Archive for the ‘Times Leader’ Category

Pa. is biggest natural gas producer that does not impose some type of tax.

MARC LEVY Associated Press Writer

HARRISBURG — The natural gas industry in one of the nation’s hottest exploration spots is bracing for a political tussle over whether and how Pennsylvania will tax methane from the potentially lucrative Marcellus Shale formation.

An industry trade association, the Marcellus Shale Coalition, said Thursday it wants any discussion of a tax to involve the high cost to drill a shale well and cumbersome state laws that make it costly to operate.

A tax enacted without addressing issues that hamper exploration companies could encourage some to move resources to shale formations in other states, said coalition president Kathryn Klaber.

“What is important is to look at the broad issues, not just a tax, as to how we make this climate best for growth,” Klaber said. “There are a lot of modernization policies that need to be put in place to develop this massive natural resource.”

On Tuesday, Gov. Ed Rendell issued his annual spending plan for the state and renewed his call to enact a tax identical to West Virginia’s: 5 percent on the value of sale, plus 4.7 cents per thousand cubic feet produced.

Rendell projects the tax would produce $180 million in the fiscal year beginning July 1 and increase to nearly $530 million after five years, including 10 percent set aside for local governments.

Rendell wants money to shore up a state treasury that faces a projected $5.6 billion gap in 2011 and 2012 resulting from spiraling public pension costs and the expiration of federal stimulus budget aid.

Pennsylvania is the biggest natural gas producer that does not impose some type of tax on it.

However, the coalition wants to steer talk of a tax to reflect those imposed by shale states, such as Texas, Arkansas and Louisiana. In those states, the tax is discounted initially to allow the exploration companies to recoup a multimillion-dollar investment in each well.

For instance, Texas imposes a 7.5 percent tax but discounts it for 10 years or until the operator recovers 50 percent of the drilling and completion costs. In Arkansas, the state imposes a 5 percent tax on natural gas production but discounts it to 1.5 percent for at least three years.

Last year, Rendell called for the same tax rate on gas. After months of Republican-led opposition, he relented, saying he did not want to hurt an industry in its infancy.

In recent weeks, Rendell has said he believes the industry can afford to pay a tax, and pointed to the heavy influx of cash into Marcellus Shale exploration ventures.

For now, production from the Marcellus Shale is still in the early stages. Fewer than half of the approximately 1,100 wells drilled in Pennsylvania are connected to pipelines that can bring the gas to customers.

Environmental groups and the Pennsylvania State Association of Township Supervisors support a tax. The Senate’s Republican majority has not ruled out the eventual imposition of a tax, although Senate Appropriations Committee Chairman Jake Corman, R-Centre, called it “premature.”

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Tunkhannock expecting $439,975 check in March from Chesapeake Energy.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Tunkhannock Township in Wyoming County announced this week it received the signed agreement for its gas-drilling lease with Chesapeake Energy for about 76 acres of public land.

The up-front bonus check for $439,975 is expected in early March.

The township board had signed the lease in October, but the process was delayed because of municipal regulatory requirements.

“We were part of the Wyoming County land group, but we had to put it out for bid being a municipality,” said Judy Gingher, the township’s secretary.

The bid stipulated, however, that the winning bidder had to have at least 1,000 acres already leased in the township, and no one entered a bid.

The township received $5,762 per acre, which was $12 per acre more than for private landowners, Gingher said. The township currently has no plans for the money.

“They’re looking possibly just to invest it,” Gingher said.

Gingher said there were minor community concerns about surface-drilling activity because much of the land is in the township’s 42.5-acre Lazy Brook Park, which hosts a variety of community functions.

The land might be off limits to surface activity because of building-setback requirements and deed restrictions.

Much of it was purchased in 2006 through hazardous flood mitigation buyouts, which carry emergency management agency restrictions that prohibit permanent structures.

