W.Va. regulators scramble to keep up with drilling

June 21, 2010 1:13:30 PM PDT
MORGANTOWN, W.Va. (AP) - The number of natural gas wells being permitted in West Virginia's portion of the vast Marcellus shale field is growing faster than the Department of Environmental Protection's ability to keep pace, Secretary Randy Huffman said.While the number of permits issued for unconventional drilling operations more than tripled between 2007 and 2009, the number of inspectors increased by only one, DEP records show. Four more inspectors are on the payroll this year, but Huffman acknowledges 18 people are not enough to handle not only more than 1,000 new Marcellus wells, but also tens of thousands of traditional, shallow gas wells.

"We simply do not have the number of people necessary to do the job," Huffman said in an interview with The Associated Press. "It's easy to issue a permit. What I think we're doing is issuing permits faster than we have the ability to keep up with them on the ground."

How to address the shortage of inspectors and how great a workload each inspector can handle are among the questions the DEP hopes to answer in an ongoing review of its Division of Oil and Gas. Huffman said he wants the "comprehensive, top-down look" completed within the next few months so he can brief Gov. Joe Manchin by November. He wants to offer any necessary policy and regulation changes - and perhaps legislation - by January.

"We've got to give the people in the state a comfort level that ... we're not selling the farm in exchange for the gas," he said.

But Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, calls the DEP time line "very aggressive."

"Any rush to judgment would be a mistake," he cautioned. "It's not like there's some tremendously critical issue out there that should be driving this. I think everyone concerned will be better off if we take our time and do it right as opposed to reacting quickly."

An explosion earlier this month at a gas well site near Moundsville did not trigger the review but verified the need for it, Huffman said.

Seven workers were injured when Texas-based Union Drilling Inc. drilled through an abandoned coal mine and struck a pocket of methane gas that ignited. The resulting fire burned for five days, and the DEP issued two violations against the permit holder, AB Resources PA LLC of Brecksville, Ohio. The state shut down all AB Resources operations in the state while it reviews the company's permit compliance.

"We don't know if a new regulatory scheme would have made a bit of difference," Huffman said.

The Marcellus shale field is a vast, rich reserve the size of Greece that underlies Ohio, West Virginia, Pennsylvania and New York. The gas is locked in tightly compacted rock a mile underground, and freeing it requires unconventional horizontal drilling technologies and vast amounts of water.

How to handle millions of gallons of chemical-tainted wastewater remains a question, but Scott Mandirola of the DEP's Division of Water and Waste Management said most companies now realize it makes environmental and economic sense to recycle. Some larger companies have told the DEP they're recycling 95 percent or more because it's cheaper than buying, hauling and disposing of water with each new well, Mandirola said.

Still, water concerns remain part of the review.

Huffman said widespread change in the state's regulatory structure may not be necessary, but the DEP does need a better way to fund inspectors, whose salaries come from permit fees.

In 2007, the DEP issued 147 new permits for Marcellus wells. In 2008, the number jumped to 387, and then to 397 last year. As of June 1, 122 permits had been issued so far this year.

"What we really believe is that a stable, adequate funding source that allows us to get a proper number of inspectors in the field, coupled with policies and a few regulatory changes, might be needed," Huffman said.

Gas drilling fluctuates with gas prices: When prices are high, drilling companies are aggressive. When prices fall, drilling activity slows down - and so do permit fees. That makes it difficult for the DEP to adapt, so Huffman wants a funding system that's more stable. That could include either tapping into the general revenue budget or imposing a production-based fee on the industry, he said.

The prospect of production fees, however, draws a chilly response from the industry, which already pays severance taxes on the gas.

Corky DeMarco, executive director of the West Virginia Oil and Gas Association, said gas companies would be more likely to support higher permit fees than production fees because of the constant fluctuation in their market.

Although West Virginia has had gas wells that produce for 80 to 100 years, DeMarco said, no one anticipated the potential of the Marcellus field. He credits the DEP for getting ahead of potential problems and said he's confident that if all sides keep talking, "we can come up with a set of rules we can all live with."

"We're on the forefront of the largest natural gas play that North America's ever seen," one that could last for decades, DeMarco said.

"If West Virginia screws this up," he said, "we all ought to be put in jail."