. So this is the third hearing of the full committee
on an issue that is uniquely important to our State and region.
I'd like to thank Chairman Bingaman and Ranking Member Lisa
Murkowski for allowing me to bring the work of the U.S. Senate
Energy Committee to West Virginia. I cannot think of a more
appropriate topic for my first field hearing. We all know that
Marcellus shale gas could truly be a game changer for our great
State. We are literally sitting on top of tremendous potential
with the Marcellus shale. We need to work together to chart a
path forward in a safe and responsible way that allows us to
produce energy right here in America and create well paying
jobs for hard working Americans.
Of course we also need to do all that we can to make sure
that West Virginians are getting the jobs here in West Virginia
because the people of our State should benefit from the natural
resources we have. West Virginians are the hardest workers in
the world. I've always said that we're not looking for a
handout. We're looking for a work permit.
We've gathered experts here today to discuss how
development in the Marcellus shale can help us rebuild America.
I know there are a whole host of issues of great concern to
folks around the State like how we can use all of our abundant
natural resources like coal, timber and natural gas in a
balanced way that does not endanger the health of our land and
water and whether industry is treating residents fairly. To
address the concerns I truly believe that we need a regulatory
system in place that is really driven by the States with the
Federal Government acting as our partner to effectively extract
the natural gas and attract the billion dollar ethane cracker,
plants for natural gas production and the jobs that they would
bring to West Virginia.
I know our State legislators and working very diligently on
this as we speak. That is why we need to explore today what we
are doing in West Virginia. We are ready to assume the primary
regulatory roles as we go forward.
We need to know are we prepared with the regulatory
expertise and the resources to develop the Marcellus shale
safely and responsibly. Do we have enough inspectors? Is our
infrastructure able to bear the burden of new development? How
can the Federal Government and the EPA act as our partner, not
our adversary, in all of this?
Let me remind all of you that oil and natural gas
exploration are not new to West Virginia. In fact, West
Virginia is home to the very beginnings of petroleum
exploration in the United States. Oil and gas production in
West Virginia actually began as an outgrowth of the salt
industry in the 1800s.
At that time oil and gas had no real significance in our
State. But salt makers would frequently hit oil and gas in
their drilling. So much oil was diverted to the Kanawha River
by salt manufacturers that it was known as Old Greasy to the
boatmen.
It didn't take long for some industrious West Virginians,
namely the Rathbone Brothers, to find the value in these salt
byproducts. These brothers began an exploration in what became
known as the burning springs oil field in the Great Kanawha
Valley region. It was named this way because you could get a
pretty good flame by throwing a lighted candle in the gas that
escaped the site.
From these early beginnings in around 1859 the oil industry
grew to peak production of 16 million barrels in 1900. Natural
gas took off from there and West Virginia led the country in
natural gas production until 1917. Natural gas output then went
on the decline and picked back up in about 1970.
There have been booms and busts throughout the last 100
years in West Virginia. It's estimated that there are more than
150,000 existing oil and gas wells in our State whether they
are still producing or not. But that doesn't compare to the
potential volumes that could be produced here in West Virginia
from the Marcellus shale. New technology like hydraulic
fracturing and horizontal drilling are really giving us the
tools to extract this vital resource.
Since 2005 drilling in West Virginia has really taken off.
In 2009 we had about 51,000 producing wells in our little
State. That number represents slightly more than 10 percent of
all the producing wells in the country. That's a lot of wells.
We are just getting started.
New permits are being issued all the time, 1,500 new
permits in 2010 alone. This has remarkable potential for new
jobs involving these drilling activities.
A recent report by NETL projects that developing shale gas
in West Virginia would result in 17,000 additional jobs, $870
million generated from State and local taxes and $1.3 billion
in direct payments to households through royalties and industry
payroll. State officials here in West Virginia have estimated
that we can expect more than 2,300 direct jobs from the
construction of just one cracker plant to convert ethane, a
byproduct of Marcellus drilling into ethylene, a chemical that
is used as feedstock in the chemical industry.
Businesses investment in one plant would be at least $1.5
to $2 billion. Now that's a serious investment. The folks at
the American Chemical Council have even more detailed
projections.
That about $3.2 billion would also be invested in the
downstream chemical facilities that would make products like
dyes, paints, coatings and plastics. That investment would
generate $7 billion in additional chemical industry output in
West Virginia. The Council also estimates that about 12,000
jobs would be created in the chemical industry and throughout
the supply chain in West Virginia moving us from 23rd largest
chemical producing States to the 13th largest in the country.
The potential of Marcellus is truly remarkable. From an
energy development standpoint we are at the cusp of something
that could help us reduce our dangerous dependence on foreign
oil that threatens both our national security and our economic
security.
It's so important that we develop our resources here at
home rather than continuing to rely on countries that don't
like us very much and perhaps wish to do us harm. We need an
energy portfolio in this country that uses everything. I repeat
everything. Natural gas and oil, coal, wind, solar, hydropower,
geothermal, you name it, we need it. Marcellus has a large role
to play in that.
But no matter how we move forward we have to do it right--
in a way that balances our environment with our economy in away
that creates jobs without damaging the health of our lands and
our waters and most importantly our children. That allows the
States to take the lead on regulating this tremendous resource.
That's what we are looking at today.
With this in mind I'd like to give my Congressional
colleagues a few minutes each to present some opening
statements. I would ask that they keep their remarks to 3
minutes and that you are welcome to submit more lengthy remarks
for the record.
So first we'll begin with Congressman Rahall.
STATEMENT OF HON. NICK RAHALL, U.S. REPRESENTATIVE, 3RD
DISTRICT OF WEST VIRGINIA
Mr. Rahall. Thank you. Thank you, Senator. I thank you,
Senator Manchin, for the kind invitation to participate in
today's hearing. Also I appreciate the courtesy extended to me
by the Senate Committee on Energy and Natural Resources.
West Virginia, as we all know, is a State whose rich
history is closely tied to our abundant supply of natural
resources. Our State was once a major salt producer, and once a
major oil producer. Our forest lands have produced billions of
board feet of timber. We remain today one of our Nation's
largest producers of coal.
Generations of West Virginians have benefited from that
development, the hard labor of digging, drilling and dredging
and logging. But in far too many instances the wealth derived
from turning those raw materials into widely marketable, highly
profitable goods has not gone to our own State residents, but
to out of State interests. In that respect our history has been
one of exporting opportunities.
Now we are confronted with yet another natural resource
bonanza possessing vast potential to enrich our State and our
people with natural gas sequestered in the Marcellus shale
play. We have a chance now to change our historic profile. I
believe we ought to make every effort, not just to simply live
with Marcellus production, but also to ensure that we thrive
from it.
We have to look no further than the last couple of decades
of lawsuits, legal opinions, regulation and legislation related
to surface coal mining to understand the complexity of the
undertaking before us. But I believe that the lessons of our
past can serve as a valuable guide to our future.
We must look ahead to both the benefits and the
consequences of vast Marcellus drilling.
We must have the involvement and buy in of stakeholders
from all corners and from every level of government.
We must consider all the environmental effects of drilling
from the rights and well being of surface owners to the
subsurface consequences of drilling methods to the effect on
water quality and quantity to air emissions.
Just as importantly we ought to do all we can to ensure
that the fullest measure of economic benefit remains in our
State for current and future generations of West Virginians.
I'm all for promoting Marcellus development as long as it
means a better life for our children and grandchildren. Our
State legislature, as Senator Manchin has referenced, has been
grappling for many months on this challenge. All indications
are that tremendous progress is being made.
Today we'll have an opportunity to hear about that as well
as the State wide permitting and oversight regime. I am looking
forward to that testimony. It is no light task to create a
comprehensive plan for development of the Marcellus formation.
But I believe the task is well and properly placed in the hands
of our State and local leaders and that there's every hope that
their work will lead to a regime that sets a standard for the
rest of the Nation to consider.
From my perspective as the lead Democrat on the House T and
I committee, a committee with jurisdiction over our highways
and waterways, as well as our water systems and pipelines, I'm
interested in how the Federal Government can aid West Virginia
in this venture to enable the preservation of our natural
treasures, the creation of well paying jobs and the cultivation
of a better, brighter future for West Virginia.
I again thank Senator Manchin and the committee. I look
forward to today's witnesses.
Senator Manchin. Thank you, Congressman Rahall.
Congresswoman Capito, please proceed with your opening
remarks.
STATEMENT OF HON. SHELLEY MOORE CAPITO, U.S. REPRESENTATIVE,
2ND DISTRICT OF WEST VIRGINIA
Ms. Capito. Thank you, Senator Manchin. I want to thank the
Senate committee, Chairman Bingaman and Ranking Member
Murkowski and certainly Senator Manchin for holding this field
hearing to examine the Marcellus shale development and
production in West Virginia.
I'm pleased to be here with my House colleagues,
Congressman Rahall and Congressman McKinley should be here
shortly. I'm happy to be here in front of a lot of friends in
our State that are going to hear a lot of different
perspectives whether it's regulators or scientists, engineers,
about the vast potential that this holds for our State. We are
seeing the economic development that a few years ago would have
been unimaginable.
Many of you know that I'm from the Northern part of the
State originally. My parents are still living in Glendale and
Moundsville, Marshall County, which is sort of ground zero for
a lot of the Marcellus shale development in our State. I travel
there frequently. I can see it is palpable the economic
development that's already occurring at the local level.
Just for instance and I'm not going to take more than my 3
minutes. But I took my mother to get her hair done. I was
talking to the hair dresser. She told me that she had a well on
her property.
I asked her if she was seeing anything from the Marcellus
shale. She said, yes, I have a well on my property. I said,
well are you going to Disney World, you know, like you've hit
the big mother lode here? She said well, no, no. We're not
really going to change our life, but we are going to put new
carpet in the house.
[Laughter.]
Ms. Capito. I thought, well, she's going to buy that carpet
from a local vendor. So that's going to be another job that's
going to be created because of the development of the Marcellus
shale on her property. It was, to me, it sort of framed out the
way, as Congressman Rahall said, the development of this should
be from the ground up so that everybody benefits, particularly
those who live and work in that area.
This is an immense resource. Senator Manchin has talked
about what the development and the jobs that can be created.
WVU has estimated that up to 20,000 new jobs will be created in
West Virginia by 2015. The opening of this resource has pushed
the price of natural gas down allowing for lower electrical
prices and heating costs. This plentiful supply makes West
Virginia a very much more attractive place for non energy
businesses to locate due to the availability of fuel to power
their operations.
The byproducts of the Marcellus include ethane, propane and
oil. The large amounts of the ethane can be converted by the
cracker plants into ethylene and then used in a variety of
ways, chemical and plastic production. So I'm not going to say
if a cracker plant is built. I'm going to say when the cracker
plant is built in West Virginia we will see billions of dollars
of development. The construction of the plant alone would
create thousands of construction jobs.
It is clear of the potential economic benefits of the
Marcellus shale development. They are great. But there are
legitimate environmental and transportation concerns associated
with the gas production. West Virginia must make sure that we
manage this resource responsibly in a way that not only allows
the State to obtain the maximum economic benefit, but protects
our clean air and water.
I look forward to the hearing. Thanks so much for the
invitation to be here today.
Senator Manchin. Thank you, Congresswoman.
First of all let me say thanks to all of you for your
remarks. When Congressman McKinley comes in we will give him
the ability to speak before you all. But we're going to go
ahead and get started with our first panel.
We have a Federal panel with us as our first panel. I'd
like to introduce them to you.
We have Mr. Anthony Cugini from the National Energy
Technology Laboratory here in Morgantown, West Virginia. Mr.
Cugini is the official representative here today for the
Department of Energy.
Our second witness will be Mr. Jon Capacasa, who is the
Director of the EPA's Region 3 Water Protection Division based
in Philadelphia, Pennsylvania.
Our third witness today is Mr. James Coleman, who is the
Leader for the Energy Resources Program at the U.S. Geological
Survey in Reston, Virginia.
I'd like to welcome and thank all of you for coming today.
We appreciate it very much. If you could begin your remarks
with a brief description for all the audiences of the role and
function of each of your agencies and then each proceed into
your oral testimony. The witnesses will have 5 minutes each.
Dr. Cugini, we'll start with you.
STATEMENT OF ANTHONY CUGINI, DIRECTOR, NATIONAL ENERGY
TECHNOLOGY LABORATORY, DEPARTMENT OF ENERGY
Mr. Cugini. Thank you, Senator Manchin.
The Department of Energy's mission is really implemented
through the NETL and has 2 primary aspects, technology
development and data compilation. We're not involved in
regulation but really looking at trying to develop the
technological data, etcetera, that can inform regulation and
also provide technologies that can be commercialized and moved
out to the industry. So with that I'd like to begin my oral
testimony.
Again, Senator Manchin, Representative Rahall and
Representative Capito, thank you for the opportunity to speak
to you today about the U.S. Department of Energy's research
efforts related to shale gas development. Shale gas production
in the United States has grown dramatically during the past
decade. Early success in the Barnett shale in Texas coupled
with additional technological improvements has prompted
producers to invest in similar plays in other areas across the
country. The Energy Information Administration projects that
shale gas production will continue to increase, growing almost
4 fold between 2009 and 2035 when it is projected to make up
nearly half of total U.S. gas production.
The benefits of the current surge and expected expansion in
natural gas production are many. Increases in business
activity, employment, personal income, royalty payments and
State tax revenues are being reported. Early projections of net
job creation and incremental tax revenue vary in terms of
impact, but they are universally positive.
However, as the level of drilling and production operations
has increased concerns have been raised by members of the
public about the potential negative impacts of shale gas
development. Citizen concerns have included potential
contamination of water supplies, road damage, air pollution,
disturbances to echo systems, noise levels and fear that the
activity will disrupt a rural lifestyle. It is within this
context that State and Federal regulators are being called on
to make important decisions that will influence our energy
supply choices for many years.
The DOE provides data and analysis to inform these
decisions and identify solutions to help enhance environmental
protection and increase the benefits to communities and the
Nation of shale gas development. As an objective source of
scientific data DOE's early contributions to the fundamental
information about gas shales, tight sands and coal seams
published in the 1980s had been credited with having played an
important role in today's domestic natural gas supply growth.
At present NETL is managing a multi-agency effort in
collaboration with a major independent producer to acquire,
analyze and publish environmental baseline data that can be
used to quantify the net impact of Marcellus shale drilling and
production activity on water, air and other valued resources.
NETL's collaborative efforts have resulted in a number of
useful products related to gas shales.
For example NETL together with the Ground Water Protection
Council and the Interstate Oil and Gas Compact Commission
developed FracFocus, a landmark, web based, national registry
for disclosing the chemical additives used in a hydraulic
fracturing process.
Similarly NETL has coordinated with States through the DWPC
to develop and maintain the risk based, data management system,
an online system that helps States streamline their oil and gas
permitting processes.
In March 2011 President Obama directed Secretary of Energy,
Steven Chu to form a subcommittee of the Advisory Board on
Natural Gas to develop recommendations to improve the safety
and environmental performance of hydraulic fracturing. The
subcommittee produced a 90 day report on August 18, 2011 with
20 recommendations and is scheduled to submit a final report
this month. In several cases the subcommittee recommended
actions that DOE, through NETL, has already begun or has been
doing. For example, funding for the risk based, data management
system and the collection of air quality data such as being
done at the Marcellus test site.
The Marcellus test site is an example of the holistic
approach taken by the Department through NETL in the area of
environmental base lining and risk assessment and an example
that effective research coordination among Federal agencies.
NETL is leading a joint industry, government research team to
monitor key aspects of shale gas development through its life
cycle. The research planning calls for 1 year of comprehensive
environmental monitoring followed by the drilling of 2
horizontal wells by Range Resources-Appalachia in July 2012 at
a well pad site in Southwestern Pennsylvania. This research
project includes one of 2 perspective case studies for the U.S.
EPA's ongoing study of the potential impact of hydraulic
fracturing on drinking water resources.
Responsible development of shale gas resources provides a
significant national opportunity for regional economic growth
not only through drilling and production but also along the
entire national gas value chain including natural gas liquids,
ethane feed stock, chemical production and natural gas fired
manufacturing processes. The role for NETL is to support the
realization of these opportunities through solid science,
objective data generation and analysis and effective efforts to
accelerate the development of technologies that can help
optimize the way we produce our natural gas resources in the
most environmentally responsible manner possible.
This concludes my oral testimony. Thank you for the
opportunity.
[The prepared statement of Mr. Cugini follows:]
Prepared Statement of Anthony Cugini, Director, National Energy
Technology Laboratory, Department of Energy
Thank you for the opportunity to speak to you today about the role
of the U.S. Department of Energy research efforts related to domestic
shale gas resource and its development.
BACKGROUND
Shale gas production in the United States has grown dramatically
during the past decade. Early success in shale gas production in the
Barnett Shale in Texas, coupled with additional technological
improvements, has prompted producers to invest in similar plays in
other sedimentary basins. In addition to the Barnett in the Fort Worth
Basin of Texas, the U.S. is now realizing production from the
Haynesville shale in Louisiana and Texas, the Fayetteville shale in
Arkansas, the Woodford shale in Oklahoma, the Marcellus shale in
Pennsylvania and West Virginia, and the Eagle Ford shale in Texas.
Other emerging natural gas shale plays such as the Utica shale in Ohio,
as well as formations in Alabama and the Rocky Mountain states, are the
scene of robust leasing and drilling activity.
The Energy Information Administration (EIA) at the Department of
Energy (DOE) projects that shale gas production will continue to
increase through 2035 in the Annual Energy Outlook 2011 Reference Case,
growing almost fourfold from 2009 to 2035. While total domestic natural
gas production increases from 21.0 trillion cubic feet in 2009 to 26.3
trillion cubic feet in 2035, shale gas production grows to 12.2
trillion cubic feet in 2035, when it is projected to make up 47 percent
of total U.S. production--up considerably from the 16 percent share in
2009.
The EIA's estimate for technically recoverable shale gas resources
in the Reference Case is 827 trillion cubic feet (Tcf). However,
estimates of technically recoverable shale gas are certain to change
over time as new information is gained through drilling, production,
and technological development. A National Petroleum Council report
published in September 2011 surveyed a wide range of producers and
consultants opinions regarding domestic, technically recoverable shale
gas volumes and reported a range from 700 Tcf to 1800 Tcf.\1\ Further,
estimates of the portion of this technically recoverable volume that is
economically recoverable will certainly change, as energy supply
choices are made and natural gas prices reflect those choices.
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\1\ NPC, ``Prudent Development Realizing the Potential of North
America's Abundant Natural Gas and Oil Resources'', Page 1-39
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The benefits of this current surge and expected continued expansion
in natural gas production are many. Increases in business activity,
employment, personal income, and royalty payments and state tax
revenues are being measured and estimated, and reported. Early
projections of net job creation and incremental tax revenue vary in
terms of impact, but they are universally positive.
However, as the level of drilling and production operations has
increased, concerns have been raised by members of the public about the
potential negative impacts of shale gas development. Citizen concerns
have included: potential contamination of water supplies from hydraulic
fracturing; increased road maintenance costs and risk of accidents due
to increased truck traffic; increased emissions of air pollutants from
diesel equipment or production operations; disturbances to ecosystems
needed to support other economic activities such as hunting, fishing,
and tourism; increased levels of noise from drilling, natural gas
processing facilities, and compressor stations; and a fear that the
drilling and construction activity will impact the lifestyle of rural
America.
It is within the context of this rapidly changing resource picture
and range of viewpoints that state and Federal regulators are being
called on to make important decisions that will influence our energy
supply choices for many years. The DOE provides data and analyses to
inform those decisions and identifies technology solutions to help
enhance environmental protection and increase the benefits to
communities and the Nation of shale gas development.
THE DEPARTMENT OF ENERGY'S MISSION RELATED TO SHALE GAS
The Department of Energy's mission with regard to gas shale
resource development activity, as implemented through the National
Energy Technology Laboratory (NETL), has two primary aspects:
technology development, and data development, compilation, and analysis
to assess technical risks. DOE's technology development role includes
helping to catalyze industry efforts to develop new technologies that
can significantly reduce the potential for environmental impacts and
improve the efficiency of gas production, and providing critical
support for nascent technology concepts that can help advance them
towards commercial development.
The other aspect of DOE's role is in generating, compiling,
analyzing, and reporting data that can be used by regulators to craft
science-based regulations, and by industry and the public to assess
risks and accelerate decision making related to resource development.
As an objective source of scientific data, DOE's early contributions to
fundamental baseline information about unconventional formations such
as shales, tight sands, and coal seams published in the 1980s, has been
credited with playing an important role in today's growth in domestic
natural gas supply. Currently, NEIL is managing a multi-agency effort,
in collaboration with a major independent producer, to acquire, analyze
and publish environmental baseline data that can be used to quantify
the net impact of Marcellus shale drilling and production activity on
the air, water, land, flora, and fauna surrounding a western
Pennsylvania drilling site. I'll speak more on this activity in a
moment.
It is also important to note what DOE does not do. DOE does not
regulate oil and natural gas exploration or production activities, or
manage Federal lands and the mineral estate.
VALUE OF DEPARTMENT OF ENERGY WORK PRODUCTS
The value of DOE's oil and natural gas research may be seen in more
efficient production of these resources with less environmental impact.
This research can support environmental compliance or increase the
efficiency of equipment designed to reduce environmental impacts.
Development of new hydraulic fracturing flowback water treatment
technologies increases the number of options available to operators. As
one example, NEIL has partnered with a group led by West Virginia
University to develop an on-site multi-media filtration system.
Flowback water is the volume of fluid produced from a well in the short
term whenever a well is ``turned on'' after being hydraulically
fractured. Flowback is comprised mostly of the injected fluid and can
be differentiated from produced water, which is fluid produced to
surface along with natural gas over the life of a well.
Scientific data sourced by NEIL is valued as objective information
by state regulators seeking information on which to base regulations
that can enhance environmental performance and community safety without
stifling economic development. These data are also valuable to
producers, particularly smaller independents without the resources to
carry out their own research that are looking for data to inform their
exploration and production strategies and development choices. A number
of popular DOE research products are online databases and decision-
making tools that are used by both operators and regulators. Examples
include the Risk Based Data Management System, FracFocus, the Produced
Water Management Information System, and the Fayetteville Shale
Decision Support System. Such tools, which would not be available
without DOE support, and have already begun to play an important role
in helping to mitigate problems associated with shale development.
FracFocus has become an increasingly popular means for companies to
voluntarily disclose the contents of fracturing fluids to myriad
stakeholders.
HOW DOE ACCOMPLISHES ITS MISSION THROUGH RESEARCH
DOE accomplishes its mission in three ways: (1) through cost shared
research with industry, academia and governmental agencies; (2) through
on-site research at NEIL, including efforts through its regional
university alliance; and (3) through strategic partnerships with other
organizations.
Cost shared research is implemented via NETL open solicitations for
research partnerships focused on topics where there is an appropriate
opportunity to perform research that will yield a clear public benefit
and that would not otherwise be carried out by industry. Cost share
from an industry/academic partner is a minimum of 20 percent. NEIL
manages such research, development and demonstration projects with
funds provided by Congressional appropriations and by Federal offshore
royalty revenues.
NETL also conducts on-site research on topics that are
complementary to the extramural research undertaken via competitive
solicitation. This research is carried out by Federal employees and
support professionals working as part of NETL's Office of Research and
Development and in partnership with researchers who are affiliated with
the NETL Regional University Alliance (NETL-RUA). This alliance is an
applied research collaboration that combines NETL's fossil energy
expertise with the broad capabilities of five nationally recognized,
regional universities: Carnegie Mellon University (CMU), Pennsylvania
State University (PSU), the University of Pittsburgh (Pitt), Virginia
Tech (VT), and West Virginia University (WVU).
Finally, NEIL forms collaborative partnerships with organizations
whose missions are compatible with DOE's. For example, NEIL, with the
Ground Water Protection Council (GWPC) and the Interstate Oil and Gas
Compact Commission, developed FracFocus, a landmark web-based national
registry for disclosing the chemical additives used in the hydraulic
fracturing process on a well-by-well basis. Similarly, NEIL has
coordinated with states through the GWPC to develop and maintain the
Risk-Based Data Management System (RBDMS). The GWPC with DOE support
has recently enhanced the RBDMS to track and record data related to
hydraulic fracturing treatments.
DOE'S HISTORICAL ROLE IN GAS SHALE RESEARCH
The DOE first began research into shale gas in the late 1970s when
fears of dwindling domestic natural gas supplies spurred researchers to
examine alternative sources of natural gas in unconventional reservoirs
such as Devonian shales, coals, and low permeability or ``tight''
sands. DOE recognized the need for research and development to
characterize these resources and developing ways to produce them.
During the period from 1977 through 1992, through a suite of three
programs focused on Eastern gas shales, Western gas sands, and methane
from coal beds, DOE helped develop and stimulate the deployment of
advanced exploration and production technologies for recovering new gas
supplies from unconventional gas resources by increasing per well gas
recovery efficiencies. NEIL employed a detailed resource
characterization and technology development approach that geologically
partitioned each natural gas resource and matched technology to geology
to chart a path for resource development. More than 25,000 feet of
oriented core and well log data from 35 cored shale wells provided the
basic rock and geologic data used to prepare the first, publicly
available estimates of technically recoverable gas from Devonian Shales
in West Virginia, Ohio, and Kentucky.
A couple of related and noteworthy milestones include:
In 1986, DOE collaborated with industry to mark the first
air-drilled 2000 foot long horizontal Devonian shale well in
the Appalachian Basin. This well also marked the first recovery
of core from a horizontal, air-drilled shale well and the first
successful use of external casing packers in an air-filled
wellbore, and was the first horizontal shale well to complete
seven individual hydraulically fractured intervals.
Early DOE leadership in the development of fracture
mapping--techniques for using seismic responses to identify the
orientation and extent of hydraulically created fractures. The
Department began support of fracture mapping as related to
geothermal resources and through a series of technology
advancements has become commercial with a number of companies
successfully mapping hydraulic fractures, including many in the
major shale gas plays.
SEAB 90 DAY REPORT
In March 2011, President Obama directed Energy Secretary Steven Chu
to form a subcommittee of his advisory board on natural gas to develop
recommendations to improve the safety and environmental performance of
hydraulic fracturing. The Subcommittee produced a 90-day report on
August 18, 2011, with 20 recommendations, and is scheduled to submit a
final report this month.
The recommendations support an approach that relies on increased
measurement, public disclosure, and continuous improvement. The
subcommittee specifically acknowledges the need for data-driven
processes with increased transparency and the development of industry-
wide ``best practices.''
In several cases, the Subcommittee recommended actions that DOE,
through NETL, has already begun or has been doing. For example, funding
for RBDMS, and to collect and publish emission data such as is being
done at the Marcellus shale Test Site. The Subcommittee also
recommended that state and Federal regulators develop an integrated
water management system; NETL has been supporting the development of a
planning and water management tool for several states, which could
serve as a building block for the referenced integrated system. In
addition, the Subcommittee recommended the continued funding and
expansion of FracFocus.
Within available funds, NEIL also has planned research related to
several topics highlighted by the Subcommittee: (1) basic research on
the relationship of fracturing and micro-seismic signaling, (2)
chemical interactions between fracturing fluids and shale, (3)
development of ``green'' drilling and fracturing fluids, and (4)
development of improved cement evaluation and tools for assuring casing
and cementing integrity.
DOE'S ``HOLISTIC'' APPROACH TO ENVIRONMENTAL RISK ASSESSMENT
The Marcellus Test Site is an example of the ``holistic'' approach
taken by the Department through NETL in the area of environmental
baselining and risk assessment and an example of effective research
coordination among federal agencies. NETL is leading a joint industry/
government research project to monitor key aspects of shale gas
development throughout its lifecycle. The research plan calls for one
year of comprehensive environmental monitoring, followed by the
drilling of two horizontal wells by Range Resources-Appalachia in July
2012 at a well pad site in southwestern Pennsylvania. Monitoring will
continue through road and pad construction, drilling, and hydraulic
fracturing, and for at least one year beyond the start up of subsequent
production operations. This research project has been selected as one
of the two ``prospective case studies'' for the U.S. Environmental
Protection Agency's ongoing study of the potential impact of hydraulic
fracturing on drinking water resources.
Comprehensive, scientifically acquired baseline environmental data
from a well site prior to drilling and fracturing have not been
rigorously acquired and analyzed. Pre-operation data are essential for
quantifying environmental impacts and for ascertaining what portion of
the post-development environmental footprint is due to current natural
gas development operations versus that which may be due to past energy
development activity or concurrent industrial, agricultural, or
recreational activities. Accordingly, these two prospective studies
will provide important reference points for discussions regarding the
need for further research and the development of regulatory policy at
both state and federal levels.
At the Marcellus Test Site, the NEIL lead team will be monitoring
groundwater and surface water quality, and air quality; conducting soil
gas surveys, hydraulic fracturing tracer studies, and electromagnetic
induction surveys to identify any possible migration of natural gas,
completion fluids, or production fluids. Quantifying potential risks
and providing sound, unbiased and transparent scientific data is an
important step in building a rationale, scientific approach to
sustainable resource development. A Marcellus Test Site summary, which
provides additional details of the research project, is being submitted
for the record.
SUMMARY
In summary, NETL has a technology development role in helping to
catalyze industry efforts to develop new technologies that can
significantly reduce the potential for environmental impacts and
improve the efficiency of gas production and in providing critical
support for nascent technology concepts that can help advance them
towards commercial development. NEIL also has a role in generating,
compiling, analyzing, and reporting data that can be used by regulators
to craft science-based regulations, and by industry and the public to
assess risks and accelerate decision making related to resource
development.
Responsible development of shale gas resources provides a
significant national opportunity for regional economic growth, not only
through drilling and production, but also along the entire natural gas
value chain, including natural gas liquids, ethane feedstock chemical
production, and natural gas-fired manufacturing processes. Increased
domestic natural gas supplies have the potential to provide a
significant source of transportation fuel, particularly for truck
fleets.
The role for NEIL is to support the realization of these
opportunities through solid science and objective data-generation and
analysis and effective efforts to accelerate the development of
technologies that can help optimize the way we produce our natural gas
resources in the most environmentally responsible manner possible.
Thank you for the opportunity to speak with you this morning. I
look forward to answering any questions that you may have.
Attachment.--DOE Leads Collaborative Effort to Quantify Environmental
Impacts of Shale Gas Development
DOE's National Energy Technology Laboratory (NETL) is leading a
joint industry/government research project monitor key aspects of shale
gas development throughout its lifecycle. The research plan calls for
one year of environmental monitoring before any development takes
place, followed by the drilling of two horizontal wells in July 2012 at
a Range Resources-Appalachia well pad site in southwestern
Pennsylvania. Monitoring will continue through road and pad
construction, drilling, and hydraulic fracturing, and for at least one
year of subsequent production operations. This research project has
been selected as one of the two ``prospective case studies'' for the
U.S. Environmental Protection Agency's (EPA) ongoing study of the
potential impact of hydraulic fracturing on drinking water resources.
As an important step in EPA's Congressionally mandated study, seven
sites were selected to help inform the assessment. These sites were
selected following input from the public, local and state officials,
industry, and environmental organizations and include five
``retrospective case studies'' that will examine areas where hydraulic
fracturing has already occurred to identify possible impacts to
drinking water resources. The two prospective sites include the NETL-
lead research project in southwestern Pennsylvania and a second
location in Louisiana's Haynesville Shale play.
The critical importance of the two prospective case studies cannot
be overstated. This is because comprehensive, scientifically acquired
baseline environmental data from a well site prior to drilling and
fracturing have not been rigorously acquired and analyzed. Pre-
operation data are essential for quantifying environmental impacts and
for ascertaining what portion of the post-development environmental
footprint is due to current natural gas development operations versus
that which may be due to past energy development activity or concurrent
industrial, agricultural, or recreational activities. Accordingly,
these two prospective studies will provide important reference points
for discussions regarding the need for further research and the
development of regulatory policy at both state and federal levels.
The NETL-lead Marcellus research effort is part of the laboratory's
unconventional fossil energy research program, a larger effort that is
focused on developing technologies that enable environmentally
sustainable development of oil and natural gas resources. NEIL will
monitor air quality and surface water quality at the Range Resources-
Appalachia site pre-and post-drilling to quantify the extent that these
vital resources are impacted by shale gas production. Further, NETL
will conduct soil gas surveys, hydraulic fracturing tracer studies, and
electromagnetic induction surveys to identify any possible migration of
natural gas, completion fluids, or production fluids.
A Range Resources-Appalachia well pad location in southwestern
Pennsylvania is the site for an EPA Prospective Case Study as part of a
NETL-led field based research initiative. NETL's Mobile Air Monitoring
Laboratory will be used to measure air quality.
NETL will deploy its mobile air emissions monitoring equipment at
the location to monitor up to 52 volatile organic compounds (VOC's),
ozone, sulfur dioxide, nitrous oxides, particulates, specific ions
(e.g., sulfate, chloride, bromide), and radon. Soil gas concentration
measurements are also an important part of site characterization,
because they can provide an indication of gas migration from depth even
before drilling or hydraulic fracturing has begun. Stable isotope
measurements are important for distinguishing between methane migrating
from a productive formation deep underground and biological and
atmospheric background methane concentrations.
NETL will also conduct surveys aimed at identifying improperly
abandoned natural gas and oil wells based on the magnetic response of
the buried remnants of well casing. This ``gas well archeology'' is
often the only way to locate old, unrecorded wells that can be the
source of communication between a shallow underground source of
drinking water (USDW) and historical producing formations. Such antique
wellbores should be located and properly plugged to address historical
methane migration problems.
In addition, NEIL will coordinate a larger research team with
specific tasks that includes the EPA and U.S. Geological Survey
(groundwater monitoring), the U.S. Fish and Wildlife Service (wildlife
acoustic monitoring), the U.S. Forest Service (landscape and soil
monitoring), the U.S. Army Corps. of Engineers (regional stream water
quality monitoring), the Pennsylvania State Department of Environmental
Protection (terrestrial and aquatic systems monitoring), and the
Pennsylvania Geological Survey (subsurface geologic monitoring).
This comprehensive, rigorously scientific collaborative effort
among federal and state agencies and a natural gas producing company
will provide valuable information that can be used to quantify the
potential risks of environmental impacts from hydraulic fracturing
during the development of shale gas resources. Quantifying potential
risks and providing sound, unbiased and transparent scientific data is
the first step towards building a rationale, scientific approach to
regulating sustainable resource development.
Senator Manchin. Thank you, Dr. Cugini.
Now from Mr. Capacasa.
STATEMENT OF JON CAPACASA, DIRECTOR, WATER PROTECTION DIVISION,
REGION 3, ENVIRONMENTAL PROTECTION AGENCY
Mr. Capacasa. Good morning, Senator Manchin and
Representatives Capito, Rahall and McKinley. I'm pleased to be
here today to discuss EPA's role in ensuring public health and
water quality are protected during shale gas extraction and
production.
As you requested Senator, just briefly. Our mission, EPA's
mission is to protect human health and the environment by
working to ensure all Americans are protected from significant
risks. At the core of our work is implementing some of the
national environmental laws that were passed by the Congress
for protecting air, water and land from pollution and making
sure they are effectively implemented. Most EPA programs are
managed by authorized States with oversight by EPA, but in some
cases EPA runs them directly.
I'd like to proceed then into the oral statement.
Senator Manchin. Yes, sir.
Mr. Capacasa. Natural gas can enhance our domestic energy
options, reduce our dependence on foreign supplies and serve as
a bridge fuel to renewable energy sources. While shale gas
holds the promise for an increased role in our energy future,
EPA believes it is imperative we access that resource in a way
that protects drinking water sources and surface waters. We
believe this important resource can be and must be extracted
responsibly and safely in a way that secures the benefit for
all. If improperly managed shale gas extraction may potentially
result in impacts to public health or our water resources.
If we look at water issues across the entire shale gas
production cycle they're--from water acquisition to waste water
treatment and disposal, some of impacts on water resources may
include stress on surface water and its uses and ground water
supplies from the withdrawal of large volumes of water for
drilling, the potential contamination of drinking water
aquifers resulting from faulty well construction, degraded
water quality due to challenges from--with managing and
disposing of contaminated waste waters where contaminates could
include organic chemicals, metals, salts and radionuclides.
