Posts Tagged ‘state law’

By Robert Swift (Harrisburg Bureau Chief)
Published: August 25, 2010

HARRISBURG – Opposing parties in a high-profile bid by a gas-pipeline company to gain public utility status are attempting to reach a settlement.

The state Public Utility Commission has suspended hearings into the application by Laser Northeast Gathering LLC to become a regulated utility because of the effort to reach a settlement by Sept. 10, agency spokeswoman Jennifer Kocher said Tuesday.

Laser Northeast plans to build a 30-mile natural gas pipeline from Marcellus Shale exploration areas in Susquehanna County into southern New York, where it will connect to a larger interstate pipeline. The company has a field office in New Milford.

The Silver Lake Association, several individuals and the company have agreed to seek a settlement, Kocher said. Not all parties who filed intervention requests in the case, including some energy firms, have indicated they support a settlement, however.

The pipeline case has drawn attention because of the prospect that Laser Northeast, as a public utility, could exercise the power of eminent domain to acquire private property for the pipeline. Tom Karam, a Laser Northeast principal and Scranton native, has said the company wants to avoid land condemnation.

Under state law, a utility can exercise eminent domain, but a Common Pleas Court judge in a respective county would have to grant that power, Kocher said.

PUC Administrative Law Judge Susan Colwell held a public hearing on the case in June at Great Bend.

If a settlement is reached, it would undergo a review process with a decision by PUC near year’s end.

rswift@timesshamrock.com

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Copyright:  Citizens Voice

By Robert Swift (Harrisburg Bureau Chief)
Published: August 10, 2010

HARRISBURG – The natural gas industry is lobbying lawmakers to tax natural gas production at a lower rate during a well’s early years of production.

Proposals for a three-tiered well tax, requiring pooling together land parcels for drilling operations and making drilling a permitted use for local zoning are being advanced by the Marcellus Shale Coalition, an industry trade group. A copy of the coalition’s legislative agenda is circulating at the Capitol.

“Together, these policies will help ensure that Marcellus development remains competitive with other shale gas producing states and that critical capital investment will continue to flow into the region,” coalition president Kathryn Klaber said Monday.

Tax deadline Oct. 1

The coalition’s proposal surfaces with leaders of the House and Senate declaring their intent to pass a state severance tax by Oct. 1 and have it go into effect Jan. 1, 2011. The declaration is part of a state budget package enacted last month. Lawmakers return to session in mid-September with the Marcellus Shale and transportation funding issues competing for attention.

The newest details in the proposal focus on what production would be taxed at lower rates or exempt, an already contentious issue in Harrisburg.

Under the proposal, “high cost” Marcellus Shale wells that go to 5,000 feet or more below the surface to reach deep gas pockets would be taxed at 1.5 percent of market value of gas produced for the first five years, with a five percent tax rate kicking in after that.

So-called marginal Marcellus wells would be taxed at one percent of market value. These are described as wells not capable of producing more than 150,000 cubic feet of gas per day in a month. Wells not capable of producing more than 90,000 cubic feet of gas per day in a month would be exempt from taxes under the proposal.

Shallow gas wells would be exempt from taxes.

Market value would be defined as the amount generated through cash receipts less the cost of dehydrating, treating, compressing and delivering the gas.

As an example of high costs, the coalition cites a provision in state law that requires Marcellus producers to drill down into the Onondaga Layer which underlies the Marcellus Shale formation if the drilling takes place in a coal region. The added cost can amount to $200,000 per well, it states.

The Pennsylvania Budget and Policy Center issued a report recently criticizing tax breaks on new wells as depriving the state of tax revenue during a well’s greatest years of production.

“It would be a severance tax in name only,” said center executive director Sharon Ward.

The industry is seeking a two-sided exemption, with the reduced tax rate at the start and exemption for wells it considers low-producing, said Michael Wood, center research director. A 150,000-cubic-feet threshold is high, he said.

‘Use by right’

In addition, the coalition wants lawmakers to declare drilling a “use by right” in local zoning ordinances. That means drilling would be allowed, without the need for a major review by a local government, as long as it meets the standards specified in an ordinance. A local zoning permit would still be needed, but that would be issued relatively quickly.

