American Oil and Gas Reporter - January 2012 - 198

ConventionSection: Pennsylvania Independent Oil & Gas Association

DRBC Rules Bad News For Marcellus
WEXFORD, PA.-Producers have been
barred from exploring the Marcellus Shale
under the northeastern tip of Pennsylvania
and southeastern New York for a year
and a half while the Delaware River
Basin Commission developed regulations
for natural gas activity. The DRBC sent
hopeful signals early in November when
it issued a revised draft of the rules and
scheduled a vote, but the Pennsylvania
Independent Oil & Gas Association reports
that subsequent actions give the impression
drilling will not begin anytime soon.
The DRBC is a compact composed of
Delaware, New Jersey, New York, Pennsylvania and the federal government that
is charged with managing the water resources of the 13,500 square-mile basin.
The Pennsylvania and New York portions
of the basin are underlain by the Marcellus
Shale and are adjacent to some of the most
prolific parts of the play, PIOGA observes.
In May 2010, the DRBC imposed a
moratorium on drilling until it could draft
a comprehensive set of regulations governing water use and protection of water
resources, PIOGA recalls. The proposed
rules were issued in December 2010, followed by a public comment period that
saw 18 hours of testimony and 69,000
comments. In its comments, PIOGA argued
that the DRBC greatly overestimated the
impact of natural gas activity on the basin's
water resources and contended the rules
would do more to prevent water use than
to manage it (AOGR, July 2011, pg. 18).
PIOGA says the second draft of the
regulations, released Nov. 8, 2011, is
even more restrictive. The rules would
authorize no more than 300 wells in the
first 18 months, the association reports.
After this period, the DRBC staff would
provide the commission with an assessment of how the program was working.
Action by the DRBC would be needed
for drilling to resume.
The revised rules also ratchet up financial assurance requirements, PIOGA
notes. The December 2010 draft required
financial assurance of $125,000 a well.
That was replaced with a three-pronged
requirement, the association says:
* $25,000 a well (or $250,000 in the
aggregate) for plugging and abandonment;
* At least $5 million a well liability
for spills and release; and
* An amount equal to the estimated
cost of mitigation/restoration under the

development plan operators must submit.
"The DRBC's original proposal was
overly restrictive, but the revised draft
shows the commission caved to antidrilling hysteria and came up with a
totally unrealistic set of regulations," declares Lou D'Amico, PIOGA president
and executive director.
Commission Divided
Three days before the DRBC was
scheduled to vote on the regulations in
late November, PIOGA says the commission indefinitely postponed any action,
saying only that commissioners needed
more time to review the proposal. However, the association says reports indicate
the commission was deeply divided over
how to proceed.
Pennsylvania Governor Tom Corbett
issued a statement saying, "Pennsylvania's
citizens have been extraordinarily patient.
We have demonstrated a willingness to
compromise and to address issues brought
forth by other members of the commission.
We have worked with our commission
partners in good faith, and it is disap-

pointing to not have these efforts reciprocated."
PIOGA says the state of New York
reportedly was pressuring the DRBC to
hold off action until it completed its comprehensive assessment of hydraulic fracturing. The association notes New York's
attorney general filed suit earlier in 2011
to stop the DRBC from implementing
regulations without an accompanying environmental assessment.
In addition, PIOGA points out New
Jersey's governor imposed a one-year
moratorium on Marcellus development,
which it calls a symbolic gesture, since
the state is not considered prospective
for natural gas.
Delaware's governor said his state
would vote no on the rules, PIOGA mentions.
"The upshot is that producers likely
will see all this as a signal that their
money is better spent elsewhere in the
Marcellus and in the Utica Shale, to the
detriment of landowners and communities
in the Delaware River Basin," D'Amico
assesses.
❒

Pennsylvania County Records
Marcellus-Powered Job Growth
WASHINGTON, PA.-The U.S. Department of Labor's Bureau of Labor
Statistics determined in October that
Washington County, Pa., had the third
highest percentage of employment growth
in the entire country, the Washington
County Chamber of Commerce reports.
The chamber says the federal agency
determined that between March 2010 and
March 2011, Washington County's employment grew 4.3 percent. Only two
other counties in the United States-Elkhart
County in Indiana and Ottawa County in
Michigan-had higher employment growth
rates, the chamber notes. Washington
County is located in southwestern Pennsylvania (south of Pittsburgh) and is at
the center of the Marcellus Shale play.
According to the chamber of commerce, Washington County business leaders credit the region's significant employment growth to developing the Marcellus Shale.
Barron P. McCune Jr. is co-chairman
of the Washington County Energy Partners,

198 THE AMERICAN OIL & GAS REPORTER

a collaboration of private companies, elected
officials, and economic development organizations promoting and supporting the
energy industry. He says, "We have every
reason to feel energized about Washington
County's future because we are at the epicenter of Pennsylvania's natural gas development. The county was the home to
the first Marcellus Shale well and the first
horizontal well. We have one of the highest
rates of drilling activity and production in
the state. With an abundant supply of these
natural resources, our county is attracting
energy companies every day, and this
means jobs for our residents."
McCune points out that more than 50
energy and energy-related companies have
located offices and operations in Southpointe,
a successful mixed-use business park in
Washington County. "Companies such as
CONSOL Energy, which is one of the nation's largest producers of natural resources,
have their headquarters in the park," he
SEE GROWTH PAGE 259

American Oil and Gas Reporter - January 2012

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