The American Oil and Gas Reporter - January 2012 - (Page 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 disappointing 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. Ì 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, 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 259 198 THE AMERICAN OIL & GAS REPORTER

Table of Contents for the Digital Edition of The American Oil and Gas Reporter - January 2012

The American Oil and Gas Reporter - January 2012
Oil & Gas Counts
State Legislative
Industry Digest
Tech Connections
Washington Watch
Federal Legislation
Gulf of Mexico
Resource Plays Providing Wealth of Opportunities
Tight Plays Poised to Transform U.S. Crude Supply
El Paso Project Optimizes Eagle Ford Completion Design
Real-Time Forward Modeling Improves Bakken Horizontals
Cover Story
Financial Firms Expand Oil and Gas Divisions
Multicomponent 3-D Poised for Growth in Shale Plays
Cloud Computing Driving Business Step Changes
Advanced Attributes Improve 3-D Interpretation
3-D Data Improve Knowledge of Shale Heterogeneity
HBUR RSS Solves Granite Wash Drilling Challenges
Technologies Improve Production Consistency in Resource Plays
SaaS Helps Operator Streamline Data Management
Automation Enhances Operations in Challenging Applications
Dispersant Chemistry Combats Plugging in Low-Gravity Oil Wells
New Technologies Optimize Production
Drilling Regs
The Presidential Papers
Energy Education
Shale Gas
New Lits & Products
Computer Currents
Industry Focus
Classified Advertising
Advertisers Index

The American Oil and Gas Reporter - January 2012