The EPA has an important role to play along with the States
in protecting water resources and in working with our Federal
partners, our State partners to manage the benefits and risks
of shale gas production and particularly using best science and
technology available. To this end we're working with many
stakeholders including the oil and gas industry, the public
health community and the States to evaluate the potential
public health and water quality issues. These actions are
important pieces of the Administration's broader effort to
ensure natural gas production occurs in a safe and responsible
manner as laid out in the President's blueprint for a secure
water future--secure energy future, excuse me.
Highlighting some of our research focus as was just
mentioned at the direction of Congress the EPA launched a
research study last year to better understand the potential
impacts of hydraulic fracturing on drinking water resources. As
part of that study we've engaged thousands of Americans across
the country, who live in areas where this activity occurs. When
complete this peer reviewed research study will help us have a
better understanding of the potential impacts of hydraulic
fracturing on drinking water resources and the factors that
lead to risks while reducing some of the scientific
uncertainties about the impacts.
The draft study plan for this research study was reviewed
by the EPA's Science Advisory Board and finalized just on
November 3rd of this year. EPA plans to release 2 reports from
the study, one in 2012 on some of the preliminary case studies
that were done and some of the date that was collected and
another report in 2014 which will provide additional
information on the case studies that are being used and the
scientific results as well there.
With regard to our authorities in this area let me give you
some examples. While Congress specifically exempted selected
oil and gas production activities from several environmental
laws but a number of environmental protections continue to
apply. Under the Clean Water Act the National Pollution
Discharge Elimination System Program and the Drinking Water
Act's Underground Injection Control Program are examples of
authorities that States and EPA use to regulate certain oil and
gas production activities.
Under these authorities EPA has a number of activities
underway which I'd like to outline for you.
Under the Clean Water Act the EPA and authorized States
including West Virginia have the authority to regulate waste
water from oil and gas wells when they are discharged into
waters of the United States or if they are discharged into
sewer systems for publicly owned treatment works.
EPA produced a frequently asked questions document to
assist State and Federal permitting agencies within the
Marcellus region in how to address treatment and disposal of
waste waters.
In addition most recently as part of the effluent
guidelines planning process under the Clean Water Act, Section
304(m), EPA recently announced its intent to modify an existing
oil and gas pre-treatment standards to address proper waste
water disposal into treatment works.
Separately under the UIC program, the Underground Injection
Control Program, EPA is working to ensure permitting
requirements are made clear for when diesel fuel is used as
part of the process of the injection process. It's clarifying
for States the proper permitting for those wells when diesel
fuel is used.
We want to acknowledge the progress of West Virginia in
updating its regulations to accommodate Marcellus shale
drilling and fracturing operations. The West Virginia DEP filed
an emergency rule related to the regulation of horizontal
drilling in August of this year which will help protect water
quality and quantity.
EPA will continue to provide input as needed to help in
those processes through the appropriate State agencies.
In summary, EPA is committed to using its authorities
consistent with the law and best available science to protect
communities across the Nation from potential impacts to water
quality and public health associated with natural gas
production. Where we know problems exist, EPA will not hesitate
to protect Americans whose health may be at risk. We will
continue to work very closely and collaboratively with West
Virginia officials who are on the front lines of protecting
water resources and regulating natural gas production
activities.
Thank you for the opportunity to testify. I'd be happy to
address some questions.
[The prepared statement of Mr. Capacasa follows:]
Prepared Statement of Jon Capacasa, Director, Water Protection
Division, Region 3, Environmental Protection Agency
Good morning, Chairman Manchin and Representatives Capito, Rahall
and McKinley. I am pleased to be here today to discuss the EPA's role
in ensuring that public health and water quality are protected during
shale gas extraction and production activities.
Natural gas can enhance our domestic energy options, reduce our
dependence on foreign supplies, and serve as a bridge fuel to renewable
energy sources. If produced responsibly, shale gas has the potential to
help improve air quality, stabilize energy prices, and provide greater
certainty about future energy resources.
While shale gas holds promise for an increased role in our energy
future, the EPA believes it is imperative that we access this resource
in a way that protects drinking water sources and surface waters. As we
listened to citizens at public meetings across the country last year,
we heard the concerns many have for their families, their communities,
and their water resources. We also heard from citizens who expressed
how much their communities sorely need the income that could be gained
from shale gas production.
We believe that this important resource can be--and must be--
extracted responsibly and safely, in a way that secures its promise for
the benefit of all. If improperly managed, shale gas extraction and
production, including hydraulic fracturing, may potentially result in
impacts to public health or our water resources. If we look at water
issues across the entire shale gas extraction process, from water
acquisition to wastewater treatment and disposal, some of the impacts
on our water resources may include:
stress on surface water and its uses and groundwater
supplies from the withdrawal of large volumes of water used in
drilling and hydraulic fracturing;
potential contamination of drinking water aquifers resulting
from faulty well construction and completion;
compromised water quality due to challenges with managing
and disposing of contaminated wastewaters, known as flowback
and produced water, where contaminants could include organic
chemicals, metals, salts and radionuclides.
The EPA has an important role to play in protecting water resources
and in working with federal and state government partners to manage the
benefits and risks of shale gas production. We must effectively address
the potential impact of shale gas development on water resources using
the best science and technology. To this end, we are working with
stakeholders, including other federal s well as state agencies, the oil
and gas industry, and the public health community, to evaluate and
address the potential public health and water quality issues related to
shale gas extraction. These actions are important pieces of the
Administration's broader effort to ensure that natural gas production
occurs in a safe and responsible manner, as laid out in the President's
Blueprint for a Secure Energy Future. They are also consistent with the
Secretary of Energy Advisory Board's recently released recommendations
on steps to support the safe development of shale gas resources.
RESEARCH
At the direction of Congress, the EPA launched a study last year to
better understand the potential impacts of hydraulic fracturing on
drinking water resources. As part of this study, the EPA has engaged
thousands of Americans across the country who live in areas where
hydraulic fracturing is currently taking place. When complete, this
peer-reviewed research study will help us better understand potential
impacts of hydraulic fracturing on drinking water resources and the
factors that may lead to human exposure and risks, while reducing
scientific uncertainties about environmental impacts from those
processes.
As part of this effort, the EPA has used information gathered
during the many stakeholder outreach meetings the EPA held during
development of the study plan. The draft study plan was recently
reviewed by the EPA's Science Advisory Board and finalized on November
3, 2011. The EPA plans to release two reports, one in 2012 that will
summarize existing data, intermediate progress regarding retrospective
case studies, scenario modeling and laboratory studies; and one in 2014
that will provide additional scientific results on these topics and
report on prospective case studies and toxicological analyses.
EXAMPLES OF AUTHORITY TO PROTECT WATER RESOURCES
While Congress specifically exempted selected oil and gas
production activities from several environmental laws, a number of
environmental protections continue to apply. The National Pollutant
Discharge Elimination System (NPDES) program of the Clean Water Act
(CWA) and the Safe Drinking Water Act (SDWA)'s Underground Injection
Control (UIC) program are examples of authorities that states and EPA
use to regulate certain oil and gas production activities to protect
public health and water quality. Under these examples of authorities,
the EPA has a number of activities underway, which I would like to
outline for you. Additionally, it is important to also mention, Section
1431 of the SDWA empowers the EPA to take action to protect human
health from circumstances which may present an ``imminent and
substantial endangerment.''
EXAMPLES OF ACTIVITIES TO PROTECT WATER RESOURCES
Under the NPDES program of the CWA, the EPA and authorized states,
including West Virginia, have the authority to regulate wastewater from
oil and gas wells when they are discharged into waters of the United
States. In addition, discharges to publicly owned treatment works
(POTWs) must comply with applicable federal, state, and local
requirements. This year, the EPA produced a Frequently Asked Questions
(FAQ) document to assist state and federal permitting authorities
within the Marcellus Shale region in addressing treatment and disposal
of wastewater from shale gas extraction.\1\ The document covers oil and
gas extraction, centralized waste treatment, acceptance and
notification requirements for publicly owned treatment works,
pretreatment, and stormwater. The FAQs have assisted the EPA and state
personnel as we have worked with the regulated community to address
shale gas extraction wastewater.
---------------------------------------------------------------------------
\1\ This document is available at http://cfpub.epa.gov/npdes/
hydrofracturing.cfm
---------------------------------------------------------------------------
In addition, the EPA is developing guidance to help states address
water quality issues related to Centralized Waste Treatment Facilities
or POTWs that accept oil and gas wastewater. As part of its effluent
guidelines planning process under CWA section 304(m), the EPA recently
announced its intent to modify the oil and gas pretreatment standards
to address proper wastewater disposal into POTWs. Under SDWA's UIC
program, the EPA is working expeditiously to ensure the SDWA
programmatic requirements related to hydraulic fracturing when using
diesel fuels are implemented appropriately. The EPA is developing
guidance to provide information on permitting wells that inject diesel
fuels during hydraulic fracturing. With regard to flowback and produced
water, we are coordinating with our state and tribal UIC Program co-
regulators to ensure proper management of flowback and produced water
disposed of via underground injection.
The state of West Virginia has been making progress in updating its
regulations to accommodate Marcellus Shale drilling and fracturing
operations. The West Virginia Department of Environmental Protection
filed an emergency rule related to the regulation of horizontal
drilling in August of this year, which will help protect water quality
and quantity. The rule is in effect for 15 months. In addition, the
West Virginia Legislature continues to work on legislation that would
further regulate the industry. EPA is currently reviewing the emergency
rule as well as the progress of the draft bill and we intend to provide
comments to help inform the state process.
The EPA is committed to using its authorities, consistent with the
law and best available science, to protect communities across the
nation from potential impacts to water quality and public health
associated with natural gas production activities. Where we know
problems exist, the EPA will not hesitate to protect Americans whose
health may be at risk.
We will continue to work collaboratively with West Virginia
officials who are on the front lines of protecting water resources and
regulating natural gas production activities. By managing potential
environmental impacts and addressing public concerns, we are ensuring
that natural gas production proceeds in a responsible manner while
protecting public health and enhancing our domestic energy options. We
believe that as a nation, we can provide for the safe and responsible
development of this significant domestic energy resource whose use
brings a range of other important national security, environmental and
climate benefits.
Thank you for the opportunity to testify, I would be happy to
answer any questions.
Senator Manchin. Thank you, sir.
I would like to also say that we've been joined by
Congressman David McKinley. We want to thank him. He's been
gracious enough to say that he will not go into his opening
statements. He'll reserve that for his question period. Dave,
we want to thank you for coming and being here.
Also, I'd like to say that Senator Rockefeller is
represented very aptly by his State Director, Rocky Goodwin in
the back there, I think. Rocky, we appreciate you being here
and Senator Rockefeller's concern. He could not join me today
but he told me, you know, that he's very interested in the
outcome of these hearings.
So with that being said, we'll go to Dr. James Coleman.
STATEMENT OF JAMES L. COLEMAN, TASK LEADER, MARCELLUS SHALE GAS
RESOURCE ASSESSMENT, U.S. GEOLOGICAL SURVEY, DEPARTMENT OF THE
INTERIOR
Mr. Coleman. Thank you, Senator Manchin and Congressman
Rahall, Capito and McKinley, thank you for allowing this
opportunity to talk about what the U.S. Geological Survey's
work is in this vital area of natural resources.
The USGS has a long standing mission to understand the
natural hazards and the natural resources of the Earth and to
share that information and analysis with State and local
governments, private citizens and really anyone who is
interested in knowing more about the Earth.
Part of our work in doing so is captured in the statement
that I would like to read now.
Thank you again for the opportunity to discuss what the
U.S. Geological Survey's role in research relating to the
Marcellus shale. My testimony today will focus on USGS work in
studying, understanding and assessing domestic energy resources
and specifically our recent resource assessment of the
Marcellus shale.
I want to thank my colleagues here from DOE and EPA and
acknowledge the work that they're doing collaboratively with us
and other Federal agencies concerning the potential
environmental and human health issues associated with the
development of this significant shale gas resource.
USGS conducts scientific investigations and assessments of
geologically based energy resources including conventional
resources, oil, gas and coal, emerging resources such as gas
hydrates, underutilized resources such as geothermal energy and
unconventional resources including shale gas, shale oil, tight
gas, tight oil, coal bed methane and heavy oil.
The mission of the USGS energy resources program is to
understand the processes critical to the formation,
accumulation occurrence and alteration of geologically based
energy resources to conduct scientifically robust assessments
of these resources and to study the impact of energy resource
occurrence and/or production and use on both environmental and
human health. The results from these scientific studies are
used to evaluate the quality and the distribution of energy
resource accumulations and to assess the energy resource
potential of the Nation, exclusive of Federal offshore waters
and the petroleum resource potential of the world.
The results from these studies provide impartial, robust,
scientific information about energy resources that directly
supports the U.S. Department of Interior's mission protecting
and responsibly managing the Nation's natural resources. The
USGS information is used by policy and decisionmakers, land and
resource managers, other Federal and State agencies, the energy
industry, foreign governments, nongovernmental groups,
academia, other scientists and the public as a whole.
On August 23, 2011, the USGS released its new assessment of
the gas and natural gas liquid resources in the Marcellus shale
in the Appalachian Basin of the Eastern United States.
According to this assessment the USGS determined that the
Marcellus shale contains a mean of approximately 84 trillion
cubic feet of undiscovered, technically recoverable natural gas
and 3.4 billion barrels of undiscovered, technically
recoverable natural gas liquids.
These gas estimates are significantly more than the last
USGS assessment of the Marcellus shale in the Appalachian Basin
in 2002 which estimated a mean of about 2 trillion cubic feet
of gas and about .01 billion barrels of natural gas liquids
which is equivalent to 10 million barrels.
So you see there's a major increase in our assessment of
both of those 2 commodities.
The significant increase in the undiscovered, technically
recoverable resource is due to new geologic information,
engineering data and technological developments since the 2002
assessment.
These new assessments are for technically recoverable oil
and gas resources which are those quantities of oil and gas
producible using currently available technology in industry
practices regardless of economic or accessibility
considerations. As such these estimates include resources
beneath both onshore and offshore areas such as underneath Lake
Erie and beneath areas where accessibility may be limited by
policy and/or regulations. The Marcellus shale assessment
covers areas in Kentucky, Maryland, New York, Ohio,
Pennsylvania, Tennessee, Virginia and West Virginia.
The Marcellus is one of several existing and potential
shale gas reservoirs in the Appalachian Basin and other
petroleum basins in the United States. The Marcellus shale
extends over almost the entire State of West Virginia. The 3
assessment units known as AUs of the Marcellus are all present
in West Virginia.
The estimated mean volume of Marcellus undiscovered
resource potential for West Virginia calculates to
approximately 563 billion cubic feet of gas for the Western
margin Marcellus. That's in the Western portion of the State.
18,000 billion cubic feet of gas or 18 trillion cubic feet
of gas for the interior Marcellus and that's in the middle
portion of the State.
114 billion cubic feet of gas for the Foldbelt Marcellus in
the Eastern portion of the State.
This sums to a total mean resource volume of 18,677 billion
cubic feet of gas or approximately 18.7 trillion cubic feet of
gas, of natural gas, in West Virginia.
So in conclusion and in summation, the USGS oil and gas
resources assessment of 2011 for the Marcellus shale of the
Appalachian Basin concluded that undiscovered, technically
recoverable volumes range between 43 and 144 trillion cubic
feet of gas with a mean volume of 84.2. Of this amount West
Virginia has an areal allocation mean volume of approximately
18.7 TCF or trillion cubic feet or approximately 22 percent of
the total estimated resource.
Thank you for this opportunity to provide an overview of
the recent USGS resource assessment of the Marcellus shale. I
will be happy to answer your questions. Thank you.
[The prepared statement of Mr. Coleman follows:]
Prepared Statement of James L. Coleman, Task Leader, Marcellus Shale
Gas Resource Assessment, U.S. Geological Survey, Department of the
Interior
Mr. Chairman and Members of the Committee, thank you for the
opportunity to appear here today to discuss with you the U.S.
Geological Survey's role in research related to the Marcellus Shale. My
testimony today will focus on USGS work in studying, understanding, and
assessing domestic energy resources and, specifically, our recent
resource assessment of the Marcellus Shale. I understand the
Environmental Protection Agency is here today to discuss the potential
environmental and human health issues associated with the development
of this significant shale gas resource.
ROLE OF THE U.S. GEOLOGICAL SURVEY IN ENERGY RESOURCE ASSESSMENTS
The USGS conducts scientific investigations and assessments of
geologically based energy resources, including conventional resources
(oil, gas, and coal), emerging resources (gas hydrates), underutilized
resources (geothermal), and unconventional resources (shale gas, shale
oil, tight gas, tight oil, coalbed methane, and heavy oil). The USGS
also conducts research on the effects associated with energy resource
occurrence, production, and (or) utilization. The mission of the USGS
Energy Resources Program is: (1) to understand the processes critical
to the formation, accumulation, occurrence, and alteration of
geologically based energy resources; (2) to conduct scientifically
robust assessments of those resources; and (3) to study the impact of
energy resource occurrence and (or) production and use on both
environmental and human health. The results from these scientific
studies are used to evaluate the quality and distribution of energy
resource accumulations and to assess the energy resource potential of
the Nation (exclusive of Federal offshore waters) and the petroleum
resource potential of the world.
The results from these studies provide impartial, robust scientific
information about energy resources that directly supports the U.S.
Department of the Interior's (DOI's) mission of protecting and
responsibly managing the Nation's natural resources. USGS information
is used by policy and decision makers, land and resource managers,
other federal and state agencies, the energy industry, foreign
governments, nongovernmental groups, academia, other scientists, and
the public.
It is important to note the distinction between the terms
``resource'' and ``reserves.'' Resource is a concentration of naturally
occurring solid, liquid, or gaseous hydrocarbons in the Earth's crust,
some of which is, or potentially is, technically and (or) economically
extractable. Reserves specifically refer to the estimated quantities of
identified (discovered) petroleum resources that, as of a specified
date, are expected to be commercially recovered from known
accumulations under prevailing economic conditions, operating
practices, and government regulations. Primarily, the USGS conducts
assessments of undiscovered, technically recoverable oil and gas
resources. The USGS also conducts select assessments of economically
recoverable resources. These resources include coal in various basins
of the United States and oil and gas in frontier areas such as Arctic
Alaska. Economically recoverable resources are a subset of technically
recoverable resources and are generally less than the technically
recoverable amount.
2011 USGS MARCELLUS GAS SHALE ASSESSMENT
On August 23, 2011, the USGS released its new assessment (http://
pubs.usgs.gov/fs/2011/3092/) of gas and natural gas liquid resources in
the Marcellus Shale in the Appalachian Basin of the Eastern United
States. According to this assessment, the USGS determined that the
Marcellus Shale contains a mean of approximately 84 trillion cubic feet
(TCF) of undiscovered, technically recoverable natural gas and 3.4
billion barrels of undiscovered, technically recoverable natural gas
liquids. These gas estimates are significantly more than the last USGS
assessment of the Marcellus Shale in the Appalachian Basin in 2002
(http://pubs.usgs.gov/fs/fs-009-03/), which estimated a mean of about 2
TCF of gas and 0.01 billion barrels of natural gas liquids. The
significant increase in the undiscovered, technically recoverable
resource is due to new geologic information, engineering data, and
technological developments since the 2002 assessment. This Marcellus
Shale estimate is of unconventional (or continuous-type) gas resources,
and significant technological developments in producing unconventional
resources have been made in the last decade.
Since the 1930's, almost every well drilled through the Marcellus
found noticeable quantities of natural gas. However, in late 2004, the
Marcellus was recognized as a potential reservoir rock, instead of just
a regional source rock, meaning that the gas could be produced from it.
Improvements in drilling and completion engineering resulted in
commercially viable gas production and the rapid development of a
major, new continuous natural gas and natural gas liquids play in the
Appalachian Basin, the oldest producing petroleum province in the
United States.
This USGS assessment is an estimate of continuous gas and natural
gas liquid accumulations in the Middle Devonian Marcellus Shale of the
Appalachian Basin. The estimate of undiscovered natural gas ranges from
43.0 to 144.1 TCF (95 percent to 5 percent probability, respectively),
and the estimate of natural gas liquids ranges from 1.6 to 6.2 billion
barrels (95 percent to 5 percent probability, respectively). There are
no conventional petroleum resources assessed in the Marcellus Shale of
the Appalachian Basin.
These new estimates are for technically recoverable oil and gas
resources, which are those quantities of oil and gas producible using
currently available technology and industry practices, regardless of
economic or accessibility considerations. As such, these estimates
include resources beneath both onshore and offshore areas (such as Lake
Erie) and beneath areas where accessibility may be limited by policy
and (or) regulations.
The Marcellus Shale assessment covers areas in Kentucky, Maryland,
New York, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.
The Marcellus is one of several existing and potential shale gas
reservoirs in the Appalachian Basin. In West Virginia and other states,
operators may co-mingle production from one or more of these shale gas
reservoirs with their Marcellus production. The USGS assessed the
resource potential of the Marcellus only and did not include an
assessment of potential future contributions from these other, co-
mingled reservoirs.
The USGS worked with the Pennsylvania Geological Survey, the West
Virginia Geological and Economic Survey, the Ohio Geological Survey,
and representatives from the oil and gas industry and academia to
develop an improved geologic understanding of the Marcellus Shale. The
USGS Marcellus Shale assessment was undertaken as part of a nationwide
project assessing domestic petroleum basins using standardized
methodology and protocol.
THE MARCELLUS GAS SHALE IN WEST VIRGINIA
The USGS assessment process examines petroleum basins and
assessment units (AU's), based on geologic features, not specific
states. Assessment units are mappable areas with common geologic
traits. The Marcellus Shale extends over almost the entire state of
West Virginia. The three assessment units of the Marcellus Shale are
all present in West Virginia as follows: the Western Margin Marcellus
Assessment Unit (27% of area), the Interior Marcellus Assessment Unit
(22% of area), and the Foldbelt Marcellus Assessment Unit (15% of
area). By applying the allocated areal percentages for each of the
AU's, the estimated mean value of Marcellus undiscovered resource
potential for West Virginia calculates at approximately 563 billion
cubic feet of gas (BCFG) for the Western Margin Marcellus AU; 18,000
BCFG for the Interior Marcellus AU; and 114 BCFG for the Foldbelt
Marcellus AU, and thus a total mean resource of 18,677 BCFG or a little
more than 18+ TCF of natural gas in West Virginia.
CONCLUSION
The USGS oil and gas resource assessment of 2011 for the Marcellus
Shale of the Appalachian Basin concluded that undiscovered, technically
recoverable volumes range between 43.0 and 144.1 TCF, with a mean value
of 84.2 TCF. Of this amount, West Virginia has an areal allocation mean
value of approximately 18.7 TCF, or approximately 22% of the total
estimated resource.
Thank you for this opportunity to provide an overview of the recent
USGS resource assessments of the Marcellus Shale. I would be happy to
answer your questions.
Senator Manchin. Let me thank each one of you for your
testimony. Also we have some visuals up here that gives you a
little bit of an idea of the drilling that's been going on and
the permitting that's been requested and required and what
we're going through right here. So we'll have those for your
viewing at any time.
So I want to thank you all. I'd like to start some
questions for our witnesses. I will start, followed by
Congressman Rahall, then Congresswoman Capito, then Congressman
McKinley. We will be limited to 3 minutes per member. There's
some extra time built in for maybe a possible second round of
questions with each member able to ask one more question.
So with that I would like to start.
Dr. Cugini, I will just basically ask you, can you describe
the interactions you've had with State and Federal regulators
in helping to shape the factual science based regulations?
Mr. Cugini. Yes, as I said our role really is not one of
regulation but providing data and technology. We've been
working very closely with groups like the EPA, USGS and others
to develop the data and understanding of the resource available
to us as well as providing information, as we said, through
FracFocus and the risk based data management system to allow
information sharing and knowledge of what are the best
practices that could be applied.
Senator Manchin. Have you been involved with the State and
Federal?
Mr. Cugini. Yes, sir.
Senator Manchin. So you have been sharing information?
Mr. Cugini. Yes, sir.
Senator Manchin. Also has anyone in NETL participated in
the review of the emergency rules that are in place for West
Virginia?
Dr. Cugini. I have to admit, sir, I'm not 100 percent sure,
but I can get back to you on that question.
Senator Manchin. If you would I'd appreciate it.
Dr. Cugini. Sure.
Senator Manchin. Also, Mr. Capacasa, do you have an opinion
of our emergency rules in West Virginia that we have in place
now?
Mr. Capacasa. I know we provided some informal comments
behind the scene. It's a great step forward. Obviously I
understand that it talks about water withdrawals and certain
siting requirements. I believe they expire in 15 months. So
certainly it would be good to build upon that and pull out a
framework for the future. It's a good start.
Senator Manchin. There seems to be a nexus between, Dr.
Cugini, NETL and EPA. Are you all sharing information to come
to a unified conclusion of what needs to be done?
Mr. Cugini. Technology wise, sir?
Senator Manchin. Yes.
Mr. Cugini. I know we're very interested in, our staff,
sir, are in communication frequently, very interested in
sponsoring with the Department of Energy, kind of a technology
forum in the next year or 2 to really make sure the best
practices in this industry are shared with all operators.
Senator Manchin. You can see where our State regulators
might get confused. They're hearing from NETL doing one set of
research and findings, EPA doing another and no one seems to be
on the same page. It really is only going to be cured if your 2
agencies are working as one.
Dr. Cugini, what's your opinion on it?
Mr. Cugini. I think as Mr. Capacasa said, we've been
sharing information quite a bit. We've been trying to provide
those kinds of information as we go into the future. We will
very likely hold joint workshops to share even further to make
sure our technologies are dovetailing together.
Senator Manchin. Mr. Capacasa, you mentioned that your
agency will not complete your EPA studies until 2012 and 2014?
In the absence of those studies and baseline data what
would you recommend to communities where shale gas development
is occurring? Is it safe? Should we continue? Do we have enough
safeguards in place?
Mr. Capacasa. I think that this is rapidly evolving
industry, rapidly growing industry and States are moving,
stepping up to the plate and putting requirements in place.
They, obviously, as you mentioned, the oil and gas industry has
been with us for over 100 years. I think this is kind of an
unconventional industry now with shale gas and needs some new
controls.
I think the States are doing a very laudable job enhancing
the regulatory framework to meet the challenge, but clearly
there's a role for communities to be involved and engaged and
providing input to the States and EPA about the regulatory
framework.
Senator Manchin. My time is up. I want to thank you for
that. Now I will go to Representative Rahall.
Mr. Rahall. Thank you, Senator Manchin.
Let me thank all of you for your testimony, of course.
Mr. Coleman, just as in an effort to learn a little more
about the geological formation of Marcellus shale in West
Virginia, there are different types of rock, are there?
Mr. Coleman. Yes, sir.
Mr. Rahall. Maybe I'm wrong.
Mr. Coleman. There are basically 2 types of rock within the
Marcellus shale. There's a shale rock made up mostly of mud.
There's a limestone rock made mostly of limestone. You're
probably familiar with both of those. They're quite common in
West Virginia.
Mr. Rahall. What is the karst rock formation?
Mr. Coleman. I'm sorry, the kurst?
Mr. Rahall. Karst. Karst.
Mr. Coleman. Karst. Oh, I'm sorry.
Mr. Rahall. Oh, that's right. I'm sorry.
Mr. Coleman. Karst is not really a rock, but it's a type of
formation that occurs when ground water percolates or bubbles
through limestone when it's near the surface. It creates
caverns. It creates large openings within that rock as it's
dissolved and the limestone is removed by water percolation.
Mr. Rahall. Rather common?
Mr. Coleman. It's very common say in the Great Valley area
of West Virginia and Virginia.
Mr. Rahall. I'm sorry, which valley?
Mr. Coleman. The Great Valley, the Shenandoah Valley, the
Great Valley of West Virginia over in the Eastern part of the
State and in other areas where there's limestone near the
surface. It is not a common phenomenon in areas where the
Marcellus is near the surface.
Mr. Rahall. The reason I ask that because there has been
concern expressed by some in the counties to which you
referenced in the southern part of the State. They're saying
that that type of karst rock formation should prevent any
fracking procedures from occurring in that region. Would you
have a comment on that?
Mr. Coleman. Karst occurs, like I say, very near the
surface within certainly a few hundred feet of the surface.
Most Marcellus drilling will be done at several thousand feet
below the surface. Now there's always a concern in areas that
karst has developed, lots of aquifers, ground water supplies
come out of karst aquifers.
But the Marcellus is at a depth much greater than the karst
features in West Virginia, so I'm a little uncertain as to what
the real question is about the concern about karst and
Marcellus drilling.
Mr. Rahall. I think they are worried that the chemical
ladened drilling waters will infect the wells or underground
water that finds its way into local waterways. So that's the
main concern I'm hearing from them.
Mr. Coleman. I think that's a proper concern. But then lots
of material at the surface could go into these karst aquifers.
Just motor oil from changing your oil in your car, you know,
it's lots of things that could infiltrate karst features near
the surface.
But and for that matter, you know, any type of industrial
or agricultural, chemical could get into the karst, sir.
Mr. Rahall. Thank you.
Mr. Coleman. It becomes very difficult to clean up.
Mr. Rahall. Thank you. Thank you, Senator.
Senator Manchin. Thank you, Congressman.
Congresswoman Capito.
Ms. Capito. Thank you.
Mr. Coleman, you described in your testimony, the
assessment of how much is in the Marcellus shale. But there
have been some talk that maybe the projections by some of those
in the natural gas industry have been inflated. I don't have a
perspective.
You said it's much greater than your last report. How would
you respond to that comment?
Mr. Coleman. All the data that went into our assessment is
publicly available data. The State of West Virginia provided
data on its wells, Pennsylvania, Ohio and New York. So we
operate with public data only. We do not have access to any of
the private data that you may be alluding to that would have to
say there's higher estimates there.
It is a real concern that we provide a very scientifically
robust assessment using public data. So that's what we've
attempted to do. I really have no information to say, to
comment, on your point.
Ms. Capito. Thank you.
Let me ask you another. I know we're talking Marcellus, but
we're hearing a lot about the Utica now. Is that supposed to be
a larger find there?
Mr. Coleman. The Utica is a formation that lies beneath the
Marcellus as much as several thousand feet. It extends much
over the same area that the Marcellus extends. Its total
petroleum potential has not been assessed by the USGS.
Ms. Capito. OK.
Mr. Coleman. But it's certainly a potential reservoir of
concern because of its apparent potential.
Ms. Capito. Do you share data then with the EPA is that a
pretty common relationship that you all have together--science?
Mr. Coleman. We're appropriate in where the--nexus if you
will of energy and water come together, we try to share data as
well as with NETL and some of the research work that's going on
at the Marcellus test site. That's probably where we're sharing
the most data with regard to the Marcellus.
Ms. Capito. Let me ask you, Mr. Capacasa, are there any
documented cases where fracking fluid has actually gotten into
publicly treated water or public water supplies?
Mr. Capacasa. By public water supply you mean like a
municipal?
Ms. Capito. Yes.
Mr. Capacasa. I'm not aware of any of those but EPA, along
with the States are currently assessing some situations where
there are contaminants of interest, if you will, in private
drinking water supplies. We haven't been able to make any
conclusions yet of a connection. But it certainly deserves more
inquiry and assessment because we've gotten a number of
complaints. I'm sure the States have gotten a number of
complaints.
But it really requires a lot of scientific rigor to
conclude that one activity affected the other. Some of those
analyses are still underway in various places around the
country.
Ms. Capito. Let me ask you this. If the State of West
Virginia and I know we've talked a lot about the legislatures
working on this now. We're going to have testimony here and
I've run out of time.
But my comment is--and maybe this will come up in some of
the further testimony. The question is if the State of West
Virginia does not legislate in this area does the EPA then come
in and regulate in the absence of that legislation?
Mr. Capacasa. No, I think that the actual drilling activity
is exempted from Federal law. So you will not see EPA issuing
drilling permits in the Marcellus area. It's exempted from
Federal law so I don't think there's any risk of that
happening.
Ms. Capito. Alright. Thank you.
Senator Manchin. Thank you, Congresswoman.
Mr. McKinley. Thank you, Senator. Thank you for the
opportunity to participate in this. I'm one of--I'm the new
member in Congress. I'm one of just 2 engineers in Congress. So
it makes it very interesting to debate and get involved in
these subjects.
One of the first things we did was found the Marcellus
shale, co-found the Marcellus shale caucus in the House so we
could address this issue and much of what we're talking about
here today.
But my question, if I could, Dr. Cugini. You and I have
discussed previously and when we've met with WVU and you and
your staff about ways of increasing the production from the
Marcellus. Currently we're getting about 25 percent out of--or
less than 25 percent out of any fracking operation. So it's
looking for additional research to be able to get that if we're
going to go to the expense of doing that.
In addition to that question I'd like for you to tell me a
little bit more of what you just heard from Mr. Capacasa about
the drilling operation. Is NETL doing research in finding ways
to prevent any cross contamination from the fracking compound?
Mr. Cugini. Thank you.
Mr. McKinley. Both questions, please.
Mr. Cugini [continuing]. Representative McKinley.
Let me start with the second part. As part of the research
undertaken by NETL we have a comprehensive portfolio of
activities that are in place to address this very issue. We're
looking at really a lot of the water issues in characterizing
baseline environmental signals at the Marcellus test site.
So the opportunity really presents itself there to look at
those potential issues. Really the Marcellus test site gives us
a really understanding and a good baseline activity for looking
at that opportunity. We're also looking at things like fluid
gas rock interactions and other types of activities. So looking
at the technology associated with these types of issues we're
really looking at those kinds of research opportunities.
Most of the research today, I will freely admit, is really
targeting toward the environmental and safety issues. But there
may be opportunity for looking at opportunities for further
developing and enhancing drilling operations. While there's a
little bit of work in that area, I would say the main focus is
really looking at things like the environmental impact at this
point in time.
Mr. McKinley. I know that the President's budget had a
reduction in funding for NETL. Is that going to have an impact
or are there ways that we can help you restore some funding so
that you can continue to do the proper research?
Mr. Cugini. I guess I'll speak as a lab director. We can
always ask for more funds. I think every national lab director
would always ask for more funds.
But we feel pretty comfortable that our current budget
allows us to meet the priorities of both the Department and the
Office of Fossil Energy. Additional information about future
levels of funding I think will really likely be announced in
the context of the 2013 budget. I think there's some
opportunities there looking.
I also believe in some of the 2012 appropriations that are
underway. There's discussions about looking at funding
opportunities.
Mr. McKinley. Thank you. My time is expired.
Senator Manchin. We have time for one question from each of
us up here to you all. So I'll start by asking the question and
all 3 of you can chime in. But let's start with Mr. Capacasa.
As a Federal regulator for the region, I know you're out of
the Philadelphia area. We have other States involved now with
New York, Pennsylvania, everyone is taking a little different
direction on this. How do you think we, as a State, as West
Virginia is doing?
My concern is primacy. I think I've spoken to you all about
that. I would like to see the States be able to maintain their
primacy. But I'd like for all of you all to come together on a
set of rules and regulations you think is needed, is reasonable
and obtainable.
Then if we don't do our job, that's when I believe that,
the EPA has the right to move, if they will. So I'm asking how
do you believe that we, as a State, are doing with the
emergency rules that we've done and also the efforts. We're
going to hear from our second panel in just a minute. So if any
of 3 of you could comment on that and hopefully you are working
together on this.
Mr. Capacasa. I certainly want to commend the State, West
Virginia DEP for getting out front and dealing with the waste
water disposal issues that were----
Senator Manchin. How does that rank with what Pennsylvania
is doing?
Mr. Capacasa. We spent--EPA has spent a lot of time in
Pennsylvania because of some issues. Let's put it that way. We
weren't quite sure where we----
Senator Manchin. Are we ahead of the curve on that one?
Mr. Capacasa. We're ahead of the curve.
Senator Manchin. OK.