Township Solicitor Paul Litwin was unsure if drilling would be considered a restriction, though, because the drilling infrastructure is temporary and the resulting well pad likely wouldn’t impede flood flow, which is the purpose of the restrictions.

Structures are permissible “as long as you don’t increase the flood height with the structure, and a pad would basically be flat once you put the structure in,” he said.

“The question we’ll have to resolve if they want to put a pad there is that a permanent structure, and we’ll have to look at that if and when they want to do that. … They haven’t applied yet, so we haven’t looked at it yet. … My guess is it probably would not be considered permanent.”

Brian Grove, the director of corporate development at Chesapeake, declined to comment on the lease or plans for the property.

Copyright: Times Leader

On WVIA show, members of industry admit not telling public about methods.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

PITTSTON TWP. – Members of the gas-drilling industry acknowledged on Thursday evening a failure to inform the public about their procedures, and the audience at the WVIA call-in show reminded them of that often.

Viewers of the “State of Pennsylvania” program repeatedly questioned – through the Internet, phone calls and in person – potentials for polluting, environmental justice issues and the industry’s willingness to abide by regulations.

There were even sporadic bursts of applause when in-house questions touched on contentious issues. “I don’t want it (Marcellus Shale drilling) in Luzerne County,” said Audrey Simpson of Shavertown “Take a trip up to Dimock (Township in Susquehanna County) and see what the hell is happening to those people up there.”

There, methane contamination in 13 wells is being attributed to gas-drilling activities. Those affected have brought a lawsuit against the local driller, Cabot Oil and Gas.

A Cabot representative was not among the panel.

In fact, the only driller there was Chesapeake Energy, represented by David Spigelmyer, the vice president of government relations for Chesapeake’s Eastern Division. The company has defended the industry by itself at several similar public-input meetings.

Early on during the hour-long program, the vehemence was foreshadowed by Gary Byron, a former state Department of Environmental Protection official and the president of Dux Head Environmental Services, a consulting firm for the drilling industry.

“The industry and the DEP don’t agree on a lot, but the one thing they do agree on,” he said, is that information has lagged behind drilling activity so much that “there are a lot of misconceptions about the industry.”

He added that many of the companies need to be educated about regulatory methods in Pennsylvania. “They want to comply,” he said.

Bruce Bonnice, who has worked for several resource-conservation groups but also leased his land to Carrizo Oil and Gas and now consults for them, likened the risks to everyday transportation. “I’m not sure I’m going to have a car accident every time I get in my car, but I still travel,” he said.

Spigelmyer noted plans for taxing the industry are premature because the Marcellus hasn’t yet shown it’s worth refocusing capital from other gas shales in southern states. He added that regulatory overhead would further stunt that process.

Copyright: Times Leader

Intent is to have inspectors based closer to local gas drilling activity.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

For some time, local legislators and environmentalists have complained that local oversight of natural-gas drilling is too difficult because the closest inspectors are in Williamsport.

With the industry preparing to ramp up activities in Susquehanna and Wayne counties, the state Department of Environmental Protection addressed that complaint on Wednesday by announcing the opening of an Oil and Gas Management office in Scranton.

“Our communities need the economic boost that gas drilling will provide, but we simply cannot afford to have state government shortchange oversight,” said state Sen. Lisa Baker, R-Lehman Township, in a news release.

She had asked Gov. Ed Rendell to open an office closer to local drilling activity, the release noted, because “given the increase in drilling activity expected to take place in the region, and the potential environmental consequences of mistakes, long-distance oversight was not an acceptable answer.”

The site hasn’t been finalized, but it will be within the city, according to DEP spokesman Tom Rathbun, and will house 10 employees who have yet to be hired. Most of those will be “field personnel,” Rathbun said, meaning “they’ll be handling inspection and compliance.”

No date has been set for the office’s opening, but Rathbun assured it would be “as soon as possible.”

