As originally described in a post by Ben Milleville on February 25th, amended Senate Bill 461, known as The Future Fund Bill, has passed the Senate and now awaits ratification by Governor Earl Ray Tomblin. As the West Virginia State Journal reports, the amended bill, modified by the House of Delegates and then passed by the Senate for a second time, calls for a baseline severance tax rate on all minerals – not just on oil and gas. Despite concerns about how the severance tax would impact the coal industry, the West Virginia Legislature ultimately agreed that the Future Fund would be a constructive way to generate revenue. Specific limitations placed on the Future Fund dictate how the money may be used and how much of the fund may be allocated at one time.
The West Virginia University College of Law is now offering a Master of Laws in Energy and Sustainable Development Law set to begin during the Fall Semester 2014. With the addition of the one-year LL.M. program, the College of Law is focusing on West Virginia’s important role in the development of the Marcellus shale and supplementing the existing WVU Law Center for Energy & Sustainable Development as well as the National Energy & Sustainability Moot Court Competition, which occurs this year on March 27, 28 and 29 in Morgantown. The College of Law recognizes that “[e]nergy is the foundation of our nation’s future, both economically and environmentally. West Virginia is as the center of energy production in the country.” The LL.M. curriculum includes a variety of energy related courses including Oil and Gas Law, Energy Regulation, Markets and Environment, Land Use and Sustainable Development, Natural Resources Law and Environmental Protection Law, among others, and is designed to prepare attorneys to work on a broad spectrum of energy related issues. Review of applications began on March 1 but the LL.M. Program maintains a rolling admissions process.
As reported in the Pittsburgh Business Times, the proposed ethane cracker plant near Parkersburg, West Virginia, could potentially have a multi-billion dollar positive effect on the state’s economy. Emeritus Professor of Economics Tom S. Witt of West Virginia University authored a report, entitled “Building Value from Shale Gas: The Promise of Expanding Petrochemicals in West Virginia,” wherein he analyzed the short and long term impact of the proposed facility on West Virginia’s economy. Based upon the conclusions of Professor Witt’s report, the construction and operation of the proposed ethane cracker plant could generate a total of 19,710 jobs, representing employee compensation of $1.047 Billion and total economic output of $2.261 Billion. Professor Witt, in his report and in an interview with the Charleston Daily Mail, gives specific policy and legislative recommendations for West Virginia to successfully attract large scale projects, such as the ethane cracker.
As reported in The Wheeling Intelligencer, the West Virginia Legislature continues to consider H.B. 4558 and S.B. 578, which would allow oil and gas producers to create production units through “Forced Pooling.” If passed, such a law would allow natural gas producers to include un-leased acreage in their active drilling units if all of the un-leased landowner’s neighbors have been leased. Industry advocates pushing for passage of these measures argue their necessity for West Virginia production to remain competitive in the Marcellus markets, as Pennsylvania and Ohio have similar laws. Opponents of the idea fear that such a law could weaken the position of landowners when negotiating leases with oil and gas companies. The West Virginia Legislature considered similar laws in the past, without success.
The respective bills are currently in Committee in both the House and the Senate. With the current legislative session ending in early March 2014, it is unclear whether the bills will be taken up for a full vote in either house of the legislature prior to the close of the session.
The West Virginia Senate unanimously passed Senate Bill 461, known as The Future Fund Bill, on February 21st. The Bill, as described in an Associated Press story published in the Charleston Gazette, would create a new fund that would be financed by 25 percent of the severance tax revenues collected from oil and gas exploration companies above a $175 million threshold. The fund would accrue interest for six years before it could be used to finance economic development projects, building infrastructure and increases in teacher salaries. As described in a Shale Energy Law Blog post from last September, the Bill was inspired by legislation passed in North Dakota that created that state’s Legacy Fund, a fund financed by extraction taxes that can be used to finance projects after 2017. The Bill must now be approved by the West Virginia House of Delegates.
The Ohio Department of Natural Resources, on February 21, 2014, published several draft rules concerning horizontal well site construction and an update to the industry standards referenced in its rules on oil and gas well drilling, permitting and safety. The public comment period for the draft rules ends on March 10, 2014. A subsequent thirty-day comment period will be announced after the draft rules are formally proposed. The draft rules and an electronic form for the submission of comments can be accessed here.
The Pennsylvania Supreme Court on Friday, February 21, 2014, denied an Application for Reargument or Reconsideration filed by the Commonwealth of Pennsylvania regarding the Act 13 decision. The December 19, 2013 Opinion and Order of the Supreme Court will stand. However, in a dissenting statement, Justice Saylor wrote that, “I am fully in line with the position that ‘[f]undamental fairness to a co-equal branch of government, as well as adherence to this Court’s precedent and established procedure, mandates that the [Commonwealth parties] be afforded a reasonable opportunity to present evidence before any judicial proclamation is made about whether Act 13 satisfies the newly-mandated balancing test under Section 27’ of Article I of the Pennsylvania Constitution. . . . The judiciary simply does not possess the ability to divine the consequences of a legislative enactment absent a developed factual record.”
The Times Leader reports that natural gas produced within Pennsylvania from the Marcellus Shale exceeded 3 trillion cubic feet in 2013. This total exceeds the production total from 2012. According to the report, the U.S. Department of Energy estimates that the Marcellus Shale provides about 18 percent of the nation’s natural gas.