This would provide for gas development in an orderly way while allowing municipalities to impose reasonable conditions on land used such as lot size and landscaping and safety features, the coalition said.

“We have problems with that,” said Elam Herr, an official with the Pennsylvania State Association of Township Supervisors. A township can’t exclude drilling under zoning laws, but local officials should be able to say where it takes place and keep it out of areas zoned for residential use, he said.

Other proposals call for providing incentives to convert state and local government and transit vehicles to natural gas fueling and giving priority to tax revenue distribution to host municipalities and counties.

Contact the writer: rswift@timesshamrock.com

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Copyright:  The Daily Review

By Elizabeth Skrapits (Staff Writer)
Published: July 26, 2010

HARVEYS LAKE – The natural gas company planning two exploratory natural gas wells in Noxen is steering clear of nearby Harveys Lake.

“Carrizo has no intention of drilling under Harveys Lake or anywhere near Harveys Lake,” Carrizo Marcellus LLC spokesman Phillip Corey said. “Our first well, the closest point to the lake as the crow flies, is almost 3 miles away.”

The company leased more than 3,000 acres of Sterling Farms, property belonging to the Sordoni family. While most of the property is in Noxen Township, some is in Harveys Lake Borough, he said. However, the company does not have rights to drill under Harveys Lake and doesn’t want to, anyway, Corey said.

“You can’t just go out there to drop a hole wherever you please,” he said.

Harveys Lake resident Guy Giordano, who is vocal about keeping contaminants out of the lake, said it’s good news that Carrizo is not drilling in the borough – but it’s still a little too close for him.

“That still doesn’t give me a lot of comfort. Thirty miles, yeah, but 3 miles, I’m not so sure,” he said.

Hydraulic fracturing, commonly called “fracking,” involves blasting millions of gallons of chemical-treated water thousands of feet underground to break up the shale and release the natural gas.

The fact that some of these chemicals are not disclosed bothers Giordano.

“Why can’t they use something non-toxic?” he asked. “I can’t believe the government would let anyone put anything in the ground that’s secret.”

State law allows natural gas companies to drill up to 100 feet away from a water source. State Rep. Karen Boback, R-Harveys Lake, wants to expand the buffer to 2,500 feet away from drinking water sources, as well as lakes and other bodies of water that are governed by boroughs or second-class townships. She also wants to prohibit drilling beneath them.

Boback has also signed on as a co-sponsor to state Rep. Phyllis Mundy’s bill calling for a one-year moratorium on natural gas drilling in Pennsylvania.

Corey said Carrizo will test the drinking water of residents around the drilling site, as required in the lease, which also calls for staying at least 500 feet away from any structure or water source.

He said Carrizo has not decided which direction, if at all, to drill horizontally. The company might just stick with a vertical well to see what’s there, he said.

“We’re going to play this very conservatively,” Corey said.

Giordano stressed that he does not oppose natural gas drilling.

“I’m glad these people got the money for these drilling leases, God bless ‘em. They deserve it,” he said. “But I wish they didn’t have to drill. If it’s rural, it’s OK, the risk is not that great. But when you’re talking about a densely populated area, it’s not worth it. I don’t see how they can take the risk.”

Ceasetown connection

Giordano pulled his minivan to the side of the road to get a better look at the Ceasetown Dam, slightly misty in the summer rain and surrounded by lush green foliage.

This is one of the main reasons he worries about Harveys Lake becoming contaminated.

“A few years ago I had a sample of lake water tested at the Kirby Health Center,” Giordano confessed. “It passed as drinking water.”

Harveys Lake is the source of Harveys Creek. Pennsylvania American Water Co. spokesman Terry Maenza said the company uses Harveys Creek as a backup water supply for the Ceasetown Reservoir. It isn’t used often but it’s there for emergencies, he said.

The Ceasetown Reservoir in Lehman Township serves about 70,000 people in all or parts of Ashley, Courtdale, Conyngham Township, Edwardsville, Hanover Township, Hunlock Township, Larksville, Nanticoke, Newport Township, Plymouth, Plymouth Township, Pringle, Salem Township, Shickshinny, Wilkes-Barre and Wilkes-Barre Township.

“We have done some sampling from Harveys Creek to get some baseline data, so we have that information on file if and when any drilling does take place in the future,” Maenza said.

