Shale producers accept Pennsylvania governor’s proposed rules

04 October 2011 22:18  [Source: ICIS news]

PITTSBURGH (ICIS)--Pennsylvania gas producers voiced approval on Tuesday for newly proposed state rules for improved environmental controls on shale gas production, but they remain cautious about possible changes by legislators and regulators.

Gary Slagel, environmental affairs director for shale gas producer Consol Energy, said the industry generally welcomed the broad outlines issued on Monday by Pennsylvania Governor Tom Corbett for improving environmental controls in shale gas production.

Speaking on the sidelines of the Infocast Marcellus Infrastructure Finance and Development Summit, Slagel said the governor’s proposals did not surprise anyone who had been following the debate at the state’s Marcellus Shale Advisory Commission.

In addition to enhanced environmental standards for shale gas drilling and production, the comission's proposals call for an impact fee on producers and plans to make Pennsylvania more energy independent.

In announcing the proposals on Monday, Corbett said that “This natural resource will fuel our generating plants, heat our homes and power our state’s economic engine for generations to come”.

But the general outlines announced by the governor must be fleshed out by the Pennsylvania legislature and then rendered into specific rules by state regulators.

“There are ample opportunities through the legislature or regulation process to further refine concepts,” Slagel said.  “I can say the devil is in the details.”

The potential impact on industry and means of enforcement are not yet clear.

The proposals include increasing the well distance from private water wells, public water systems and natural bodies of water.

The governor also suggested an increased price for well bonding and blanket well bonds. The presumed liability period for unconventional gas well operators after completion would be doubled to 12 months.

Other penalties would be doubled and permits could be withheld from operators who consistently violate the rules.

The proposed impact fee would generate funding for local communities experiencing drilling repercussions.

“Estimates show that this impact fee will bring in about $120m [€91m] in the first year, climbing to nearly $200m within six years,” Corbett said. “As the number of wells grows, so will the revenue.”

Each well is subject to an impact fee up to $40,000 in the first year after completion, falling by $10,000 each subsequent year.

In the fourth year, the fee would hold at $10,000 through the tenth year.

Slagel said the industry does not oppose the fees, given that the money goes to local communities.

Local governments would receive 75% of the fee funds, and 25% would go toward transportation infrastructure maintenance and repair and to first responders.

($1 = €0.76)

By: Sheena Martin
+1 713 525 2653

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