Mr. Capacasa. Ahead of the curve, I think emergency rules
dealing with the water withdrawals and I think one area I would
encourage the State to spend some time in is the actual siting
of well pads where we're seeing some situations where well pads
are in the stream bank, roads are in the stream bank. I think
spending some time on proper siting to avoid the stream, a
stream, would be very important.
But the emergency rules are a great step. I think obviously
you want to continue to enhance that.
Senator Manchin. Do you all set the rules or oversee
basically how the well is drilled to make sure it's safe, the
safety precautions are being taken so that aquifers and the
things that the Congress, all of us, have had concerns about
are not breached?
Mr. Capacasa. EPA has casing its many requirements in our
underground injection control program but those regulations
don't apply directly to this drilling operation. But there's
certainly a reference to be used for the proper casing of
wells.
Senator Manchin. We'll be asking the same questions to our
State panels too, but that's something you would work with them
on?
Mr. Capacasa. Exactly. We often convene a lot of the State
and interstate organizations to share best practices and
lessons learned.
Senator Manchin. Do you have a thought? Are you able to
give us your thought process on primacy?
Mr. Capacasa. The national environmental laws really are
designed for the States to run them, the States to be
authorizing. West Virginia is authorized for the Clean Water
Act, the Drinking Water Act and we--the expectation is that you
will, the State, will run those programs directly with our
oversight.
Senator Manchin. Either one of you? Dr. Coleman or?
Mr. Cugini. The only thing I would add to that is the SEAB
report, the Secretary Energy Advisory Board, really kind of
supports your kind of comment and highly supports sharing of
information and best practices. So I think this is something
that really we're all working and endeavoring to do.
Senator Manchin. Dr. Coleman.
Mr. Coleman. My point is exactly that. We're cooperating
with these agencies through the SEAB process and contributing
our appropriate sharing.
Senator Manchin. What happens if you all don't agree?
Mr. Coleman. I think we've agreed to agree. It's just what
level of agreement is necessary I don't know. It's a progress
report.
Senator Manchin. It's kind of hard for State to follow a
pattern if you 3 are going different directions.
OK, I'm sorry, my time is up.
Congressman Rahall.
Mr. Rahall. Thank you, Senator Manchin. Excuse me.
As we all know in West Virginia all hydraulic fracking/
fracturing companies are required to list the chemicals they
use for fracking on these drilling permits. However, the
proportions that each company uses remains proprietary
information. Do you have an opinion on rather those proportions
should be released in an effort to allow States to better
identify leaks and waste water treatment facilities to treat
those leaks if they knew what proportions of particular
chemicals were in the water?
Mr. Cugini. I'll start off by just again referencing this
SEAB report. That is one of the recommendations. I think
industry has made a lot of progress in that area. So I think
that's something that was a strong recommendation on the SEAB
report.
Mr. Capacasa. Certainly we would endorse as much
transparency as possible in the permitting processes and in the
operations. Whenever we get information from the companies
about the constituents of the frack water, it's posted on our
website pretty regularly.
Mr. Coleman. We are in the process of looking at samples
that we've collected from these sites. It would be very helpful
if we had what went into the ground so we can compare it with
what we're getting coming out of the ground.
Mr. Rahall. OK. Thank you.
Senator Manchin. Thank you.
Congresswoman Capito.
Ms. Capito. Quick question. When you talk a lot about the
hope that we could secure a cracker here in our State or 2 or 3
or 4 or 5 and I'm curious about the transportation of the
resource to these particular plants. Is that an aging
infrastructure? Is that something that you all oversee in terms
of the safety aspects of it--if you have an opinion on it?
Mr. Capacasa. Certainly pipeline safety and pipeline
integrity is very critical to protecting our environment. I
know there are a couple other Federal agencies dealing with
that issue. There's a Federal Pipeline Safety Administration,
etcetera, and perhaps FERC has a role there. But it's not
something that comes under our purview, but if you have any
questions, I would be glad to follow up on them.
Ms. Capito. Alright. Does anybody else have a comment?
Mr. Cugini. That doesn't fall under our purview. But the
notion of these crackers is very valuable to the State.
Ms. Capito. Thank you.
Senator Manchin. Thank you, Congressman.
Congressman McKinley.
Mr. McKinley. Thank you, again.
One of the things that we've heard in our hearings in
Energy and Commerce in the House and also in our caucus has
been the issue of primacy whether its State or Federal. We've
listened very intently with what's happened in New York and
Pennsylvania. I understand there's quite an issue there that
they're fighting against the EPA over primacy.
So my question is who is going to set the standards? In
this Constitution, in the tenth amendment, I'm just asking from
the EPA. Where would we find in here, under the EPA, in the
Constitution, does it have that provision that it would take
primacy over addressing and coming up with the standards over
the State? Can you share your opinion on that?
If you answered it before, I'm sorry. I didn't hear it.
Mr. Capacasa. I'm sorry.
Representative, we're--you know, primacy is embedded in the
national environmental laws. The national environmental law is
really intended for the States to run them and be authorized.
You mentioned Pennsylvania. Pennsylvania doesn't have pre-
treatment primacy nor underground injection control primacy
whereas West Virginia has the full suite of Federal delegated
programs.
So we very much feel the States are out front on this
issue. EPA has limited authorities to deal with the actual
drilling of a Marcellus well. So I don't think you have any--
there's no real concern with regard to us taking primacy for
the well drilling. We've been exempted from that role.
Mr. McKinley. What about through the fracking then, the
whole operation?
Mr. Capacasa. Obviously, you know, there are many
operations that can impact on the environment including surface
activities. So there are Clean Water Act authorities, Drinking
Water Act authorities that come to play. But again, the States
are authorized to be the primary primacy agent there with our
oversight. The laws envision some continuing--
Mr. McKinley. So is your conclusion then that the DEP is
capable of doing this without your taking over?
Mr. Capacasa. We're very confident in their abilities. I
think it's important for us to maintain an ongoing oversight as
well.
Mr. McKinley. Thank you.
Senator Manchin. Let me just say I want to thank all of you
for your testimony today. I want you to know that you are free
to go at this time. I hope that you will stay and listen to the
other, if you have time. We appreciate it. You're free to go.
What we're going to do is welcome our second panel and
introduce our expert witnesses. I'd like to start with that at
this time.
We have Mr. Kurt Dettinger is General Counsel for Governor
Tomblin. Glad to have him here.
Mr. Randy Huffman, Cabinet Secretary of the West Virginia
Department of Environmental Protection.
Also we have with us our Legislative Representatives and
Co-chairs, Mr. Tim Manchin, Delegate from the West Virginia
House of Delegates.
Mr. Doug Facemire, State Senator of District 12 in the West
Virginia State Senate.
Thank all of you for being here.
You each will have 5 minutes to give your oral remarks.
Mr. Dettinger, if you could get the panel started, we'd
appreciate it.
STATEMENT OF G. KURT DETTINGER, GENERAL COUNSEL, OFFICE OF THE
GOVERNOR, CHARLESTON, WV
Mr. Dettinger. Thank you. My name is Kurt Dettinger and I'm
General Counsel to Governor Earl Ray Tomblin. I'd like to thank
Senator Manchin and Representatives Rahall, Capito and McKinley
for inviting me to this hearing this morning. I'm honored to
deliver testimony on behalf of the Governor.
West Virginia has always emphasized its natural resource
industries as important and valuable assets to its citizens.
Our coal miners have a long history of supplying the energy
that powers our great Nation. Governor Tomblin is confident
that West Virginia energy will play a prominent role in leading
America out of its current economic doldrums.
Traditionally the coal industry has been the backbone of
West Virginia's energy portfolio and has been a key component
in our economy. Recently, however, West Virginia's energy
portfolio has expanded due to production of natural gas in the
Marcellus shale. With the advancement of drilling technologies,
unconventional gas reserves such as the Marcellus shale are
being developed in West Virginia. As a result of the discovery
of these reserves and advances in drilling technology, West
Virginia natural gas has the potential to play a vital role in
achieving energy independence in the United States.
Development of shale gas plays like the Marcellus presents
tremendous economic opportunities for West Virginia. We must
seize upon these opportunities and we must do so in a manner
that ensures that our children and grandchildren will be able
to enjoy our majestic mountains, precious streams and rivers
and bountiful wildlife for generations to come. In other words,
we, as policymakers must strike an appropriate balance between
embracing and promoting growth in our burgeoning natural gas
industry in protecting the environment and our most important
asset, our citizens.
Over the past year, Governor Tomblin has done just that.
First, by issuing an executive order number 1-11 Governor
Tomblin formed the West Virginia Marcellus to Manufacturing
Task Force to position West Virginia to attract ethane cracker
investments to our State. The task force has made significant
progress in its work to provide Governor Tomblin and his
administration with the information and tools necessary to
competitively recruit and negotiate with international
petrochemical companies interested in building ethane crackers
in our region.
The economic development opportunities presented by
crackers are astounding. For example, construction of a single
cracker is projected to create up to 10,000 construction jobs
and between 500 and 1,000 permanent operational jobs depending
on the size of the cracker. Capital investment with
construction of a cracker is likely to exceed $2 billion.
Furthermore, according to the American Chemical--Chemistry
Council, as Senator Manchin mentioned, if a cracker is
constructed in West Virginia an additional $3.2 billion would
likely be invested in downstream chemical facilities which is
projected to translate into approximately $7 billion of
additional chemical industry output and 12,000 new jobs. These
opportunities are indeed stunning. They represent
transformational opportunities for West Virginia to rejuvenate
and revitalize our chemical manufacturing industry.
Governor Tomblin and his Administration maintain regular
contact with petrochemical investors and are doing everything
possible to attract these investments to West Virginia.
Shortly after forming the task force, Governor Tomblin also
recognized the need to adopt additional environmental
regulatory rules governing Marcellus shale production and to
create regulatory certainty within the West Virginia natural
gas industry. Our citizens deserve to know that their
government is responsibly regulating Marcellus shale
production. Likewise, companies investing hundreds of millions
of dollars in natural gas drilling programs also deserve to
know the rules by which they must operate and that these rules
will be consistently applied after their investments are made.
Accordingly Governor Tomblin issued executive order number
4-11 this past summer ordering the West Virginia Department of
Environmental Protection to promulgate additional rules
governing the development of the Marcellus shale. Unlike the
United States Environmental Protection Agency's regulatory
approach to coal mining, Governor Tomblin's emergency rules
were not punitive. Rather Governor Tomblin's emergency
Marcellus rules were tailored to address legitimate
environmental concerns and were premised on objective
scientific goals.
Now that these rules are in place Governor Tomblin looks
forward to working with the West Virginia legislature over the
coming weeks, months and years to pass comprehensive Marcellus
shale regulatory legislation that enjoys broad support from
leadership in both Houses of the legislature. The West Virginia
Department of Environmental Protection, the natural gas
industry and other affected stakeholders including the
environmental community, surface centers, mineral owners, the
Farm Bureau, local government and others. No one party will
unduly suffer at the expense of another and no one interest
group, no matter how vocal, will dictate the policy of the
State of West Virginia.
To close, Governor Tomblin will continue down the path that
he started nearly a year ago. A path that will seek to maximize
the economic opportunities presented by development of the
Marcellus shale while at the same time taking the necessary
steps to ensure that West Virginians and our environment are
protected by reasonable regulations that require natural gas
producers to responsibly develop our natural gas reserves.
Thank you for the opportunity to present today.
[The prepared statement of Mr. Dettinger follows:]
Prepared Statement of G. Kurt Dettinger, General Counsel, Office of the
Governor, Charleston, WV
Good morning. My name is Kurt Dettinger and I am Governor Earl Ray
Tomblin's General Counsel. I am honored to appear before this Committee
and offer testimony on behalf of the Governor, who regretfully is
unable to participate in today's hearing.
West Virginia has always emphasized its natural resource industries
as important and valuable assets to its citizens. Our coal miners have
a long history of supplying the energy that powers our great nation.
Governor Tomblin is confident that West Virginia energy will play a
prominent role in leading America out of its current economic doldrums.
Traditionally, the coal industry has been the backbone of West
Virginia's energy portfolio and has been a key component in our
economy. Recently, however, West Virginia's energy portfolio has
expanded due to production of natural gas from the Marcellus Shale.
With the advancement of drilling technologies, unconventional gas
reserves, such as the Marcellus Shale, are being developed in West
Virginia, throughout the Appalachian Basin and across the United
States. As a result of the discovery of these reserves and advances in
drilling technology, West Virginia natural gas has the potential to
play a vital role in achieving energy independence in the United
States.
Development of shale gas plays, like the Marcellus, presents
tremendous economic opportunities for West Virginia and other states.
We must seize upon these opportunities. We must do so in a manner that
ensures that our children and grandchildren will be able to enjoy our
majestic mountains, precious streams and rivers and bountiful wildlife
for generations to come. In other words, we, as policy makers, must
strike an appropriate balance between embracing and promoting growth in
our burgeoning natural gas industry and protecting the environment and
our most important asset--our citizens.
Over the past year, Governor Tomblin has done just that. By issuing
Executive Order No. 1-11 and Executive Order No. 4-11, Governor Tomblin
has taken bold steps to promote value-added economic opportunities
derived from the liquids-rich Marcellus Shale gas and to require the
West Virginia Department of Environmental Protection to promulgate
emergency regulatory rules pertaining to Marcellus Shale production.
I will examine each order in turn. First, by issuing Executive
Order No. 1-11, Governor Tomblin formed the West Virginia Marcellus to
Manufacturing Task Force (the ``Task Force''). The primary goal of the
Task Force is to position West Virginia to attract ethane cracker
investments within our borders. The Task Force is comprised of natural
gas production and transportation executives, chemical manufacturing
executives, organized labor interests, intermodal transportation
experts, environmental advocates and economic development
professionals. The Task Force has made significant progress and its
work has provided Governor Tomblin and his administration with the
information and tools necessary to competitively recruit and negotiate
with international petrochemical companies interested in building
ethane crackers in our region.
The economic development opportunities presented by ethane cracker
development are astounding. For example, construction of a single
cracker is projected to create approximately 10,000 construction jobs
and between 500 and 1,000 permanent operational jobs, depending on the
size of the cracker. Capital investment associated with construction of
a cracker is likely to exceed $2 Billion, and could amount to as much
as $5 Billion invested in West Virginia. Furthermore, construction and
operation of a single cracker alone could result in economic activity
amounting to tens of billions of dollars in West Virginia over a 25-
year period. Specifically, it can reasonably be expected to drive a
reemergence of the manufacturing sector of our economy.
According to the American Chemistry Council, if a cracker is
constructed in West Virginia, an additional $3.2 Billion would likely
be invested in downstream chemical facilities that utilize polyethylene
to make products like plastics, dyes, paints and coatings. The
revitalization of our chemical manufacturing industry is projected to
translate into approximately $7 Billion of additional chemical industry
output and 12,000 new jobs in the chemical industry and throughout the
supply chain in West Virginia. Such developments would elevate West
Virginia from the 23rd largest chemical-producing state to the 13th
largest chemical-producing state in the nation.
These opportunities are indeed stunning--they represent
transformational opportunities for West Virginia to rejuvenate and
revitalize our chemical manufacturing industries. Governor Tomblin and
his administration officials maintain regular contact with
petrochemical investors and are doing everything possible to attract
these investments to West Virginia.
Shortly after forming the Task Force, Governor Tomblin also
recognized the need to adopt additional environmental regulatory rules
governing Marcellus Shale production and to create regulatory certainty
within the horizontal drilling segment of the West Virginia natural gas
industry. Our citizens deserve to know that their government is
responsibly regulating Marcellus Shale drilling activity. Companies
investing hundreds of millions in capital in natural gas drilling
programs in West Virginia also deserve to know the rules by which they
must operate, and that these rules will be consistently applied after
their investments are made. Accordingly, Governor Tomblin issued
Executive Order No. 4-11 this past summer, ordering the West Virginia
Department of Environmental Protection to promulgate additional rules
governing development of the Marcellus Shale. These additional
regulatory measures focus on responsibly and proactively addressing
potential adverse environmental impacts to our natural water supplies
and surface lands associated with horizontal drilling techniques.
Unlike the United States Environmental Protection Agency's
regulatory approach to coal mining, Governor Tomblin's emergency rules
were neither punitive nor based on fear or political ideology. Rather,
Governor Tomblin's emergency Marcellus rules were tailored to address
legitimate environmental concerns and were premised on objective,
scientific goals. Now that these rules are in place, Governor Tomblin
looks forward to working with the West Virginia Legislature over the
coming weeks, months and years to pass comprehensive Marcellus Shale
regulatory legislation that enjoys broad support from leadership in
both houses of the Legislature, the West Virginia Department of
Environmental Protection, the natural gas industry and other affected
stakeholders, including the environmental community, surface owners,
mineral owners, the farm bureau and local governments. No one party
will unduly suffer at the expense of another and no one interest group,
no matter how vocal, will dictate the policy of the State of West
Virginia. Governor Tomblin is steadfast in his commitment to do what is
best for the State of West Virginia.
To close, Governor Tomblin will continue down the path he started
nearly a year ago--a path that will seek to maximize the economic
opportunities presented by development of the Marcellus Shale, while at
the same time taking the necessary steps to ensure that West Virginians
and our environment are protected by reasonable regulations that
require natural gas producers to responsibly develop our plentiful gas
reserves. This multi-tiered approach will guide Governor Tomblin's
policy-making efforts regarding development of the Marcellus Shale in
West Virginia.
Thank you.
Senator Manchin. Secretary Huffman.
STATEMENT OF RANDY C. HUFFMAN, SECRETARY, WEST VIRGINIA
DEPARTMENT OF ENVIRONMENTAL PROTECTION, CHARLESTON, WV
Mr. Huffman. Thank you, Senator Manchin. I appreciate the
opportunity to be here today and Representatives Rahall, Capito
and McKinley, thank you for coming.
The Department of Environmental Protection's 2 primary
roles one is that we're responsible for enforcing the State's
environmental rules which include regulating the chemical
manufacturing industries as well as our mineral extraction
industries. We also have a very robust reclamation, remediation
and infrastructure program that we conduct at the State level.
I appreciate the opportunity to address the panel. I'll
start by saying that the advancement of unconventional natural
gas extraction has drastically changed America's energy future
and with it the regulatory landscape. West Virginia, like other
energy producing States, takes its duty to protect the
environment seriously. DEP and its Office of Oil and Gas
oversee the permitting, drilling, completion and production of
every oil and gas well in the State.
With that authority comes the responsibility to promote
economic growth and the development of the State's natural
resources. The primary factor in maintaining a proper balance
is the recognition that West Virginia is in the favorable
position of being proactive rather than reactive.
West Virginia has a long history of regulating oil and gas
activity and it has overseen the practice of hydraulically
fracturing wells for decades. However, the practices associated
with unconventional extraction brings unique concerns from an
environmental perspective. The larger scale associated with the
process leads to environmental issues such as water management
and surface disturbances and safety issues such as design, site
stabilization and drilling practices. West Virginia recognizes
that as unconventional extraction increases so do DEP's
regulatory duties.
Senator Manchin, in 2010 while you were Governor, you
directed the DEP to form a task force to review West Virginia's
oil and gas regulatory program. Environmental groups, land
owners, members of the public, industry representatives and
other State and local agencies had a seat at the table. What
developed from the discussions by that group was a wide ranging
bill, proposed legislation, designed to address most of the
concerns raised by the task force members. While that bill did
not pass, it initiated a robust debate on the matter which
continues in the legislature currently.
Governor Tomblin recognized the importance of addressing
the immediate environmental concerns and in July of this year
issued an executive order directing us to promulgate an
emergency rule. That rule which went into effect on August
29th, addresses water management, surface disturbance, site
stabilization, casing standards and public notice procedures.
In addition the emergency rule mandates that all drill cuttings
and drilling mud from an unconventional well site must be
disposed of in an approved solid waste facility unless the
company can prove that its onsite methods will be protective of
the environment.
Prior to the actions I've already mentioned DEP developed
some policies and tools designed to address some of the issues
surrounding water use and disposal. West Virginia has been
commended for DEP's development of a water withdrawal guidance
tool on the agency's website that provides timely data for
operators to follow when withdrawing surface water. Back in
2009, well ahead of EPA's guidance release the past March, DEP
West Virginia restricted POTWs, publicly owned treatment works
from accepting drilling waste water. Currently the only
acceptable methods of waste water disposal are underground
injection control wells and the recycling or reuse of the
water.
While the Office of Oil and Gas has been addressing policy
and regulation matters it has been dealing with the dramatic
shift in work load associated with permitting. The total number
of well work permits issued has dropped from a high of more
than 2,300 in 2007 to 508 in 2010. But the number of horizontal
permits has gone from zero in 2006 to 430 in 2010. This shift
in the permitting load has caused a huge loss of revenue for
DEP, but a huge increase in the work load of the Office of Oil
and Gas permit staff which consists of 2 full-time permit
writers and a supervisor. We're confident a funding mechanism
will be including in the proposed legislation which will enable
us to obtain the resources necessary to continue operating an
effective regulatory program.
As our esteemed representatives at the Federal level it is
important for you to know that we at the State level believe
the Federal Government does have a role to play. In fact, the
influence of the Nation's 3 major environmental regulations are
already in place and underpin the regulatory scheme through the
Clean Water Act, the Clean Air Act and the Safe Drinking Water
Act. Also, Federal agencies are in a position to undertake
research and provide reliable data on controversial topics such
as radioactivity. They can also recommend best management
practices and technological advances.
Recommendations such as these could prove valuable as
States evaluate the needs of their regulatory programs.
However, because of the differences from State to State
anything beyond that may prove to be ineffective. Certainly we
do not believe the role of Federal agencies includes
perpetuating the myth that States are incapable of or
ineffective at regulating this industry.
In closing West Virginia has played a proud role in this
Nation's energy history and we anticipate maintaining a
prominent role in our Nation's energy future. The opportunity
presented by unconventional extraction carries with it unique
concerns and challenges. As it has done in the past, West
Virginia will continue to answer the regulatory call associated
with oil and gas activity.
Mineral development including unconventional extraction
does not have to come at the expense of our State's other
natural resources. In West Virginia, it will not.
Thank you.
[The prepared statement of Mr. Huffman follows:]
Prepared Statement of Randy C. Huffman, Secretary, West Virginia
Department of Environmental Protection, Charleston, WV
The State of West Virginia and its Department of Environmental
Protection (DEP) appreciate and welcome the opportunity to address this
committee. The advancement of unconventional shale gas extraction has
drastically changed America's energy future, and with it the regulatory
landscape. West Virginia, like other energy producing states, takes its
duty to protect the environment seriously. DEP and its Office of Oil
and Gas (OOG) oversee the permitting, drilling, completion, and
production of every oil and gas well in the State. With that authority
comes the responsibility to promote economic growth and the development
of the State's natural resources. The primary factor in maintaining a
proper balance is the recognition that West Virginia is in the
favorable position of being proactive, rather than reactive.
Unconventional extraction, along with its potential, brings unique
concerns. In order to establish a stable and predictable regulatory
climate, all parties must be allowed a seat at the table. As part of
West Virginia's oversight of the Marcellus Shale activity,
participation of environmental groups, land owners, other state and
local agencies, members of the public, and the industry all play a key
role in robust regulation. West Virginia, through its ability to foster
its relationships with and manage these competing interests, is in a
naturally advantageous regulatory position. In the summer of 2010, then
Governor Joe Manchin III ordered DEP to form a taskforce comprised of
members of those groups to review West Virginia's oil and gas
regulatory program with an eye toward developing comprehensive
legislation to regulate this burgeoning industry. That group worked
hard and was successful in developing a wide-ranging bill to address
most of the concerns raised by its members and their constituents.
While that bill did not pass, it created the impetus to have a robust
debate on the matter, which is continuing in the Legislature.
West Virginia recognizes that, as unconventional extraction
increases, so do DEP's regulatory duties. The practices associated with
unconventional extraction are not new. For example, in West Virginia's
long history of regulating oil and gas activity, it has overseen the
decades-old practice of hydraulically fracturing wells. What is
unprecedented with unconventional extraction is the scale of both the
surface disturbance and the water use, and with that increased scale
come environmental issues, such as water management and surface
disturbance, and safety issues, such as well design, site
stabilization, and drilling practices. Governor Earl Ray Tomblin
recognized the importance of these issues, and on July 12, 2011, he
issued an Executive Order directing the DEP to promulgate an emergency
rule to address these and other matters surrounding horizontal well
development, including erosion and sediment control, casing standards,
and public notice procedures.
In addition, West Virginia has been commended for DEP's development
of a water withdrawal guidance tool. This tool is available on the
DEP's website and provides timely data for operators to follow when
withdrawing surface water. This tool is constantly being updated to
provide the most accurate data to both operators and regulators so that
both can take the steps necessary to protect this vital natural
resource. It will be invaluable in implementing the water management
plans that are a central component of the emergency rule, which went
into effect on August 29, 2011.
West Virginia also restricted publicly owned treatment works from
accepting wastewater in 2009, well ahead of EPA's guidance of March
2011. Currently, the only acceptable methods of wastewater disposal in
West Virginia are underground injection control (UIC) wells, which West
Virginia regulates, and the recycling or reuse of water, which is
strongly encouraged. The emergency rule mandates that all drill
cuttings and associated drilling mud from an unconventional well site
must be disposed of in an approved solid waste facility, unless the
operator can prove to the satisfaction of DEP that its on-site
management of those materials will be protective of the environment.
West Virginia currently has one permitted facility that is entirely
dedicated to wastewater treatment for reuse, and is working with other
operators to develop similar facilities, both centralized and on-site.
Other policies implemented by DEP to complement the rule are
enhanced casing and cementing standards for horizontally drilled wells
and stringent standards for well site safety plans. West Virginia's
Division of Highways also has policies in place that require operators
to repair and maintain roads.
The upswing in unconventional extraction has had a dichotomous
effect on the permit load in the Office of Oil and Gas. The number of
well work permits issued has dropped, from a high of 2,391 permits
issued in 2007 to 508 in 2010, but the number of horizontal permits has
shot from zero in 2006 to 430 in 2010. In other words, 85% of the
permits issued by the Office of Oil and Gas are now horizontal,
unconventional well work permits. This shift in the permitting load has
caused a huge loss of revenue for DEP but a huge increase in the
workload of the OOG permit staff. OOG has a small staff--less than 30
total--and 19 members of that staff are in the field. The permitting
staff consists of two full-time permiters and their supervisor. DEP
believes that the West Virginia Legislature, which is currently working
on a comprehensive bill to regulate unconventional drilling activity,
will include a funding mechanism in its legislation that will enable
the OOG to hire the amount of staff necessary to implement a robust
regulatory program.
While there is no aspect of unconventional extraction that is
beyond West Virginia's reach, that does not mean there is no role for
the federal government to play. However, such a role does not include
contributing to the myth that states are incapable of or ineffective at
regulating oil and gas activity. First and foremost, the federal
government ultimately oversees the Clean Water Act, the Clean Air Act,
and the Safe Drinking Water Act, all of which play a role in oil and
gas regulation, but all of which are primarily implemented by the
states. Federal agencies are also in a position to undertake research
and provide reliable data on controversial topics, such as
radioactivity, and to recommend best management practices and
technological advances in hydraulic fracturing and well design and
construction. Recommendations could serve as an invaluable resource as
states evaluate the needs of their regulatory programs, but anything
beyond recommendation may prove to be ineffective and tumultuous
considering the independence and asymmetry of state regulatory
programs. The best way to ensure this undesirable effect does not come
to fruition is to continue engaging the states, rely upon them for an
accurate depiction of their regulatory capacity and efficacy, and trust
that no state considers environmental protection an ancillary concern.
West Virginia has played a proud role in this nation's energy
history, and we anticipate maintaining a prominent role in our nation's
energy future. The opportunity presented by unconventional extraction
carries with it unique concerns and challenges. As it has done in the
past, West Virginia will continue to answer the regulatory call
associated with oil and gas activity. Mineral development, including
unconventional extraction, does not have to come at the expense of our
State's other natural resources, and in West Virginia, it will not!
Senator Manchin. Thank you.
Delegate Manchin.
STATEMENT OF TIM MANCHIN, DELEGATE, WEST VIRGINIA LEGISLATURE,
FAIRMONT, WV
Mr. Manchin. Welcome, Senator Manchin, Congressman Rahall,
Congresswoman Capito and Congressman McKinley. Thank you for
the opportunity to outline the West Virginia Legislature's
efforts to address issues raised by Marcellus development.
Our efforts began 3 years ago with Water Resource Committee
hearings and a House bill to prevent water withdrawals from
sensitive streams and to require record keeping for what went
in the ground, what came out of the ground and how it was
disposed of. Although written with great assistance from EQT,
much of the industry opposed the bill leading to its failure,
although its substance was ultimately incorporated into
Governor Tomblin's emergency rules.
However many areas for legislative action have been
identified and proposed bills addressing those issues failed in
the 2011 legislative session. As a result the Joint Legislative
Committee on Marcellus was formed to formulate and agree on a
bill to be presented with a call for a special session. The
House members immediately scheduled public hearings at which
over 750 citizens appeared and more than 250 offered comments.
Using S. 424 as a draft the House members met on their own
time to author more than 25 amendments to protect the
environment, surface owner rights and even the industry. The
committee has met every month since July for approximately 4 to
6 hours with many more hours in outside discussions.
The committee has now adopted 30 amendments dealing with
broad areas such as increasing well permit fees to increase the
number of inspectors and taking the burden off the taxpayers.
Increasing the minimum distance from a gas well to a
dwelling from 200 to 625 feet.
Increasing the individual and public notice requirements
through website notification and other means.
Providing for public comment periods and in limited
circumstances public hearings.
Increasing set back distances from public water intakes and
trout producing streams.
Providing a rebuttable presumption and water supply
replacement in the event of contaminated water wells.
Increasing pre-drilling water testing.
Requiring independent reviews of DEP agency efficiency.
Tightening requirements for reclamation.
Tightening requirements on disposal of drilling waste.
Increasing bonding.
Requiring studies of the need to regulate noise, air and
light pollution which is an area in which we could certainly
use Federal resources and assistance.
Increasing permit considerations.
Incentivizing the use of surface owner agreements.
Taking special precautions, Congressman, to be taken in the
Karst formation drilling efforts.
But most importantly, the adoption of strict and specific
well casing and cementing standards with appropriate inspection
to provide the greatest protection of our underground water
that is possible in an effort to restore the public's
confidence in the industry.
Finally, West Virginians have and will experience
inconveniences of road destruction and congestion as well as
inevitable environmental damage. It can't be helped. Industry
has touted that this is a small price to pay for the good
paying jobs we will receive.
However Wetzel County which has been inundated with
numerous wells has the highest unemployment in the State while
the hotels are full of out of State gas drilling employees. Our
people want to know where are the jobs. The Joint Committee has
heard them and has adopted a job reporting requirement to
obtain accurate information about the number of in State and
out of State employees with their respective aggregate income.
The industry needs to treat West Virginians and our
beautiful hills with the same respect and courtesy they would
show for a long term business partner. The industry needs to
sit down and negotiate a good deal for both sides. While some
members of industry have done so, many have not.
By Wednesday I expect the proposed bill will be voted out
of our Joint Committee. The challenge will then pass to the
entire legislature. We will have the opportunity to prove to
the U.S. Congress and to the rest of the country that we have
the political will and fortitude to protect our land owners and
our environment while still providing a balanced, common sense,
regulatory system in which the Marcellus industry can flourish.
Thereby providing our Nation with a viable alternative to oil
and an opportunity to break our dependence on foreign oil and
the disastrous consequences it inflicts upon our economy.
For now we are optimistic of the bill's chances for
passage. However if the industry uses its vast arsenal of
lobbyists and other means to delay or defeat a meaningful bill,
you won't have to come back here to hear about it because I'll
be coming to Washington to ask for your intervention to protect
our citizens and our beloved West Virginia hills. Thank you.
[The prepared statement of Mr. Manchin follows:]
Prepared Statement of Tim Manchin, Delegate, West Virginia Legislature,
Fairmont, WV
INTRODUCTION
The emergence of the horizontal drilling methods along with the
development of new shale fracturing techniques have generated a boon
for gas drillers and a potential windfall for mineral owners in the
Marcellus shale region, and a potential huge influx of severance taxes
and associated economic benefits for the state. West Virginia stands to
gain greatly from the development of Marcellus shale gas including
benefitting from the jobs and taxes associated from development of
these wells, corresponding distribution infrastructure, and hopefully
post production industrial uses. However, the boon does not come
without costs and impacts to the state and its citizens and environment
in the communities where these operations are being undertaken. We have
been hearing from impacted citizens and other citizens from across the
state who anticipate what the future holds as this new activity appears
where they live in this state. These citizens have been letting us
legislators know in a loud and clear voice that they expect us to
fairly regulate these activities and also represent the vast numbers of
citizens in this state who are or will be directly impacted by this
emerging industry.
This new drilling process has not been experienced before in West
Virginia and the regulatory scheme for traditional drilling methods is
clearly insufficient to address the impacts to local communities, the
environment, infrastructure and regulatory enforcement. The moving
target of emerging technologies has caused a steep learning curve for
regulators and lawmakers who have been trying to sort through this
important issue. I have been frustrated by the unwillingness of the
industry, with the exception of a few, to be forthcoming in developing
this regulatory scheme. The West Virginia Oil and Natural Gas
Association and Independent Oil and Gas Association of West Virginia
have been disappointing in their failure to engage in constructive
dialog regarding the issues raised by this our efforts to reach
reasonable solutions to the problems these new operations present to
our state. This has been a two year process of attempting to forge a
reasonable regulatory program while being sensitive to impacts of these
proposals to the gas industry, surface owners, local communities and
for the broader interests of the state of West Virginia.
This testimony is intended to provide this Committee a brief
history of the efforts undertaken by the West Virginia Legislature the
last two years to develop a regulatory scheme and my commentary
regarding the issues under consideration by the Joint Select Committee
on Marcellus Shale.
I. 2010 INTERIMS AND 2011 REGULAR SESSION
A. 2010 Legislative study
During 2010, a study was undertaken and legislation was drafted by
a Subcommittee of the Joint Judiciary Committee of the West Virginia
Legislature. The Subcommittee proposed legislation for consideration
during the 2011 Regular Session to provide a regulatory scheme for
these large drilling operations. The bill also addressed local concerns
by addressing protections for surface owners, local environmental
impacts and protection of roads. This bill was recommended for
introduction in December 2010 and introduced on January 26th, 2011
[H.B.2878].
B. Department of Environmental Protection [DEP] proposal
The DEP held a series of meetings with interested parties through
the summer and fall of 2010 and developed its own legislation which was
introduced on February 2nd, 2011. This bill [S.B. 424 & HB 3048]
addressed several regulatory aspects of horizontal drilling and water
use. The bill provided new specific regulations but did not address
items outside of the DEP's regulatory duties, and things such as
providing protections for local land owners and consideration of local
impacts were not addressed. This bill was generated without input,
participation or coordination with the Legislature.
C. 2011 Regular Session
After several public meetings and hearings by the Judiciary and
Finance Committees, and considerable work by a subcommittee of the
House Judiciary Committee, HB2878 was reported out of both the House
Judiciary and House Finance Committees with overwhelming support.
However, the bill was not advanced on the House Floor for a vote on
third reading.
The Senate Committee on Mining and Industry jettisoned the DEP
proposal contained in S.B.424 and generated a committee substitute
which established minimum regulatory standards and did not address
several of the issues of the House proposal. As a result it became
quickly apparent that there was much disagreement between the two
houses as to what a final bill should look like. S.B.424 was reported
out of the Senate but did not pass the House prior to adjournment.
Summary of differences between the House and Senate proposals at
the end of the 2011 Regular Session:
House and Senate versions both addressed:
Requiring road maintenance agreements with Dept of Highways;
Special requirements for construction of large marcellus
impoundments;
Increased notice to property owners;
New permitting and regulatory program created in new Article
6A;
Providing that local governments are preempted by the state
law, except for traditional zoning regulation; and
Extending current public comment process 15 days for all
wells, to 30 days for Marcellus wells.
PERMIT FEES: Senate permit fees of $5,000 for first and $1,000 for
subsequent wells on same pad. House directed the DEP by rule to
establish permit fees for horizontal shallow wells.