The Susquehanna River Basin Commission, which regulates large water withdrawals from sources within the river basin, has not issued permits for any natural gas companies to take water from anywhere in Luzerne County, including the Ceasetown or Huntsville reservoirs.

Besides permits from the commission, “There are other permits they would have to get through us before they could start taking our water,” Maenza said.

Last week, there were water tankers at the Huntsville Reservoir, but they were removing sludge, Maenza said. When the filters at the water treatment centers are backwashed, the sludge goes into a lagoon, he explained. About 95 percent of it is recycled, including for agricultural use, he said.

When it comes to natural gas drilling, Maenza said Pennsylvania American Water officials are being vigilant, talking to the state Department of Environmental Protection about permits, keeping in constant touch with legislators including Boback, Mundy, and state Sen. Lisa Baker, R-Lehman Township.

Maenza said the company has also been in contact with Encana Oil & Gas USA Inc., which started site preparations for a second exploratory natural gas well on Zosh Road in Lake Township on Wednesday, the same day Encana began drilling its first well in Fairmount Township.

“Nobody’s more concerned than us,” Maenza said. “This is our business. Water quality is what we rely on. We don’t want anything to put our water supply in jeopardy.”

eskrapits@citizensvoice.com , 570-821-2072

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Copyright:  The Citizens Voice

By Elizabeth Skrapits (Staff Writer)
Published: July 21, 2010

HARVEYS LAKE – If the state Department of Environmental Protection can make borough officials do something about sewage pollution in the lake, why can’t it step in to prevent potential contamination from natural gas drilling?

That was the argument state Rep. Karen Boback, R-Harveys Lake, approached council with Tuesday. She asked borough officials to meet with DEP and the state fish commission to discuss a one-year moratorium on drilling near the lake.

Her suggestion was greeted with applause from the approximately 80 people who filled council chambers. Council members were open to the idea of contacting the state agencies.

“As far as I’m concerned, the precedent is set,” Boback said. “In my letter to (DEP Secretary John) Hanger, I put it was due to the infiltration problems during storm events. Our concern is the potential contamination with fracking fluids, and if that’s not a legitimate argument, I don’t know what is.”

Hydraulic fracturing or “fracking” involves blasting millions of gallons of chemical-treated water thousands of feet underground to break up the shale rock and release the natural gas.

Because of problems with raw sewage flowing into the lake during heavy rains, DEP cited the borough and ordered its officials to come up with a corrective action plan. As a result, the General Municipal Authority of Harveys Lake put a DEP-approved voluntary moratorium on new sewer connections in July 2003 until inflow and infiltration into the system was cut back. DEP allowed the authority to relax the moratorium in 2006.

“If they’re talking about infiltration, what about fracking water spewing all over the place?” Boback said, referring to a recent well blowout in Clearfield County.

Boback said she is writing legislation similar to what she introduced to protect drinking water sources, such as the Huntsville and Ceasetown reservoirs. DEP allows natural gas drilling up to 100 feet away from bodies of water. Boback wants that changed to 2,500 feet.

She also wants to prohibit drilling beneath drinking water sources and lakes, such as Harveys Lake, that are governed by a borough or second-class township.

Resident Michelle Boice urged council to take a “strong, proactive stance” with DEP on the issue.

“My concern is that we should be working closely with DEP as a government, and ask the tough questions as to why, when they have been a strong presence in this borough for more than 40 years, they are not doing something about controlling where these drilling permits are being issued,” she said. “Right over the hill, a half mile at Alderson, a drilling permit has been issued.”

Boice was referring to the Sordoni family’s Sterling Farms, where Carrizo Marcellus LLC plans to drill one of two exploratory wells in the Noxen area. She also noted so far 300 acres in Harveys Lake Borough have been leased to gas companies.

Councilman Ryan Doughton said gas companies can lease anywhere. However, zoning restricts where they can drill.

The only place where mineral extraction is allowed in the borough is in the small manufacturing zone on the northern side of the Old Lake Road, Doughton said. Natural gas companies seeking to drill in other parts of the borough would need a zoning hearing for a conditional use permit, he said.

