Monday, July 25, 2011

Statement On the Report of Governor's Marcellus Shale Advisory Commission

Members of the Commission and its staff worked hard and should be thanked for offering 96 recommendations for the public's consideration, but what do they mean and what affect on policy will they have?  See

The Senate Republican leadership is being vocal in offering sharp critiques of the whole undertaking, with a leadership aide at one point declaring the Commission "irrelevant" to legislative deliberations, so perhaps the 96 recommendations could mean little.

I offer three principles for judging the Report, its recommendations, and drilling policy.  First, gas drilling is industrial activity that must be strongly regulated and reasonably taxed.  Second, policy should maximize the benefits from gas drilling and minimize its costs, while recognizing it cannot be done with zero impact. Third, every Pennsylvanian must receive a direct benefit from gas drilling, because all Pennsylvanians are impacted by hosting gas drilling and production.

The bulk of the Report's Recommendations are non-controversial, modest, useful ideas that in some cases are partially or even fully implemented and should be.  In some other cases, the recommendations need more work and detail.  Then there are a few recommendations that I oppose and three important issues not addressed.

I. Recommendations That I Support

The most useful part of the Report are recommended changes to the Oil and Gas Act that would strengthen environmental protections. 

The Report recommends raising the statutory fines, allowing DEP to assess the fines without going to the Environmental Hearing Board, giving DEP clear authority to condition permits based on its impact on public resources, and giving DEP stronger authority to deny, revoke, or suspend permits when operators are out of compliance with environmental regulations. 

The Report further recommends amending the Oil and Gas Act to increase setbacks to 500 feet from a private water well and 1,000 feet from a public water system, providing DEP the power to deny or condition drilling permits in floodplains, requiring notification of proposed drilling to anyone within 2,500 feet, requiring inspections for erosion and sediment controls prior to drilling the gas well, and mandating 24 hour notice by drillers to DEP of cementing and casing, hydraulic fracturing, pressure testing of production strings; and plugging.

The Oil and Gas Act is overdue for a modernization and a strengthening of the environmental protections.  The foregoing recommendations should be adopted.

II. Recommendations That I Cannot Support Now

The Report Recommends raising the bonding amount required to plug a well when the well stops producing.  The bonding amounts must be raised, and the amounts recommended are an improvement over the current levels but still inadequate.  A $250,000 blanket bond for all the wells drilled by a single company when the total already runs into the hundreds per company cannot be adequate to protect taxpayers from being stuck with a large liability in the future.  Pennsylvania's taxpayers are right now stuck with the costs of plugging tens of thousands of gas wells that have been abandoned, unplugged by drilling companies that no longer exist.  This mistake cannot be repeated.  More work is needed.

Using more gas to replace old, coal fired power plants with no pollution controls and to reduce oil consumption would slash pollution, reduce sickness and premature death from pollution, while boosting Pennsylvania's economy.

The Report's recommendations for using more gas are not bold, ambitious enough.  Pennsylvania must set a goal of getting off of foreign oil by 2025, a roughly 70% reduction.  Natural gas costs about $1.50 to $2.00 less than gasoline and is less polluting.  Pennsylvania should adopt a goal to build both natural gas fueling stations and electricity charging stations over the next decade so that both are within 5 miles of every Pennsylvanian. Pennsylvania's electricity and gas utilities and other private companies can be a major driving force behind achieving this vital objective. Pennsylvania should also accelerate the use of biodiesel, a fuel in which we are also a leader.  Again more work is needed on this issue.

III. Recommendations That I Oppose

The Report's Recommendation for a very limited impact fee is unacceptable.  Every Pennsylvanian is impacted by hosting gas drilling and production, and every Pennsylvanian must directly benefit.  A tax or broad impact fee that supports statewide environmental programs like Growing Greener, higher education, or early education can deliver important benefits to every Pennsylvanian.  One must be enacted.

The Report's Recommendation to put natural gas into Tier 2 of Pennsylvania's Alternative Energy Portfolio Standards Act is a mistake.  It will harm the industries and companies already in Tier 2, and the natural gas industry does not need this support.

IV. Three Important Issues Not Addressed

The Report makes no recommendation about regulating nitrogen oxide or other air emissions from gas production.  This issue is not going away and must be addressed.

The Report made no recommendation about regulating or reducing methane leakage from gas production.  Some states limit or ban venting of methane for example. Methane is a powerful heat trapping gas and reducing its leakage shrinks further the environmental footprint of natural gas.

The Report made no specific recommendation about future hiring and staffing levels for the oil and gas staff within DEP or about the future structure of fees used to pay for the staff. The staff is currently paid for by a one-time fee paid at the time an application to drill is made.  DEP needs to plan to move to a fee structure that includes an annual fee.

At this point, I urge the General Assembly to modernize and strengthen the Oil and Gas Act and to enact a drilling tax that delivers benefits to every Pennsylvanian.

1 comment:

  1. Useful analysis. Thank you.

    Stanley R Scobie, Ph.D., Binghamton, NY