Senate version applied to all horizontal wells, while House applied
to ``horizontal shallow wells that use 210,000 gallons or more of
water.''
Both versions required soil and erosion management plans. The
Senate draft required a safety plan for drilling operations be adopted,
while the House required a study and report on safety concerns. Both
versions established large impoundment construction and management
requirements. Several differences existed in the two versions relating
to impoundment requirements.
Senate Water protections:
Rebuttable presumption for water rights civil actions within
1,000 feet of the well site;
Provide protections for karst formations;
Require a water management plan if the well uses more than
210,000 gallons of water; and
Require study of whether rules need to be developed for
greater regulation of water use and management.
House Judiciary/Finance amendment to SB424:
House Committee Water protections:
Well prohibited within 1,000 feet of a well or public water
intake;
No well within 100 feet of a water course or wetland; and
Mandatory water management plan requirements, applicable to
all shallow horizontal wells, with specific water withdrawal
and frack water management requirements.
Requirements that the DEP consider well impact to public resources
such as parks, wildlife areas, scenic rivers, and historic places.
Special requirements provided for drilling near high quality naturally
occurring trout streams.
House provided special requirement for well construction
inspections to assure proper cementing of well casings has been
verified.
Additional House provisions:
Prohibiting construction of a drilling pad on a surface owner
when pooling agreements are utilized without surface owner
consent.
Reporting to the Legislature from DEP and state universities
to see if further regulation is needed for: worker safety
standards for these large operations; whether radiation is
being released into the fracking water during the drilling
process; whether there are new air pollution problems
associated with these drilling operations; whether enhanced
water disposal requirements are needed; if there are Karst
formation leaking/impacts; and a report on number of DEP
inspections and inspectors. Studies with annual reporting
requirements and a July 2016 final report date.
Requiring the operations to be drug free work places.
Timber to be valued at a minimum of two times the value of
the present appraised value.
Repeals the Oil and Gas Inspectors Examining Board, allowing
DEP to hire inspectors in the same fashion it hires all other
inspectors.
ii. creation of joint select committee on marcellus shale
The Speaker and Acting President created the Joint Select Committee
on Marcellus Shale in June of this year to study and draft legislation
that would have broad based support in the Legislature. The Committee
is made up of five Senate and five House members.
A. Select Committee monthly meetings
Beginning in July of this year the Committee has been meeting
regularly to hear testimony, review legislation and consider
amendments. We agreed to begin working from the Senate bill as a
regulatory framework and to consider each proposed amendment
individually to allow for debate and discussion, and hopefully
reasonable compromise. The House members proposed over 20 amendments to
the bill. These amendments (with the exception of a few which were
revised or offered later)were published and remain on the WV
Legislature web page since August 17th 2011. At that time a letter was
send to gas industry groups and businesses and other interested parties
soliciting comment and reactions to the proposed legislation and
pending amendments. The industry and others responses to this request
are attached to these comments. The Committee has diligently worked
each amendment and many of these proposals were amended and adopted by
the Committee and represent reasonable compromises to these areas of
concern. Each amendment adopted and pending before the Committee has
and continues to be available at www.legis.state.wv.us.
Interest Groups and stakeholders
During the months of study of this issue the Committee and
individual legislators have heard from a variety of parties and
interest groups regarding this legislation. These include surface
owners, residents living near drilling operations, environmentalists,
mineral owners, watershed groups, the oil and gas industry,
municipalities and counties and their associations, labor groups, local
law enforcement officials, the Division of Highways, and regulators.
B. House Members public hearings
The House members of the Select Committee held a series of public
hearing around the state to receive input from affected communities.
These meetings took place in Wheeling, Morgantown and Clarksburg. The
purpose of these meetings was to invite public comment and suggestions
regarding the Committee's consideration of legislation that would
regulate the horizontal gas well drilling. The first public hearing was
held on July 21, 2011 in Wheeling, WV at the West Virginia Northern
Community College. Approximately 38 individuals addressed house members
to voice their views about gas well horizontal drilling and
approximately 75 individuals were in attendance for this hearing. The
second public hearing was held on July 25, 2011 in Morgantown, WV at
the West Virginia University School of Law. Approximately 74
individuals presented with well over 100 individuals in attendance. The
final public hearing was held at the Robert C. Byrd High School in
Clarksburg, WV on July 27, 2011. Approximately 128 individuals spoke
and over 500 individuals were in attendance. In sum, over 240 members
of the public and industry addressed the House members. Additionally,
over 700 attended these public hearings and submitted hundreds of
documents, in writing, to support their respective positions. All
submitted documents, attendance records and recordings of each of these
public hearings are on file with the Committee's Clerk and I will be
glad to make them or a portion of them available to this committee upon
request.
The discussions at all three of these public hearings essentially
mirrored one another. The gas industry employees, operators and
lobbyists, which were generally the only speakers to speak in favor of
the industry, took the position that drilling horizontal gas wells into
the Marcellus Shale formation is essential to the economic growth of
our state and the creation of employment opportunities for our
residents. Additionally representatives of the gas industry,
particularly at the Clarksburg hearing, took the podium to support this
assertion and to stress the importance of their industry. They also
stated that there was no factual evidence that current hydraulic
fracturing has caused any deaths, illness, pollution or damage to
surface owners' drinking water or the land and air in general.
Alternatively, the comments by those supporting more stringent
regulation of the horizontally drilled gas wells varied greatly, but
generally expressed concerns about community impacts. These speakers
represented a wide variety of concerned citizens such as local
residents, environmentalists, academics, and adjoining property owners
regarding the need for legislation that strikes a reasonable balance
between economic development/job creation and protection and
consideration of the local residents who are absorbing the adverse
impacts of these operations. Their areas of concern include:
significant road use by large trucks in rural areas not accustomed or
designed for such traffic, air pollution from machinery at the well
site and from waste impoundments, protection of drinking, surface and
ground water, surface owners' protections, the need for a safe distance
from these operations to residences, the right to use and enjoy their
land as intended, noise pollution, impacts to local towns and cities at
or near well sites, adequate permitting requirements and fees, property
devaluation, management of large water and waste impoundments, and
effective well inspections. Several speakers advocated a moratorium on
further drilling until a proper regulatory scheme is in place. With the
exception of one circumstance where a lobbyist for the industry
attempted to disrupt a hearing by provoking a breach of decorum, the
participants at these hearing were respectful and attentive.
C. Amendments Adopted by Committee
1. Information to accompany permit application
A. Filing of directional drilling information
The current information to be included in a drilling permit
application was designed when vertical wells were the only types of
wells that were being drilled. Currently, the direction and length of
the proposed horizontal lateral is not reflected on any submitted plat,
and the proposed directional drilling information is not required to be
included with the application.
There is a need to identify the direction and length of the well's
proposed and constructed laterals for a variety of reasons. The
location of the laterals helps identify the areas and properties from
which gas production is to be stimulated, and the location of other
surface and subsurface structures in relation to the entirety of the
drilled borehole. The ability to locate the proximity of the proposed
borehole and laterals to other prior drilling activity and abandoned
wells is necessary to protect against unanticipated migration of gas or
potential hazards while drilling the horizontal laterals. Reliable as-
built mapping of these horizontal sections will also be increasingly
important as additional laterals or vertical sections are drilled
through the well's completion zone.
For these reasons, the amendments recommended by the Committee
would require that the projected directional drilling information be
included as a part of the permit application.
B. Karst Formations
An amendment pending before the committee will require an
assessment and certification from the permit applicant that no karst
formations, which are generally sandstone formations which tend to have
large cracks and can serve as a conduit for frack water into
groundwater, are not impacted by the drilling operations. These
formations only exist in certain regions of the state, and this
amendment is intended to assure that there are no impacts to these
formations.
2. Notice of permit application
A. Notice to specific groups of affected individuals/property owners
Under current WV code, the only classes of people who are provided
with notice of a natural gas well drilling permit application are:
1. The owners of record of the surface tract where the well
is to be located;
2. The owners of record of a surface tract where land would
be disturbed or owners of a surface tract to be utilized as
roads to the proposed well site; and
3. Coal operators or other owners of coal interests for any
coal seam known to underlie the tract where the well is to be
located.
After hearing the additional concerns expressed by the other
property owners whose ability to utilize and enjoy their property
interests would be potentially impacted by a large horizontal drilling
operation and hydraulic fracturing, the Committee has proposed by
amendment to add the following categories of persons to receive
individual notice of the permit application:
4. Surface owners of any tract of land which is immediately
adjacent to a tract where well work is to be conducted or other
land disturbance is to occur;
5. Any surface owner or water purveyor who is known to have a
water well, spring or water supply source located within 2500
feet of the center of the proposed or existing well pad, when
the water from that supply source is used for consumption by
humans or domestic animals.
Each of the individuals receiving individual notice of the
application would receive a copy of the application, the well plat
setting forth the location of the well and the roads and appurtenances
to be established for the well, and the well's erosion and sediment
control plan.
B. Public notice requirements
Under the current provisions of the West Virginia Code, public
notice is not required of a proposed shallow gas well or a proposed
deep well. It only provides an alternative for the applicant to provide
a Class II legal ad as an alternative to providing individual notices
to a surface tract which is owned by three or more tenants in common.
The current provisions of the West Virginia Code require that public
notice be provided by a Class II legal ad (2 consecutive weeks) for a
proposed coalbed methane well.
The public concerns regarding the impact of horizontal well
drilling on large multi-well pads and the stimulation of the gas
production by hydrofracturing with large volumes of water are much more
significant than the issues normally associated with traditional
vertical wells and other drilling activities conducted on a much
smaller footprint. Therefore, the Committee found it reasonable and
appropriate to establish a mechanism to provide for public notice and
comment for proposed horizontal well permit applications which proposed
to utilize more than 210,000 gallons of water over a 30 day period or
require a drilling footprint of 3 acres or more on the surface.
Under the provisions reflected by the Committee's adopted
amendment, the public notice is to be provided by a Class II legal ad,
with the first notice to be provided at least ten days' prior to the
filing of the application. The public may file public comment for a
period of thirty days 30 days after the filing of the application, and
the public comment period can end no sooner than 30 days after the
second published notice.
3. Review and consideration of comments, objections and protests
The DEP (Office of Oil & Gas) is to review all comments, protests
and objections that are filed in response to a permit application.
Under the amendments proposed by the Committee, the character of
all objections, comments and protests received to the application are
to be provided by the DEP to the applicant within 15 days of the close
of the public comment period, or 45 days after the date of the permit
application, whichever is later.
Objections filed by owners of coal interests will continue to be
reviewed and considered by the DEP or by the Shallow Gas Board, as
provided by the current statutory framework. That current statutory
framework provides a mechanism for the applicant and the owners of the
coal interest to agree on any changes or alterations of the application
by agreement, or submit the dispute for hearing or resolution. A
hearing on the coal owner's unresolved issues are initially heard by
the Shallow Gas Review Board for shallow wells, and by the DEP for deep
wells.
The proposed amendment would similarly allow the applicant and the
objecting surface property owners and water purveyors to agree on an
alternate location or agree on the conditions under which the drilling
is to take place, subject to approval by the DEP.
The amendment would provide the DEP with the discretion to conduct
a public hearing on the permit application, if it so desired. The DEP
would be permitted to identify and narrow the issues to be addressed at
any such scheduled public hearing. At the close of the comment period
the DEP would provide notice of the public hearing by Class I legal ad.
This public hearing would have to be scheduled and conducted within
thirty days after the close of the comment period. Any person may
submit a written or oral statement for the Secretary's consideration.
However, the only parties allowed to file testimony or documents for
consideration at the public hearing would be the proposed well
operator, those receiving individual notice of the permit application,
counties or municipalities where the activity is to be conducted, or
other parties who are specifically granted intervener status by the
DEP.
4. DEP authority to conduct a public hearing on horizontal permit
issues
While the DEP had a clear statutory authority to conduct public
hearing to address related objections raised by owners and operators of
an underlying coal seam, the current statutes did not provide a clear
mechanism for the DEP to conduct a public hearing on other issues
associated with a horizontal drilling permit application. The
Committee's proposed bill, as amended, would provide that clear
authority to the DEP. The DEP's decision to conduct such a public
hearing is purely discretionary, and the DEP may identify and limit the
scope of the issues to be addressed at the hearing. Any such hearing is
to be conducted promptly and in such a manner which would not
unreasonably delay the DEP's ultimate decision on the permit
application.
5. Predrilling water supply testing/ presumptions
Under current West Virginia law, in any cause of action brought for
the contamination or deprivation of a fresh water source or supply, if
the fresh water source or supply is located within 1000 feet of a
drilling site for an oil or gas well, there is a statutorily created
rebuttable presumption that the oil or gas well was the proximate cause
of the contamination or deprivation of the fresh water supply source.
At the time this standard was developed, all oil and gas wells were
drilled as vertical wells, and there was no horizontal drilling.
Currently, all surrounding surface owners within 1000 feet of a
permitted well are provided with notice of the opportunity to have a
predrilling survey conducted at the operator's expense before drilling
is commenced under an issued permit. This provides both parties the
opportunity to have a baseline study conducted to protect their
respective interests.
Opponents of horizontal drilling and hydraulic fracturing are
concerned about the prospects of drilling fluids and fracking fluids
potentially contaminating freshwater supplies which lay overtop of the
stimulated zones. They are also concerned that if a well is not
properly cased and cemented before hyrdrofracturing stimulation is
performed on the well, then zones and formations above the targeted
completion zone may be inadvertently injected with contaminants and
fluids, which could migrate into the water supplies over time.
While industry experts assure the Committee that the prospect of
such a scenario is highly unlikely, there is frankly a lack of
scientific data to confirm the existence or absence of such
contamination. Methane may naturally leach into freshwater supplies,
and certain contaminants may be found in the water as a result of other
natural or manmade occurrences. The best means for evaluating the
impact of any prospective drilling activity on a water supply is by
conducting reasonable and sufficient baseline testing in advance of the
drilling activities, and comparing those results to samples taken from
the same water supply source sometime after the drilling and/or
production activities ceased. If no sufficient baseline testing in
conducted, the owner of a water supply may conclude, rightly or
wrongly, that a subsequently observed contamination of his or her water
supply was attributed to the drilling or production activity.
According to microseismic testing conducted by some entities after
stimulation, longitudinal microcracks produced in Marcellus shale by
hydrofracturing have been measured to travel as far as 2400 feet from
the horizontal lateral. These microfractures travel along a path of
least resistance, and are effectively sealed from the other shale
formations above the Marcellus zone by a layer of limestone just above
the Marcellus shale. It is easier for the microcracks to travel through
the Marcellus shale than to break into the limestone which lies above.
While there may be some naturally occurring fractures or fissures in
this limestone layer, the limestone effectively acts as a caprock, or a
relatively impermeable barrier above the stimulated Marcellus
production zone. The hydrostatic pressures are carefully monitored
during the hydrofracturing process, and the frack is immediately ceased
if a sudden and unanticipated pressure drop is observed during the
fracking procedure. Such a sudden pressure drop could indicate that an
unanticipated void or cavern was encountered, or the ability to
maintain containment within the production zone had been somehow
compromised.
Even if some fluids were to theoretically get past the first
limestone caprock layer, there is a second layer of limestone caprock
several layers above, which would effectively keep any of the escaping
fluids trapped in the Devonian shale layers that lay above the
Marcellus zone. This second limestone layer would keep any such fluids
away from the freshwater supplies.
The most likely route of contamination from Marcellus shale
drilling and stimulation activities would likely come from fluids
getting into the annulus of the borehole, (or the space between the
production pipe and the drilled out rock formations), where the
limestone caprock was compromised during he drilling process. This
breach of the limestone caprock is effectively repaired and resealed
during the casing and cementing process, and keeps fluids from crossing
from one zone into another. That is the reason why the establishment of
sufficient casing and cementing requirements for the production zone
are so important for a horizontal Marcellus well.
The present standards, which provide a 1000 foot presumption and a
1000 foot zone for predrilling baseline testing, may be sufficient for
testing the integrity of a vertical well, but it is generally agreed
that an expanded level of baseline testing is reasonable to confirm the
integrity of a horizontal well.
Since the horizontal laterals are drilled on a gradual slope after
the well-bore deviates from vertical, the actual fracking activity is
initiated several hundred feet away from the center of the well pad.
While the vertical bore would still represent the most likely conduit
for a contaminant associated with drilling or stimulation activities
from reaching a fresh water zone, the Committee agreed, by amendment,
to expand the statutory presumption (and the associated baseline
testing driven by the presumption) from 1000 feet of the well to 2500
feet of the center of the well pad.
The amendment also specifically provided that this presumption
would be rebutted by the following:
1. The pollution existed prior to the drilling or alteration
activity, based upon a predrilling or prealteration survey.
2. The landowner or water purveyor refused to allow the
operator access to the property to conduct a predrilling or
prealteration survey.
3. The water supply is not within 2500 feet of the well.
4. The pollution occurred more than 6 months after completion
of drilling or alteration activities.
5. The pollution occurred as the result of some cause other
than the drilling or alteration activity.
The predrilling or prealteration testing would have to be conducted
by an independent certified laboratory, and a copy of the results of
the survey would be submitted to the DEP and to the landowner or water
purveyor in a manner required by the DEP.
The public notice provided with the permit application shall also
advise owners of water supplies and water purveyors in proximity of the
proposed drilling activities of the advisability of securing such
prealteration and predrilling surveys, and the associated presumptions
that are associated with those tests.
The conduct of these baseline studies will provide the drilling
industry with its best ability to defend itself from future claims if
any water supplies should later be found to be contaminated, after its
drilling activities are completed. They will also provide the public
with a means to verify when observed contamination is apparently
associated with the horizontal drilling and fracking. In the event that
repeated contamination is revealed by such baseline testing, the
Legislature could revisit the issue, with the benefit of more
definitive scientific data.
6. Establishment of additional web-based resources, available to public
As amended, the bill drafted by the Committee would have the DEP
provide resources on its public website which would provide searchable
information on Marcellus well applications filed in the state,
including county and approximate location, well number, date of
application, name of the applicant and well application number. Notice
of any scheduled public hearings are to be concurrently published on
the DEP website. Finally, an e-notification system is to be established
by the DEP, by which individuals, corporations and agencies may
register to receive electronic notice of filings and notices pertaining
to horizontal well applications, by county of interest.
7. Considerations in reviewing and issuing/conditioning permits
A. Well location restrictions from residences, water intakes and
protection of nearby state waters
One of the most pressing concerns raised by local residents is
establishing reasonable distance restrictions from their homes, water
intakes and other localized uses that can be adversely impacted by a
drilling operation. The Committee adopted an amendment that established
several protections for local residents. A general prohibition of
drilling within 650 feet of a home or larger agricultural facility, a
100 foot prohibition from drilling from any watercourse or body of
water, and 200 feet from a wetland and 300 feet from a naturally
occurring trout stream. No wellpad may be located within 1,000 feet of
a public water intake. These prohibitions relating to watercourses may
be waived by the DEP upon finding that specialized facilities or
practices will assure protection of these waters. The residence/
agricultural structures prohibition may be waived by the property
owner. The well operator may also request a variance from the DEP if a
distance restriction would deprive the owner of the oil and gas the
right to produce or share in the oil or gas underlying the surface
tract. If a waiver or variances is granted by the DEP, the DEP is to
identify the additional measures or practices to be employed at the
site.
The well location restriction language is clarified to make it
clear that the distance restriction for location near existing springs,
wells and other existing water supplies only apply to those water
sources that existed at the time the operator first gave notice of
entry. This was done to prevent surface owners from sterilizing land
from drilling activities by installing wells after notice that a
operator was interested in placing a well on their property. This was
done to address industry concerns that some surface owners were
unfairly taking advantage of this prohibition.
B. Pending amendment on areas of special concern to allow DEP to place
special permits conditions
A amendment is currently pending before the committee that will
address other localized concerns that may require special limitations
places on permitted locations. These include allowing the DEP to
consider the drilling activity will potentially threaten a public or
private water resources; the well's proximity to municipalities or
densely populated areas and the well's impact on those areas; the
adequacy of the permit's proposed erosion and sediment control plan and
water use plan; the impact on public resources including parks,
forests, gamelands and wildlife, natural landmarks, endangered species
and historical sites. These protections are intended to facilitate a
balance between the gas industry land use and the local communities to
protect the local communities from losing exiting natural, historic and
other resources that are highly valued and deserving of protection.
8. Impoundment issues
The DEP is directed to conduct a study and report back to the
Legislature next year about the need for further requirements for the
regulation of impoundments. The DEP is directed to investigate whether
a need for greater regulations to prevent toxins and other hazardous
materials contained in impoundments and pits need further air
regulation and safety standards and if so to propose those though the
rulemaking process. This issue has received much discussion and the
committee is asking for an ongoing review be undertaken to satisfy the
concerns of the proper management and disposal of the substances
generated by these operations.
9. Water use/ water impact issues
The committee has continued to support the water use and reporting
requirements that were developed in the House bill last year and have
been incorporated into this draft and were the basis for the Governor's
executive order directing the DEP, by emergency rule, to establish
these requirements. The committee did adopt on amendment that requires
in addition to flow tests for nearby water wells that water quality
tests also be taken to establish baseline water quality for these
wells, to determine if the drilling activity has impacted these
resources.
10. Casing and cementing standards
One of the primary issues raised by the public during the public
hearings was the concern that the drilling fluids and fracking fluids
used to stimulate horizontal Marcellus wells would somehow contaminate
well water and other public water supplies. The hydrofracturing or
``fracking'' process uses large volumes of water under high pressures
to fracture and create microcracks in the Marcellus shale so that the
large volumes of gas contained in the rock are released under high
pressures. Proper containment, recapture and disposal of the drilling
fluids and fracking fluids which return to the surface is easily
monitored and observed on the surface, as it is collected and contained
in tanks, trucks or impoundments. The ability to ensure that the
fracking fluids which don't return to the surface are properly
contained within the Marcellus production zone, thousands of feet from
the surface, is depends on the adequacy of the protective casing and
cementing that is done along the length of the well.
The well itself has a number of protections, through the
installation of multiple layers of steel and cement, to insure that the
gas flows coming from production zones 5000 to 6000 feet below the
surface, do not interact with the fresh water supplies located much
closer to the surface.
The 7 or more layers of protection begin with a steel surface
conductor pipe, which is cemented in place. A new borehole is then
drilled through the interior of the conductor pipe to a point below the
fresh water zone. At that time, a water protection string of casing is
placed in the borehole, and in cemented from the bottom of the hole
created below the base of the casing string to the surface. The
cementing process causes cement to fill the space between the casing
string and the outside diameter of the borehole. A new (smaller)
borehole is then drilled down the center of the water protection string
to a depth below the last expected coal seam (usually 2000 feet or
more). At that point, a coal protection casing string is installed and
cemented in place, to the surface. If the coal protection casing cannot
be cemented to the surface, WV has certain statutory requirements which
are to be satisfied, to insure that all zones are properly sealed off
from one another. From that point, a smaller borehole is drilled down
the center of the coal protection string, to a point where the well is
to deviate from vertical. An intermediate casing is installed, and
cemented in place. Finally, the well is drilled to its final depth, and
the horizontal drilling extends the borehole along the target formation
to the well's final total length.
The fracking activity or stimulation of the well is done along the
horizontal length of the production casing, in incremental stages.
After one length of the horizontal lateral is stimulated, it is
temporarily sealed while the next length of horizontal section is
stimulated. After this process is completed, the temporary plugs are
removed, and the produced gas starts flowing to the surface at high
pressures. The gas which is flowing to the surface through the
production pipe is separated from the fresh water zones by at least
four layers of steel piping, with at least two of those layers sealed
with cement to the surface.
At the time the present WV casing and cementing standards were
developed for oil and gas wells, they were developed for vertical
wells, and there was no such thing as a horizontal well. While they
included clear standards for cementing and completing casing in the
water protection zones and the coal protection zones, they did not
establish clear or uniform standards for cementing or completing the
intermediate string of casing or the production string of casing. The
completion techniques in those zones differed depending on the
characteristics of the formation being stimulated or produced.
The adequacy of the cementing and packers used to separate fluids
introduced into the production zone from the other zones is critical to
ensure that the zones above the limestone caprock are not compromised.
It is also important to the operator of the well, to insure that the
well produces gas efficiently, and the targeted gas supplies are
properly contained for production.
While the specific casing and cementing standards for each
horizontal well was reviewed and approved by the DEP's Office of Oil
and Gas, there is quite frankly a general distrust of the adequacy of
those efforts and requirements by some members of the public.
To address that concern, the Committee had its staff review the
casing and cementing standards which had been adopted in neighboring
states, and compare them to the recently amended standards which have
been proposed by a policy letter issued by the Director of the DEP's
Office of Oil & Gas. The modified standards proposed by that policy
letter are still under comment and review by the Office of Oil & Gas,
and may require further revision to address concerns raised by various
commentators.
The State of Pennsylvania revisited and amended its casing and
cementing standards to reflect what is needed to provide adequate
protections for horizontal drilling. The PA casing and cementing
standards, which have been in place since October of 2010, were
developed by a multidisciplinary effort which included experts from the
oil and gas industry, submitted for an extensive public comment period,
and have been fully vetted by a completed rulemaking review process.
The horizontal formations to be drilled and fracked in West Virginia
are essentially the same as those to be drilled and fracked in
Pennsylvania. Many of the same operators are drilling horizontal wells
in both states and are already well familiar with the Pennsylvania
casing and cementing requirements. Therefore, the members of the
Committee saw no legitimate reason why the West Virginia casing and
cementing standards are not at least as protective as those utilized in
Pennsylvania.
The State of Pennsylvania casing and cementing standards are much
more detailed and explicit than the current standards or the proposed
revisions advanced by the WV Office of Oil & Gas policy letter. The
Committee would require that the WV casing and cementing standards be
updated to be at least as protective as those that have been
implemented for similar formations in Pennsylvania. The adopted
Committee amendment requires the Office of Oil & Gas to issue a policy
document which incorporates most of those standards as a baseline
requirement. The amendment adopted by the Committee reiterates the PA
standards, for the most part, with the exception that the WV
protections for the coal protection zones were deemed superior to
Pennsylvania's, and were incorporated by reference.
This action would not prevent the WV Office of Oil & Gas from
establishing more stringent standards for horizontal wells by rule or
by permit condition, or from adopting alternative protections and
requirements by rule or permit condition, consistent with best industry
practices, as they continue to evolve.
11. Other environmental concerns
Air Quality
The Committee adopted two amendments to address air quality
concerns. If you have toured one of these operations as I have it is
striking to see the size of the operation, the number of trucks and
diesel engines used in the fracking process, the amount of dust
generated, and the size of the large impoundments and pits. All of
these have the potential to impact air quality and it is vitally
important to investigate whether additional requirements need to be
established to regulate these emissions. An amendment was adopted
authorizing the Office of Air Quality to regulate these activities and
to consider the cumulative impacts of these emissions in determining
whether additional air quality permitting is needed. The agency is
authorized to promulgate rules as needed to regulate these emissions.
The DEP is also directed to conduct a study of health impacts and the
need for further legislation for regulation of these activities and to
report back to the Legislature on its findings.
12. Application fees and bonding requirements
A. Permit fees
This has been a most difficult issue to nail down for the
committee. Permit fees are intended to fund the necessary inspectors
and permit writers to adequately serve the existing permitting and new
permitting activities. Our efforts to find a fair and appropriate
permit fee as been thwarted by the inability of the DEP to provide us
with a good estimate of the numbers of employees it needs to hire to do
its job. We finally did get an estimate of the numbers of employees
they will need to do their job regulating the gas industry. It has been
extremely frustrating to have the regulatory institution for this state
being unable or unwilling to provide a good faith estimate on their
funding needs. Nonetheless we reached a number which the DEP says will
allow it to hire 9 more inspectors and permit writers. We do not know
for sure if this is sufficient to address regulating the thousands of
existing wells in the state and properly permitting and inspecting
these new wells. We settled on $10,000 for first well and $5,000 for
each additional well on a well pad as the permit fee that will fulfill
the agency's employment needs.
B. Increased bonding
Current bonding requirements provide a $5,000 bond with a blanket
bond of $50,000 for ten or more wells. The committee agreed to adopt a
$50,000 per well bond with a $250,000 blanket bond for these
operations. This is close to the information the Committee received
that the actual cost is near $50,000 to $60,000 to plug one of these
wells.
13. Reports to the Division of Labor
This is a contiguous issue to which the industry has expressed
strong opposition. The Committee feels that it is in the best interests
of this citizens of this state that we try to track employment in this
transitory industry to see what we can do to maximize the number of
citizens in this state employed in this industry. The amendment is not
onerous to the industry and asked them simply to report to the Division
of Labor their in-state and out-of-state employment trends, payroll
information and job types held by in-state verses out-of-state, and the
number of instate residents employed by them. This would be reported to
the Division of Labor which would then generate a report to the
Legislature. The hope is that we can develop training and employment
opportunities for our citizens in the industry and an important
component of that is to being able to track employment trends and
opportunities. This is an important component of that effort. The
industry feels like they are being singled out by this amendment and
they are to the extent it is. But, by its nature the gas industry more
than any other has temporary jobs moving throughout our state and we
want to be able to monitor those movements to help facilitate better
understanding of the employment opportunities for our citizens.
E. Amendments pending for November interim meetings
Amendment--Establishing requirments for surface owners land use
agreement. This proposal is to incentivise gas operators to reach
agreement with surface owners prior to entering into the land to
conduct drilling operations. The amendment would require the gas
operator to pay all legal fees of the surface owner if the surface
owner is awarded in court an amount greater than 15% of the last offer
made by theoperator.
Amendment--Providing evaluation of area for karst formations and
special testing requirements when karst formation found within area
drilling is to occur. The purpose of this amendment is to provide
additional protections through proper evaluation of the geologic
formations in the area to assure no fracking water reached karst
formations containing groundwater.
Amendment--Establishing minimum qualifications for Oil and gas
inspectors. This amendment will establish minimum experience
qualifications for inspectors .
Amendment--Establishing additional localized factors the DEP is to
consider when granting a permit: Include dense population areas,
location of public water intakes, to allow protection of preexisting
conditions to allow the DEP to provide additional protections for these
existing conditions.
III. INDUSTRY PARTICIPATION
The House members of this Committee have spoken in one voice about
the need for reasoned protections for the citizens of this state
impacted by these drilling operations. I have been extremely frustrated
by the industry's lack of participation in the process we have
undertaken. Despite frequent invitations, they have been unwilling to
negotiate and agree to solutions for our most difficult issues. The
industry trade groups provided at my invitation, letters responding to
proposed amendments under consideration by the Committee. The industry
states that it wants fair and reasonable regulations but beside
offering criticisms about proposed and adopted amendments, they have
not brought forth one proposal offering solutions to the problems we
are trying to address.
IV. CONCLUSION
I am hopeful that legislation can be enacted in West Virginia to
address the concerns of all those benefitting and impacted by the new
horizontal drilling activities. I encourage the United State Congress
to also investigate whether any uniform regulatory requirements are
appropriate for the various states regarding this new gas drilling
activity. I do believe that the industry can profitably operate in this
state without causing harm to the local communities and residences, but
a balance must be struck between these competing interests. I stand
ready to offer you any assistance that I can provide in this important
inquiry and will continue in my efforts to advance a reasonable and
balanced approach to regulation of this new opportunity for West
Virginia.
[Applause.]
Senator Manchin. Thank you.
Senator Facemire.
STATEMENT OF DOUG FACEMIRE, STATE SENATOR, WEST VIRGINIA
LEGISLATURE, GASSAWAY, WV
Mr. Facemire. Thank you, Senator Manchin, Representative
Rahall, McKinley and Capito for the opportunity to address the
Senate committee on Energy and Natural Resources and hopefully
answer any questions that you might have.
The development of the Marcellus shale formation in West
Virginia is critically important to the economy of our State.
It represents a historic opportunity to join hands and create a
well balanced regulatory program in West Virginia which
encourages economic growth and job creation along with the
implementation of standards that ensure protection of the
environment. To achieve this goal all West Virginians,
industry, government and the public must come together in the
spirit of cooperation to develop a comprehensive regulatory
program which balances all competing interests.
After considerable time and effort from all interests the
Joint Select Committee on Marcellus shale is close to
recommending legislation that provides safeguards for the
environment, encourages development and promises certainty for
the regulated community. With these considerations in mind I
will provide a brief review of pending legislation.
Marcellus operations use considerably large amounts of
water to conduct fracturing operations compared to the
conventional operations. Because of this the proposed
legislation imposes new comprehensive casing and cementing
standards to protect fresh water and ground water supplies from
the increased potential for contamination. To protect the
surface water sources the pending legislation imposes new
surface water use and reporting requirements, operations would
have to submit a water management plan which identifies the
location of surface withdrawal and nearby public water intakes
along with the anticipated volume and months of each
withdrawal, a disposal plan for waste water and a list of
chemicals used in the fracturing fluids.
Additional requirements increase the minimum distance
between well sites and water bodies and public water intakes
and expands the distance between well sites and existing water
sources to survey water quantity and quality prior to drilling.
To address the concerns about protecting the public interest
this legislation more than triples the distance between well
sites and existing homes and agriculture facilities. It also
potentially subjects Marcellus operations to regulation under
our air quality laws and calls for a study of the impact of air
emissions from well sites on the public health.
Moreover the category of persons entitled to receive notice
to propose Marcellus operations are expanded to include
adjacent surface owners and owners and suppliers of water
sources. Current law only requires notice to surface owners and
owners of coal interest directly affected by the proposed gas
operation. This notice would have to include a copy of all
documents and information required in a permit application.
Those entitled to receive notice would then have 30 days to
comment on any part of the proposed operation. Current law only
provides for a 15 day comment period.
In response to the concerns regarding the impact of
increased vehicle traffic on our State's infrastructure and the
effect of operations on local interests, the pending
legislation contains 2 provisions governing road use and land
development. Marcellus operations would have to enter into a
written agreement with the State to maintain and repair public
roads used by the operations. Any failure to do this would
result in a suspension of operations until compliance is
achieved.
To protect local interest the legislation allows local
governments to pass zoning and land development laws to protect
the health and welfare of the general public. These are just a
few of the many provisions in the legislation currently pending
before the Marcellus Committee.
Some interests believe the legislation is not enough.
Others believe it represents a significant improvement over the
existing laws governing gas operation in the State. I believe
it provides a framework of certainty for everyone, the
regulated community, the public and other related businesses
that might convince to local here and take part in the
opportunity to create more jobs and contribute to the continued
economic growth in the State.
However, none of this will happen without the cooperation
of all competing interest and the willingness to compromise. If
we can do this West Virginia will truly be a more wonderful
place to live. Thank you. I appreciate this opportunity.
Senator Manchin. Thank all of you.
We are going to start the same. We're going to have the
same round of questioning like we had before with our first
panel. I will start it off.
If I can ask both of our State Representatives, Delegate
Manchin and Senator Facemire, do you all believe that you have
enough support or can muster enough support to pass
legislation?
Mr. Manchin. We think so. I mean, there are some provisions
in the bill that industry is not very happy with. There's a
concern that they will exert influence to block the bill.
But I think that in my private discussions with many
Senators and the House members, I believe that we want a bill.
I think our citizens have spoken loudly and clearly that they
want a bill. We owe them that bill. I think everybody is going
to try to get there.
Mr. Facemire. I tend to agree. The main thing that we have
to remember here is this is the beginning. This is not a bill
that it's a onetime deal.
As this bill gets put into law and implemented, we will
have the opportunity to come back and make any adjustments that
needs to be made to this. But the citizens have made it
perfectly clear to us over the last few years that they want
some regulation and some rules put into place. That's what
we're going to attempt to do here.
Senator Manchin. Secretary Huffman, have you been working,
your agency been working, with the legislators as they've been
drafting and putting together this bill?
Mr. Huffman. Yes. There are a lot of amendments that have
been offered so far that our environmental, directly
environmental protection type things that we have worked with
them on. Some of the matters that they are addressing are
policy matters that don't directly fall into our area of
expertise and responsibility.