According to resident Guy Giordano, the underground-spring-fed Harveys Lake is a source of the Ceasetown Reservoir, where thousands of people in the Wyoming Valley get their drinking water.

“Council needs to take a stronger position on this and ask the state for help, because this not only affects our wells around Harveys Lake, it affects the drinking water for the entire Wyoming Valley,” he said.

Councilman Rich Williams III said he has been studying the state Oil & Gas Act, trying to find out what council as a local government can do – state law supersedes local government.

“Please don’t think what you say is falling on deaf ears, because I practically use this thing for a pillow,” he told residents.

eskrapits@citizensvoice.com , 570-821-2072

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Copyright:  The Citizen’s Voice

Pa. senator says protection needed to ensure drilling doesn’t contaminate water.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

The state senator representing the Back Mountain is proposing a series of bills to protect drinking water sources from contamination associated with natural gas drilling.

Sen. Lisa Baker, R-Lehman Township, said on Monday that the chances of water contamination grow as drilling into the Marcellus Shale increases in Pennsylvania, and the proposed bills are in response to citizen and community concerns about the safety of water resources.

“Prevention and protection are preferable to crisis management and emergency response,” Baker said.

EnCana Oil & Gas plans to drill two natural gas wells in the Back Mountain – one each in Lehman and Lake townships – and a third in the Red Rock area in Fairmount Township, not far from Ricketts Glen State Park.

The well site in Lehman Township is less than two miles from the Huntsville Reservoir.

Although there are proposed water protection regulations moving through the approval process, Baker said state law has “more force.”

And as drilling proceeds on a larger scale, “area residents want answers that show responsibility being assured, rather than risks being assumed,” Baker said.

“Reasonable environmental protections will not discourage the development of this industry; they will help to make sure that unreasonable costs are not imposed on local communities and homeowners,” she said.

In order to protect aquifers and determine any adverse consequences attributable to drilling, one bill would require testing at three times – before drilling, at the completion of drilling, and six months afterwards – at three different depths.

A second bill would rule out drilling at sites too close to drinking water sources such as reservoirs.

A third bill would require the state Department of Environmental Protection to ensure that operators of wastewater treatment facilities are properly trained and sufficiently monitored to lessen the chances of human error creating a major problem.

Baker said some of the costs would be borne by the gas companies.

Oversight costs could be paid for through a severance tax, which is expected to be debated in the coming weeks.

She reiterated her opposition to any severance tax plan that would devote the revenue generated to filling a hole in the state budget rather than providing for community protection in drilling areas.

“The environmental and economic catastrophe in the Gulf of Mexico underscores the crucial nature of taking all reasonable precautions and for being prepared for dealing with extreme situations when things go horribly wrong,” Baker said.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

Bill would have rollback taxes assessed only on land impacted by wellhead permanently.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

Luzerne County Assessor’s Office Director Tony Alu still doesn’t know how Marcellus Shale development on land with “Clean and Green” designation will affect the land’s tax status.

“We don’t have a clear-cut plan yet. … I’m turning over every stone to get as much information as possible. We won’t be doing anything until I’m sure what our options are,” Alu said Monday.

Clean and Green is a program authorized by state law that allows land devoted to agricultural or forest use to be assessed at a value for that use rather than at fair market value.

The intent of the program, which is administered through county government, is to encourage property owners to retain their land in agricultural, open-space or forest-land use by providing real estate tax relief.

Property owners benefit through lower taxes as long as their land isn’t used for housing developments or other uses inconsistent with agricultural production, open-space or forest-land use.

If a property owner decided to use the land for a purpose inconsistent with the program, the landowner would have to pay “rollback taxes” – the difference between fair market value and use value of the land – for as many years as the property had been designated Clean and Green, up to a maximum of seven years.

Although it’s a state-authorized program, with maximum use values set annually for each county by the Department of Agriculture’s Bureau of Farmland Preservation, the bureau offers no guidance on how drilling for natural gas on a Clean and Green parcel would affect the tax status.

“The (state Farmland and Forest Land Assessment) Act is silent in that regard, so it’s left up to each individual county how to address it,” said bureau director Doug Wolfgang.