“We’re anticipating continued growth in Wayne and Susquehanna counties, according to what the industry is reporting, so we’re responding to that,” he said. “That’s based on the industry forecasts where they’re doing next year, what they expect to do.”

Funding for the employees and regional office will be paid for through increased permitting fees the industry is paying to drill in the Marcellus shale, “which was the original intent behind increasing the fees: to make the program pay for itself,” Rathbun said.

The shale is a rock formation a mile underground stretching from New York to Kentucky and is estimated to store enough gas to supply the nation’s current consumption for two decades.

The employees will be part of 68 new DEP hires that Rendell announced last week to handle increased gas drilling, Rathbun said.

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Beaver County lawmaker opposes bill introduced by U.S. Sen. Casey to close “Halliburton loophole.”

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Concern over environmental damage from natural-gas drilling in the Marcellus Shale region has increased enough to attract federal attention, but at least one state representative believes regulation should be left to the states.

The state Department of Environmental Protection is strengthening its regulations for well construction, and Gov. Ed Rendell responded to the concern last week by announcing a plan to begin hiring 68 more DEP workers for inspections and compliance of gas drilling.

The U.S. Environmental Protection Agency announced last week an “Eyes on Drilling” tip line for citizens to report – anonymously, if preferred – anything that “appears to be illegal disposal of wastes or other suspicious activity,” according to an EPA news release.

Also, U.S. Sen. Bob Casey Jr., D-Scranton, has introduced the Fracturing Responsibility and Awareness of Chemicals Act, which would close the so-called “Halliburton loophole.”

In the Energy Policy Act of 2005, hydraulic fracturing or “fracking” was exempted from the federal Safe Drinking Water Act, creating the loophole. Fracking forces water, sand and chemicals into rock formations underground such as the shale to crack the rock and release natural gas.

In a resolution introduced in the state House Environmental Resources and Energy Committee last week, Rep. Jim Christiana, R-Beaver, called for lawmakers to urge the U.S. Congress to not pass Casey’s proposal.

Noting that fracking itself has not caused any known groundwater contamination at more than 1.1 million wells in which it’s been used, Christiana’s resolution supports continued state regulation of the process. The resolution refers to the 2005 energy act, indicating that Congress specifically meant to exclude fracking.

It also states that a federal Environmental Protection Agency report from 2004 found that hydraulic fracturing in coal bed methane wells “poses minimal threat” to drinking water sources.

State Rep. Jim Wansacz, D-Old Forge, wasn’t sure whether he supported the resolution, but felt confident that it doesn’t really matter either way. Congress members “don’t pay much attention to that,” he said. “Resolutions don’t mean a whole lot.”

He said a federal regulation might help by keeping all states at an equal minimum, but he said treading on states’ rights would “bother” him.

Wansacz said he doubted the bill by Casey would overrule states’ authority, but he was sensitive to the issue.

“Once the feds come in, they take over … so we’ve got to be careful what we ask for.”

State Rep. Phyllis Mundy, D-Kingston, isn’t so sure the resolution is focused on states’ rights. “This resolution is obviously industry driven” she noted in an e-mail.

“The industry somehow got hydraulic fracking exempted from the (drinking-water act) and now Senator Casey has a bill to eliminate this exemption. I support the Casey bill. … It would protect drinking water and the public health from the risks imposed by hydraulic fracturing.”

Separately, the EPA is offering citizens a way to report drilling problems. The announcement comes in the wake of several controversies over whether companies are reporting all spills.

The state Department of Environmental Protection fined a Towanda company earlier this month for spilling seven tons of drilling wastewater last year. The incident was reported only after a nearby Pennsylvania Department of Transportation crew witnessed it.

In October, a complaint was filed with DEP to investigate a suspicion that trees were damaged at a Wayne County site from an unreported drilling-fluid spill.

