Posts Tagged ‘Ed Rendell’

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.”

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.

Copyright: Times Leader

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

The Associated Press

HARRISBURG — Republicans in Pennsylvania’s House of Representatives are proposing a plan to expand natural gas drilling on 390,000 additional acres of state forest land.

The Republicans proposed the plan Tuesday as an alternative to Democratic Gov. Ed Rendell’s plan to impose a severance tax on natural gas production.

Drilling is a major issue in Pennsylvania since exploration companies are eager to tap the natural gas trapped in the Marcellus Shale rock formation.

Republicans say the leasing under their plan would take place over the next three years and provide $260 million per year.

Rendell expects his 5 percent tax on gas production to provide $236 million to the state budget in its first full year.

The state raised $190 million last year by leasing 74,000 acres of state forest to drilling companies.

Copyright: Times Leader

Gas industry officials told state senators in Dallas that cumbersome rules make it difficult to operate.

MICHAEL RUBINKAM Associated Press Writer

DALLAS — Executives of drilling companies exploring a huge untapped reserve of natural gas say the economic windfall expected from the Marcellus Shale may not come to pass if Pennsylvania doesn’t get its regulatory house in order.

Industry officials complained Tuesday about a time-consuming and lengthy permitting process and cumbersome regulations that, on top of plummeting natural gas prices and the credit crisis, is making it difficult for them to operate in Pennsylvania.

“I have great hopes for what the Marcellus Shale play might still hold for Pennsylvania. Unfortunately, my experience to date does not lead me to be very optimistic,” Wendy Straatman, president of Exco-North Coast Energy Inc., told Republican state senators at a hearing in northeastern Pennsylvania.

She said the Akron, Ohio-based company has moved drilling equipment to West Virginia and delayed its plan to transfer a “significant number” of employees into Pennsylvania because of DEP permitting delays that are “unlike anything we have seen in any other state in which we operate.”

Another executive, Scott Rotruck of Oklahoma City-based Chesapeake Energy Corp., the largest natural gas producer in the United States, predicted “ominous” consequences for Marcellus development if Pennsylvania’s regulatory environment doesn’t become more welcoming. He said the permitting process is easier and less costly in other states.

Sympathetic GOP senators pressed acting Environmental Secretary John Hanger for answers, warning that Pennsylvania can’t afford to scare off an industry that has promised to create tens of thousands of new jobs.

The state needs to be “careful we are not killing the goose that’s laying the golden egg,” said Sen. Mary Jo White, R-Venango.

Hanger agreed that regulations need to be streamlined and said his agency is working on it, but added that most applications are processed within 45 days.

“There has to be a smart way to protect what we need to protect, and at the same time (prevent) a delay that really serves no purpose,” he said. “I believe there’s a learning curve here for everyone involved.”

Part of the problem may be a lack of DEP manpower to cope with a record number of natural gas applications. The agency is on track to issue 8,000 permits in 2008, up from 2,000 in 1999, yet staffing in the agency’s oil and gas division has remained stable at about 80. The DEP has proposed to raise fees on drilling companies to pay for additional staff to process applications and inspect wells.

Tuesday’s hearing at Misericordia University was called by the Senate Majority Policy Committee to explore the economic and environmental impact of drilling in the Marcellus, a layer of rock deep underground that experts say holds vast stores of largely untapped natural gas.

Industry executives also opposed a tax on natural gas that the administration of Gov. Ed Rendell has said it is considering.

“New taxes will stymie Marcellus development,” said Ray Walker Jr., vice president of Range Resources Corp., a Texas-based oil and gas company with an office in southwestern Pennsylvania.

Copyright: Times Leader

By MARC LEVY Associated Press Writer

HARRISBURG, Pa. (AP) _ The land agents, geologists and drilling crews rushing after the Marcellus Shale are raising something besides the natural gas they’re seeking: Talk of a natural gas tax.

Thanks to a state Supreme Court decision six years ago, Pennsylvania is now one of the biggest natural-gas producing states — if not the biggest — that does not tax the methane sucked from beneath its ground.

But momentum is gathering to impose such a tax. The Marcellus Shale — a layer of black rock that holds a vast reservoir of gas — is luring some of the country’s largest gas producers to Pennsylvania, and state government revenues are being waylaid by a worldwide economic malaise.

A spokesman for Gov. Ed Rendell says the administration is looking at the idea of a tax on natural gas, but a decision has not been made. Typically, Rendell does not reveal any tax or revenue proposals until his official budget plan is introduced each February.

Senate Republicans are planning a November hearing at Misericordia University in northeastern Pennsylvania to look at what effect can be expected on local governments if Marcellus Shale production lives up to its potential.

Local officials worry about damage to local roads ill-suited for heavy truck traffic and equipment. School districts could be strained by families of gas company employees moving into town. And some residents are concerned about gas wells disrupting or polluting the water tables from which they draw drinking water.

Legislators must find the fairest way for companies to share those costs, whether by levying a tax or through some other means, said Sen. Jake Corman, R-Centre, the GOP’s policy chairman.

“I do think there is an understanding that some sort of compensation for municipalities is warranted,” Corman said. “We just have to figure out the best way to do that.”

So far, drilling activity is under way on the Marcellus Shale in at least 18 counties, primarily in the northern tier and southwest where the shale is thickest, according to the state Department of Environmental Protection.

Land agents are trooping in and out of county courthouses to research the below-ground mineral rights. At least several million acres above the Marcellus Shale have been leased by companies in West Virginia, New York and Pennsylvania.

Just this week, Range Resources Corp. and a Denver-based gas processor said they have started up Pennsylvania’s first large-scale gas processing plant, about 20 miles south of Pittsburgh.

And CNX Gas Corp. announced that a $6 million horizontal well it drilled in southwest Pennsylvania is producing a respectable 1.2 million cubic feet a day — a rate it expects to improve in coming weeks.

In the opposite corner of Pennsylvania, drilling pads are now visible on Susquehanna County’s farmland, and hotel rooms are booked with land agents and drilling crews.

“It is the talk at the coffee shops, at the local grocery store, the gas station — everybody,” said state Sen. Lisa Baker, R-Luzerne.

Activity is still in the early stages, as exploration companies work to confirm their basic assumptions about the potential of the Marcellus Shale reservoir, and probe for the spots with the greatest promise, analysts say.

Industry representatives say they oppose a tax, and Stephen W. Rhoads, the president of the Pennsylvania Oil and Gas Association, questioned the wisdom of imposing a tax on gas production that is still speculative.

In some natural-gas states, a tax is collected based on a company’s gas production by volume.

But in Pennsylvania, the Supreme Court ruled in 2002 that state law did not allow counties, schools and municipalities to impose a real estate tax based on the value of the subsurface oil and gas rights held by exploration companies.

An appraiser’s study presented last year during a House Finance Committee hearing estimated that the court’s decision had cost Greene, Fayette and Washington counties up to $30 million in county, school and municipal tax revenue.

The state’s county commissioners and school boards support the resumption of some type of taxing authority — although that could mean landowners would get smaller royalty checks.

Regardless, Doug Hill, the executive director of the County Commissioners Association of Pennsylvania, said the matter is one of basic fairness since coal, gravel and limestone are assessed.

“The bottom line is it isn’t a windfall issue,” Hill said. “It’s a tax equity issue.”

___

Marc Levy covers state government for The Associated Press in Harrisburg. He can be reached at mlevy(at)ap.org.

Copyright 2008 The Associated Press.