However, Wolfgang said, in March 2009, state Sen. Gene Yaw, R-Loyalsock Township, introduced a bill that would amend the act, allowing for natural gas drilling on Clean and Green land, with rollback taxes being assessed only on the portion of land that would be permanently impacted by a wellhead. State Sen. Lisa Baker, R-Lehman Township, was a co-sponsor of that bill.

Yaw represents Union and Sullivan counties and parts of Susquehanna, Bradford and Lycoming counties, which together boasted a total of about 200 natural gas wells by the end of last year.

The bill won Senate approval in February and is before the House for consideration.

Yaw has said the bill would provide counties across the state with “a consistent interpretation” to follow and would “help to prevent differing opinions on how many acres of roll-back taxes should be levied on landowners who have leased for natural gas development.”

He has said farmers and landowners need the bill to become law “so that there isn’t any confusion on how the Clean and Green Program operates.”

The bill also would exempt land with underground transmission or gathering lines from roll-back taxes and would allow for one lease for temporary pipe storage facilities for two years. Each property would have to be restored to its original use.

Regardless of whether the bill becomes law, Lake Township Supervisor Amy Salansky said neither she nor her husband, Paul, will have to pay rollback taxes on their Clean and Green land, on which EnCana Oil and Gas USA intends to drill a natural gas well in August. If county officials decide to assess rollback taxes, the lease with EnCana makes the energy company responsible for paying them.

Salansky noted neither she nor her husband own the mineral or gas rights to the land.

The couple bought the land after the owner died so they could farm it, but the owner had willed the mineral and gas rights to his nephew, who retained them in the sale.

The Salanskys are crop farmers, growing oats, corn and hay. They own and work more farmland nearby, Amy Salansky said.

Even if the entire 50-acre parcel is kicked out of the Clean and Green program, Salansky said she would reapply to have the parcel accepted back into the program, minus the 6 acres that would be used for the gas-drilling operations.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

Jurisdiction over drilling for natural gas in the Marcellus Shale is subject of hearing.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

HARRISBURG – The chairman of the state Public Utility Commission is confident that Marcellus Shale development will stabilize prices not only of natural gas, but electricity prices as well, and is thrilled the natural gas industry supports the PUC’s oversight of pipeline safety in Pennsylvania.

Commission members on Thursday heard testimony from representatives of the natural gas industry, a federal pipeline safety official, the state consumer advocate and the director of the Pennsylvania Association of Township Supervisors on the commission’s jurisdiction as related to Marcellus Shale development.

“I think everybody is in agreement that this increased gas supply, whether the gas is sold in Pennsylvania or not, is going to have a depressing effect on the wholesale price of gas,” PUC Chairman James H. Cawley said after the hearing.

Irwin “Sonny” Popowsky, of the state Office of Consumer Advocate, testified that the retail and wholesale price level of natural gas “has been on a roller coaster ride for years.”

He said an abundance of natural gas should stabilize and ultimately lower the price of gas and electricity so that it is affected by supply and demand rather than politics in the Middle East.

Commissioner Wayne Gardner said he’s heard that many roads were severely damaged under Chesapeake Energy traffic.
David J. Spigelmyer, vice president of government relations for Chesapeake, said a harsh freeze-thaw season and the fact that many roads were never constructed with proper foundations resulted in the need significant road repairs. But the company is bonded to repair those roads and has hired 23 road contractors in Bradford County to repair them.

David M. Sanko, executive director of the Pennsylvania Association of Township Supervisors, said his concern is that state law requires bonds for roadwork in the amount of $12,500, but it could cost up to $100,000.

Commissioner Robert Powelson asked how the commission can be confident that the “self-policing system (of the gas industry) will work and that safety will be maintained?”

Spigelmyer said the industry has worked closely with the state Department of Environmental Protection to ensure the industry meets state requirements and noted that permit fees that fund inspections climbed from $100 to about $4,000.

Alex Dankanich, general engineer with the U.S. Department of Transportation’s Office of Pipeline Safety, testified that of the 31 states that produce natural gas, only Pennsylvania and Alaska lack the statutory authority to regulate gas gathering pipelines.

Cawley noted that the administration had been pushing for the PUC to obtain inspection authority because the administration doesn’t have the manpower.

Dankanich said the PUC would be reimbursed 80 percent of the cost for inspecting non-Class I pipelines – those surrounded by 10 or fewer homes within 220 yards of a pipeline in a 1-mile stretch. Those lines are exempt from federal inspection.

