Pennsylvania needs tougher regulations for Marcellus shale gas drilling, aggressive, independent enforcement, and a severance tax on the gas extracted, according to state Department of Environmental Protection Secretary John Hanger.
And yesterday would not be soon enough to get all of that done and “done right” to protect the state’s water resources, said Mr. Hanger in a forceful keynote speech opening the Marcellus Shale Policy Conference at Duquesne University on Monday.
“Let me be clear: Self-regulation doesn’t work. That’s not contestable,” Mr. Hanger told the audience of about 250, including a significant number of gas industry representatives. “We’ve made mistakes before. We have to get this right or the costs will overwhelm the benefits.”
Citing environmental damage done by Pennsylvania’s early history of unregulated coal mining, the oil well disaster and widening slick in the Gulf of Mexico and the 29 dead miners at the Upper Big Branch mine in West Virginia, Mr. Hanger challenged state legislators, regulators and the natural gas industry not to allow those kinds of mistakes to happen again.
“Rules matter. The philosophy of the staff matters. And what is needed is the right rules and the right staff with the independence to enforce those rules,” Mr. Hanger said. “Also needed are companies with the right culture that want to do things the right way. We have some of those, as well as some at the other end and some in the middle.”
He said there’s no such thing as “zero impact drilling” and said he will push for stronger regulations to protect Pennsylvania’s rivers and creeks from extremely salty well wastewater pollution, tougher and more comprehensive well construction standards, rules limiting toxic air pollution from wells and compressor pumping stations, and bigger bonds to cover capping of wells when they stop producing.
Each well pumps 2 million to 8 million gallons of chemically treated water underground and under high pressure to fracture the shale rock and release the gas. About 1,400 Marcellus shale wells have been drilled to date and tens of thousands more are expected.
“The bonding regulations are pitiful — $2,500 a well or $25,000 for all the wells a company drills in the state,” Mr. Hanger said, provoking a couple of chuckles from the audience. “Well the joke will be on us when the first company leaves Pennsylvania. Right now, clearly the rational economic decision would be forfeit the bond and walk away.”
He said Gov. Ed Rendell strongly supports a 5 percent severance tax on gas taken from the Marcellus shale formation, which lies 5,000 to 8,000 feet deep under three-quarters of Pennsylvania and parts of New York, Maryland, Ohio and West Virginia, a total of 95,000 square miles.
Twenty-eight natural gas producing states have a severance tax, but last week the Pennsylvania Independent Oil and Gas Association, representing more than 700 companies and individuals, sent a letter to Mr. Rendell and members of the general assembly saying it opposed a severance tax.
“The industry pays a severance tax in every other state, in Alabama and Texas and West Virginia and Oklahoma, and in private they know they should pay one here,” Mr. Hanger said. “Its position is indefensible. The Marcellus is so attractive that companies from around the world, from Japan, Norway, France, and the U.K, are coming. Billions of dollars are coming. The tax shouldn’t be the highest but it shouldn’t be the lowest.”
The two-day conference is sponsored by Duquesne University and the Pennsylvania Environmental Council, which intends to release a blueprint for effective regulation of the drilling industry later this year. The PEC said it will release a policy report and recommendations based on information developed at the conference, which concludes today.
Estimates of the amount of extractable gas it contains have risen from 25 trillion cubic feet a year ago to up to 75 trillion cubic feet today and there are now 73 companies operating in the Marcellus shale field.
Kent Moors, director of the Energy Policy Research Group at Duquesne’s Graduate Center for Social and Public Policy, said the state’s failure to make good Marcellus shale drilling policy decisions will result in the costs being borne by local municipalities, including infrastructure impacts, especially destruction of roads, price inflation and impacts on agricultural land and water.
“Water prices will increase and drilling may cause industrial facilities to close. It’s a rising tide that won’t raise all boats,” Dr. Moors said in his keynote address. “It must be met head on, transparently and collaboratively. It can’t be rammed down the throats of the locals.”
On a six-person panel discussing “unresolved” Marcellus shale issues at the conference, Kathryn Klaber, president of the Marcellus Shale Coalition, an industry lobbying group, said state regulations need to be “dusted off and modernized” but emphasized the competitive nature of the gas drilling industry and its economic benefits for the state. She said a study commissioned by the coalition found the gas well industry would create 107,000 new jobs in Pennsylvania this year and spend $4 million per well.
She rejected a suggestion by another member of the panel, Charles Christen, director of operations at the Center for Healthy Environments and Communities, in the University of Pittsburgh’s Graduate School of Public Health, that Pennsylvania impose a moratorium on Marcellus shale development, like New York has done, until regulatory, legislative and severance tax decisions are made.