But yes, we've been working closely with them.
Senator Manchin. Have you shared basically the proceedings
with the EPA? How well are you working with the EPA District
Office in Philadelphia?
Mr. Huffman. Mr. Capacasa accurately pointed out a while
ago that the actual drilling process and activities related to
oil and natural gas extraction are not directly subject to any
Federal oversight. What is subject to Federal oversight,
however, and is also subject to the State oversight are the
requirements to protect the ground water, the surface water and
the air. We already have a regulatory framework in place to do
that. We have adequate and proper oversight from the Federal
Government within those programs.
So there's really not a counterpart. We've talked a lot
about primacy today. There's not a counterpart, oil and gas
regulatory program at the Federal level.
Senator Manchin. Mr. Dettinger has the Governor's Office
basically evaluated the amount of resources that it's going to
take to amply oversee this procedure and this new opportunity
we have. If the legislature falls short of securing the revenue
or enhancing the revenue that the DEP is going to need how do
you all plan on funding that?
Mr. Dettinger. Senator Manchin, we feel comfortable that
the legislature will implement appropriate drilling permit
fees. I know Secretary Huffman has appeared before the Joint
Select Committee on a number of occasions and has offered
testimony about the amount of money he needs to implement these
regulations. I believe that encompasses what's in the current
amendment for the bill.
Senator Manchin. My time is up.
Congressman Rahall.
Mr. Rahall. Thank you, Senator Manchin.
Delegate Manchin, let me explore with you in my limited
time the job reporting requirement. We all want to see these
jobs go to West Virginians. You referenced motel parking lots
that are full of out of State license plates.
I have talked to some of those out of State license plates
in Southern West Virginia. In some cases they are West
Virginians, who left during the bad times and now are coming
back to work here and leaving their families living in North
Carolina and they're commuting on weekends.
How do you account for that? What----
Mr. Manchin. I don't know.
Mr. Rahall [continuing]. Job reporting requirement upon the
industry.
Mr. Manchin. It's not very specific. It just asks for
aggregate number of in State residents who are employed,
aggregate number of out of State and the total payroll for
each, something that can be created by computer easily. We just
feel like we need real numbers.
I mean, I know that there's going to be deviations. I don't
expect us to have 100 percent West Virginians. You know, if it
was 80 percent West Virginians and 20 percent out of State, I'd
be tickled to death. If it's 20 percent West Virginians and 80
percent out of State, I'm not so happy.
That doesn't mean we can do anything about it. But the
point is that you need some public pressure on these companies
to make them know that the public is aware of it. That they
want to see them do something about it. That they want to see
them work with our community and technical training schools to
provide that training that's necessary for those people to come
in and take those jobs.
That's what we're after, Congressman. It's not meant to be
a punitive thing by any measure. We just need some real
numbers.
Mr. Rahall. I would agree. I didn't mean it in a punitive
term. I just think, you know, you've got to take into account
those that want to come back home too.
Mr. Manchin. Absolutely.
Mr. Rahall. I mean, out of State license plates.
Mr. Manchin. Absolutely agree with you.
Mr. Rahall. OK. Thank you. Thank you, Senator.
Senator Manchin. Congresswoman Capito.
Ms. Capito. Thank you. I'm going to apologize in advance.
I'm going to have to leave here in about ten or fifteen minutes
to catch the flight back to Washington.
Secretary Huffman, when you have complaints, when there are
complaints, how do you handle those and what's your follow up?
Mr. Huffman. The complaints take on many forms. We get a
number of complaints that are really contractual, related to
the contractual relationship between the driller and the land
owner. We don't mediate those. We try to prioritize the calls
we get based upon the environmental issue that has been brought
up whether it's mud in a creek or a slip that's blocked a road
or an allegation of water contamination or something like that.
So that's how we try to handle the complaint.
Ms. Capito. Do you follow up with those?
Mr. Huffman. Yes.
Ms. Capito. Delegate Manchin, you mentioned that the bill
failed. Give me the 3 top reasons why that bill didn't make it.
Mr. Manchin. The industry didn't like it.
[Laughter.]
Ms. Capito. For what reasons?
Mr. Manchin. It was----
Ms. Capito. Just 3.
Mr. Manchin. I don't know to be real honest with you. I
mean there were essentially wording problems and some of those
sorts of things. But we consulted with--I mean, EQT helped us
write that bill. They were the only company that I could get to
sit down and actually address the issues, the subjects that we
wanted. They actually sat down and helped us write a good bill.
Ms. Capito. So was the industry at the table with the new
bill that you're writing now?
Mr. Manchin. They've been invited to be at the table. We
haven't received many comments. Although, within the recent--I
mean, we posted these amendments and sent them out to every
member of ANGA about 2 months ago.
We're now starting to see a trickle in. We've heard a
position from ANGA. So we're starting to get a little bit of
feedback. But we're awfully late in the game to try to perfect
it if we're going to have a special session. That's one of the
problems.
But nevertheless, I've still talked with some industry
representatives. We hope to have a sit down and discussion with
them between now and Wednesday to see if there are a few things
that we can hammer out that can make the bill more attractive.
We certainly want it to be workable and feasible. I mean,
that's first and foremost, that's our desire.
Ms. Capito. Yes, I didn't know, Senator Facemire, if you
had--I didn't follow it as specifically as to the particulars
of that legislation. So I really was honestly curious as to
know, you know, if there was a specific thing that you've now
dropped out or reformed or reshaped in this new legislation?
Senator Facemire.
Mr. Facemire. To go back to the start. Last year the Senate
did pass a bill for whatever reason the House decided to not
take the bill up and let it die.
Ms. Capito. I understand that problem.
Mr. Facemire. Yes.
[Laughter.]
Mr. Facemire. But, you know, like I said, we did do what we
thought we needed to be done and with Senate bill 424, so we
passed out a bill last year.
Ms. Capito. Alright. Thank you.
Senator Manchin. Congressman McKinley.
Mr. McKinley. Delegate Manchin, let me build a little bit
back on your--you had commented about the lack of training, a
trained work force, for West Virginia. That was one of the
first bills I introduced when I went to Congress because I was
hearing the very same thing. So we offered some legislation in
the House to be able for our employers, our employees, to go to
a community college to get the training necessary so that we
can overcome that bias because they were saying we didn't have
a trained work force.
Let's get that trained work force. We have the resources if
we can get that bill out of the House.
Mr. Manchin. Thank you.
Mr. McKinley. Now second with the--West Virginia has a
history, unfortunately, of extracting some of our natural
resources and shipping them out whether that's hardwood and
petroleum and the like. So we have an opportunity here
downstream from that, after that, cracking process, where we're
going to have some of the feedstock for the plastic industry.
What is happening in the legislature? What can happen to
see that industry, that stay here, that product stay here in
West Virginia instead of being shipped down to the Gulf. If
it's incentives, let's do it. With 10.2 unemployment and across
the country applying for unemployment, that's an excellent
opportunity for us to create jobs here in West Virginia.
Mr. Manchin. Sure.
Mr. McKinley. Yet there seems to be an undercurrent. That's
what I'm trying to understand. Why are the industry not keeping
these--that gas products here in West Virginia?
Mr. Manchin. I don't know all of that. I know that last
session we already acted and provided important tax incentives
for anybody that was interested in establishing a cracker plant
in this State. That was done in consultation with industry.
Mr. McKinley.--Downstream. Once you get a cracker they're
going to take off and they're going to take that product and
use that feedstock someplace else. I want to see that stay here
in West Virginia so that we have that plastic, that ethylene
that we create or the propane, or the butane and have an
industry that is built around that, that we can create jobs
here in West Virginia instead of taking that propane and
shipping it to the Gulf Coast or the ethylene to another area
of the country.
Mr. Manchin. I can't speak specifically whether the tax
credit in--the downstream to the spin off industries that
you're talking about. But I'm sure we're willing to. But I
think the real issues are, are they willing to put up the
capital.
Can you put up the capital and build them here more cheaply
than what you can do in just hauling them down to existing
plants. I think that's part of it. I don't know. But that seems
like a logical question to ask.
Mr. McKinley. Senator, do you have anything? I know I'm
going to run out of time here in a second.
Mr. Facemire. We heard the testimony of what kind of an
investment is involved in these cracking plants. I think it's a
prudent business decision. What these people are wanting to
know before they commit to West Virginia, they want to know
that we're going to create an environment where that they will
have the supply of gas that they need.
When you talk about the magnitude of gas these cracking
plants have, you know, it takes a lot of gas. I'm not sure that
right now we produce enough gas in this State to operate 2 or 3
cracking plants. In order for them to make that investment they
have to know that the supply of gas is going to be here.
Mr. McKinley. I'll leave it at that. My time is up. I'd
like to follow it back. Maybe what I'll do with you Senator,
get back with both of you and let's see what we can do because
there are too many people unemployed.
Mr. Manchin. Sure.
Senator Manchin. We have time for one more round. I know
Senator Capito has to catch a plane. I want to thank her for
participating.
Ms. Capito. Thank you.
Senator Manchin. If we will we'll have one more round here.
I'll start.
Secretary Huffman and maybe to Kurt, very quickly, is there
adequate or is there a fund set aside for severance tax or the
permitting fees that would adequately have a fund that was
capable of proper closure and capping of wells. Because you
look on that map, 150,000 wells have been drilled in West
Virginia. How many of them have properly been closed/capped?
How many air pollutants are we getting from them that
should be taken care of? With this new fine is it going to be
possible for us to put a fund together to take care of our past
sins and maybe prevent the future ones?
Mr. Huffman. Yes, sir. There is no such fund that I'm aware
of that has adequate resources in order to take care of the
number of wells out there that are no longer producing. They're
abandoned or orphaned that need reclaim by the State.
Senator Manchin. Like the AML money?
Mr. Huffman. Yes, sir.
Senator Manchin. Like the AML money, abandoned land mine
money. We have no abandoned well money?
Mr. Huffman. We do, but it's a small amount. It's not
enough to----
Senator Manchin. It needs to be a great cash, I mean, for
this type of a play coming in to put something properly to take
care of that?
Mr. Huffman. It very possibly could be.
Senator Manchin. Mr. Dettinger, does the Governor or the
Administration have a position on that?
Mr. Dettinger. I'd like to understand the magnitude of the
emissions and the number of wells, you know, help make sure to
consult with Secretary Huffman.
Senator Manchin. Either one of our delegates have a
position on that? Is that being considered in the legislation?
Mr. Manchin. No. I mean, what we're trying to do is make
sure it doesn't happen in the future. But taking care of the
past sins is not yet a consideration.
Senator Manchin. We did that with coal mining, our AML
money is done by tonnage. I'm just asking is there a
consideration because I never knew the magnitude of what we
have done in our State.
Mr. Manchin. No, but it's a great idea. We are aware. I
mean, this is one of the reasons why some of the complaints
that we have is are we going to put in place enough bonding and
that sort of thing to make sure that they reclaim, that they
cap when the time comes, so.
Senator Manchin. Thank you.
Mr. Manchin. I think we've taken action in that regard.
Senator Manchin. Congressman Rahall.
Mr. Rahall. Just to follow up on Senator Manchin's question
in a sense we're establishing new funds here. What about the
infrastructure? Are you requiring the companies to repair
public roads?
I heard you say, Senator Facemire?
Mr. Facemire. Yes, sir.
Mr. Rahall. Does that go into a fund that would be
dispersed for public road infrastructure repair?
Mr. Facemire. They make an agreement. They go out. They
film the road before the job starts. When it's done they film
it again. They assess the repair bill. The company has to pay
to repair the bill.
They can either do it themselves. They can contract it out
or they can just directly pay the Department of Highways to do
it.
Mr. Rahall Are you getting any push back?
Mr. Facemire. No, sir. We're not.
Mr. Rahall. No push back.
Mr. Facemire. No.
Mr. Rahall. You?
Mr. Manchin. Congressman, there are some additional issues.
I mean, that there is discussion and I think it's a great idea
that at some point in time we need to designate a portion of
our severance money to go into a perpetual trust that we use
solely for infrastructure in West Virginia in the future
whether it be roads. Because a lot of the roads we're talking
about, these are really small roads.
We're not doing anything in terms of US route 79 or other
things. Those aren't being factored in. They would be difficult
to factor in.
But there is wear and tear on those. We do need to set
aside some of that money and put it in perpetual trust and use
that interest to improve the roads as well as perhaps other
infrastructure projects of which we're in desperate need.
Mr. Rahall. One last quick question probably to our DEP
Director and/or the Governor's Office. Of course we all are
hearing many cases of citizen complaints regarding pollution
from drilling activities, traffic congestion, land aggregation,
etcetera, all of these resulting from new operations in West
Virginia.
What would DEP and/or the Governor's Office be doing to
alleviate or some avenues through which people can address
these concerns? Is there a hotline number or an office of
complaints or what avenue do they have?
Mr. Huffman. Congressman, I think the first thing that we
needed to do was to establish, you know, the rules of the game
which we have a, you know, framework for that in place now with
the emergency rules so that we know what is acceptable and what
is unacceptable. Right now the process that you're referring--
to which you're referring has a--it's a complaint system that
where people call in the agency and we direct that to the field
representative in order for him or her to investigate. So we
don't have anything more formal than that. But other than a
resource issue, that system works pretty good.
Mr. Rahall. Adequately staffed?
Mr. Huffman. I don't think I'll go that far today.
Mr. Dettinger. One of the other things, Representative,
that we need to do is embrace the evolution of best practices
and centralize impoundments is one of the ideas that's
blossoming in the industry where one large, centralized fresh
water impoundment is being used to supply water for multiple
operations nearby and that decreases traffic on the roads. So
there are some things that are evolving that are taking care of
some of these practices and problems.
Senator Manchin. Congressman McKinley.
Mr. McKinley. It just seems like from industry or the whole
issue is it's convenient for people to say that we don't have
the supply here in West Virginia. We'll ship it out. Much like
the issue with the post offices, the volume isn't here so we're
going to lose our post offices to someplace else.
We're going to lose our gas to someplace else because they
claim maybe we don't have gas, but yet I've talked with several
in the industry and they're talking about maybe even shipping
our gas over to Ohio. OK?
But why are they shipping the gas from the Utica from Ohio
back to West Virginia and creating it here? I'm really am
touring the legislature to find ways with tax incentives and
opportunities that we've seen in South Carolina when they
landed the Boeing and others and the auto sales down in
Tennessee, the manufacturing. They offered some terrific
incentives for people to locate these jobs here in West--in
those respective States.
I just hope there's somehow that you all in West--in the
legislature can come up with something to attract that back
because there are so many secondary jobs can come from that if
you will provide them the incentives to do it. They're going to
locate someplace. I'd love it to be in West Virginia. Put our
people back to work.
So I ask you in that when you go in your special session if
you can look at that to see if there are ways that you can
create some incentives with that.
Thank you all very much.
Senator Manchin. Let me just thank all of you. It's been an
extremely informative panel, very much so. I think everyone has
enjoyed it. I know our first 2 panels now, we want to thank
both of them.
We're going to take a 5-minute recess. We have a third
panel coming back. It's going to be a very, very good panel.
Then we'll wrap it up.
But I want to thank you all again. I encourage you to come
together as West Virginians always do and work for the
betterment of the people of West Virginia.
Thank you.
[RECESS.]
Senator Manchin. This is our final panel. We want to thank
all of you.
Pat, anybody out there wants to come in, get them in. Round
them up, brother.
OK.
I want to introduce you to our witnesses for this final
panelists and they include:
Dr. Tom Witt, who is the Director of the Bureau of Business
and Economic Research at West Virginia University.
We have Mr. Scott Rotruck, who is Vice President of
Corporate Development and State Government Relations for
Chesapeake Energy.
We have Mr. Kevin West, who is the Managing Director for
External Affairs of EQT Corporation.
We have Mr. Don Garvin, who is a Legislative Coordinator
for the West Virginia Environmental Council.
Dr. Witt, we'd like for you to proceed.
STATEMENT OF TOM S. WITT, DIRECTOR, BUREAU OF BUSINESS AND
ECONOMIC RESEARCH, PROFESSOR OF ECONOMICS, COLLEGE OF BUSINESS
AND ECONOMICS, WEST VIRGINIA UNIVERSITY, MORGANTOWN, WV
Mr. Witt. Thank you, Senator Manchin and Congressman Rahall
and McKinley. Thank you for having me here today.
I'm here to discuss the economic impact of the development
of the Marcellus shale play in West Virginia. I'm currently the
Director of the West Virginia University Bureau of Business and
Economic Research, a position I've held since 1985. I'm also a
Professor of Economics in the WVU College of Business and
Economics.
Since I arrived in West Virginia in 1970 I've had the
opportunity to research various dimensions of our State economy
ranging from manufacturing coal and chemicals to tourism and
bioscience. Most recently our research in the Bureau has
focused on the emerging economic development associated with
the Marcellus shale play in our State. My testimony today
covers the key points from some of our recent studies on this
topic as well as providing my perspectives on the future
development from this energy resource.
I co-authored a Bureau report, The Economic Impact of the
Marcellus Shale Play in 2009 that was released last year. I'd
like to take time to highlight some of the key elements.
Since 2002 drilling and development operations in the
Marcellus shale play have become an increasing important
component of West Virginia's natural gas industry. The
development of this play has led to a significant amount of job
creation in the industry. It's also raised the average wage
level for the industry in comparison to the rest of the State.
In order to quantify the economic importance of this play
in West Virginia our report started with publicly available
data on the natural gas industry that we obtained from Federal
and State statistical agencies. Our starting point was the use
of the North American Industrial Classification Sector
definitions for the oil and natural gas industry which
encompasses the following sectors: oil and gas extraction,
drilling oil and gas wells, support activities for oil and gas
operations, natural gas distribution, oil and gas pipeline and
related structures construction, oil and gas field machinery
and equipment manufacturing and pipeline transport of natural
gas.
These categories cover all aspects of the natural gas
extraction processing and transportation system but I'll show
you that's not the whole story.
In our publication we surveyed West Virginia operators to
obtain information on their operations in 2009. The responses
indicated that the average 139 acres were leased per well for
Marcellus shale development at a cost of $914 per acre. This
average acreage price estimate from the industry fell in line
with lease estimates found on land owner websites such as
GoMarcellusShale.com and the Natural Gas Forum for land owners
in which land owners indicated that they've been receiving
between $300 and $2,500 per acre depending on the area of the
State in which their land was leased.
Prior to drilling operators spend, on average, $300,000 per
well in location set up according to our survey responses.
Drilling for natural gas in the 2009 in the Marcellus shale
costs, on average, about 1.5 million per well and averaged 2
million per well completed.
Now we use these survey results to estimate the total
expenditures for Marcellus development and found that they were
quite considerable. The estimated economic impacts which are
shown in Table 1 of my testimony, show that Marcellus shale
development generated 2.35 billion in business volume and
approximately 1.16 billion in total value added in the West
Virginia economy. In 2009 the economic activities associated
with the Marcellus shale development created approximately
7,600 jobs and $298 million in employee compensation.
We also estimated the associated sale--State taxes were
approximately $14.5 million and other taxes paid included
nearly $66 million in severance taxes and $88.4 million in real
and personal property taxes. But our economic impact estimates
are conservative since they exclude the impacts associated with
bonuses and royalties paid to the mineral owners and also
excludes the economic impacts associated with mid stream
development pipeline construction and operation within the
State necessary for delivery of the natural gas to the ultimate
customers.
For this reason we also believe that the study
underestimated the economic impact since it does not include
the impacts that resulted from the drops in natural gas prices
that are paid by West Virginia customers that come about as a
result of the development of this unconventional gas playing.
Our study also projected what the economic impact was of
future development in the industry based on scenarios that we
developed based on responses from the industry. That's
reflected in the testimony that I've provided here today.
In addition as others have testified the downstream
opportunities associated with the development of crackers and
associated chemical industry are fairly considerable. I stand
ready to answer any questions you might have.
[The prepared statement of Mr. Witt follows:]
Prepared Statement of Tom S. Witt, Director, Bureau of Business and
Economic Research, Professor of Economics, College of Business and
Economics, West Virginia University, Morgantown, WV
Thank you Mr. Chairman and members of the Committee: I appreciate
the opportunity to be here today to discuss the economic impact of the
development of the Marcellus Shale Play in West Virginia. I am Tom S.
Witt, director of the West Virginia University Bureau of Business and
Economic Research, a position which I have held since 1985. I am also a
professor of economics in the WVU College of Business and Economics.
Since I arrived at WV in 1970, I have had the opportunity to research
various dimensions of our state's economy, ranging from manufacturing,
coal and chemicals to tourism and biosciences. Most recently our
research in the Bureau has focused on the emerging economic development
associated with the Marcellus Shale Play in our state.
My testimony today covers the key points from our recent studies on
this topic as well as providing my perspectives on the future potential
from the development of this energy resource.
economic impact of the marcellus shale play in 2009
I co-authored a Bureau report, Economic Impact of the Marcellus
Shale Play in 2009, that was released in December 2010.\1\ I would like
to take this time to highlight some of the key elements of this report.
---------------------------------------------------------------------------
\1\ Amy Higginbotham, Adam Pellillo, Tami Gurley-Calvez and Tom S.
Witt. The Economic Impact of the natural Gas Industry and the Marcellus
shale Development in West Virginia in 2009, WVU Bureau of Business and
Economic Research, December 2010. Available at www.bber.wvu.edu.
---------------------------------------------------------------------------
Since 2002, drilling and development operations in the Marcellus
Shale play have become an increasingly important component of West
Virginia's natural gas industry. The development of the Marcellus Shale
play has led to a significant amount of job creation in the state's
natural gas industry and has also raised the average wage level for the
industry in comparison to the rest of the state.
In order to quantify the economic importance of the Marcellus Shale
play in West Virginia, our report started with publicly available data
on the natural gas industry from state and federal statistical
agencies. Our starting point was the use of NAICS sector definitions
for the oil and natural gas industry, which encompasses the following
sectors\2\:
---------------------------------------------------------------------------
\2\ The North American Industry Classification System (NAICS)
classifies establishments by their primary type of activity. Further
information regarding NAICS can be found at http://www.naics.com.
NAICS 211: Oil and gas extraction
NAICS 213111: Drilling oil and gas wells
NAICS 213112: Support activities for oil and gas operations
NAICS 221210: Natural gas distribution
NAICS 237120: Oil and gas pipeline and related structures
construction
NAICS 333132: Oil and gas field machinery and equipment
manufacturing
NAICS 486210: Pipeline transportation of natural gas
These NAICS categories capture all aspects of the natural gas
extraction, processing and transportation system; however, as we'll
soon see this is not the total story.
We surveyed West Virginia operators to obtain information on their
operations during 2009. The responses indicated that on average 139
acres were leased per well for Marcellus Shale development at a cost of
$914 per acre. This average acre price estimate from the industry falls
in-line with lease estimates touted on landowner websites, such as
GoMarcellusShale.com and the Natural Gas Forum for Landowners, in which
landowners indicate that they have been receiving between $300 and
$2,500 per acre depending on the area in the state in which their land
was located.
Prior to drilling, operators on average spent $300,000 per well in
location setup according to survey responses. Drilling for natural gas
in the Marcellus Shale for 2009 in West Virginia cost, on average, $1.5
million per well and averaged $2 million per well completed.
We used these survey results to estimate the total expenditures for
Marcellus Shale development in 2009. Total expenditures for the 383\3\
Marcellus Shale wells drilled in West Virginia in 2009 were estimated
at $1.5 billion\4\. Drilling and well completion expenditures accounted
for approximately 87 percent of total expenditures.
---------------------------------------------------------------------------
\3\ Source: West Virginia Geological and Economic Survey http://
www.wvgs.wvnet.edu/www/datastat/devshales.htm)
\4\ Note that the economic impact of the Marcellus Shale in West
Virginia did not include expenditures for bonuses and royalties to
landowners, exploration, pipeline, processing, royalties or severance
taxes. Data for these expenditures were not available but if added
would increase the economic impact on the state.
---------------------------------------------------------------------------
The total estimated impact of the Marcellus Shale development on
the West Virginia economy in 2009 was developed using the IMPLAN
modeling software. As shown in Table 1, Marcellus Shale development
generated $2.35 billion in business volume and approximately $1.16
billion in total value added in the West Virginia economy. In 2009, the
economic activities associated with the Marcellus Shale development
created approximately 7,600 jobs and $298 million in employee
compensation. Assorted state taxes (sales, use, personal income,
corporate net income, and business franchise taxes) associated with
Marcellus Shale development totaled $14.5 million. Other taxes paid
include $65.9 million in severance taxes and $88.4 million in real and
personal property taxes.
Our economic impact estimates are conservative, however, since they
exclude the impacts associated with bonuses and royalties paid to
mineral owners. It also excludes midstream gathering, processing and
pipeline construction and operation within the state necessary for the
delivery of natural gas to ultimate customers. The estimate also
excludes the impacts on West Virginia business and consumer budgets
resulting from the significant drop in the price of natural gas from
earlier period that resulted from the development of these
unconventional gas resources.
ECONOMIC IMPACTS FROM FUTURE MARCELLUS SHALE PLAY DEVELOPMENT
The continued development of the Marcellus Shale represents a game
changer for our state's economy. Our report provided estimates of these
impacts for the period 2010 thru 2015 that were again estimated using
the IMPLAN modeling software and responses to a survey of West Virginia
industry operators. These operators were asked to provide growth
estimates for each year (2010-2015) based on 2009 EIA forecasted
average wellhead price for natural gas. Based upon these responses
three levels of growth were projected and analyzed in more detail: no
growth (i.e. same level of development each year as there was in 2009),
5 percent growth each year, and 20 percent growth each year.
The future economic impacts under these three different growth
scenarios are shown in Table 2. The levels of employment and employee
compensation impacts vary greatly by not only the year but also by
range of growth per year. The employment impact of Marcellus Shale
development for 2010 was estimate at between 7,600 and 8,500 additional
jobs depending upon the growth rate. By 2015 the number of additional
jobs created in 2015 was estimated to be between 6,600 and 19,600. The
employee compensation impacts range from less than $300 million each
year with no growth to approximately $890 million in 2015 with 20
percent growth each year.
As indicated earlier in my testimony, these impacts are
conservative. We are continuing our research on the industry and hope
to have updated estimates of its economic contribution soon.
One of the most exciting opportunities from the development of the
Marcellus Shale play is the opportunity to use the resulting ethane
extracted from the gas stream to attract ethane crackers and associated
petrochemical investments back to West Virginia. Earlier this year the
American Chemistry Council released a study on the downstream economic
impacts associated with new petrochemical production that would make
use of the ethane associated with the methane in the wet gas portions
of the Marcellus Shale play\5\. This analysis indicated that the
economic impact associated with the construction and operation of a new
1.0 million metric ton per year world-class ethylene cracker as well as
affiliated polyethylene and other downstream derivative plants. A $3.2
billion investment in an ethylene complex would generate a total of
$4.8 billion in additional chemical industry output and 12,000
permanent jobs.
---------------------------------------------------------------------------
\5\ American Chemistry Council, Shale Gas and New Petrochemicals
Investment, available from http://www.americanchemistry.com/
shalegasimpact.
---------------------------------------------------------------------------
Last week we released our annual West Virginia economic outlook
forecasts covering the period 2011-2016\6\. Over this period we project
continued growth in employment in the natural gas industry, offsetting
employment declines in the coal industry. If the potential of the
Marcellus Shale play is realized and downstream development
materializes, I anticipate even greater economic growth across a wide
range of industries for the foreseeable future. Besides the additional
employment and earnings above the statewide averages, West Virginians
will benefit from the continued low natural gas prices and state and
local tax revenues paid. Future development of the Utica Shale play
within the state will only add to the economic contributions associated
with this resource. In short, shale gas development is a great economic
development opportunity for West Virginians.
---------------------------------------------------------------------------
\6\ George W. Hammond, West Virginia Economic Outlook 2012,
available from the West Virginia University Bureau of Business and
Economic Research, www.bber.wvu.edu. These forecasts have been
incorporated Executive Budget that have been submitted by five
governors to the West Virginia Legislature.
---------------------------------------------------------------------------
CONCLUSION
I am happy to answer any questions that you may have.
Senator Manchin. Thank you.
Mr. Rotruck.
STATEMENT OF SCOTT ROTRUCK, VICE PRESIDENT, CORPORATE
DEVELOPMENT, CHESAPEAKE ENERGY CORPORATION, OKLAHOMA CITY, OK
Mr. Rotruck. Thank you, Senator Manchin. Thank you,
Representative Rahall. Thank you, Representative McKinley. It's
a privilege and an honor to be here today with you.
I want to discuss the enormous economic and environmental
potential of natural gas production from the Marcellus shale in
our home State of West Virginia. What the U.S. now considers
the Saudi Arabia of natural gas, Senator Manchin, as you said
announcing this field hearing, we're in a unique position of
strength for this resource. Companies like Chesapeake are
excited to be leading the way with other leaders in the
industry staying highly focused, committed to the safety of our
employees, our contractors, our communities and the
environment.
I am Scott Rotruck, Vice President for Corporate
Development for Chesapeake Energy. Our company is the second
largest producer and most active driller of clean burning
natural gas in the United States, as well as a top 15 producer
of natural gas liquids and oil. Chesapeake has about 12,000
employees.
I am a native West Virginian. I'm one of 700 West
Virginians who work for Chesapeake. We have offices in Jane Lew
and Charleston all focused on the Marcellus.
Today we have about 175 rigs running across the Nation, 7
in West Virginia. We hope to have 9 by January, totaling about
30 in the Marcellus.
The natural gas industry has and can continue to be a great
economic impact on our State. The industry employs thousands of
West Virginians and more than 19,000 additional jobs could be
created by 2015 according to West Virginia University's study.
We have 187 West Virginia vendors on our approved list, hiring
locally and having an impact on communities.
Areas of the State that have been experiencing higher
unemployment are now seeing real success. In Wetzel County
which had an unemployment rate of 16.3 in January and 11.9 now,
boast Litman Excavating and Construction Company, a small
company owned by New Martinsville resident Bob Litman. His
employment has gone from 17 to 105.
With this activity comes a great commitment to safe and
responsible development. Our industry has evolved
significantly, technologically to do so. At Chesapeake we use
state-of-the-art technology and resources that enable us to
drill more accurately and precisely.
West Virginia also has many other wonderful assets that can
help us advance our industry, including the National Energy
Technology Lab and West Virginia University which has one of
the few petroleum engineering programs east of the Mississippi.
Our industry has known about the existence of natural gas in
deep shales because that was a source rock for all the shallow
gas has been drilled. But advancements in horizontal drilling
and hydraulic fracturing have unlocked these vast new
resources.
Horizontal drilling is the process of drilling vertically
and then directionally approaching the target formation on a
horizontal plane. It is a great innovation as we move toward
the sweet spot of the rock. The second advancement that makes
the shale revolution possible is hydraulic fracturing or
fracking which has been utilized since 1940s but has become
more and more sophisticated. It is very important to reiterate
that these deep shale formations exist thousands of feet below
the land surface and separated from freshwater supplies by
layers of steel casing protected by concrete barriers as well
as millions of tons of solid rock geologic formations above.
One issue that has arisen in recent times is the concern
over additives used in the process like EQT here today,
Chesapeake is a proud participant in FracFocus.org, a public
registry where operators post their chemicals used in the
hydraulic fracturing mix. Education on all issues associated
with energy development is one of the things our industry has
been too slow to do with this supply revolution. Not just for
communities where we operate but for policymakers and leaders,
like yourself. We are going to continue to do better in getting
our message out.
We are committed to the highest standards of environmental
at Chesapeake. While no energy source is without impact, we
work every day to improve our industry leading practices by
integrating our core values, protecting the environment,
striving for operational excellence, continuously seeking ways
to improve practices and to minimize our footprint. Fortunately
today's shale gas is no longer just a potential. It has indeed
become a game changer.
Institutions like MIT and the U.S. Energy Information
Agency have all confirmed there is abundance. As you can see
shale gas extraction has changed the economic and energy
picture in States like West Virginia. We also realize that with
this leadership comes responsibility. We take it seriously.
We'll continue to be committed to the highest standards in
all areas.
Senator Manchin, thank you very much for the opportunity to
be here today.
[The prepared statement of Mr. Rotruck follows:]
Prepared Statement of Scott Rotruck, Vice President, Corporate
Development, Chesapeake Energy Corporation, Oklahoma City, OK
Thank you, Senator Manchin, for the opportunity to discuss the
enormous economic and environmental potential of natural gas production
from the Marcellus Shale in our home state of West Virginia. With the
U.S. now considered the ``Saudi Arabia of natural gas,'' as you said in
announcing this field hearing, West Virginia is in a ``unique position
of strength'' with this resource, and companies like Chesapeake Energy
are excited to be leading the way--staying highly focused and committed
to the safety of our employees, our communities and the environment and
our natural resources.
I am Scott Rotruck, Vice President for Corporate Development for
Chesapeake Energy Corporation. Our company is the second-largest
producer and most active driller of clean natural gas in the United
States, as well as a top 15 producer of natural gas liquids and oil. No
company knows more about producing these domestic resources than
Chesapeake, and we are proud of the leadership role we have built and
continue to play in developing natural gas and oil from shale plays
throughout the country and specifically here in West Virginia.
While Chesapeake is headquartered in Oklahoma City with about
12,000 employees nationwide, I am a native West Virginian and live in
Morgantown. As such, I am one of nearly 700 West Virginians employed by
Chesapeake. Our offices here in Jane Lew and Charleston (and likely the
northern panhandle soon) are focused on the development of what we
believe may be one of the world's largest natural gas deposits,
underlying parts of West Virginia, Pennsylvania, New York and other
Appalachian states, which--as we know well today--is called the
Marcellus Shale.
First, let me begin by providing some additional background on
Chesapeake Energy. Today, we have about 175 rigs operating across the
country of the approximately 2,000 total rigs--with seven of our 175
operating in West Virginia and 28 in the Marcellus Shale.
Chesapeake was one of the early entrants into the major natural gas
shale basins, including--in addition to the Marcellus where we hold
about 1.8 million acres of leasehold (net)--the Barnett Shale in north-
central Texas, the Fayetteville Shale in north-central Arkansas (though
we have since sold this), the Haynesville Shale in Louisiana and East
Texas and the Bossier Shale in Louisiana. Today, we are also a key
player in liquids-rich like the Eagle Ford Shale in south Texas and the
Utica Shale in Ohio, Pennsylvania and other eastern states.
We are very proud that our company is America's leader in high-
potential deep shale gas exploration and production, and we are excited
about what this can mean to West Virginia and America's energy future
and security.
As you know, the natural gas industry has and can continue to have
a great economic impact on our state. Today, the industry employs
32,000 West Virginians, and more than 19,000 additional jobs could be
created by 2015, according to a West Virginia University study.
Chesapeake alone has 187 West Virginia vendors on our approved vendor
list, hiring locally and having an economic impact on communities where
they operate.
Thanks to our industry, areas of the state that have been
experiencing higher unemployment are now seeing real success stories.
In Wetzel County, Litman Excavating and Construction, a small company
owned by New Martinsville resident Bob ``Boo'' Litman, has seen his
company's employment grow more than 400 percent from just 17 employees
to about 105 due to Marcellus Shale activity, and as he told New
Martinsville's City Council, ``we need more.''
With this activity comes a great commitment to safe and responsible
development, and our industry has evolved significantly over the years
and decades with great technological advancements to make natural gas
production truly a manufacturing process.
At Chesapeake, we use state-of-the-art technology and resources
that enable us to drill more accurately and precisely. Our Reservoir
Technology Center allows us to generate on-site core analysis. We also
have our own 3-D seismic visualization center where we can display
robust and vivid subsurface images, making it possible for our
geologists to pinpoint natural gas prospects miles below the surface.
Our company has an unparalleled inventory of more than 30 million acres
of 3-D seismic data, as well as U.S. onshore leasehold of about 15
million acres. In short, we believe no other entity has more knowledge
about America's subsurface as it relates to natural gas than
Chesapeake.
West Virginia also has wonderful assets that can help us advance
our industry, including the National Energy Technology Lab (NETL),
based in Morgantown, as well West Virginia University, which has one of
the few petroleum engineering programs west of the Mississippi.
