Legislature Considers Shale Bills

February 25, 2013

WHEELING - Via the proposed West Virginia Futures Fund, state Senate President Jeff Kessler, D-Marshall, wants all residents to benefit from the Marcellus Shale rush for years to come.

This is just one of several bills introduced during the regular session of the Legislature that would impact the Mountain State's burgeoning natural gas and oil drilling industry.

With Chesapeake Energy now drawing oil from wells in Ohio and Marshall counties, there is clear potential for the shale boom to create sustained economic growth.

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However, as Delegates Mike Manypenny, D-Taylor, and Barbara Evans Fleischauer, D-Monongalia, point out in bills they have introduced, concerns regarding the safety of horizontal drilling and fracking remain.

Manypenny represents the county where a blast at an EQT Corp. drilling site this month left one worker dead.

Futures Fund

Kessler and Sen. Rocky Fitzsimmons, D-Ohio, are among those sponsoring Senate Bill 167, which would establish the West Virginia Futures Fund.

The bill would create the fund to hold 25 percent of the increased revenue the state receives from severance taxes to be appropriated by the Legislature at a later time.

"Use of the accumulated fund is left open to address future needs of the state," the bill states.

In both 2011 and 2012, Kessler introduced similar legislation that ultimately failed to gain enough support. He has said the object of the program would be similar to one in Alaska that allows residents to benefit from drilling.

In Alaska, government officials are required by constitutional amendment to set aside tax dollars generated by oil production in a separate fund that can't easily be touched by lawmakers. Withdrawing funds from the budget reserve into the general fund requires a 3/4 vote of each house of the Alaskan legislature and must be repaid.

Marcellus Development Account

House Bill 2435 sponsors include Delegates Mike Ferro, D-Marshall; Dave Pethtel, D-Wetzel; Ryan Ferns, D-Ohio; Randy Swartzmiller, D-Hancock; and Erikka Storch, R-Ohio. This bill would help fund infrastructure projects in counties that produce Marcellus and Utica shale gas. Ten percent of everything the state collects from oil and gas drilling - over the $64.8 million baseline - would benefit the counties and cities directly impacted by drilling and fracking. The remaining 90 percent would be placed into the new Marcellus Development Account for later infrastructure projects.

Earthquake Monitoring

Another piece of legislation, HB 2255, is sponsored by Swartzmiller, Fleischauer and Manypenny. This bill would require monitoring of seismic activity near both production well and wastewater injection well sites for possible earthquakes.

This is similar to action taken in Ohio following an earthquake near a Youngstown injection well last year.

A briny wastewater injection well should not be confused with a Marcellus or Utica shale production well. After gas drillers pump millions of gallons of fracking fluid - consisting mostly of water and sand, but also including different chemical combinations that vary per the choice of the driller - into a production well, much of this substance flushes back up through the shaft. The fracking fluid combines with minerals and mud from the earth to create the briny wastewater, which must be discarded.

Water Sources

Manypenny and Fleischauer are sponsoring HB 2256, which would require "cradle to grave" monitoring of water withdrawals from the state's water resources.

According to the legislation, each monitoring system "shall include the use of hydrants with a backflow preventer to protect the state's streams and rivers from contamination from truck wastewater backflow." The bill authorizing rulemaking and fee collection for the monitoring program.

Landmen Regulations

Manypenny is also sponsoring HB 2280, a measure to require "landmen" - those who sign contracts with mineral owners - to meet specific requirements before working in West Virginia. Unless these individuals are members of the American Association of Professional Landmen, the legislation would compel them to have at least two years of experience in contracting before being allowed to sign Marcellus Shale leases in the Mountain State.

It also requires the landmen to complete an ethics class.

"Most new landmen are challenged by the fact that they have to be an analyst, manager, salesman and negotiator all at the same time," the bill states.

Forced Pooling

Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, is not sure if his organization will make another push for forced pooling legislation as it has in past years.

As of Friday, a forced pooling bill had not been introduced.

"I am not sure if we will make a push for it or not. I don't know whether there is much of an interest in doing anything here other than building jails," he said when asked of his organization's intentions.

Forced pooling - which is now illegal for horizontal Marcellus drilling in West Virginia - would allow natural gas drillers to draw gas and minerals from land they have not leased.

For example, if all of your neighbors have signed leases with a particular drilling company but you refuse, you may be forced to allow your minerals to be used by gas drillers for the development of your neighbors' gas by placing your minerals into the drilling unit.

"Pooling is necessary if you are going to realize maximum output. Sometimes, you get someone who has 5 acres right in the middle of something - they are keeping their neighbors from developing their gas," DeMarco said.

The Legislature considered a provision for forced pooling in 2011, but ultimately decided against it after many landowners voiced concerns about losing their ability to negotiate better lease deals from the gas companies.

The Legislature's regular session ends April 13.