PUC Vice Chairman Tyrone Christy asked if Pennsylvania should also exempt Class I pipelines from inspection.

Lindsay Sander, a consultant for the Marcellus Shale Coalition, said she was comfortable with the exemption given the low number of Class I problems.

Cawley said the natural gas industry “seems to be bending over backwards to be responsible. But you’ve got to have the rules in place for everybody, including the potential bad apples who are going to try and take shortcuts.”

He said the commission is not trying to economically regulate the gas production industry.

“We’re not going to try and set the rates. We just want safety jurisdiction, whether they’re a public utility or not. And … the industry coalition, which has 170 members, support us adopting the federal standards. … They’ve said that’s fine and they’ve said they’re willing to help pay for it on a per-mile basis,” he said.

Cawley said the commission has submitted proposed statutory language to House and Senate oversight committees related to PUC safety regulation.

“One part of it has already been passed by the House almost unanimously. It would increase fines for violations to the federal level. It would go from $10,000 per day to $100,000 per day and up to $1 million overall. House Bill 1128, that could be the vehicle for getting it done. The Senate could amend it and send it back over or the House could give us this additional legislation, but this is our top legislative priority – pipeline safety,” Cawley said.

He said he also asked the industry for a commitment to use PUC’s certificated trucks for hauling equipment and supplies, “and they’ve committed to that, which is good. We’ve increased carrier enforcement in that area because we discovered that in their haste to get supplies in, they weren’t using PUC certificated carriers.”

“We’ve increased our enforcement, … and now that they know we’re watching, they’ll be more careful about the carriers they use,” Cawley said.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

The Associated Press

HARRISBURG — Pennsylvania will join other major natural-gas states in requiring the prompt disclosure of production results.

State senators unanimously approved the measure Tuesday, six days after the House did the same. Gov. Ed Rendell is expected to sign it.

State legislators are peeling back the cloak of secrecy just as exploration companies are flocking to Pennsylvania in pursuit of natural gas in the sprawling Marcellus Shale formation.

The measure will require the disclosure of well-specific production data every six months. Currently, a 25-year-old state law requires state regulators to keep oil and gas production data confidential for five years.

Supporters say faster disclosure will help companies harvest the gas and let landowners see whether they are getting the royalties they are owed.

Copyright: Times Leader

PennEnvironment group wants to ensure water, land isn’t damaged by natural gas exploration.

CBy Rory Sweeneyrsweeney@timesleader.com
Staff Writer

According to a state environmental advocacy group, Pennsylvania needs to do more to ensure that gas drilling creating profits today won’t end up like the coal mining of yesterday that left a costly environmental legacy for the next generation.

In a recent report, PennEnvironment outlined various changes it recommends to the state’s approach to the drilling industry.

They include: strengthening clean-water laws and regulatory tools; making sensitive public lands off limits to drilling and instituting a severance tax on the extracted gas.

“I think we’ve leased out too much state forest land,” said state Rep. Greg Vitali, D-Delaware County, who attended a teleconference last week.

He added that it’s “irresponsible” to lease more until the production is taxed.

“It’s only political influence … that’s kept the Marcellus Shale from being taxed,” he said.

He hoped to get such a tax in the next state budget cycle.

At issue is how to best oversee the increased drilling in the gas-laden shale, which is about a mile underground throughout much of northern and western Pennsylvania. While the state Department of Environmental Protection has promised increased oversight, a rash of issues at various drilling sites has residents concerned that companies will strip out the gas and leave pollution in their wake.

The report lists various regulatory changes PennEnvironment believes would minimize the potential realization of those fears.

“We disagree with the idea that dilution is the solution,” said Brady Russell of the Clean Water Action organization.

He suggested that drilling companies should foot the estimated $300 bill for landowners to get baseline water testing before drilling begins because it can be difficult for landowners to find that money.

The report also calls for better right-to-know laws to force drillers to release the kinds and amounts of chemicals they use and account for the water they consume, while providing for public input that includes allowing health officials opportunities to review proposed permits.

The report also suggests rewriting the municipal code to give local officials primacy over state law for siting wells, which would overrule a recent state Supreme Court decision.