According to the release, “public concern about the environmental impacts of oil and natural gas drilling has increased in recent months, particularly regarding development of the Marcellus Shale formation where a significant amount of activity is occurring. … The agency is also very concerned about the proper disposal of waste products, and protecting air and water resources.”

The EPA doesn’t grant drilling permits, but its regulations may apply to storing petroleum products and drilling fluids, the release noted. The EPA wants to have “a better understanding of what people are experiencing and observing as a result of these drilling activities,” the release noted, because “information collected may also be useful in investigating industry practices.

The new DEP employees will be paid for through well-permitting fees that were increased last year. There will also likely be more of them: Rendell said the industry expects to apply for 5,200 permits this year, three times as many as last year.

The new DEP regulations they’ll have to obey include increased responsibility to repair or replace affected water supplies, procedures to correct gas migration issues without waiting for DEP’s direction and re-inspection of existing wells.

The draft regulations were opened for public comment on Friday.

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

The Wyoming Valley Sanitary Authority is looking to join the ranks of regional sewer authorities profiting from natural gas drilling.

Following Williamsport and Sunbury, where authorities are already treating drilling wastewater, the WVSA is requesting proposals to build a closed-loop pretreatment plant on its land in Hanover Township.

The plant would accept wastewater only within certain pollution parameters, and the treated water would need to be reused for other gas drilling.

Proposals are due by March 29, and the authority hopes to have the plant built within a year, pending necessary permitting.

“I think this thing can get built in seven, eight, nine months or quicker, so again, when will it be permitted?” said John Minora, president of PA NE Aqua Resources, which is consulting on the project.

The plant would be able to treat 800 gallons a minute with a daily flow of 1 million gallons, plus storage and a filling station. The system could utilize any of several techniques that could include separation and disposal of waste in a landfill, evaporation and land application of the minerals or treatment and dilution, Minora said.

Dilution would require the same amount of water, plus about 10 percent more, he said, which would come from the plant’s treated sewage water.

Removing the solids and chemicals is easy, he said, but extracting the dissolved salts is not, which is why dilution might be the most economical option.

“Honestly, we’re open,” he said. “We’ll consider any system that does that job.”

Unlike at Williamsport or Sunbury, however, the resulting Hanover Township water won’t be sent to the existing treatment facility and would need to be purchased by gas companies for use in drilling.

“We want a system that isn’t going to discharge (into a waterway, such as the Susquehanna River), whether or not there’s a byproduct we have to dispose of in another fashion,” he said.

There is an old rail spur at the site that could be reconditioned. Rail is the preferred transportation method, he said, because it’s faster and less disturbing to the community. However, a trucking route is being considered utilizing a second entrance that passes only a few homes, he said.

That route requires the rebuilding of a washed-out bridge.

“We’ve looked at some alternatives, where really the impact on the neighborhood is minimal,” he said.

All proposals require a bid bond of 10 percent of the total bid. Minora declined to offer an estimated cost.

Copyright: Times Leader

A panel offers an update on legislation, which turns out to center on money.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

BENTON – With interest increasing in drilling for natural gas in the Marcellus Shale, there’s a whole swirl of legislation related to it being considered in Harrisburg, but much of it comes down to money.

“A lot of what goes on in Harrisburg is who’s gonna pay to make the pie and who’s going to get a piece,” said state Rep. Garth Everett, R-Lycoming. “The fight is how we’re going to divide up the pie. … We want to see the Commonwealth get its fair share, but we also don’t want to … go New York on them and drive them away.”

Everett was among two other representatives – Karen Boback, R-Harveys Lake, and David Millard, R-Columbia – who spoke on Thursday evening at a meeting of the Columbia County Landowners Coalition.

A state Department of Environmental Protection official and a Penn State University educator were also on the panel.

Everett described the intention and status of nearly 20 bills throughout the legislature, noting that they fit into four categories: taxation and where the money goes, water protection, access to information and surface-owner rights.

