[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


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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

                              ----------                              

                               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

                              ----------                              


                       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.
---------------------------------------------------------------------------
    \1\ NPC, ``Prudent Development Realizing the Potential of North 
America's Abundant Natural Gas and Oil Resources'', Page 1-39
---------------------------------------------------------------------------
    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.

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