Regarding regulations, the report suggests expanding buffer zones around streams where drilling is prohibited and account for cumulative impacts of drilling when considering additional well permits.

The report calls for banning wastewater discharge to publicly owned treatment works and requiring recycling and reuse of all flow-back wastewater, while setting zero-discharge limits at treatment facilities.

While the report doesn’t address the threat of concentrating naturally radioactive refuse from the drilling process – an issue of concern in New York as the state considers regulations for drilling – Erika Staaf of PennEnvironment said the issue hasn’t come up in Pennsylvania because it doesn’t seem that anyone has tested for it yet.

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

Copyright: Times Leader

Court will hear landowners’ claims that gas companies took advantage of them.

MARC LEVY Associated Press Writer

HARRISBURG — Pennsylvania landowners who want to snatch a better deal from natural gas companies hoping to drill into their ground and the potentially lucrative Marcellus Shale formation beneath it will get the ear of the state’s highest court.

Wednesday’s oral arguments in front of the state Supreme Court are certain to be watched closely for its impact on one of Pennsylvania’s biggest economic opportunities and environmental challenges in decades.

For exploration companies with offices from Calgary to Canonsburg, the decision could either bring a huge sigh of relief or the havoc of renegotiating land leases across the state, possibly throwing the entire gas industry into chaos.

The fact that the court moved quickly to hear the case — and resolve a burgeoning number of complaints in state and federal courts — demonstrates the seriousness of the matter.

“By its actions, I think the court recognizes that this really is an extraordinary issue for Pennsylvania and it’s critically important that it is resolved,” said David Fine, a Harrisburg-based lawyer representing ElexCo Land Services Inc. and Southwestern Energy Production Co.

To some extent, justices will hear plaintiffs’ attorneys tell a story of big corporations taking advantage of unsuspecting landowners, paying them a fraction of the upfront per-acre leasing fee that they later paid to other landowners as competition in the land rush intensified.

“They didn’t know Marcellus Shale from a hole in the wall and they feel the gas companies came in and got them to sell away the rights to their property,” said attorney Laurence M. Kelly, who is representing Susquehanna County landowner Herbert Kilmer and his family.

The real legal question will be whether some tens of thousands of leases were never valid because they violate a state law that guarantees landowners a minimum one-eighth royalty from the production of oil and gas on their land.

The lawsuits are just the latest sign that Pennsylvania’s laws governing mineral rights and environmental protection are lagging behind the large, modern-day industry presence that has descended here.

Dozens of exploration companies and contractors have flocked here since early 2008 from as far away as Houston, Denver, and Calgary, Alberta, in a rush to lock up land rights over the thickest portions of the shale. That rush has eased somewhat since the recession drove down natural gas prices — but the legal disputes have not.

By Fine’s estimate, more than 70 lawsuits have been filed in federal and state courts by plaintiffs seeking a judgment that the leases they signed were never valid.

In general, the leases in question give the exploration company the right to subtract certain costs — such as taxes, assessments or transportation — before paying the 12.5 percent royalty. That violates the law, plaintiffs say.

The law, however, is silent on the meaning of “royalty” and whether it is determined before or after those expenses.

Fine and industry officials say it is standard language in leases to deduct those costs — a contention disputed by landowner advocates in Pennsylvania and elsewhere.

But judicial decisions in two of the cases raised the prospect of a myriad of different legal opinions.

In Susquehanna County, the judge in the Kilmer vs. ElexCo case handed the companies an initial victory, saying the law does not specifically prohibit the subtraction of costs. Kilmer has appealed to state Superior Court.

Separately, a federal judge in Scranton hearing a case against Cabot Oil & Gas Corp. denied a motion to dismiss the case, saying the law’s silence does not necessarily mean the costs can be legally deducted.

Fine decided to ask the state Supreme Court to take up Kilmer vs. Elexco immediately, and effectively settle the matter for everyone.

Still, the high court’s decision could create a new kind of chaos. Records of oil and gas leases dating back to the royalty law of 1979 are kept in county courthouses, often in arcane filing systems, making it nearly impossible to know how many landowners and leases are potentially affected.

“I’m sure that no one person knows,” Kelly said.

Copyright: Times Leader