As reported in the Spirit of Jefferson newspaper, Senate Bill 474, introduced in the West Virginia Senate on Monday, February 3, would amend W. Va. Code § 22-15-8 to allow commercial waste facilities to accept drill cuttings and associated hydraulic fracturing waste above and beyond their monthly tonnage waste limits without a public approval process, provided that the drilling waste is placed in a separate cell dedicated solely to the disposal of such waste. Normally, commercial waste facilities must go through an approval process, including public hearings, to accept solid waste beyond their usual monthly tonnage limits (usually 10,000 or 30,000 tons). The bill, which was drafted by the West Virginia Department of Environmental Protection, must gain approval from the Senate Government Organizations Committee and the Senate Judiciary Committee before taking affect. A public hearing was held in regard to the bill on Monday, February 17 at 5 p.m. in Charleston.
The Ohio House Ways and Means Committee updated House Bill 375, which proposes changes to the severance tax on natural resources. Among the updates are an increase in the proposed severance tax to 2.25% from 2% for horizontal wells, a reduction in the period of time for the initial 1% tax rate from 5 years to 2 years, and an allocation of 10% of tax revenues to Eastern Ohio counties where drilling activity is concentrated. Under the proposal, operators of traditional vertical wells would not pay any severance tax for the first three years. Thereafter, the tax increases to .25% of gross receipts before falling to .1% after 20 years. A vote on updated House Bill 375 has not yet been scheduled.
The U.S. Environmental Protection Agency (EPA) recently issued an Interim Chemical Accident Prevention Advisory concerning the design of liquefied petroleum gas (LPG) installations at natural gas processing plants. EPA has found that some existing plants were constructed in accordance with National Fire Protection Association 58, Liquefied Petroleum Gas Code (NFPA 58). EPA notes in the advisory announcement that NFPA 58 does not apply to natural gas processing plants and that more specific industry standards would apply in determining compliance with the requirements of the risk management provisions of Section 112(r) of the Clean Air Act, and the Chemical Accident Prevention Provisions of 40 CFR Part 68. EPA has suggested that American Petroleum Institute 2510, Design and Construction of Liquefied Petroleum Gas (LPG) Installations (API 2510) and its companion document API 2510A, Fire Protection Considerations for the Design and Operation of LPG Storage Facilities (API 2510A), are more widely recognized standards for the design of LPG installations at natural gas power plants. EPA is accepting comments on this interim advisory until July 31, 2014.
West Virginia State University has developed a new academic program designed to educate the next generation of oil and gas employees, developers, and industrialists in the Appalachian region. WVSU now offers a Concentration in Energy Management associated with its Bachelor of Science degree in Business Administration. This new concentration is designed to expose student to several industry topics which may not typically be included in Business Administration curriculum, including emphasizing communication skills, studying energy financial markets, personnel management, and accounting. This partnership between industry heavy-weights and WVSU promises to offer a fruitful collaboration benefiting both the students and the State of West Virginia.
For more information regarding the Energy Management Concentration, call (304) 766-3065.
On January 27th, 2014, the Commonwealth Court of Pennsylvania overruled in part and sustained in part the preliminary objections of Seneca Resources Corporation (Seneca) to a complaint filed by the Pennsylvania Game Commission (Commission). The Commission requested injunctive and declaratory relief against Seneca relative to the development of oil and gas under State Game Lands 39 in Venango County, Pennsylvania. The controversy stemmed from the interpretation of two severance deeds. A 1928 deed to the Commission excepted and reserved “all the oil and gas in or under the herein[-]described lands, with the right to operator for same by ordinary means now in use” (emphasis added). A 1932 deed excepted and reserved “all petroleum and oil and natural gas together with the right to prospect for, drill and bore for, produce and remove the same.” Seneca is the owner of the oil and gas rights that were excepted and reserved from the two deeds. Although the Commission conceded that Seneca acquired the oil and gas, it maintained that it owns the development rights to extract the oil and gas by “modern means” since horizontal drilling and hydrofracturing were not available practices at the time of the severance, and therefore, the parties could not have contemplated such practices as “ordinary means now in use.” With regard to the 1932 deed, the Court held that there were no limitations on the manner of extraction. With regard to the 1928 deed, the Court stated that the language was ambiguous with regard to whether “modern” extraction methods were prohibited and that the litigation would proceed to determine that claim.
Consol Energy has announced that it expects to spend $1.5 billion this year to further its natural gas exploration and production activities. The company also announced that it has selected the former vice president of the Appalachia South Business Unit for Chesapeake Energy, Timothy Dugan, to serve as CEO of its exploration and production unit. Part of the investment will go to drill 32 wells in Harrison, Belmont, Guernsey and Noble Counties, Ohio.
The National Transportation Safety Board (NTSB) has included “enhancing pipeline safety” on its 2014 Most Wanted List, which identifies its top 10 priorities for the year. The NTSB warns that although “[p]ipelines remain one of the safest and most efficient means of transporting vital commodities . . . the consequences can be tragic when safe operational practices are not employed and standards are not implemented.” Hydrostatic pressure testing, remote controlled and automatic shutoff valves and improved communications between pipeline operators and emergency responders are among the suggested improvements to promote safe operation of pipelines. Recent pipeline incidents like the rupture of a natural gas transmission pipeline near Interstate 77 in Sissonville, West Virginia, on December 11, 2012, have contributed to the NTSB naming pipeline safety as one of its top priorities for 2014.