The rest of the energy industry is now investing heavy dollars into
shale prospects. Chesapeake, for example, has attracted billions of
dollars in our company in recent years, including deals with Statoil,
BP, Total, BHP Billiton and others. You see the ``major'' integrated
companies for the first time in many years really investing in the
U.S., including ExxonMobil's purchase of XTO in 2010.
To provide some background about this supply revolution, our
industry has known about the existence of natural gas in deep shale
formations for many years. Unfortunately, we did not know how to
economically extract the gas in commercial quantities from this very
hard, non-porous and low-permeability sedimentary rock.
Then along came the Barnett Shale in the Dallas-Fort Worth area of
Texas. George Mitchell pioneered the Barnett Shale play starting in the
1980s. After combining hydraulic fracturing with horizontal drilling
techniques while natural gas prices rose off their lows, the play took
off in 2003, and today, is the most prolific producing natural gas
field in the country.
Horizontal drilling is the process of drilling vertically and then
directionally approaching the target formation on a horizontal plane at
an ``entry point.'' In some cases, the horizontal portion of the well
bore extends beyond a mile. While not a new process, horizontal
drilling has greatly advanced over the years.
Modern horizontal drilling can make a near 90-degree turn with the
drillbit, which allows much increased exposure of the drillbit to the
``sweet spot'' of a geologic formation and the ability to extract much
greater quantities of natural gas than a vertical well because the
horizontal well bore exponentially increases contact with the target
formation. In addition, it can provide a much more environmentally
friendly technique because the number of surface locations is
dramatically reduced, thus minimizing the surface footprint. It also
allows us to safely drill in urban areas such as Fort Worth, Texas,
near Shreveport, Louisiana and in other heavily populated areas where
surface locations and surface disturbances need to be minimal.
The second advancement that makes this shale revolution possible is
hydraulic fracturing, or ``fracking,'' which has been utilized
commercially since the 1940s and is now used on nearly all producing
natural gas wells drilled. Performed after a well has been drilled,
this process creates fissures in very tight shale formations deep
underground, many thousands of feet below the surface and freshwater
aquifers. Water and sand, which is a ``proppant,'' are pumped down the
wellbore at high pressure to fracture the rock, so natural gas will
flow into the wellbore while the proppant serves to prop and keep open
those fractures. In addition to these primary elements a very small
percentage of other additives is used in the fracturing mixture to
protect target formations and increase recoveries.
It is very important to reiterate that these deep shale formations
exist thousands of feet below the land surface and are separated from
freshwater supplies by layers of steel casing, protected by concrete
barriers as well as millions of tons of hard, dense solid rock geologic
formations.
One issue that has arisen in recent years is the concern over
chemicals used in the process. Like EQT here today, Chesapeake is a
proud participant in www.fracfocus.org, a public registry where
operators post chemicals used in hydraulic fracturing on a well-by-well
basis. In fact, we have been disclosing our chemicals since 2009.
Today, Chesapeake is working with the Environmental Protection Agency
(EPA) on its hydraulic fracturing study--we have offered a prospective
site for this study--which is scheduled to have initial research
results by the end of 2012 and a final report released in 2014. Our
highest priority is a science-based and balanced report.
Education on all the issues associated with energy development is
one of the things our industry has been too slow to do with this supply
revolution, not just for local communities and states but policymakers
and leaders like yourself. At Chesapeake, we have certainly tried to
change that in recent years by leading the way--not just by disclosing
hydraulic fracturing chemicals, but also on issues like road use and
truck traffic, water use and noise.
For instance, in West Virginia in the past several years, we have
hosted meetings with residents most affected by our activities to
listen to their concerns and share our plans. Through our experience
with these Community Advisory Panels in drilling areas, we have
negotiated solutions on issues like school bus travel, noise, and road
use. It is no secret that our activity takes a toll on roads, and so we
have invested $70 million on rebuilding roads in the state--in many
instances returning them to a condition better than we found them.
We are committed to the highest standards of environmental
excellence at Chesapeake. While no energy source is without impact, we
work every day to improve our industry-leading practices by integrating
our core values--protecting the environment and natural resources;
striving for operational excellence; continuously seeking ways to
improve our practices and minimize our footprint; supporting robust
science-based regulation at the appropriate levels of government;
community focus and involvement; and a commitment to human, physical
and financial capital to achieve and maintain those core values. These
values are vital to our operational structure, and we expect the same
commitment from our partners, contractors and vendors.
I will conclude with some comments about what all this can mean for
our state and our nation. Interestingly, the last time someone from
Chesapeake spoke on a related issue before a Congressional panel was in
June 2009, when a former Chesapeake colleague, also from West Virginia,
testified on the issue of ``shale gas potential'' before a House
Natural Resources subcommittee. Even with all the enormous potential
then, it is amazing how much has even changed--just a little more than
two years later.
That same year, the U.S. surpassed Russia as the largest producer
of natural gas in the world. Moreover, companies like ours have now
discovered additional natural gas and oil fields across the country,
including, for instance, the Utica Shale in Ohio and other Eastern and
Midwestern states.
Today's widely recognized natural gas supply abundance is even more
amazing considering that, less than a decade ago, the U.S. was facing
difficult energy and economic decisions based on natural gas scarcity.
Then, our manufacturing and chemical facilities were moving
offshore--as you know, chemical companies use large amounts of natural
gas as a feedstock and a fuel--agriculture was facing steep fertilizer
prices due to higher natural gas prices, affected Americans were facing
high home heating costs, and we were importing more and more foreign
oil for transportation, posing continued national security concerns.
The broad effects of this then-natural gas supply scarcity demonstrates
the wide variety of uses for natural gas, which represents about 23
percent of our power generation mix, in addition to its industrial,
commercial and residential uses.
Fortunately, today shale gas no longer just has ``potential.'' It
is real, and it is a game-changer not only for America's natural gas
industry but also potentially for our nation, our economy and our
environment--and possibly the world. Institutions like the
Massachusetts Institute of Technology (MIT), the Potential Gas
Committee at the Colorado School of Mines and the U.S. Energy
Information Administration (EIA) have all continued to reaffirm in
recent years the reality of U.S. natural gas supply abundance.
Finally, according to a recent study by Navigant Consulting
released just this month, the boom in natural gas development is saving
consumers billions of dollars a year, thanks to a supply that keeps
outstripping demand and can do so for many decades. According to the
report, in West Virginia alone, consumers in 2010 saved $296 million--
or 33 percent of their gas bill--versus what it would have been without
the new, abundant supply.
As you can see, shale extraction has changed the economic and
energy pictures in states like West Virginia, and we are proud to be
leading the way. As I said before, though, we also realize that with
leadership comes responsibility. Chesapeake takes this responsibility
seriously, as an industry, economic and environmental leader, and we
will continue to be committed to the highest standards in all areas.
That is what Chesapeake expects of our employees, our partners, and our
company.
Thank you, Senator Manchin, and I look forward to answering any
questions.
Senator Manchin. Thank you.
Mr. West.
STATEMENT OF KEVIN WEST, MANAGING DIRECTOR, EQT CORPORATION,
PITTSBURGH, PA
Mr. West. TThank you, Senator Manchin, Congressman Rahall
and Congressman McKinley. EQT appreciates the opportunity to be
able to provide this testimony at this field hearing this
morning.
EQT is truly an Appalachian based natural gas producer.
We've been headquartered in Pittsburgh for over 120 years. Have
been operating in West Virginia for over a century.
We have 427 employees in West Virginia. It is estimated
we're responsible for almost 500 additional jobs related to our
operations. We have over 5,000 natural gas wells and 5,100
miles of pipeline in West Virginia. Have drilled 27 horizontal
wells in West Virginia thus far in 2011 with that number
projected to reach 33 by year's end.
As many of the distinguished witnesses on the panel have
testified this morning, West Virginia's abundant natural gas
reserves provide the State with a tremendous economic
opportunity. EQT and other natural gas producers in West
Virginia are keenly aware of that with the opportunities that
natural gas provides the State come the responsibility to be
dedicated environmental stewards. Just as important as
accessing this clean energy resource is making sure that we
place safety first.
The vast increases in our domestic natural gas resources
over the last few years have been made possible by 2
technologies that have been improved in recent years to the
point where we are now able to tap into deep supplies of
natural gas like the Marcellus shale that were once thought to
be inaccessible.
The first of these technologies is horizontal drilling.
This process is exactly what it sounds like. A vertical hole is
drilled that turns horizontally over a mile below the surface
and then extends laterally. This is an important advancement
because it allows multiple wells to be drilled from a single
well pad significantly reducing the overall environmental
impact of drilling activities by giving access to more of the
natural gas formation underground from a lesser amount of
surface above the ground.
The other improved technique that is allowing natural gas
producers to tap into new supplies of natural gas is hydraulic
fracturing. Hydraulic fracturing takes place more than a mile
below the Earth's surface and several thousand feet below any
water sources. Hydraulic fracturing is minimally invasive and
involves drilling a small hole that is lined with 3 layers of
steel encased in cement to protect any fresh water supplies and
allow for the safe extraction of natural gas. Then pressurized
water, sand and additives are used to create small, often
millimeter thick fissures in carefully targeted sections of the
shale rock.
In addition to ensuring that no water sources are impacted
during the drilling and hydraulic fracturing process EQT and
other West Virginia producers have developed comprehensive
spill prevention plans to minimize the risk that any water
source will be affected by natural gas surface operations.
In the interest of providing the public with all of the
facts about hydraulic fracturing in August 2010, EQT began
posting on its website the contents of the hydraulic fracturing
solution for each well we drill along with a broad range of
industry participants including Chesapeake, EQT supports
FracFocus.org, a public data base of hydraulic fracturing
fluids developed by the Ground Water Protection Council and
their Interstate Oil and Gas Commission.
Governor Tomblin, Secretary Huffman and their staffs have
and continue to ensure that natural gas operations are
conducted in a safe and environmentally responsible manner.
They possess the expertise to ensure that West Virginia's
natural resources are not damaged by natural gas production.
State level enforcement is considered critical because drilling
practices are customized to the unique geological
characteristics of different parts of the country.
EQT looks forward to continue to work with West Virginia
State regulators and with the general assembly so that West
Virginia can reap the benefits of natural gas production
without any fear that its other abundant natural resources will
be disturbed. Natural gas presents one of the most significant
opportunities ever for West Virginia economic development. The
State has and will benefit from the jobs natural gas production
creates, the ability to attract to West Virginia industries
that use natural gas as a fuel source or seed stock and cheaper
energy and fuel costs for its citizens.
EQT has been in West Virginia for more than 100 years.
We're here for the long haul. We look forward to working with
the rest of the natural gas community in West Virginia to help
the State take advantage of this tremendous opportunity.
Thank you, Senator.
[The prepared statement of Mr. West follows:]
Prepared Statement of Kevin West, Managing Director, EQT Corporation,
Pittsburgh, PA
Good morning, I am Kevin West, Managing Director of External
Affairs for EQT. EQT appreciates the opportunity to provide testimony
to the Committee this morning.
EQT is truly an Appalachian based natural gas producer. We have
been headquartered in Pittsburgh for over 120 years and have been
operating in WV for over a century. We have 427 employees in West
Virginia and it is estimated we are responsible for almost 500
additional jobs related to our operations. We have 5,288 natural gas
wells and 5,100 miles of pipeline in West Virginia and have drilled 27
horizontal wells in West Virginia thus far in 2011, with that number
reaching projected to reach 33 by year's end.
It has been conservatively estimated that there are between 98 Tcf
and 150 Tcf of Marcellus reserves in West Virginia. This abundant
natural resource presents West Virginia with a tremendous economic
opportunity. In a time of economic downturn, the natural gas community
is actually adding jobs. Studies examining the economic impact of
natural gas production in West Virginia estimate that natural gas
production in the state accounts for 7,600 jobs and total annual added
revenues to the state's economy of a billion dollars. These same
studies have projected that with steady growth at least 6,600 new jobs
will be created by 2015. Development of the Marcellus Shale has enabled
West Virginia to be the only state east of the Mississippi River that
is a net exporter of natural gas.
EQT and other West Virginia natural gas producers are keenly aware
that, with the opportunities that natural gas provides the state come
the responsibility to be dedicated environmental stewards. Just as
important as accessing this clean energy resource is making sure we
place safety first.
The vast increases in our domestic natural gas supplies over the
last few years have been made possible by two technologies that have
been improved in recent years to the point where we are now able to tap
into deep supplies of natural gas like the Marcellus Shale that were
once thought to be inaccessible.
The first of these technologies is horizontal drilling. This
process is exactly what it sounds like, a vertical hole is drilled that
turns horizontally over a mile below the surface and then extends
laterally. EQT's average lateral is approximately 5,000 feet and we
have drilled laterals that extend as far as 9,000 feet. This is an
important advancement because it allows multiple wells to be drilled
from a single well pad significantly reducing the overall environmental
impact of drilling activities by giving access to more of the natural
gas formation underground from a lesser amount of surface wells above
ground. Thanks to horizontal drilling, today's average well site is
just 30 percent of the size of its 1970s counterpart and can access 60
times more below-ground area. Continued technological advancements mean
fewer wells are recovering even greater reserves and creating less
surface disturbance and waste.
The other improved technique that is allowing natural gas producers
to tap into new supplies of natural gas is hydraulic fracturing.
Hydraulic fracturing takes place more than a mile below the earth's
surface, and several thousand feet below any water sources. EQT has
conducted micro-seismic testing, which revealed that from the surface
down as deep as 5300 feet there was no impact caused by hydraulic
fracturing.
Hydraulic fracturing is minimally invasive and involves drilling a
small hole that is lined with three layers of steel encased in cement
to protect any fresh water supplies and allow for the safe extraction
of natural gas. Then pressurized water, sand and additives (less than
one percent of the overall mixture) are used to create small, often
millimeter-thick fissures in carefully targeted sections of the shale
rock. This releases the natural gas, allowing it to safely rise to the
surface within the self-contained system. In addition to ensuring that
no water sources are impacted during the drilling and hydraulic
fracturing process, EQT and other West Virginia producers have
developed comprehensive spill prevention plans to minimize the risk
that any water source will be affected by natural gas surface
operations.
In the interest of providing the public with all of the facts about
hydraulic fracturing, in August, 2010 EQT began posting on its website
the contents of the hydraulic fracturing solution for each well we
drill. Along with a broad range of industry participants, including
America's Natural Gas Alliance, the Independent Petroleum Association
of America and the American Petroleum Institute, EQT supports
FracFocus.org--a public database of hydraulic fracturing fluids
developed by the Ground Water Protection Council and the Interstate Oil
and Gas Compact Commission. This state-based registry of hydraulic
fracturing fluids includes information on a well-by-well basis for
operations on government and private lands.
Governor Tomblin, Secretary Huffman, and their staffs have and
continue to ensure that natural gas operations are conducted in a safe
and environmentally responsible manner. They possess the expertise to
ensure that West Virginia's local air, land and water are not damaged
by natural gas production. State-level enforcement is considered
critical, because drilling practices are customized to the unique
geological characteristics of different parts of the country. The
geology of natural gas formations can vary greatly from region to
region--even well site to well site in some areas. Each shale, and even
different parts of the same shale, possesses unique geological
characteristics that require specialized approaches to developing the
natural gas found there. Well design, location, spacing, operation,
water management and disposal, waste management and disposal, wildlife
impacts and surface disturbance are all variables that differ and are
accounted for by state-led regulation. EQT looks forward to continuing
to work with West Virginia's state regulators so that West Virginia can
reap the benefits of natural gas production without any fear that its
other abundant natural resources will be disturbed.
West Virginia has also taken a major step toward reducing its
dependence on foreign oil by enacting legislation that promotes the use
of natural gas vehicles. EQT looks forward to working with the state in
providing its citizens with a cheaper, cleaner, American alternative
transportation fuel.
Natural gas presents one of the most significant opportunities ever
for West Virginia economic development. The state has and will benefit
from the jobs natural gas production creates, the ability to attract
industry to West Virginia that use natural gas as a fuel source or
feedstock, and cheaper energy and fuel costs for its citizens. EQT has
been in West Virginia for more than 100 years and is here for the long
haul. We look forward to working with the rest of the natural gas
community and West Virginians to help the state take advantage of this
tremendous opportunity.
Thank you.
Senator Manchin. Thank you.
Mr. Garvin.
STATEMENT OF DONALD S. GARVIN, JR., LEGISLATIVE COORDINATOR,
WEST VIRGINIA ENVIRONMENTAL COUNCIL, BUCKHANNON, WV
Mr. Garvin. Thank you, Senator Manchin, Congressman Rahall
and Congressman McKinley. My name is Don Garvin. I'm the
Legislative Coordinator and Lead Lobbyist for the West Virginia
Environmental Council.
We don't drill wells. We have bake sales.
[Laughter.]
Mr. Garvin. I moved to Buckhannon, West Virginia in 1982 to
manage Braxton Oil and Gas, my father's independent oil and gas
production company. We drilled conventional wells primarily to
produce natural gas from relatively shallow, geological
formations. But Marcellus drilling is not my father's gas
patch.
Marcellus shale drilling is gas drilling on steroids.
Everything about these unconventional drilling operations is
leaps and bounds bigger than conventional gas well drilling.
They impact more land. They use more water. They produce more
liquid and solid waste and they emit more air pollution.
Marcellus drilling operations are so huge that the impacts
are felt far beyond the surface tracks being disturbed. Impacts
can occur to public lands, special places, high quality
streams, neighboring land owners, local infrastructure and to
quality of rural life. It is resulting in what can only be
described as the industrialization of rural West Virginia.
The hundreds of large truckloads daily hauling drilling
equipment, water, sand and fracturing chemicals and then all
the liquid and solid wastes on narrow country roads, huge
drilling rigs running 24 hours a day, months on end. It all
amounts to a major industrial activity. In areas where this
drilling is occurring the very nature and character of rural
life is changing.
In West Virginia the problems and conflicts are compounded
by our mountainous terrain and by the fact that so many surface
owners do not own the minerals under their own land. Therefore
have little or no control over what is happening on their
property.
The new technologies responsible for this boom in drilling
are still largely unregulated. Horizontal drilling and
hydraulic fracturing cause an exponential increase in surface
disturbance, water use and waste disposal and can pose a
serious threat to our land, water and air resources and public
health. Eliminating, or at the very least, minimizing those
threats is the main concern of the West Virginia Environmental
Council.
In the United States the responsibility for regulating the
oil and gas industry is largely been delegated to the
individual States. So for the last 3 years WVEC has worked
cooperatively with the West Virginia DEP as well as the State
legislature in efforts to craft a comprehensive State
regulatory framework to regulate Marcellus shale drilling that
would protect the environment while allowing the drilling to
continue. To this date, as you've heard, those efforts have
failed largely due to industry opposition.
On the Federal level last week, late last week, the Shale
Gas Production Subcommittee of the Secretary of Energy's
Advisory Board released its second 90 day report. The report
concludes that the subcommittee believes that if action is not
taken to reduce the environmental impact accompanying the very
considerable expansion of shale gas production expected across
the country. There is a real risk of serious environmental
consequences causing a loss of public confidence that could
delay or stop this activity.
The Subcommittee's report contains 20 recommendations that
WVEC broadly supports particularly those dealing with air and
water pollution.
I want to draw your attention to the subcommittee's
recommendation No. 2 which recommends Federal funding of $5
million a year for 2 existing non-profit organizations, the
State Review of Oil and Natural Gas Environmental Regulations
known as STRONGER and the Ground Water Protection Council which
is involved in FracFocus. The State review process now
conducted by STRONGER is a voluntary program that measures a
State's regulatory program against the set of guidelines
developed and revised by stakeholders over the last 20 years.
I've been a board member of STRONGER since the year 2000. I
urge Congress to fund the STRONGER State review process.
Finally the West Virginian Environmental Council supports
repeal of the exemptions to Federal law granted to the oil and
gas industry and the Energy Policy Act of 2005. These
exemptions have weakened the previous safeguards against water
pollution from oil and gas exploration under the Clean Water
Act, the Safe Drinking Water Act and the NEPA. We urge their
repeal.
I, in my written testimony talk about the efforts in the
State to craft legislation. I'll be glad to answer questions
about that and--or anything you might want to have----
[The prepared statement of Mr. Garvin follows:]
Prepared Statement of Donald S. Garvin, Jr., Legislative Coordinator,
West Virginia Environmental Council, Buckhannon, WV
Senator Manchin, Congressman Rahall, Congresswoman Capito, and
Congressman McKinley:
My name is Don Garvin, and I am the Legislative Coordinator and
lead lobbyist for the West Virginia Environmental Council (WVEC). I
thank the Committee for the opportunity to testify today at this Field
Hearing on behalf of WVEC.
I moved to Buckhannon, West Virginia, in 1982 to manage Braxton Oil
and Gas, my father's independent oil and gas production company. We
drilled conventional wells, primarily to produce natural gas from
relatively shallow geological formations. This was not the ``oil
patch'' of tycoons portrayed in the popular television series, Dallas.
But it provided my father's family, and several other families, with a
comfortable middle-class living. And, yes, we did hydraulically
fracture those gas wells.
But Marcellus shale drilling is not my father's ``gas patch''.
Marcellus shale drilling is gas drilling on steroids. These well
sites are gargantuan. Everything about these ``unconventional''
drilling operations is exponentially leaps and bounds bigger than
conventional gas well drilling: they impact more land, they use more
water, they produce more liquid and solid waste, and they emit more air
pollution.
Marcellus drilling operations are so huge that the impacts are felt
far beyond the surface tracts being disturbed. Impacts can occur to
public lands, special places, high quality streams, neighboring
landowners, local infrastructure, and to quality of rural life.
Of course, the money is also bigger. The Marcellus shale formation
is now the second largest field of gas in the world. It is twice the
size of the gas fields in Saudi Arabia. Major oil companies are buying
up gas resources here. Conventional shallow wells that cost $300,000.00
to drill have given way to 6 to 8 horizontal wells drilled from one
well pad. And each horizontal well costs $3 million or more to drill.
The result is a boom in gas drilling the likes of which West
Virginia has never seen, and it is resulting in what can only be
described as ``the industrialization of rural West Virginia.'' The
hundreds of large truckloads daily hauling drilling equipment, water,
sand and fracturing chemicals on narrow country roads, huge drilling
rigs running 24 hours a day, months on end--it all amounts to a major
industrial activity. In areas where this drilling is occurring the very
nature and character of rural life is changing--perhaps forever. There
can be no dispute that Marcellus shale drilling is bringing economic
benefits to the state. At the state level, severance taxes and other
revenues are up. And business at the restaurants, gas stations and
convenience stores in communities near the activity is booming--just
try to get a motel room near by. However, local community leaders and
state policy analysts and decision makers are only now beginning to
look at the externalized economic costs this activity is bringing to
public infrastructure, public health and the environment.
WVEC'S CONCERNS
This new boom in drilling (and the new technologies associated with
it) is still largely unregulated.
Horizontal drilling and hydraulic fracturing cause an exponential
increase in surface disturbance, water use and waste disposal, and can
pose a serious threat to our land, water and air resources, and public
health.
Eliminating, or at the very least minimizing, those threats is the
main concern of the West Virginia Environmental Council.
In the United States the responsibility for regulation of the oil
and gas industry has largely been delegated to the individual oil and
gas producing states. And this new boom of shale gas drilling across
the nation, enabled by new technologies in horizontal drilling and
high-volume hydraulic fracturing, caught most state regulatory agencies
off guard.
West Virginia was no exception. WV Department of Environmental
Protection (DEP) Cabinet Secretary Randy Huffman has said publicly that
his agency was not prepared for this increase in permit activity and
has noted that DEP's Office of Oil and Gas needs more funding, more
field inspectors, and additional statutory and regulatory tools to deal
with the new technologies. For at least three years that office has
been operating with a $1 million budget deficit and was until recently
unable to fill four of the 17 field inspector positions due to lack of
funding.
THE STATE LEGISLATIVE PROCESS
For the last three years WVEC has worked cooperatively with the DEP
as well as the State Legislature in efforts to craft a comprehensive
state regulatory framework to regulate Marcellus shale drilling that
would protect the environment while allowing the drilling to continue.
It began in 2009 with some minor changes proposed by DEP to Rule
35CSR4, the Oil and Gas Well Rules. At that time the industry lobbyists
even opposed requiring drilling pits to be lined with synthetic liners.
However, the final rule adopted by the Legislature contained language
that basically guaranteed the use of the liners.
In 2010 WVEC supported HB 4513, ``establishing requirements for
Marcellus gas well operations' use of water resources.'' If it had
passed, the bill would have set additional reporting requirements for
water withdrawals from streams, the contents of water used for high-
volume ``slick water'' hydraulic fracturing, and where the waste water
was to be disposed. The bill would also have required drillers to have
plans for handling water withdrawals and waste disposal prior to
getting the permit to drill. One of those plans would have covered
maintaining minimum instream flows when withdrawing water. But the bill
died in conference committee on the final night of the session, again
due to industry objections.
Also in 2010 WVEC participated with DEP stakeholder meetings as the
agency began a programmatic review of its oil and gas regulatory
program. Later that year I served on DEP's Marcellus Task Force, along
with Dave McMahon with the WV Surface Owner's Rights Organization
(WVSORO), Ted Streit with the WV Land and Mineral Owners Association,
and eight or nine industry representatives. Basically, the task force
was a discussion group used by DEP as a sounding board for developing
proposed legislation.
Then in 2011 DEP submitted its proposed Marcellus shale regulatory
bill to the Legislature (HB 3042 and SB 424), and the Joint Judiciary
Interim Committee submitted its proposed bill, the Hydraulic Fracturing
and Horizontal Drilling Gas Act (HB 2878 and SB 258). The Senate passed
a pared down version of the DEP bill, SB 424, while the House was
continuing to work on the Judiciary Committee bill, HB 2878.
Eventually, House committees passed a committee substitute version of
SB 424, but the bill was not voted on by the full House. So the bill
died.
That brings us to where we are today. After the regular session,
Governor Earl Ray Tomblin said publicly that if the two chambers could
agree on a Marcellus regulatory bill, he would call the Legislature
into Special Session to pass the bill. So, during the June Interim
Committee meetings, the Joint Committee on Government and Finance
created a Select Committee on Marcellus Shale comprised of five
Delegates and five Senators and charged it with attempting to come up
with a bill. The Select Committee agreed to begin with the version of
SB 424 that was passed by the Senate during the regular session. At the
time of this writing, the Select Committee has adopted 27 amendments to
the bill, with four amendments pending. It is still not clear whether
there is general overall support for the amended bill, and with the
holidays upon us, it is looking less and less likely that there will be
a Special Session.
The West Virginia Environmental Council has been, and will continue
to be, actively involved in the state legislative process. As you might
expect, we have developed our own list of ``essential elements'' that
should be contained in an effective state regulatory bill. We have
shared this list with both the DEP and the Legislature. I have attached
that list at the end of this document.
FEDERAL REGULATION
While the responsibility for regulation of the oil and gas industry
has largely been delegated to the states, a broad array of Federal
environmental laws provides the blanket for state regulation. However,
since the 1980's specific executive administrations, with the support
of the U.S. Congress, have granted exemptions to the oil and gas
industry from several major environmental laws. The result has been
weakened federal laws, a patchwork of differing state laws and
regulatory programs, and little oversight by the federal government
until recently.
For example, the oil and gas industry enjoys an exemption granted
by Congress from the Resource Conservation and Recovery Act (RCRA).
This statute gives the EPA the authority to control hazardous wastes
from ``cradle to grave'' including the generation, transportation,
treatment, storage, and disposal of hazardous waste (USEPA).
Essentially, this exemption precludes all fluids used by industry for
oil and gas drilling exemption from being regulated as hazardous
wastes. This exemption was granted in the late 1980's.
As a more recent example, in the ``Energy Policy Act of 2005''
Congress granted the industry numerous adjustments to and exemptions
from federal laws. These changes have weakened the previous safeguards
against water pollution from oil and gas exploration contained in three
of the major pieces of federal environmental law that protect our
waters in the United States:
The first of these 2005 changes totally exempted oil and gas
field activities from the storm water runoff provisions of the
federal Clean Water Act. However, at least one federal court
has thrown out this exemption, but the case is still under
litigation.
Secondly, the 2005 Energy Policy Act contained three
weakening provisions to the federal Safe Drinking Water Act
(SDWA): it completely exempted hydraulic fracturing procedures
from SDWA regulation; it allowed for the voluntary cessation of
the use of diesel fuel in fracking fluid instead of banning it;
and it exempted flow back water from regulation if disposed via
underground injection wells unless it contained diesel fuel.
Thirdly, the 2005 Energy Policy Act gave the industry an
exemption from the environmental assessment requirements of the
National Environmental Policy Act (NEPA). The NEPA requires an
environmental assessment to be conducted before any major
projects on federal public lands are undertaken that could
possibly impact the environment and also provides an
opportunity for public interaction though a comment process.
Instead, the 2005 Energy Policy Act, however, granted various
oil and gas industry operations a created a ``categorical
exclusion'' under the Interior and Agricultural Departments.
Granting this ``categorical exclusion'' means that less strict
assessments are now required for oil and gas operations on
federal lands, reduces the opportunity for public involvement
though the NEPA process, and shifts the burden of proof for the
need for additional analysis of these projects from the agency
to the public.
The West Virginia Environmental Council supports the removal of the
exemptions granted under the 2005 Energy Policy Act.
Again, thank you for the opportunity to provide testimony today.
Attachment.--Essential Elements of an Effective Marcellus
Regulatory Bill
PUBLIC NOTICE OF PERMIT APPLICATIONS
Every permit application to drill a horizontal well should be
officially noticed to the public (via newspaper ads, etc.), and should
include a 30-day public comment period (this is in addition to all the
appropriate notice provisions to surface owners and others).
Water: Regulation from ``Cradle to Grave''
Water Withdrawals.--WV should implement a permit system for
large volume water withdrawals in order to maintain minimum in-
stream flows. This is necessary to protect both aquatic life
and downstream users.
Water Content.--WV should require an initial listing of
chemicals to be used in fracturing a well in the permit
application, and a complete listing of the actual chemicals
used, and the amounts, should be filed with the completion
report and be available to the public.
Wastewater Disposal.--The operator should be required to
measure and report both the volume of water used to frac a
well, and the volume that returns as flow-back water. WV should
require the use of a ``closed loop'' system for large volume
fracs. Flow-back water should not be stored in temporary
impoundments or pits. Drilling pit wastewater should be
disposed of in the same manner as flow-back water (no land
application). The operator must maintain an appropriate
evidentiary record tracking the disposal of all wastewater. WV
should also prohibit the disposal of oil and gas well
wastewater in underground mines.
Source Water Protection
There should be a minimum 150' buffer zone to distance all
oil and gas drilling activities from stream channels and
wetlands.
No horizontal well should be drilled within 2,500 feet of a
surface water source that serves a public water system.
All fresh water and flowback water impoundments, and all
drilling pits should be constructed with a dual liner system
with a leak detection system installed between the two liners.
WV should end the practice of burying drilling pits on site.
All drilling pit liners and drill cuttings should be removed
and disposed of at licensed hazardous waste landfills.
The operator should test all flow-back water and drill
cuttings for the presence of naturally occurring radioactive
materials (NORMs).
All drill site reclamation, including pits, impoundments,
roads and pipelines, must be timely and prevent the erosion and
sedimentation of fresh water streams and wetlands.
Groundwater Protection
No horizontal well should be drilled within 1,000 feet from
any existing building or existing water well without the
written consent of the owner.
No horizontal well should be drilled within 1,000 feet of a
groundwater source that serves a public water system.
The operator should be required to perform a ``pre-
drilling'' test of all water wells and freshwater springs
within 5,500 feet of the bore hole, and provide copies of the
test results to the landowner. These tests must be conducted by
a certified lab, and include testing for chemicals or chemical
compounds known to be commonly used for hydraulic fracturing.
The operator should be automatically required to replace
damaged or lost groundwater supplies located within 2,500 feet
of the well.
An oil and gas inspector should be present during each phase
of cementing well casings.
PERMIT FEES AND WELL BONDS
The increase in drilling activity has left the agency in the
position of lacking both the funds and the staff to adequately review,
evaluate and issue permits, observe field activities and perform
compliance monitoring. The permit fee for drilling a horizontal well
should be set at a minimum of $10,000 per well. In addition, a $25,000
individual bond should be required for each horizontal well (no
``blanket bonds''). Additional fees should be established for modifying
a well work permit, reclamation, and annual inspections.
INSPECTORS
The Oil and Gas Inspectors' Examining Board, which has been
historically dominated by the regulated industry, should be eliminated.
In its place, the agency should be given the authority to hire
inspectors under the civil service system, with an appropriate training
program and a six-month probationary period.
Additional Protections for Surface Owners
Pre-permit notice for the surface owner. The notice should
include copies of applicable statutes and rules and an offer to
meet with the surface owner before coming onto the land.
Pre-permit incentives to encourage the operator to work with
the surface owner on planning where and how well sites and
access roads will be built and reclaimed.
Improvements to damage compensation procedures and
standards.
SEISMIC EXPLORATION
WV needs a statute and rules regulating geophysical seismic
testing.
Some Useful Links
WV Surface Owners' Rights Organization (split estate issues):
http://www.wvsoro.org/
Wetzel County Action Group (air quality and other drilling
issues): http://www.wcag-wv.org/Default.htm
West Virginia Rivers Coalition (a primer on Marcellus in West
Virginia): http://www.wvrivers.org/articles/
Marcellus%20Report%202010.pdf
Senator Manchin. Thank you.
We'll have a round of questioning like we had with the
previous 2 panels. I will start it.
First of all let me say to Dr. Witt that I know there's a
decline. You mentioned a decline in the coal industry. With the
decline in the coal industry, the people that work in that
industry right now, the jobs that we're providing in the coal
industry. Do you believe they can--that same type of a work
force can be retrofitted, if you will, or re-trained for the
work that should be in this Marcellus shale and the
opportunities we have there?
Mr. Witt. Yes, I think so. Actually last week we released
our economic forecast for the State. We're showing continued
declines for the foreseeable future in the tons from the coal
industry. But that's offset by the potential growth.
So I think those issues of work force development and
retraining are very essential for the State to make that
transition.
Senator Manchin. Would there be a net increase of jobs or
is it going to be revenue neutral? I mean, net neutral?
Mr. Witt. There is going to be a net increase for the whole
mining industry. Over the next 5 years.
Senator Manchin. OK.
If I can to Mr. West, do you believe that it's possible to
have an irresponsible drilling operation that could do
irreparable harm to our environment if we don't have specific
drilling rules in place because you were talking about double
walled and proper drilling and cementing. If it's not adhered
to and it's not inspected and oversight, I mean, how does that
line up with other States you're operating in? I'm sure you're
in Pennsylvania.
Mr. West. We are.
Senator Manchin. OK. Tell me how we line up with that.
Mr. West. Certainly, Senator Manchin. Our company supports
reasonable regulation of the industry. It's an industry like
any industry that has risk. Responsible regulation is
necessary.
So in particular, as one of the specific items you
mentioned on the casing and cementing. Other States do have
standards that are proposed standards here in West Virginia.
We're supportive of that.
Senator Manchin. Are the proposed standards that we have in
the bill adequate?
Mr. West. They are. They are.
Senator Manchin. How do they compare? Are they comparable
or are they more stringent?
Mr. West. They're comparable. They are a little more
detailed. The one thing that might be beneficial is to give the
DEP, as part of any bill, latitude to be able to regulate as
there are advancements with regard to drilling practices.
Senator Manchin. Thank you.
Mr. Rotruck, there have been several reports and news
articles, various lawsuits that your company Chesapeake has
been involved with related to mineral rights, lease disputes,
probably more troublesome is the claims that they did not
properly reclaim drilling pad sites. I'm sure you're aware of
all these. What is the condition of those now and how are you
all settling them?
Mr. Rotruck. Any site that is found to be not in compliance
is immediately remediated. We now have an internal auditing
program, a third party that we bring in to audit all of our
sites so that we make certain that we don't make mistakes.
