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Study Makes Recommendations On Marcellus Shale

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Natural gas, gas drilling

ANNAPOLIS, Md. (AP) — A Maryland panel recommended in a report on Monday that the General Assembly impose a fee on gas leases in the Marcellus Shale to fund studies about the impact of drilling in far western Maryland.

The report, the first of three, also recommended that lawmakers should enact an appropriate state-level severance tax based on the value of the natural gas that is extracted. The panel recommends that revenue from the tax go into a Shale Gas Impact Fund to be used for continuing regional monitoring. The fund also would be used to address the impact of gas exploration and production that cannot be attributed to a specific operator.

The report was careful to note, however, that there is still work to be done to determine whether natural gas production from the Marcellus Shale in Maryland can be done without unacceptable risks to public health and the environment.

“The state has not yet determined whether gas production can be accomplished without unacceptable risk and nothing in this report should be interpreted to imply otherwise,” the report said.

The report also recommends that the General Assembly change the law that limits the amount of a performance bond by removing any reference to a dollar amount. A performance bond is money set aside by the person who does the drilling to make sure all requirements of remediation or environmental impacts are addressed.

It also directs the Maryland Department of the Environment to set the proper amount of bond by regulation, based on likely costs of complying with permit provisions, properly closing a well and performing site reclamation.

The General Assembly should enact a comprehensive Surface Owners Protection Act, the report said, to give protections and rights to property owners.

Drew Cobbs, director of the Maryland Petroleum Council, described the report as very general. He also expressed concerns about the length of the review process.

“I’ve been critical about the length of the process as much as anything else,” Cobbs said. “It could be done at a quicker pace.”

The Maryland Departments of the Environment and Natural Resources have roles in evaluating natural gas projects, the report noted, and each would be involved in any future permitting decisions for drilling. Maryland received its first application for a permit to produce gas from the Marcellus Shale using horizontal drilling and high volume hydraulic fracturing in 2009.

While legislation passed the House of Delegates last year that would have funded a study by assessing a fee on those who hold gas leases in Maryland, the bill stalled in a Senate committee. Gov. Martin O’Malley issued an order requiring further study in June.

Two more studies are scheduled. A study with recommendations for best practices for all aspects of natural gas exploration and production in the Marcellus Shale is due Aug. 1, 2012. A final report with findings and recommendations relating to the impact of drilling, including possible contamination of ground water, handling and disposal of wastewater, environmental and natural resources impacts is due no later than Aug. 1, 2014.

(Copyright 2012 by The Associated Press. All Rights Reserved.)

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