While some likely won’t ever see a vote, Everett said a few will probably pass this session, including a bill that would require companies to release well production information within six months instead of the current five years.

He said a tax on the gas extraction also seems likely “at some point.”

For the most part, the industry received a pass at the meeting, with most comments favorable. One woman suggested companies might underreport the amount of gas they take out and questioned what’s being done to help landowners keep them honest.

Dave Messersmith of Penn State suggested that an addendum to each lease should be the opportunity for an annual audit of the company’s logs.

Robert Yowell, the director of the DEP’s north-central regional office, said the rush to drill in the shale happened so quickly that DEP is still trying to catch up with regulations. Likewise, he said, companies are still becoming acquainted with differences here from where they’re used to drilling.

“When they first came to town, I don’t think they realized how widely our streams fluctuated,” he said.

He added some public perceptions need to be changed – such as the belief that people aren’t naturally exposed to radiation all the time – and that he felt confident that “this can be done safely.”

In response to contamination issues in Dimock Township in Susquehanna County, DEP is upgrading and standardizing its requirements for well casings, Everett said. He added that it’s being suggested the contamination in might have been caused by “odd geology.”

“Every time humans do anything, there’s an impact on the land,” he said. “We just need to balance this right so that we end up with something we’re happy with when we’re done.”

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

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Feedback sought on impact on communities and environment as industry explores Marcellus Shale.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

With questions, concerns and accusations increasing with the rise of drilling for natural gas in Pennsylvania, state legislators and officials have been on the road to hear from voters and explain what they’re doing in Harrisburg.

A Senate Urban Affairs and Housing Committee public hearing last week in Bradford County heard about renters being priced out of their apartments by rig workers.

Later that day at a League of Women Voters forum in Scranton, a state Department of Environmental Protection official addressed concerns about a lack of oversight.

State Sen. Lisa Baker, R-Lehman Township, was involved in a Senate Environmental Resources and Energy Committee hearing on drilling wastewater treatment issues on Wednesday in Harrisburg.

State Rep. Karen Boback, R-Harveys Lake, joins the road warriors tonight in Benton, where the Columbia County Land Owners Coalition is hosting informational meetings. Along with Boback will be state Reps. Garth Everett, R-Lycoming and David Millard, R-Columbia, for the three meetings, which are organized geographically.

Boback is “just going to be there to let homeowners know what’s being done in Harrisburg to address their concerns,” spokeswoman Nicole Wamsley said.

Depending on the crowd, the legislators could face either support or hostility about the issue. Anti-drilling groups have coalesced in the region and have organized attempts to voice their concerns at everything from rallies to zoning board hearings.

While drilling for gas in the Marcellus Shale holds the tantalizing promise of economic benefits and jobs for decades, it also raises a variety of environmental issues, most notably the quality and availability of water.

Add to that concerns such as the practice of “forced pooling.” In theory, it’s designed to minimize surface disturbances by evenly spacing well pads over an entire drilling area and protect landowners from having their gas siphoned off without compensation.

In practice, it forces landowners into leases whether they want one or not.

Legal in New York, it’s being addressed in Harrisburg. Boback had supported a bill based on the land-conservation premise, but recently retracted it “when the questions arose … based on discussions with research staff” regarding its practical application, Wamsley said.

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By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Several local legislators have removed their support from a bill purported to protect landowners from unwanted gas drilling near their property, after learning about potential unintended implications in the legislation.

State House Bill 977, introduced by state Rep. Sandra Major, was announced in February to “extend the Oil and Gas Conservation Law to development within the Marcellus Shale deposit,” along with other protections for landowners, according to the co-sponsorship memorandum distributed throughout the House.

Those protections, however, would allow in the Marcellus area so-called “forced pooling.” Defended as a way to reduce land disturbance by maximizing the area each gas well drains, the practice essentially forces landowners into leasing if surrounding land has been leased for drilling.