This industry has gone up quite a learning curve and so has
our company especially in regards to roads. But we're getting
out ahead of that now. We've hired a highway engineer who
retired to help us in that regard.
So we're trying to be continuously improving everything we
do and be in compliance.
Senator Manchin. The most troublesome thing, sir, was that
there were some land owners that said they had to clean up the
sites after you all left. You all were----
Mr. Rotruck. If you would tell me, sir, which ones those
are I will look into them and get back to you. Absolutely.
Senator Manchin [continuing]. Do that.
The most troubling thing that I have concern of is--and you
and I have spoke about this, is the contract that you have with
the pipeline company that the first 75,000 barrels of, let's
say, of product is going to be leaving our State which gives us
less chance to really develop a cracker or more future
development.
If you'd want to speak on that?
Mr. Rotruck. Yes, sir. Thank you very much for that
opportunity.
First, Governor Tomblin appointed me to the Marcellus to
Manufacturing Task Force. My company was instrumental in
bringing the first company here, Petrochem, who would take a
look at building a cracker and that was Petro logistics. They
were pretty far along, but for their own reasons they pulled
out. So we've been very favorable to having a cracker built in
this region.
The contract that you speak of, Senator Manchin, is a
contract with Enterprise Pipeline. It is a contract for
transportation. We've not sold any ethane ahead yet. We have
bought capacity on that line.
The reason that is so critical, we're seeing the Marcellus
continuing to ramp up. We have 7 rigs now. We're going to go to
9. We hope to go to more.
The ethane is either a wonderful benefit or it could be a
burden. We had to make certain we didn't shut down the
Marcellus, that we had some way of dealing with it. So sir,
it's a multi-tiered solution, but a cracker is a big part of
it.
Senator Manchin. Thank you. My time is up.
Congressman Rahall.
Mr. Rahall. Thank you, Senator.
Survey question time. On a scale of one to 5 with 5 being
the most urgent, one being the least urgent. Starting with you
Dr. Witt. How urgent is it that the State legislature pass a
bill?
Mr. Witt. Without saying specifically what bill, I'd say
the State does need to pass a bill that provides certainty for
all the players in the industry. One thing that investors do
not like is uncertainty. We have to face the fact that we're
competing with other States not only on the Marcellus and
Utica, but with other shale plays around the country.
Mr. Rahall. One to 5 scale?
Mr. Witt. I would say it's probably 4.
Mr. Rahall. Four?
Mr. Rotruck.
Mr. Rotruck. Yes, sir, Representative Rahall. Thank you.
I believe it's 2 and a half. The reason I would say that is
the DEP had a lot of provisions already in place and were doing
a good job with the industry in regulating it. But the public
is demanding what we have is certainty and just like the market
is as well.
So I think it's right in the middle in terms of need.
Mr. Rahall. Mr. West.
Mr. West. I would have to echo a little bit of what Dr.
Witt said and Mr. Rotruck said. I think the DEP has done a good
job here in West Virginia in regulating natural gas production.
But I think certainty is important to all of the stakeholders
involved in natural gas development here.
So I would say that, without addressing any particular
bill, that by the end of the 2012 session, I think that it's--I
would rate it at a 4.
Mr. Rahall. One, 2 and a half and 2 4.
Mr. Garvin?
Mr. Garvin. A 5.
[Laughter.]
Mr. Garvin. The emergency rule provided no additional money
to the department. It did not increase the drilling permit
fees. The agency has had, for most of the last year, 13
inspectors, 4 positions they couldn't fill and the Office of
Oil and Gas has been operating under a million dollar budget
deficit for 3 years in a row.
The best written bill is no good if you don't have
enforcement, if you don't have inspectors in the field
overseeing the operations that's why it's a 5.
Mr. Rahall. What's my time?
Senator Manchin. You're good. There's time.
Mr. Rahall. OK.
Mr. Rotruck, you responded to Senator Manchin a minute ago.
Mr. Rotruck. Yes, sir.
Mr. Rahall. In regard to a complaint you were going to look
into.
Mr. Rotruck. Yes, sir.
Mr. Rahall. Do you and you, Mr. West as well, and I asked a
similar question to Mr. Huffman earlier. Do you have complaint
divisions that respond to people's complaints, a toll free
number or how does somebody?
Mr. Rotruck. We not only have--yes, sir. Thank you.
We not only have toll free numbers for people that have
issues that relate to leases and so on. But in our company we
have corporate development. That is the department that I'm the
head of for the Eastern United States. We have people that are
very engaged with the communities every day.
We have conducted activities called CAPS, Community
Advisory Panels, where we have brought people in from around
the community, who are diverse in what they do so they could
bring us their ideas and their problems so we could try to
solve them at the community level.
Mr. West. Congressman Rahall, we have processes in place
within our company to deal with any inquiries or complaints
that we receive from land owners or any one that may have
questions about our operations. But we realize the increased
importance of that. So during 2012 we're establishing a
separate Community Affairs department. Part of that will be in
the areas where we have operations.
We're actually going to have resident employees so that if
people do have questions about our operations or complaints,
that they'll be able to approach those individuals right there
in their own community and have them addressed.
Mr. Rahall. Thank you.
Senator Manchin. Congressman McKinley.
Mr. McKinley. Mr. Rotruck, as you know Marcellus shale, the
gas is very substantially throughout the formation. West
Virginia is more of a wet gas and high pressure. In New York
and Pennsylvania is virtually dry and low pressure.
How do you accommodate the differences in your operation?
Mr. Rotruck. That's a very good question. One thing that
does, I'll speak to it first, is a reason the regulation needs
to be continued to be handled by States at the local level
because they have the most expertise to understand those
differences in topography and, as you say, in the geology.
The dry gas window in Northeast PA is different than what
we have in our unique slice of the Marcellus in West Virginia
which is wet gas primarily in the pan handle, although we're
also producing dry gas in West Virginia as well. So we know
that there are differences.
They are significant and a good thing is and we heard
earlier about, and you mentioned it, about how much we were
getting out of the formation. That's one of the greatest
opportunities for innovation. More and more BTUs off of the
same size well pad.
Thank you.
Mr. McKinley. Mr. Garvin, there was a facility in Fairmont
that they were--they had a way that cleans the recycled water,
the brown water. That plant was closed for a variety of
reasons. But I understand now that some of the drillers are
recycling and putting the same material back in again.
What environmental issues does that pose to us in recycling
the brown water?
Mr. Garvin. The recycling doesn't. Although to recycle,
reuse, the frack water they have to add fresh water to it. So
they're increasingly--it's increasing the demand on the fresh
water resource. But it's certainly recycling and reusing is a
good thing. They're--I'm not an expert on the amount they get
back, somewhere in the neighborhood of 20 to 40 percent.
Mr. McKinley. Mr. Garvin, if I could. Some have come to us
in Washington and said it's not a good thing. So that's why I
was curious to see it, from a West Virginia perspective because
the chemical concentration increases by virtue of it being
recycled you get that. So I'm interested----
Mr. Garvin. Eventually you're going to have the brine to
contend with. Eventually you're going to have to deal with the
salts and process that water. It's so salty.
One of the problems that AOP Clearwater, I think it was
called, the plant in Fairmont had was all their equipment
corroded from the salt.
Mr. McKinley. Thank you.
Senator Manchin. We're going to have one more round very
quickly and then we'll finish up. Thank you all so much.
Let me just say with all of our power plants and we're very
hopeful for a new coal to liquids plant in Southern West
Virginia, Mingo County. As you know we've been working on that.
With the CO2 we'd be producing from them, if we can
take the clear stream CO2 off would it--and any of
you can answer this. Would it enhance, would it be a value with
what we've developed now into the Marcellus, the enhancement of
better recovery by using the CO2 injection?
Probably be Mr. Rotruck and Mr. West.
Mr. Rotruck. Yes. That has been considered. In fact one of
the members of TransGas, Randy Harris, a former employee at
NETL, has thought about that a lot.
We don't know if that's doable yet. But everything like
that is certainly worth investigating. In fact going back to
the water treatment, we're looking at using AMD waters and
cleaning them up and using that for frack water.
So everything that we can to complete those circles, we'll
try.
Senator Manchin. Mr. West, do you feel the same?
Mr. West. I would agree, Senator. It's in the investigatory
stage. But certainly EQT and this industry supports anything
that enhances energy production for West Virginia or this
country.
Senator Manchin. Mr. Garvin, if I could finish with you. Do
you believe that we can do this right in West Virginia and
should we be taking the primacy as a State to oversee this
exploration?
Mr. Garvin. I do believe we can do it right. I believe we
can do it right.
We have primacy.
Senator Manchin. So you're not currently----
Mr. Garvin. The feds aren't going to take primacy from us.
Senator Manchin. Right.
Mr. Garvin. They don't have any money to come and run our
program. So, you know, but we can do it right.
Senator Manchin. What----
Mr. Garvin. I'll give you a good example.
Senator Manchin. Yes, please.
Mr. Garvin. These 2 companies right here use something
called a closed loop system for drilling. All of their drilling
mud, all of their water, all of their fracturing chemicals,
everything comes in in containers and trucks. Everything goes
out in containers and trucks.
There's no drilling pits. Both of these companies are using
secondary containment systems, you know.
Senator Manchin. What's your greatest concern?
Mr. Garvin. That just ought to be in the rule.
Senator Manchin. What's your greatest concern?
Mr. Garvin. Let's put that in the rule. Let's put that in
the statute. Let's mandate it that all the companies do these
protections.
Senator Manchin. Do you all agree to that?
Mr. Rotruck. We agree that there should be tough standards
which incorporate the best practices.
Senator Manchin. What I'm saying is it looks like you all
aren't that far apart.
Mr. West. No. I think that's been one of the positive
things that industry and the environmental community and the
general assembly are----
Senator Manchin. I know that will help our legislators in
making their final determination if you all can be in
agreement.
Mr. West. Right.
Senator Manchin. Mr. Rotruck.
Mr. Rotruck. Yes, sir, in agreement, Senator Manchin. Also
just to note that the innovation around even this hasn't been
completed. The WBU has a one million dollar grant now to study
how to further perfect the filtering of the water for reuse in
that closed loop system.
Senator Manchin. Finally, do you all agree and accept the
recommendation as far as on the permit fees?
Mr. Rotruck. It is a standard that the regulated community
has to pay to be regulated. That is the guiding principle. What
that amount is has to be one that has the agency properly
supplied with folks to regulate us and have the right amount of
money.
But it needs to be the right amount.
Senator Manchin. Mr. West.
Mr. West. We agree that there need to be increased permit
fees in West Virginia so that the regulators can enforce the
law.
Senator Manchin. Mr. Garvin, you're watching that very
closely I would suspect.
Mr. Garvin. Yes, we're disappointed that the select
committee bill lowers it from $10,000 a well for every well on
the pad to $10,000 for the first well and then $5,000 for
additional wells. But that amount will get DEP back in this
ball game.
Senator Manchin. Thank you, sir. My time is up.
Congressman Rahall.
Mr. Rahall. I have nothing.
Senator Manchin. Congressman McKinley.
Mr. McKinley. Just earlier in this session we heard people
referring to it as the--we were going to have the Saudi Arabia
equivalent in gas.
Then I heard in the last panel maybe we don't. Maybe we're
not going to have sufficient gas to justify a cracker.
Which is it? I think clearly we're going to have enough
gas. But I'd like to hear from you all. I'm hoping there's more
than one because again, if we don't those jobs are going to go
someplace else.
I think we all have a responsibility to create jobs here in
the private sector, not in the government jobs, in the private
sector. We have an opportunity.
So do you think that there's going to be enough gas? Are we
going to be the Saudi Arabia of gas?
Mr. Rotruck. The Chairman of my company, Aubrey McClendon,
has said he thought the Marcellus maybe was 2 Saudi Arabias.
Senator Manchin mentioned us as being the Saudi Arabia of
natural gas in West Virginia. We have that unique slice of wet
gas in the Northern pan handle.
I think the legislator earlier was referring to the timing
of it. He didn't think we had enough now, but as we keep
ramping up our drilling activity his optimism will grow.
Mr. McKinley. Mr. West.
Mr. West. I agree with Mr. Rotruck's statement. I think
that certainly there's no doubt there are abundant Marcellus
reserves here in West Virginia. That if things are done
properly I don't know whether a comparison is necessary to
Saudi Arabia, but I think that certainly there will be enough
natural gas to supply the needs of West Virginia's and West
Virginians and to attract business and industry here that use
natural gas a fuel source and feed stock.
Mr. McKinley. OK.
Mr. Rotruck, with the drilling that's going on in the North
pan handle where the wet gas is. Is that wet gas being put in a
pipeline or is there someplace--or is there someone separating
that now?
Mr. Rotruck. That gets separated. Yes, Mark West is
involved in that or a Caymans involved in that. Again, we have
30 rigs running in West Virginia now as an industry. We just
have 7 of them. So that question is rather complex as to who is
doing what.
But the activity is pretty robust.
Mr. McKinley. In the time remaining if we just stay with
you because you're one of the larger drillers and I think one
with a better reputation. So my--I'm curious about your impact
you've had in the communities in which you've been drilling.
Can you share a little bit about what you've done?
Mr. Rotruck. As I mentioned earlier and this is my wife's
hometown, your wife's hometown, New Martinsville in Wetzel
County. That's an area that we know has lost a lot of
employment over the years. But as we heard, Mr. Litman has a
company that's dramatically increased his employment work force
by 400 percent just in that area.
Across the State our employment has been growing in the
industry and in Chesapeake. I think since 2005 the industry has
added 2,500 people in West Virginia. So the news is good. It
will continue to grow and be good.
Mr. McKinley. My light is still green so as long as it's
still green.
Senator Manchin. You--it all, aren't you?
Mr. McKinley. How about go what you're doing in terms of
training because we've all heard the concern about so that
we're not outsourced. What are you doing to help train people
to do the work for you?
Mr. Rotruck. Part of the corporate development department's
effort is to be engaged with our community and technical
college. We've been engaged with the Pierpont community and
technical college. We supported that initiative to have a
training facility. It was in Braxton, now in--County. We
supported that with $100,000 involved with West Virginia
Northern in helping them develop their program.
We're involved with Marshall University, West Virginia
University in terms of scholarships for at the Law School and
the College of Engineering and in the GO Sciences. So we're
very involved across that seamless band of education because
the opportunities in this industry goes from someone who loves
to work outside and drive a truck to someone that wants to be a
petroleum engineer and get 6 figures on his first day of work.
Thank you.
Mr. McKinley. Thank you.
Senator Manchin. Congressman Rahall has one question.
Congressman Rahall.
Mr. Rahall. Thank you, Senator.
I believe, Scott, you kind of addressed this earlier in
your willingness and the fact that you are exploring for
alternatives to water. But there is concern among some in the
State about competing requirements for water resources. In
2007, for example, coal extraction in West Virginia required
8.8 billion gallons of water and natural gas extraction
required 392 million gallons of water which is only expected,
of course, to increase as more shale gas wells are drilled.
You are exploring feasibilities of alternatives to using
water like CO2 and propane. Would that be an
alternative that's possible? A third question is what other
frictions might exist with our coal industry? Can you live side
by side with them?
Mr. Rotruck. Let me say something first we'll address the
coal industry because I came from there. I spent 15 years in
the coal industry.
In 1979 a nuclear engineer, Jimmy Carter, was President. He
asked the coal industry to rise to the occasion and they did.
We built a lot of coal fired based load power in this country
that has served us very well.
Our coal industry is still the best in the country. We're
exporting a lot of coal. I think they'll continue to do very
well. I think Dr. Witt would agree with that.
As to water, Congressman Rahall, water is one of our best
stories. We, from shale gas, we use less than a gallon all in
to produce a million BTUs. Coal is more than that, but coal is
nowhere near what it takes to produce ethanol with water.
As to alternatives for fracking right now in the shales
water has been found to be the best medium as amended with a
handful of additives in order to frack the formation. But since
we're reusing it we're not using very much water at all
comparatively and we frack once.
Mr. Rahall. Mr. West.
Mr. West. We're constantly looking for ways to reduce our
water use from the standpoint of one, we want to conserve West
Virginia's resources.
Second, it makes good business sense too because one of the
largest costs involved in drilling and completing a Marcellus
well involves the water cost.
So that's why we're looking at ways to reduce our water use
by recycling and other technologies. This, you know, this is an
industry which everyone realizes is growing. So there are a
number of companies, associated companies that are involved in
research and development to try to find ways to reduce the
amount of water to be used.
Mr. Rahall. Yes, Mr. Garvin.
Mr. Garvin. I first became really concerned about Marcellus
shale drilling because of water withdrawals. In West Virginia
it's only been, what, 5 years since we passed the West Virginia
Water Resources Control Act or Protection Act that cleaned the
waters of the State for West Virginia. The State legislature
gave DEP 5 years to come up with a water resources protection
plan and that's coming up in 2013, I believe, a statewide plan.
We're really concerned that the agency's water withdrawal
guidance tool is inadequate and the Environmental Council
really wants an actual permit system for withdrawals like
they're doing in the Susquehanna River Basin and the Delaware
River Basin. Then you can figure out how to charge the industry
for that water.
Senator Manchin. Thank you all.
Before we close I think the Governor's Council, Mr.
Dettinger had one comment.
Mr. Dettinger. Sure. If I may, on the question as it
relates to whether we're a Saudi Arabia or we don't have enough
gas. In the Task Force we've quantified and estimated that by
the end of 2015 we'll have approximately 270,000 barrels of
ethane production a day in West Virginia and in Western
Pennsylvania. With some of the commitments that have been made
to Canada and to the Gulf Coast there still will be enough to
produce a--or to support an ethane cracker in West Virginia.
We also think with the Utica shale coming online in the
ethane rich natural gas over there we will have an abundant
supply.
Senator Manchin. Let me say to everybody that it's been a
wonderful panel. I appreciate all of your candor. I hope this
has been informative for all of you. It sure has been for me.
I know that my colleagues here are learning more about
this. I appreciate the open mindedness that the environmental
community and also the production, if you will, and also Mr.
Witt from you all kind of monitoring the whole thing.
The legislature, I encourage you. I appreciate the work
that's been done so far. I know you will get a good product. I
know that you have the best interest of the State of West
Virginia. The future generations that are going to be depending
on us to do this well, do this right.
I'd never imagine. If you look at that, if you haven't done
anything else, look at that map and see what West Virginia and
the activity we've had since the beginning of drilling in this
State where we are today. We owe it to future generations to
make sure that we clean up whatever we've left behind. We make
sure we don't leave anything else behind with this new
exploration. I think that you all can do that.
So I would encourage that. We'll be taking all this back
from our field hearing to our committee. I'll be reporting to
Chairman Bingaman. I'm sure that you're going to see the
Federal Government hopefully act in a way that creates a good
partnership.
With that, Secretary, I know that you will receive it in
that manner also.
So this hearing is ended. Thank you all. I appreciate it.
[Whereupon, at 12:48 p.m. the hearing was adjourned.]
APPENDIX
Additional Material Submitted for the Record
----------
American Chemistry Council
SHALE GAS AND NEW PETROCHEMICALS INVESTMENT: BENEFITS FOR THE ECONOMY,
JOBS, AND US MANUFACTURING
For full-text of ACC report, please visit: http://
www.americanchemistry.com/ACC-Shale-Report
March 2011.
EXECUTIVE SUMMARY
Chemistry transforms raw materials into the products and processes
that make modern life possible. America's chemical industry relies on
energy derived from natural gas not only to heat and power our
facilities, but also as a raw material, or ``feedstock,'' to develop
the thousands of products that make American lives better, healthier,
and safer.
Access to vast, new supplies of natural gas from previously
untapped shale deposits is one of the most exciting domestic energy
developments of the past 50 years. After years of high, volatile
natural gas prices, the new economics of shale gas are a ``game
changer,'' creating a competitive advantage for U.S. petrochemical
manufacturers, leading to greater U.S. investment and industry growth.
America's chemical companies use ethane, a natural gas liquid
derived from shale gas, as a feedstock in numerous applications. Its
relatively low price gives U.S. manufacturers an advantage over many
competitors around the world that rely on naphtha, a more expensive,
oil-based feedstock. Growth in domestic shale gas production is helping
to reduce U.S. natural gas prices and create a more stable supply of
natural gas and ethane.
In its new report, Shale Gas and New Petrochemicals Investment:
Benefits for the Economy, Jobs and US Manufacturing, the American
Chemistry Council (ACC) uncovered a tremendous opportunity for shale
gas to strengthen U.S. manufacturing, boost economic output and create
jobs.
ACC analyzed the impact of a hypothetical, but realistic 25 percent
increase in ethane supply on growth in the petrochemical sector. It
found that the increase would generate:
17,000 new knowledge-intensive, high-paying jobs in the U.S.
chemical industry
395,000 additional jobs outside the chemical industry
(165,000 jobs in other industries that are related to the
increase in U.S. chemical production and 230,000 jobs from new
capital investment by the chemical industry)
$4.4 billion more in federal, state, and local tax revenue,
annually ($43.9 billion over 10 years)
A $32.8 billion increase in U.S. chemical production
$16.2 billion in capital investment by the chemical industry
to build new petrochemical and derivatives capacity
$132.4 billion in U.S. economic output ($83.4 billion
related to increased chemical production (including additional
supplier and induced impacts) plus $49.0 billion related to
capital investment by the U.S. chemical industry)
The scenario outlined in ACC's report is corroborated by trends in
the chemical industry. ACC member companies, including The Dow Chemical
Company, Shell Chemical, LyondellBasell, Bayer MaterialScience and
others have announced new investments in U.S. petrochemical capacity to
benefit from available resources and grow their chemical businesses.
Some of these investments are being made in areas of the country that
have been hardest-hit by declines in manufacturing, improving the
outlook in economically depressed areas of the country. Further
development of the nation's shale gas and ethane can drive an even
greater expansion in domestic petrochemical capacity, provided that
policymakers avoid unreasonable restrictions on supply.
ACC supports a comprehensive energy policy that promotes energy
efficiency and conservation, energy diversity, and expanded domestic
oil and natural gas supply, onshore and offshore. The United States
must ensure that our regulatory policies allow us to capitalize on
shale gas as a vital energy source and manufacturing feedstock, while
protecting our water supplies and environment.
______
Links to additional documents submitted on behalf of the American
Chemistry Council
1. ACC West Virginia shale gas economic impact fact sheet
http://www.americanchemistry.com/Policy/Energy/Shale-Gas/ACC-
State-Shale-Fact-Sheet-West-Virginia.pdf
2. ACC West Virginia chemical industry fact sheet http://
ex.democracydata.com/ACHEMC/sites/ImpactChem/docs/
WestVirginia.pdf
3. Cal Dooley op-ed in Charleston Daily Mail http://
www.dailymail.com/Opinion/Commentary/201110022796
4. Charleston Daily Mail front page story quoting Cal Dooley
http://dailymail.com/ap/ApTopStories/201109200945
5. Wheeling Intelligencer story http://
www.theintelligencer.net/page/content.detail/id/559754/Study--
12-000-Cracker-Jobs-Possible.html?nav=515
______
Statement of Gary Zuckett, Executive Director, WV Citizen Action Group,
Charleston, WV
Dear Senator Manchin and Committee Members,
Marcellus Shale exploration in WV comes with great promise but also
many unanswered questions on the long-term environmental and human
health effects of exposure to the various chemicals used in the Hydro-
Fracking process.
We work with a group--WV Surface Owners' Rights Organization--that
receives calls on a regular basis from WV landowners that are
experiencing adverse health effects and water quality problems that are
occurring during or after Marcellus Drilling on their property.
The industry claims that this Hydro-Fracking process is safe. Why
then did Congress have to exempt this process from the Clean Water Act,
the Clean Air Act and at least four other major federal environmental
and right-to-know laws in order for this process to be expanded into
Shale drilling?
We would suggest that, if indeed this process is a benign as
industry proponents claim then it should be no problem for Congress to
rescind these exemptions which are not currently afforded to any other
heavy industry such as Coal mining.
In these troubled economic times, we welcome the good-paying jobs
associated with this industry but not at the expense of our citizens'
health, well-being and land destruction. If this Hydro-Fracking process
was overseen by the Clean Air and Water Acts citizens would have more
protection from reported industry abuses.
In regards to jobs, it was very troubling to hear last week that an
industry leader in the WV Marcellus fields had announced its decision
to build a pipeline to ship WV production all the way to Texas. This is
occurring at a time when WV business and labor leaders along with state
government was actively negotiating for the construction of two ethane
cracking plants to be located in-state.
This pipeline, if built, would literally pipe permanent WV jobs to
Texas to the detriment of our state and its labor force. We have the
skills and eager workers to fill such jobs and we ask our WV Senators
to do whatever they can to support local value-added industries to make
use of the Marcellus production.
Thank you and the Committee for the chance to submit these
comments.
______
From: Julie Archer
To: Teri Anderson; Tim Manchin;
cc: Dave McMahon;
Subject: WV-SORO Comments on Proposed Marcellus Shale Legislation and
Amendments
Date: August 31, 2011 11:52:56 AM
Attachments:
WVSORO--Comments--on--Proposed--Marcellus--Legislation--and--
Amendments--Aug31--2011.pdf
SOROPrioritiesforMarcellusLegislation--LtrHead.pdf
Essential Provisions NOT Included in Proposed Marcellus Shale
Legislation.pdf
Delegate Manchin,
Thank you for the opportunity to provide input on the proposed
Marcellus Shale legislation and amendments. Our comments are attached.
If you have any questions, please feel free to contact us.
Sincerely,
Julie Archer,
WV Surface Owners' Rights Organization.
Attachment 1.--WV SORO Comments
West Virginia Surface Owners' Rights Organization,
Charleston, WV, August 31, 2011.
Hon. Tim Manchin,
Chairman, Select Committee on Marcellus Shale, 1900 Kanawha Blvd. East,
Building 1, Room 418M, Charleston, WV.
Dear Delegate Manchin, Thank you for your letter requesting input
regarding the draft legislation and proposed amendments being
considered by the legislature's Select Committee on Marcellus Shale. We
appreciate the opportunity and our comments are below. However, we also
want to express our gratitude to you and the other House members of the
committee for the considerable time you spent holding public hearings
to get input from the citizens of West Virginia. Many citizens are
affected in profound and personal ways by the industrialization that is
occurring in the rural parts of our state as a result of Marcellus
Shale development. We also appreciate the time the House members have
spent discussing, drafting and offering amendments to strengthen the
proposed legislation in response to the concerns raised at the public
hearings.
Comments on Proposed Amendments
Eliminate Oil and Gas Inspectors Examining Board.--WV-SORO
supports abolishing this industrydominated board and making oil
and gas inspectors subject to the same hiring practices as
other environmental inspectors within the Department of
Environmental Protection.
Consideration of Comments, Public Hearing.--WV-SORO supports
extending the opportunity to comment on a permit application to
both neighboring landowners and the general public and giving
the DEP Secretary the authority to hold a public hearing to get
additional input prior to issuing a decision on the permit.
Because the effects of Marcellus Shale operations are felt far
beyond the surface tracts being disturbed, giving neighboring
landowners and others who might be affected the opportunity to
provide input on a permit is appropriate.
Notice Requirements.--Because the effects of Marcellus Shale
operation are felt beyond the surface tracts being disturbed,
WV-SORO supports and appreciates the expanded notice to
adjacent landowners, owners of water wells and springs within
2,500 feet and the general public. However, we are concerned
about the language notifying water supply owners about ``the
advisibility of taking their own prealteration survey.'' We
appreciate that a subsequent amendment proposes to expand the
operator's presumptive liability to 2,500 feet, and that
drillers have the authority to ask for testing within that
distance to protect themselves, but we believe that owners of
water supplies within 2,500 feet of a proposed gas well should
be able to have their water tested at the driller's expense.
Well Location Restrictions.--WV-SORO supports increased
setbacks from homes and water supplies to at least 1,000 feet.
The current 200-foot setback can be found in leases dating back
to the 1890's, and our laws have not kept up with technological
advances in drilling. With Marcellus Shale operations in
particular, we are especially concerned about the close
proximity to peoples' homes given their duration and the noise,
light and other pollution from the sites. There is also the
potential for serious accidents such as the fires and
explosions that occurred last year in the Northern Panhandle.
In addition to homes and water sources, these setbacks should
apply to schools, places of worship, nursing homes, hospitals,
and other similar places where people live or gather. Finally,
we suggest defining the word ``occupied'' or replacing it with
the word ``habitable.''
Department Website & Electronic Notification.--WV-SORO
supports any efforts to make information more readily available
and easily accessible to landowners and the public.
Protection of Water Supplies.--WV-SORO supports and
appreciates the proposed expansion of the operator's
presumptive liability to 2,500 feet and the clarification of
water replacement requirements. However, we are concerned about
the six-month limitation on claims of contamination. When a
contaminant plume enters an aquifer may take years, or decades,
to pass by an individual well. (Most private water wells are
developed in fractures in shale and sandstone, under thin
soils, and in valleys that are typically down gradient from
natural-gas well sites. U.S. Geological Survey data from the
Kanawha and Monongahela NAWQA studies show that typical wells
in this type of setting have water that is 40 years old, or
older.) There is no limitation on the current 1,000-foot
presumption and we feel the amendment would be more protective
without this constraint. We are also concerned that neither the
proposed legislation nor the amendments expand pre-drilling
testing parameters. Currently drillers are required to test for
constituents in drilling muds and fluids, but not for chemicals
or chemicals compounds used in hydraulic fracturing, or
naturally occurring radioactive materials (NORMs) known to
exist in the Marcellus Shale. Additionally, we suggest that the
operator be required to provide a temporary water supply until
a permanent supply can be established and that the orders
issued to the operator include deadlines for establishing
temporary and permanent supplies.
STRONGER Hydraulic Fracturing Review.--WV-SORO supports a
STRONGER review of West Virginia's laws and regulations
pertaining to the drilling of horizontal wells and hydraulic
fracturing.
Bonding Requirements.--WV-SORO supports revising and
improving bonding requirements to prevent wells from being
orphaned and unplugged. In order to have some assurance that
wells will be plugged, blanket bonds should not be allowed. An
individual bond should be posted for each well. The current
blanket bonding provisions allow bonding amounts of $25 or less
per well for some operators.
Casing and Cementing Requirements.--WV-SORO supports
enhanced casing and cementing requirements. In addition to
requiring integrity (pressure) testing, drillers should be
required to run a bond log to make sure that the casing job is
done right and properly cemented to the well bore--something
that did not happen in the Gulf of Mexico. Intermediate casing
should be required (page 11 line 9 of the amendment says, ``If
the well is to be equipped with an intermediate casing, . .
.'') and each string of casing should be cemented from top to
bottom to prevent the migration of gas or fluids from
uncemented formations into peoples' water wells. WV-SORO also
supports increased oversight of the casing and cementing
process. In particular, an inspector should be there for the
cementing of the surface/freshwater casing. DEP should also be
given rule-making authority to revise casing and cementing
standards as needed in response to technological changes and
advances. Finally, subdivision (3), subsection (e) of the gas
migration response section (page 22, line 4) says that in the
event of a potential migration event, the Secretary may require
the operator to conduct an ``evaluation of the operator's
adjacent oil and gas wells [within 2,500 feet] to determine
well cement and casing integrity and to evaluate the potential
mechanism of migration.'' While we believe such an
investigation is important in determining the cause of the
migration, should such an event occur, an evaluation of all
existing oil and gas wells within 2,500 feet of a proposed well
(including the horizontal legs) could help prevent such
migrations from happening in the first place.
Comments on Adopted Amendments
Generally, WV-SORO supports the strengthening amendments already
adopted by the Select Committee, especially those dealing with air
quality and drilling waste, however we have comments on two of the
other amendments.
Adopted Amendment #1 (Allowing Highways Enforcement).--WV-
SORO supports the amendment to address problems with damage to
roads and infrastructure, however, we feel that this sort of
permit blocking should be authorized for any substantial
violation of any existing permit. Unfortunately, as the
proposed legislation is current drafted, drillers can get
permits for horizontal wells even if they are in violation of
requirements for conventional wells (subsection (k), section 7
of article 6A).
Adopted Amendment #2 (Acreage Reduction for Engineer
Certification).--WV-SORO appreciates the acreage reduction,
however, the engineering requirement does not apply to access
roads and pipelines which are frequently more of a problem than
the well sites themselves. Additionally, having a professional
engineer supervise the construction and reclamation would help
ensure that the soil erosion and sediment control plans are
followed, since there are too few inspectors to oversee well
site construction (although we hope the shortage of inspectors
will be addressed with an amendment to increase permit fees and
provide DEP with the funding necessary to increase staffing
levels).
Thank you again the opportunity to provide input on the proposed
legislation and amendments. At this time we remain concerned that the
draft legislation is deficient in terms of addressing several important
issues (see enclosed Priorities for Marcellus Shale Legislation and
Essential Provisions NOT Included), however, we look forward to the
Select Committee continuing its work and to working with you to
continue to make improvements to the bill.
Sincerely,
Julie Archer,
Project Manager.
David McMahon, J.D.,
Co-Founder.
Attachment 2.--Priorities for Marcellus Shale Legislation
August 31, 2011.
The impact and problems related to Marcellus Shale and other gas
well drilling demand a comprehensive overhaul of our state's oil and
gas regulatory program.
WV-SORO believes any bill passed by the legislature must:
1.) Include pre-permit incentives to encourage the driller to
work with the surface owner on planning where and how well
sites and access roads will be built, maintained and reclaimed.
Earlier notice and a requirement to meet are needed and
appreciated but allow the companies to give the appearance they
are working with landowners without actually requiring that
they to do so. Drillers should be required to negotiate a
written agreement with the surface owner before they can get a
permit or, if no agreement can be reached requiring them to
post an individual well bond that guarantees the surface
owners' compensation for damages. These incentives are needed
for ALL wells, not just horizontal wells.
2.) Improve the laws governing conventional and vertical
Marcellus wells not just horizontal wells. Marcellus Shale
development is resulting in what can only be described as ``the
industrialization of rural West Virginia.'' Because our oil and
gas drilling laws have not been updated in nearly 30 years,
this new boom in drilling (and the new technologies associated
with it) is largely unregulated. However, there are also many
problems with other (conventional) gas well drilling that need
to be addressed. Poor construction and maintenance of well
sites and access roads, ineffective soil erosion and sediment
controls, stream sedimentation and poor or delayed reclamation
are common problems, problems that are exacerbated by a lack of
enforcement. Regulations should be based on the amount of land
disturbed and the amount of water used, rather than whether a
well is ``vertical'' v. ``horizontal'' or ``shallow'' v.
``deep.''
3.) Increase the current statewide setback of 200 feet from
homes and water wells to at least 1,000 feet. 200-foot setbacks
can be found in leases dating back to the 1890's, and our laws
have not kept up with technological advances in drilling.
Natural gas drilling is a major industrial activity and with
Marcellus Shale operations in particular, we are especially
concerned about the close proximity to people's homes given
their duration, the noise, light and air and other pollution
from the sites, in addition to the potential for series
accidents like the fires and explosions which occurred last
year in the Northern Panhandle. In addition to habitable
dwellings and water sources, these setbacks should apply to
schools, places of worship, nursing homes, hospitals and other
similar places where people live or gather.
4.) Expand protections for drinking water sources. Full and
equal protection is needed for all water supplies, including
adequate setbacks and testing. Increased oversight of casing
and cementing is also critical. Recent events in Morgantown
have highlighted the need for additional protections for public
water supplies. Because of the concern about siting two
Marcellus gas wells within 3,000 feet from Morgantown's
drinking water intake, additional safeguards were written into
the permits the WV-DEP issued to Northeast Energy. These
safeguards include redundant spill prevention and containment
measures, integrity testing of well casings and a prohibition
of on-site disposal of drilling waste. Why shouldn't these
conditions be required of all wells in order to protect
citizens and the environment?
5.) Prohibit on-site disposal of drilling waste. Although
land application of any return fluids from drilling in the
Marcellus Shale is currently prohibited by the State (because
they are known to contain high levels of salt, as well as
naturally occurring radioactive materials or NORMs), under the
State's general permit, drillers may land apply liquid waste
from conventional wells on site. Current law also allows the
cuttings of drilled out rock and other solid waste from the
drilling and fracturing process to be buried in place ,
unmarked on the surface owner's land. These practices should be
prohibited and all contents of the drilling pit should be
hauled away and disposed of properly.
