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Permit Fees Restored to Marcellus Measure

Fri, 10/14/2011 - 5:35am
LAWRENCE MESSINA,Associated Press

CHARLESTON, W.Va. (AP) — West Virginia lawmakers are sticking with the permit fees that drew industry objections as they craft proposed rules for the Marcellus shale natural gas field.

Legislators drafting a Marcellus shale regulatory bill voted Thursday to keep the proposed permit fees at $10,000 for the initial natural gas well drilled and $5,000 for each additional well at that site.

The special House-Senate committee had earlier agreed to reconsider the amounts. The state now charges just a few hundred dollars for permits to drill in the rich natural gas reserve. The draft bill had initially proposed charging $5,000 for the initial well and $1,000 for each additional one.

But industry groups have balked at the proposed amounts, citing fees assessed by other Marcellus states. The deposits are concentrated beneath parts of West Virginia, Pennsylvania, Ohio and New York.

Environmental Protection Secretary Randy Huffman also questioned the focus on permit fees, which he called an unstable funding source for his department's regulatory efforts.

Lawmakers also added provisions calling for stricter standards for the cement casings meant to prevent wells from leaking. The committee held off acting on an amendment addressing the rights of surface owners whose properties host wells.

After gradually assembling the bill over the last several months, the committee members hope to advance a regulatory measure capable of passage. They could resume work next month, either during the scheduled series of interim study meetings or when the Legislature certifies Gov.-elect Earl Ray Tomblin as the Oct. 4 special election winner. Tomblin has said he will convene a special session to consider Marcellus issues before January's regular session if lawmakers can reach consensus on a bill. They failed to pass one during this year's 60-day session.

Sen. Karen Facemyer advocated reconsidering the fee hikes approved during a September meeting. But the Jackson County Republican also opposed returning them to the draft bill without further review. She said that while neighboring Pennsylvania recently approved a one-time $160,000 fee for Marcellus drilling, that state does not tax extracted natural gas as West Virginia does. She estimated that each of West Virginia's Marcellus wells will provide a total of $1.2 million through these severance taxes.

"If we can get by with only a couple hundred or a couple thousand dollar fee, as compared to a $10,000 fee, why not do that?" Facemyer asked. She added, "Why are we always assuming that the industry ... that they're the bad guys? We're trying to make this state a business-friendly state."

She recommended making a supplemental appropriation to support the department's work, saying fees would take time to collect.

Huffman agreed that $2.1 million in immediate funding would allow DEP's Office of Oil and Gas to hire seven inspectors, one investigator and four office support staff. Huffman added that he would not expect the agency to complete filling those vacant and new slots until late 2012.

He could not immediately say what the agency will need in continuing funding.

"We would be in a much better position a year from now to make a proposal on what kind of funding would be necessary to carry out the requirements of the bill," Huffman told the committee. "I think it would just be really a wild guess right now if I were to try to come up with a number for you."

But Huffman also appeared to agree with the committee's House co-chair, Delegate Tim Manchin. The Marion County Democrat estimated that the bill's newer provisions would require another five inspectors, and that the proposed permit fees would provide the needed revenue.

Sen. Orphy Klempa, D-Ohio, argued that West Virginia's severance tax isn't keeping natural gas operators out of its Marcellus shale field. He urged committee members to consider the complaints and concerns they and other lawmakers have heard from Marcellus-area residents regarding area property, air and water in the aftermath of drilling and well production. The fee revenues will help provide them and other West Virginians with "a sense of security and a sense of knowing that they're being protected," Klempa said.

"There are a lot of good operators, a lot," Klempa said. "But this industry is going to be judged by its worst operator, and it only takes one not being overseen correctly to create a scenario."

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