State Reps. Karen Boback, R-Harveys Lake, Phyllis Mundy, D-Kingston and Jim Wansacz, D-Old Forge, have removed their support of the bill in response to that potential threat.

Mundy asked legal counsel for the House Environmental Resources and Energy Committee – where the bill has been sitting since March – to investigate the implication.

“The issue of forced pooling is a double-edged sword,” the analysis concluded. Without it, gas companies are free to drill as close to property lines as possible and siphon off gas from neighboring unleased property that naturally drains out – known as the “Law of Capture” – without compensation. “Yet the remedy of forcing the unwilling landowner to open up the land for drilling is unsatisfactory as it infringes upon individual property rights,” according to the analysis.

Major, R-Montrose, acknowledged that potential interpretation of her bill, but maintains that wasn’t the intent. She said she is open to amending the bill’s language to unambiguously protect landowners’ rights. Mundy, Boback and Wansacz noted that they would consider supporting the bill with changes and acknowledged that their support was based on the claims in the original memo rather than the bill’s wording.

“What we did is we assumed it. Up here, you take people for their word. Bills can be interpreted many different ways,” Wansacz said.

He said he felt confident that, had the bill ever been subjected to hearings, the issues would have arisen and been addressed. “Before a bill becomes law, it never ever looks like what it started out,” he said.

Mundy said she will support existing bills that individually address the other proposals in Major’s bill, such as prohibiting drillers from drilling through unleased land and ensuring that extraction costs aren’t deducted from landowners’ royalties.

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

Holdouts wonder if someday they’ll be forced to enter into natural-gas leases.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

With more than 150 acres between her and her parents, Maria Rinehimer’s family could stand to make a tidy profit off natural-gas leasing. But their banker won’t need to worry about clearing out room in the vault any time soon – the family’s not interested.

“I think it’s a really bad thing for the area. If something happens, like a spill or something, I don’t think they’re going to clean it up for us. I think we’re going to be stuck with it,” Rinehimer said.

In Union Township near Shickshinny Lake, Rinehimer, her husband, Kevin, and her side of the family, the Scalzos, sit squarely within the current area of focus for the two gas companies partnering on drilling activities in the county.

The family’s aversion to leasing highlights several growing issues with increased drilling in the Marcellus Shale.

First, residents of northern Pennsylvania, who’ve long harbored suspicion of wealthy interests exploiting local resources such as coal and trees, question whether gas companies can be trusted on the face value of their assurances or if they’re just another chapter in the sad litany of robber barons.

And second, will people who don’t want to lease be forced to if everyone around them is? It’s a practice called “forced pooling,” and while it’s not yet legal in Pennsylvania’s Marcellus Shale, there is a bill in the state House, according to Tom Murphy, an educator with the Lycoming County Penn State Cooperative Extension.

“That would make everything in the Marcellus and below fall in the forced pooling scenario, but at this moment it has not been passed,” he said.

The practice, which is legal in New York, is defended as a way to reduce land disturbance by maximizing the area each well drains.

House Bill 977 – which is cosponsored by, among others, Reps. Karen Boback, R-Harveys Lake, Phyllis Mundy, D-Kingston and Jim Wansacz, D-Old Forge – has been sitting in committee since March.

Rinehimer attended a September meeting held by WhitMar Exploration Co., which later teamed with EnCana Oil and Gas (USA) Inc. to propose three wells in northern Luzerne County.

“He (a company representative) kind of went around the answer, and didn’t really go right ahead and say if something does happen to your water system and you can’t drink it … they’re going to clean it up for you,” she said. “Nothing was really clear.”

EnCana’s is sensitive to the issue, company spokesman Doug Hock said.

Its policy in this area is to monitor all water supplies within a mile of wells before and after the drilling occurs. The company cases wells with several layers and pressure tests, he said, ensuring the integrity of each well.

“If there were a loss of fluid or a loss of gas, we would know through that pressuring testing process,” he said.

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

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