6.) Improve enforcement and reform hiring practices for
inspectors. Regulations are only as effective as their
enforcement. The DEP Office of Oil and Gas has too few
inspectors to adequately protect citizens and the environment
from the threats oil and gas drilling and development poses to
human health and our land, air and water. In addition to
increasing the number of inspectors, hiring practices need to
be changed. The industry-dominated Oil and Gas Inspectors
Examining Board should be abolished to allow the DEP Secretary
to hire these inspectors the way it hires other inspectors
within the agency. Fines and penalties should as be increased
so that they serve as a deterrent rather than being considered
part of the cost of doing business. And enforcement procedures
should be changes to match those for other regulated
industries. The state should be able fine drillers without
having to go to circuit court.
Attachment 3.--Essential Provisions NOT Included in Proposed Marcellus
Shale Legislation
(engrossed committee substitute for sb 424, 2011 regular session)
Scope
Regulations should be based on the amount of land disturbed and the
amount of water used, rather than whether a well is ``vertical'' v.
``horizontal'' or ``shallow'' v. ``deep.''
Surface disturbance.--Sites that disturb 3 acres or more,
including pipelines and access roads, should have soil erosion
and sediment control plans certified by a professional
engineer, and the engineer should supervise the construction
and reclamation. Provisions in SB 424 apply only to horizontal
well sites that disturb 5 acres or more, excluding pipelines
and access roads.
Water use.--210,000 gallons is a reasonable trigger for
requiring water management plans, etc. but it should not be
limited to horizontal wells. SB 424 would have no effect on
Marcellus vertical wells that can use up to 1 million gallons
in the hydraulic fracturing process.
Inspectors and Enforcement
The DEP Office of Oil and Gas has too few inspectors (17 for 59,000
active oil and gas wells) to adequately protect citizens and the
environment from the threats oil and gas drilling and development poses
to human health and our land, air and water.
Funding.--Earlier this year, the DEP proposed a permit fee
of $10,000 for horizontal wells to help it cover the additional
costs associated with reviewing and processing Marcellus Shale
drilling permits and to double its existing staff. The
legislature should honor the DEP's request, or authorize the
agency to implement and increase fees as needed to pay for
oversight. A $10,000 permit fee would be only 1/4 of 1% of the
cost of drilling a horizontal well ($3 million to $7 million)
and is hardly excessive. The fee schedule provided in SB 424,
($5,000 for the first horizontal well on a pad and $1,000 for
each additional well) is not adequate to sustain even current
staffing levels.
Hiring practices.--In addition to increasing the number of
inspectors, hiring practices need to be changed. The industry-
dominated Oil and Gas Inspectors Examining Board should be
abolished. SB 424 maintains the board, although the original
DEP bill proposed to eliminate it and make oil and gas
inspectors subject to the same hiring practices as other
inspectors within the agency.
Enforcement procedures should be changed to match those for
other regulated industries. For example, the state should be
able to fine drillers without having to go to Circuit Court. No
changes are proposed in SB 424, and as it is currently drafted,
drillers can get permits for horizontal wells even if in
violation of requirements for conventional wells.
Penalties for violations should be increased so that they
serve as a deterrent rather than being considered part of the
cost of doing business. SB 424 proposes some increases, but
only for horizontal wells.
Bonding requirements need to be improved to prevent wells
from being orphaned and unplugged. Current blanket bond
provisions allow bonding amounts of $25 or less per well for
large drillers. SB 424 makes no improvements to the bonding
requirements for conventional wells and allows a blanket bond
of $50,000 for all of an operator's horizontal wells. An
individual bond of at least $25,000 should be required for each
horizontal well, as proposed in the interim bill by the Joint
Judiciary Committee (HB 2878).
Notice and Other Protections for Surface Owners
Pre-survey notice--SB 424 provides notice ``at least
seventy-two hours but no more than fortyfive days'' prior to
entry to conduct surveys. A firm 30-day notice, like that
included in the House Judiciary amendments to SB 424, would be
preferable.
Incentives to work with the surface owner--SB 424 has no
such provisions. HB 2878 would have allowed operators to obtain
permits sooner if they negotiated a surface use and
compensation agreement, or required them to post an extra bond
if no agreement could be reached.
Expanded notice and other provisions should apply to ALL
wells not just horizontal wells.
Public Notice and Comment
Because of their industrial nature, the effects of Marcellus Shale
operations are felt far beyond the surface tracts being disturbed. In
rural areas in particular, neighboring landowners and local
infrastructure are affected. Impacts can also occur to public lands,
special places, high quality streams, etc. Therefore, any permit to
drill a horizontal well should be officially noticed to the public and
should include a 30-day public comment period.
Setbacks from Homes and Water Sources
The current setback of 200 feet from homes and water wells should
be increased to at least 1,000 feet. With Marcellus Shale operations in
particular, we are especially concerned about the close proximity to
peoples' homes given their duration (up to 6 months to complete one
horizontal well), the around-the-clock industrial noise and lighting,
and the air and other pollution from the sites, in addition to the
potential for series accidents like the fires and explosions which
occurred last year in the Northern Panhandle. This is a safety issue as
well as an issue that affects property values. In addition to habitable
dwellings and water sources, these setbacks should apply to schools,
places of worship, nursing homes, hospitals and other similar places
where people live and gather. No increased setbacks are included in SB
424.
Protections for Drinking Water Sources.
Full and equal protection is needed for all water supplies (public
and private), including adequate setbacks and testing. Increased
oversight of casing and cementing is also critical.
Testing parameters should be expanded to include chemicals
or chemical compounds commonly used in hydraulic fracturing.
Currently, drillers are required to test for constituents in
drilling muds and fluids, but not fracturing fluids.
A well operator's presumptive liability for pollution or
water loss should be extended from 1,000 feet to at least 2,500
feet, to include possible pollution from horizontals that can
extend a mile or more. Landowners with a water well or spring
within 2,500 feet of a proposed gas well should be notified and
be able to have their water tested at the drillers expense.
SB 424 proposes no changes to the current testing distance and
parameters other than requiring flow tests of water wells within 2,500
feet. The flow tests will be conducted only upon request of the
drinking well owner, yet current notice provisions only extend to 1,000
feet and no changes are proposed. The House Judiciary amendment to SB
424 comes much closer to providing the needed protections for both
private and public water supplies.
Clarify water replacement requirements for damaged or lost
groundwater or surface water supplies. Both the original DEP
bill and Joint Judiciary Committee bill introduced during the
2011 regular session contained new requirements for water
replacement.
Increase oversight of casing and cementing. In particular,
an inspector should be there for the cementing of the surface/
freshwater casing.
Because of the concern about siting two Marcellus gas wells within
3,000 feet from Morgantown's drinking water intake, additional
safeguards were written into the permits the WV-DEP issued to Northeast
Energy. These safeguards include redundant spill prevention and
containment measures, integrity testing of well casings and a
prohibition of on-site disposal of drilling waste. Why shouldn't these
conditions be required of all wells in order to protect citizens and
the environment?
Air Quality
In addition to increases in surface disturbance, water use and
waste disposal, Marcellus Shale development degrades air quality. Many
of the processes involved with this and other natural gas development
release nitrogen oxide (NOx), volatile organic compounds (VOCs) and
other potentially harmful substances into the air. However, no one is
currently regulating or even monitoring these emissions. In order to
protect citizens and the environment, DEP needs authority to monitor
and regulate air emissions from well sites. The only provision in SB
424 that addresses air quality requires drillers ``to control fugitive
particulate matter.''
Disposal of Drilling Waste
Land application of drilling wastewater and on-site burial of drill
cuttings and other solid waste should be prohibited until further
studies on the contents of drilling waste and the effects of on-site
disposal on the soil and groundwater can be conducted to determine if
these methods are safe. A recent U.S. Forest Service report on drilling
in the Fernow Experimental forest documents problems and severe damage
with both practices. A study conducted by the New Mexico Oil
Conservation Division determined that pits contain characteristically
hazardous waste. All contents of the drilling pit should be hauled away
and disposed of properly. Unfortunately, SB 424 proposes no changes to
the current disposal methods for drilling waste.
______
Additional documents submitted on behalf of Tim Manchin, Delegate, West
Virginia Legislature, Fairmont, WV
ATTACHMENT 1.--COMMENTS BY WV-SORO ON MARCELLUS DRAFT BILL WITH ADOPTED
AMENDMENTS
Prepared by David McMahon and Julie Archer
November 8, 2011.
WV-SORO has, on numerous occasions, submitted lists of what should
be in legislation to regulate Marcellus Shale and other gas well
drilling. These are our substantive and technical comments on the bill
being worked by the Joint Select Committee on Marcellus Shale. Failure
to mention or include in these comments recommendations we made in our
previous public statements or correspondence does not mean that we have
abandoned those positions.
SUBSTANTIVE COMMENTS
Inspectors
Page 12, Sec. 32-6-2(c). The changes regarding inspector
qualifications and the elimination of the Oil and Gas Inspectors
Examining Board are of course very good.
Definition of ``Deep Well'' and ``Shallow Well.''
Pages 7 and 9 (Sec. 22-6-1), and 109 to 118 (Sec. 22C-8-2 and
Sec. 22C-9-2). The rule of capture, which is essentially legalized
stealing, is bad. It can result in too many wells being drilled too
close together, which results in less total gas being produced from the
pool, as well as gaps between wells that will not be effectively
drained. It allows citizens who should be receiving royalty be deprived
of that royalty. The solution to these problems is forced pooling and
unitization. These changes make less oil and gas subject to forced
pooling. Bad idea. Also, if the bill is intended to apply only to
horizontal Marcellus wells, this change has nothing to do with
horizontal Marcellus wells, which are ``shallow,'' and is therefore not
appropriate in this bill.
Coal Declaration
Page 23 and 24, Sec. 22-6-36. Surface owners have no objection to
this change. However, a less onerous solution was worked out but not
adopted during the regular session last year. That solution would be
even better if applied only to the tax district and not the county.
Scope/Applicability
Page 25, Article 6A. We think these provisions should apply to
vertical Marcellus wells, and many of them should apply to all wells.
Application of Article 6 to Horizontal Wells
Page 30, Sec. 22-6A-5. David carefully reviewed this section of the
bill during the regular session and pointed out some errors to Joe
Jenkins. We do not know if this version of the bill corrects them and
we not had an opportunity to re-review them.
Erosion and sediment control plan
Page 39, Sec. 22-6A-7(c)(1). It says the plan must show the amount
of acreage disturbed. Current plans included in permits do show the
total acreage disturbed-usually 12 acres or so in the ones that I have
seen. However, some plans, and even the plats, do not show the
dimensions of the well pad itself. And the ones I have seen that do
show the dimensions of the pad, do not include the area to be disturbed
for the impoundment. The definition of ``horizontal well'' needs to
correspond with this provision of the erosion and sediment control plan
and maybe the plat etc.
Permit blocking
Page 43, Sec. 22-6A-7 (k). Since permits can only be blocked if an
inspector actually issues a violation to the operator and gives him
time to fix the problem, this section is worthless. The presence of a
violation elsewhere should block a permit whether or not an inspector
has had time to write it up. Additionally, as the proposed legislation
is currently drafted, drillers can get permits for horizontal wells
even if they are in violation of requirements for conventional wells.
Minimize fire hazards
Page 48, Sec. 22-6A-8(f)(6) requires drillers to minimize fire
hazards ``in accordance with industry standards.'' There have been at
least two fires in the last year. We suggest that the industry
standards are not high enough.
Record Keeping and Reporting for Water and Wastewater
Page 51, Sec. 22-6A-8(f)(9)(C)(iii). We think that the information
collected pursuant to this subdivision should be reported to the state
rather than simply being maintained by the operator. Having this
information will help the state to make informed decisions about future
regulations and to monitor whether wastewater is being disposed of
properly.
Impoundments
Page 52, Sec. 22-6A-9(f). There have already been problems with
leaks from torn pit liners. The result was pollution of ground water.
This pollution may have been avoided if there was a dual liner system
with a leak detector.
Notice to property owners
Page 56, Sec. 22-6A-10. We previously submitted the following
comments on the proposed notice provisions:
Because the effects of Marcellus Shale operation are felt
beyond the surface tracts being disturbed, WV-SORO supports and
appreciates the expanded notice to adjacent landowners, owners
of water wells and springs within 2,500 feet and the general
public. However, we are concerned about the language notifying
water supply owners about ``the advisability of taking their
own pre-alteration survey.'' We appreciate that a subsequent
amendment proposes to expand the operator's presumptive
liability to 2,500 feet, and that drillers have the authority
to ask for testing within that distance to protect themselves,
but we believe that owners of water supplies within 2,500 feet
of a proposed gas well should be able to have their water
tested at the driller's expense.
Location restrictions and distances
Page 64, Sec. 22-6A-12(a).
Distance from Homes
The distance in this version for an occupied dwelling is 625 feet
from the dwelling to the center of the well pad.
The word ``occupied'' is not defined. What about rental or second
homes? ``Habitable'' might be a better choice.
There is no requirement that the gas wells be at the center of the
well pad. These wells are drilled 15-25 feet apart and 6 to 12 wells
were drilled on a pad. The noise from the edge of the pad could be very
close to the surface owner. We know some surface owners that are 655
feet from a well site and they cannot sleep in their homes at night.
This is unacceptable.
The World Bank, Colorado and California have determined that the
maximum decibel level for a residence measured at the residence should
be 45 decibels at night and 55 decibels during the day (see http://
www.earthworksaction.org/noiseresources.cfm#45RATIONALE). These
standards should be used. This would eliminate the need for a variance
in some respects, if the driller did the things that are necessary to
prevent homeowners from having their windows rattled. However, it does
not the concerns about the air and other pollution from the sites and
the state does not have data to confirm whether or not the proposed
setback is protective of human health.
Additionally, even if the safety of persons could be assured, the
proposed set back isn't protective of property values, marketability,
etc. Although no instate studies have been done to determine what
impact Marcellus drilling has on property values, marketability, etc.,
common sense will tell you that when houses are immediately adjacent to
well sites there is likely to be a measurable impact on the value and
the home owners' ability to sell. A study conducted for the Town
Council of Flower Mound, TX found that negative impacts on property
values generally dissipated at a distance of 1,000 to 1,500 feet. In
response, Flower Mound adopted an ordinance that that makes it
``unlawful to drill, re-drill, deepen, re-enter, activate or convert
any oil or natural gas well, for which the closest edge of construction
or surface disturbance is located . . . within one thousand five
hundred feet (1,500') of any residence'' (see http://www.flowermound.
com/env_resources/env_resources_ong.php).
Distance from Water Wells
Adequate setbacks are needed for the protection of all water
supplies (public and private), yet the proposed legislation provides a
more protective setback for public water intakes than it does for
private water wells and springs. WV-SORO shares the concerns of public
water supply managers and users that their water be protected, however,
it is unfair and unjust that the Select Committee chose not to extend
the same protections to those whose water supplies are most likely to
be affected and who have fewer resources available to them to deal with
the contamination if it occurs.
At one of the recent meetings of the Select Committee, an industry
official testified that a typical well site is 300 feet by 400 feet.
Based on these figures, if the well head is in the center of the pad, a
water well or spring that is 250 feet measured horizontally from the
well head would, at most be 100 feet from the well pad. Moreover, if
the well pad were larger, the water well or spring would be located on
the well pad.
Additionally, the 250 foot setback from water wells and springs may
be less protective than the existing setback of 200 feet, because the
proposed legislation allows drillers to seek a variance. However, under
current law drillers cannot locate a well less than 200 feet from a
water well without the written consent of the owner.
Bonds
The change from 50,000 to 250,000 for a blanket bond is largely
cosmetic. For large companies with multiple wells that will only raise
the bond per well from about $20 to $100--a pittance of what it will
cost to plug the well.
Presumption of contamination of fresh water source or supply
Page 76, Sec. 22-6A-16. This presumption continues the limitation
to the current presumption. The presumption is only proximate cause. A
civil action for negligence requires the proof of duty, breach,
proximate cause and injury. David had to take a case to jury trial for
a well within 1,000 feet because the company denied breach of duty
facts. We appreciate extending it to 2,500 feet although the
horizontals can go for 5,000 feet or more, and be near abandoned,
uncased or uncemented wells.
There should not be a limitation of six (6) months. If there is a
spill of fracturing fluid or flowback onto the well site, it could take
that long or much longer for it to work its way down into the
groundwater and 2,500 feet away to ruin your water well. When a
contaminant plume enters an aquifer it may take years, or decades, to
pass by an individual well. A 2006 study by the U.S. Geological Survey
found that groundwater in aquifers of West Virginia ranged in age from
5.9 to 56 years, with a median age of 19 years. The study concluded
that because most of the groundwater sampled and analyzed in the study
is young (geologically speaking), the potential for human activity to
adversely affect ground water quality in West Virginia is high.
According to the report, the ages indicate, ``that the State's aquifers
are vulnerable to contaminant sources in a time span of less than 30
years'' (see http://pubs.usgs.gov/sir/2006/5221/pdf/SIR2006-5221.pdf).
Water Replacement
Page 78, Sec. 22-6A-16(e) and (f). We support and appreciate the
clarification of water replacement requirements.
Website
Page 82, 22-6A-20. This should say, ``at a minimum'' in case the
Secretary can easily make more information available the web site than
is required.
Air Quality.
Page 83,. Surface owners support these provisions.
Air, pit safety and other studies
Page 83, Sec. 22-6A-21 and page84, Sec. 22-6A-22. Unless there is
substantial funding for independent review, this is not going to be
very effective.
Casing standards
Page 85, Sec. 22-6A-24.
It is most important that in casing standards require a bond log of
the cementing of the surface casing after the cement has been allowed
to harden for twenty four (24) hours. Also, the production casing
should be cemented up through any formations that are productive of oil
and gas. Additionally, one comment we have heard repeatedly from those
we contacted seeking information about the PA regulations is that
notwithstanding the new regulations, there are still numerous cases of
methane migration that have been linked to faulty casing and cementing
practices. According to PA DEP, an overpressured annulus was the cause
of most recent incidents in Pennsylvania. A requirement to control and
monitor annulus pressure would greatly improve safety and decrease the
likelihood of such incidents occurring.
Gas Migration Response
Page 106, Sec. 22-6A-24(12)(E)(iii) says that in the event of a
potential migration event, the Secretary may require the operator to
conduct an ``evaluation of the operator's adjacent oil and gas wells
[within 2,500 feet] to determine well cement and casing integrity and
to evaluate the potential mechanism of migration.'' While we believe
such an investigation is important in determining the cause of the
migration, should such an event occur, an evaluation of all existing
oil and gas wells within 2,500 feet of a proposed well (including the
horizontal legs) could help prevent such migrations from happening in
the first place.
Property tax compensation
Page 108 Sec. 22-7-3(b). This is 8/100ths of 1% cost to drill the
well, assuming it will cost $3,000,000.00 to drill the well, and only
2/100ths of 1% of total value of the gas produced assuming 8BCF at $4
per MCF gas.
TECHNICAL COMMENTS
Erosion and Sediment Control Manual
Page 28, Sec. 22-6A-4(b)1. The reference to this Manual in Article
6 talks about the Manual, ``as adopted and, from time to time, amended
by the office of oil and gas...''. Similar language, with reference to
the ``department'' as opposed to the office of oil and gas, is used in
the next section on page 39, line 14. For consistency, that language
should be included here.
Use of ``parallel'' in definition of Horizontal Drilling
Page 29, Sec. 22-6A-4(b)(3). As I read the dictionary parallel
means along something else but next to it, not inside it.
Definition of Horizontal Well
Page 29, Sec. 22-6A-4(b)(4).
Can a ``well'' be defined as a ``site'' that is other than a
``well''.
``Utilizes'' suggests something that has one purpose is being used
for another purpose. Off-brand use of a drug would be utilizing the
drug for different disease. The proper word is ``uses'' we believe.
``In any month'' means they can use 150,000 gallons of water on
October 31 and another 150,000 gallons on November 1 and fall outside
the definition. That is the way we read it. It should say in any thirty
(30) day period.
``Liquid'' in definition of Pit
Page 29, Sec. 22-6A-4(b)(8). Should the word ``liquid'' should be
removed. What about a gel or a solid? ``Liquid'' is also used in
reference to drilling waste on page 79, Sec. 22-6A-17(b), line 16.
``Certified by a registered professional engineer''
Page 40, line1 Sec. 22-6A-7(c)(2) VS. Sec. 22-6A-7(d). Both of
these provisions require the same thing. What is the registered
professional engineer certifying? There won't be an erosion problem?
That the plan complies with requirements? Just that he is an engineer?
Applicability
Page 40, Sec. 22-6A-(e). Does the bill need to restate the 210,000
gallons per month here? Same problem other places in the bill.
Statements of no objection
Page 45, Sec. 22-6-A-(b). This section only talks about serving the
person with the soil erosion and sediment control plan and plat. Many
other things accompany the permit application. And this language should
be matched up with the final result of surface owner notice/agreement
amendment.
Disposal of cuttings at the well site
Page 47, Sec. 22-6A-8(f)(3). This appears to allow the disposal
cuttings at the well site when there was an amendment adopted to
prohibit it (see page 67, Sec. 22-6A-14(a), lines 18-21).
Water flow
Page 49, Sec. 22-6A-8(f)(9). Should this read ``In addition to the
other requirements of this section, ...'' rather than ``subsection''?
Two or more well pads
Page 52, Sec. 22-6A-9. The use of this language is confusing and
does not make sense in (b). Do two impoundments that serve one well
require two fees? Would it be clear to end both (a) after the word
``impoundment on line 13 and (b) after the word ``impoundment on line
20?
Disposal of cuttings/waste
Page 67, Sec. 22-6A-14(a). What is ``liner waste''? It is the
process of drilling and developing a well that generates the waste.
Attachment 2.--Comments By WV-SORO on Pending Amendments to Marcellus
Draft Bill
Prepared by David McMahon and Julie Archer
November 9, 2011.
WV-SORO has, on numerous occasions, submitted lists of what should
be in legislation to regulate Marcellus Shale and other gas well
drilling. These are our substantive and technical comments on the
pending amendments to the bill being worked by the Joint Select
Committee on Marcellus Shale. Failure to mention or include in these
comments recommendations we made in our previous public statements or
correspondence does not mean that we have abandoned those positions.
COMMENTS/PROBLEMS WITH THE SURFACE OWNER AGREEMENT LANGUAGE
Summary
Under the amendment, the surface owner still does not have to get
notice before the driller comes onto their land, the surface owner
could have to pay attorney's fees if they sue the driller, and there is
no right to a jury trial on damages. While the statute does have a
better damages provision then the current surface compensation act, for
these immense well sites, the common law claims are already better.
[Note that technically the paragraph numbers have errors that make
it very difficult to determine what is intended. Provision (d) should
probably be (c)(3) with its subdivisions 1, 2 and 3. Also, paragraph
(f) has subdivisions (1), (2) ``or'' (g).]
``May''
It says the driller ``may'' provide a notice to the surface owner
before coming out to the land. This still allows it to be legal for the
driller to sneak out on to a surface owner's land without telling the
surface owner first in order for the driller to survey a well pad, frac
impoundment and access road location for 12 acres of surface
disturbance with no input from the surface owner first. [Technically:
what are ``drilling operations''? The permitting statute uses ``well
work'' which is defined. Is surveying, or is staking a site by the
driller for the surveyor to survey ``drilling operations''? Surveying
is the key.]
``Court''
The damages right now are determined by the ``court'' which means
there is no jury trial.
``Reciprocal'' attorney fees
Surface owners are opposed to an attorney's fees provision if it
also provides that driller's could have attorney's fees against the
surface owner. In the realities of bringing law suits, drillers may be
willing to bring a law suit even if they have to risk paying the
surface owner's attorneys fees, but most surface owners would barely be
able to afford their own attorney's fees, let alone risk having to pay
the driller's attorney's fees.
Page 2 line 24 says that the statute will provide for ``prevailing
party'' attorney fees ``as follows''. What follows maybe is intended to
provide attorneys fees only if the surface owner ``prevails'', but
drillers will certainly try to get courts to misconstrue the statute
using the word ``reciprocal'' in the statute.
Subsection (g) clearly provides for the possibility of drillers
getting attorneys fees if the surface owner ``willfully and knowingly
violates'' the surface compensation agreement. Driller's draft these
agreements. Their lawyers will put in provisions to trip up surface
owners so they can counter-sue any surface owner that sues the driller.
``The terms of this agreement will be confidential,'' for example.
Another example, ``Surface owner will notify the operator within 24
hours of every act or omission that is a violation of the agreement''.
The surface owner notifies the driller 3 times and nothing happens and
so gives up and later sues.
Damages
The damages for taking the surface owner's land are not limited to
the current use value, as in the present code. However, we believe that
under common law trespass and ``contemplation of the parties'' the
driller has no right to be there at all, so the bill is weaker than
common law.
Technical
Subsection (f) does not refer to (b) so it could be read to require
notice before a surface owner brings any suit, even if the surface
owner sues under common law legal theories and not this statute.
COMMENTS ON KARST AMENDMENT
Pre-permit application review
What constitutes/is involved in ``a pre-permit application
review''? The most reliable way to determine the subsurface/geologic
conditions that would be encountered during drilling would be to
conduct a geophysical or seismic survey of the area.
COMMENTS ON INSPECTOR QUALIFICATIONS AMENDMENT
This amendment appears to reinsert qualifications that were struck
by the adoption of a previous amendment. Experience in the industry
might be a good thing, but should not be a requirement. In addition the
amendment says in order to be eligible an applicant must be ``a citizen
of West Virginia.'' Is this even constitutional?
Attachment 3
West Virginia Oil and Natural Gas Association,
October 12, 2011.
Hon. Douglas E. Facemire,
Room 217W, Building 1, State Capitol Complex, Charleston, WV.
Hon. Tim Manchin,
Room 212E, Building 1, State Capitol Complex, Charleston, WV.
Re:Joint Select Committee on Mareellus Shale Draft Legislation
Gentlemen,
I am writing to highlight a few of the very serious concerns that
the members of the West Virginia Oil and Natural Gas Association
(WVONGA) have related to the draft legislation and amendments under
consideration by the Joint Select Committee on Marcellus Shale
(Committee).
WVONGA recognizes the critical importance of safe and effective
exploration using horizontal technology to develop the Marcellus shale
formation and supports the public policy stated in proposed Senate Bill
424 that ``allowing the responsible development of our State's natural
gas resources will enhance the economy of our State and the quality of
life for our citizens while assuring the long term protection of the
environment,'' Equally as critical is that any legislation passed be
limited to those wells drilled horizontally that use more than live
thousand (5,000) barrels of water and disturb three (3) acres of land
or more. Further, WVONGA recommends eliminating any language that
identifies a single formation; i.e., Mareellus in a statute or
subsequent rule, Identifying a particular formation may limit the
application of the statute or subsequent rule when considering other
formations produced through the use of similar techniques.
Our support is driven by the fact that WVONGA members are key
participants in the development of the Marcellus shale, and we find
that rational, predictable statutory and regulatory oversight are
critical to decisions to invest in the development of Marcellus shale
in West Virginia and elsewhere. This said, over-regulation and abusive
fee increases will most certainly decrease investment and
correspondingly reduce economic impact including job creation and tax
revenue generation--both directly and indirectly. As such, we offer the
following key points as a non-inclusive list of concerns associated
with the work of the Committee--past and future.
First, the ``well location restrictions'' amendment pending before
the Committee will cause very significant portions of the State to
become off-limits to drilling thereby sterilizing many resources.
Prohibiting production from being located within 1,000 feet of occupied
dwellings, barns, water wells or springs used for ``domestic animal
consumption,'' and public water supply intakes effectively precludes
drilling within a 72 acre area around each such location. You can
quickly see how much drilling space is further sterilized by a water
well that is 1,000 feet from a house which is 1,000 feet from a barn.
Perhaps even more problematic is prohibiting drilling within 100 feet
of a ``watercourse'' and 200 feet from a ``wetland'' where each can be
located in close proximity to one another and are not always easily
identifiable. This amendment will have a very significant and perhaps
unanticipated negative impact on natural gas drilling in our State.
Second, the ``casing and cementing requirements'' amendment is an
example of legislating details of operation rather than leaving such
details to rulemaking by the appropriate State agency--the Office of
Oil and Gas of the Department of Environmental Protection (DEP) in this
instance. The rulemaking process is better designed to consider the
very technical operating variables that may exist from one type of
horizontal well or target formation to another. It appears that the
drafters of the amendment essentially borrowed the language from
Pennsylvania regulations that were finalized after considering around
2,000 comments. West Virginians deserve the same opportunity to
participate in a rulemaking process rather than having the Legislature
serve in the rulemaking capacity.
Third, ``property owner public notice'' amendment that was adopted
appears to be designed to increase administrative burdens without
material public benefit. Increasing the list of persons to receive
notice of well permit application to include owners of property
adjacent to where well work or land disturbance is performed
significantly increases work to identify owners without regard to
whether such owner might be remotely affected by drilling operations.
Moreover, identifying and providing notice to persons ``known to the
applicant to have a water well, spring or water supply source within
2,500 feet'' creates an area of roughly 143 acres subject to this
requirement without any standard as to how ``known to the applicant''
will be interpreted. These requirements--along with an unprecedented
requirement that notice of the tiling of each application must be
published for 2 weeks in a local newspaper--will result in obstructing
the well permit application process rather than promoting the stated
public policy.
An overarching concern is the magnitude of the proposed fee
increase by about 1400%. This increase--atop an already aggressive
severance tax, as well as the various other incremental costs
associated with current and future regulation--sends a clear message to
the industry that West Virginia is an uncompetitive business
environment. With low natural gas prices in the United States market,
capital is limited and easily transferred to areas where a competitive
environment is being embraced. Pennsylvania is experiencing a shift
away from the dry gas areas where prices are low, to the liquids-rich
regions of Ohio where a more competitive environment for development
exists. During this foundation-setting period for shale gas
development, making sure we have a proper balance in our statutory and
regulatory approach to governing our oil and gas program is absolutely
critical if we are to maximize the number of jobs flowing to West
Virginia residents.This said, we embrace DEP's funding request and
respectfully suggest an alternative approach toward the desired end:
blending a small increase in the permit fee with a reallocation of a
small percentage of the severance tax currently being collected.
It is WVONGA's view that the adopted and pending amendments do not
advance the cause of promoting the development of our natural resources
while at the same time ensuring long term protection of the
environment. As examples, singling out the drillers of horizontal wells
for additional and burdensome reporting to the Division of Labor and
expanding from 1,000 feet to 2,500 feet the presumption of pollution of
water wells due to drilling operations are unfair and undermine the
confidence of the industry that the Legislature supports the
development of Marcellus shale gas reserves.
Further, even though 22 amendments have been adopted with another 4
pending, the Committee has not taken any steps toward exploring pooling
or unitization provisions that would dramatically improve our ability
to efficiently develop our natural resources while at the same time
minimizing environmental impact. Such a conservation provision in the
proposed legislation would greatly enhance support from WVONGA members.
I would be happy to respond to questions or discuss these and other
important issues with you at your convenience. Thank you for your
consideration of this letter and for your service to our great State.
Sincerely,
Robert C. Orndorff,
President of the Board.
Attachment 4
Independent Oil and Gas Association of West Virginia, Inc.,
Charleston, WV, August 31, 2011.
Hon. Tim Manchin,
1543 Fairmont Avenue, Suite 203, Fairmont, WV.
Dear Delegate Manchin, Thank you for your letter dated August 16th
that requests comments regarding the draft legislation and amendments
being considered by the Joint Select Committee on Marcellus Shale.
While the members of the Independent Oil and Gas Association of West
Virginia (IOGAWV) appreciate the gesture, only being given a short
period of time to adopt formal comments to the proposed amendments is
somewhat unrealistic in that considerable study and debate among
members of industry must be undertaken. Additionally, we would not be
doing our due diligence if we did not also consider the expertise of
professionals in the fields of civil engineering, petroleum
engineering, environmental law, real estate and mineral law, the
drilling process itself that is required to provide you with informed,
factual, reliable and reasonable comments as to each proposed
amendment.
In addition to industry experts, very thorough and competent study
by lawyers well-versed in property law and even constitutional law is
required for the balancing of the rights of surface owners and mineral
owners. Without that sort of expertise, one can hardly imagine any new
law emerging that would stand the scrutiny of courts. Changing the
precedent vested rights of one party at the expense of another can be a
very difficult challenge to meet and must be carefully considered by
the best legal minds available to US.
That being said, what follows is our best effort, given the short
notice, to address the current state of Marcellus Shale regulations in
West Virginia.
Without question, the development of the Marcellus Shale is a
generational changing event for West Virginia. Along with the
downstream value added potential from wet or ethane rich natural gas
produced from the Marcellus Shale, an economic revival of epic
proportion for West Virginia is forecasted and hoped for by many as
means by which today's students have lucrative jobs--whether as
laborers, petroleum engineers, geologists, surveyors, chemical
engineers, patent lawyers, mineral lawyers, or as entrepreneurs in the
manufacturing sector of the economy. Whatever the case, much hope is
given to a new generation of West Virginians--hope that is beyond
anything else remotely considered at this time. Accordingly, IOGAWV
feels it is very important to make sure whatever changes to current
law, rule and regulation governing the drilling industry comes about,
is reasonably protective of the environment and yet flexible enough to
allow the natural gas industry and its downstream value added
components to realize their potential.
While we are hopeful that your fellow House members recognize the
potentials that our state faces thanks to the Marcellus Shale, and
while we appreciate the time and effort that you and your committee
members have put forth thus far through public hearings and
discussions, in view of the expressed position of Senate members of the
Joint Select Committee on Marcellus Shale and the obvious lack of
consensus on what should or can be done in these matters, it is the
feeling of IOGAWV that a more deliberate, methodical process of issue
development should be pursued in order to achieve a legislative
response to issues that is right, based on fact and expert knowledge as
opposed to sensationalism and emotion.
Further, it is not logical that one would express a preference or
objection to any of the amendments to which you refer until they are
fully vetted by those with expert knowledge as to each. Unfortunately,
that was not able to occur before your August 31, 2011 deadline.
However, you can be assured that IOGAWV has engaged an internal process
of reviewing the amendments offered by House members and remaining to
be considered by the Joint Select Committee. As determined appropriate
at the time, I am sure such information will be shared with you and all
members of the Joint Select Committee, including those from the Senate.
Until such time as we have the information we need to make informed
decisions, we feel the state is well served by the proactive efforts of
the WV Department of Environmental Protection (WV DEP) and its approach
to dealing with Marcellus Shale drilling circumstances. It is important
to note that since the active introduction of horizontal drilling and
hydraulic fracturing the WV DEP has made at least twelve policy
modifications within its inherent authority to regulate drilling. While
industry has not necessarily felt each to be perfect, we do recognize
they have been effective in addressing increased engineering standards
for drill site construction, impoundment construction, pit
construction, pit reclamation, modifications to the soil erosion and
sediment control manual, various matters relating to water withdrawal,
water usage and water disposal associated with the process and more.
We would also like to point out the collaborative efforts of
industry and the WV Division of Highways to develop a program of pre-
assessing the condition of roads and putting in place policies to
insure restoration of local use roads to conditions equal to or better
than they were prior to the onset of drilling operations.
Perhaps most significant are the new requirements imposed by Acting
Gov. Tomblin's recent executive order. The approval of the WV DEP
emergency rules by the Secretary of State serves our state well as an
interim measure to further insure protection of the environment while
additional policy concerns are considered in a more methodical,
informed and calculated process than one in which only one half of a
joint select committee is functioning at a time.
This concludes the comments that we are prepared and able to make
at this time. Thank you again for your letter and for allowing us the
opportunity to respond. We look forward to working with the members of
the Select Committee on Marcellus Shale to insure that the significant
opportunities surrounding the discovery of the Marcellus Shale
formation and West Virginia's natural gas industry are developed to
their fullest potential.
Best Regards,
Charlie Burd,
Executive Director.