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Monday, March 26, 2012

Shale Gas Roundup Newsletter For March/April

Shale Gas News

Roundup

Potter County, Pa.

March/April 2012

Gas Task Force Evolves To Resource Center

In 2009, the Potter County Board of Commissioners formed a Natural Gas Task Force after obtaining input from a broad-based local steering committee. Now, it’s time to adjust to a new set of circumstances and challenges as the shale gas industry evolves. Therefore, the Task Force is merging with the Natural Gas Resource Center, a partnership between the Commissioners and Potter County Education Council.

Not much will change. Public education meetings will still be held. The work groups established through the Task Force will continue to oversee water quality, job training, public safety/emergency services, and municipal issues.

The Resource Center is equipped with the staffing and networking structure to allow greater flexibility, timeliness and professionalism. A major focal point will be a website that will become a one-stop shop for public/general information, business connections, job training, employment opportunities, government agencies and community resources for Potter, McKean and Cameron counties. Links will include reliable websites, educational resources, industry news, and county-sponsored task forces. The site, still under construction, can be reached at www.naturalgasresourcecenter.com.

A steering committee will be formed to assure that the Resource Center is functioning efficiently. More details will be announced. Phone number for the Natural Gas Resource Center is at (814) 260-5625. Facilitators for the center at the Education Council are Bob Veilleux (bobv@pottercountyedcouncil.org) and Janine Morley (janine@pottercountyedcouncil.org).

Lull In Shale Gas Drilling Seen As ‘Temporary’

Potter County is experiencing a “temporary dip” in shale gas drilling, as are many other counties, but the long-range forecast calls for the industry to remain a major force for decades to come. That was the theme of a comprehensive assessment delivered by Jim Ladlee (shown) at the February meeting of the county’s Natural Gas Task Force.

“History has taught us over and over again that it would be foolish to make any firm predictions about what energy companies are going to do,” Ladlee said. “There are far too many factors at play and conditions are always changing.” He added that, with the presence of quality shale gas confirmed in Potter County and the inevitability of gas consumption increasing in future years, companies will be active here. He just couldn’t say when.

Market forces (i.e., gas prices that have dropped from $10.00 per MCF to about $2.30), a temporary oversupply of gas and the absence of pipeline distribution capacity have slowed drilling and production in Potter County. However, many industries are evolving to increase the consumption and distribution of gas — retrofitting coal-fired electricity generators to be fueled by gas, boosting gas exportation, and building motor vehicles to be powered by natural gas, rather than gasoline.

Ladlee is director of initiatives at the Marcellus Shale Education and Training Center, executive director for Penn State Extension in Clinton County, and has recently joined the staff of Penn State’s Marcellus Center for Outreach and Research.

Volunteer Stream Monitors Needed

A call has been put out for more volunteers to monitor creeks, streams and rivers throughout Potter County located in close proximity to gas-drilling activity. Equipment and training are available and a centralized location is being established for data collection, but more volunteers are needed. The local organization is modeled after a similar group – the Water Dogs – in Tioga County. God’s Country Chapter of Trout Unlimited and local watershed associations in Potter County are also supporting the effort. Volunteers are needed to take occasional samples of rivers and streams in Potter County as part of a citizens’ water monitoring project. Next training session for “God’s Country Water Dogs” will be held Saturday, March 24, from 9 am to 3:30 pm at the Gunzburger Building in Coudersport.

Training will cover how to take samplings and record information, and how to report incidents of environmental harm or concerns for public safety. Julie Vastine, director of Dickinson College’s Alliance for Aquatic Resource Monitoring (ALLARM), will instruct the course. To register or to request more information, contact Jim Clark at Penn State Extension; 814-887-5613 or jac20@psu.edu.

Want A Gas Job? Opportunity Abounds

Not everyone is cut out for a job in the gas industry. But opportunity abounds for those who have the skills and flexibility companies are looking for. They’re always looking for truck drivers, roughnecks, derrick hands, soil scientists, equipment operators, sales representatives, cement mixers, land agents and more. A job-seeker who is trained and is willing to travel stands an even better chance of being hired. Some 47% of the gas industry’s workforce consists of jobs that do not require a degree: general labor (20%), heavy equipment operators (17%), and commercial driver’s license truckers (10%). Seneca Highlands Career & Technical Center, in partnership with the Potter County Education Council, has been approved as a ShaleNET Training Partner. This brings pre-employment programs at little or no cost to area residents. A federal initiative, ShaleNET supports recruitment, training, placement, and retention in high-demand occupations. Anyone interested in enrolling, interviewing graduates, or learning more should call (814) 545-1333.

Gas Business Expo Planned In Emporium

Potter, Cameron and McKean County businesses, non-profits and municipal officials have a unique opportunity in the coming weeks. “Natural Gas Connections,” based in Emporium, is replacing the traditional gas expo held in the last two years. Three workshops are planned:

Saturday, March 24, 9 am to 4 pm -- Businesses looking to learn more about the industry -- specifically what they must have in place in order to land a contract -- should attend. The live workshop will be held at the Cameron County Courthouse and will be simulcast to the Potter County Education Council office in Coudersport, Kane Area High School and University of Pittsburgh at Bradford. Cost is $75. It will include a presentation on insurance requirements and master service agreements, and on registering with IS Networld.

Tuesday, April 3, 9:30 to noon – A second workshop is geared toward non-profits. Most companies in the natural gas industry have a charitable giving program. Attendees will learn which companies have a program, who to contact, and what types of services they’ll support. Fee is $25. The workshop will be available in Emporium, Coudersport, Kane and Bradford.

Saturday, April 14, 9:30 am to 11:30 am – A third workshop, to be held at Woodland Elementary School, is focused on municipal officials. There is no fee. A speaker from Wild Well Control will address the responsibility of officials in the case of an emergency. A representative of the Pa. State Assn. of Township Supervisors will talk about the latest regulations for road bonding and township responsibilities and options.

Natural Gas Connections is sponsored by a consortium of gas task forces and other agencies in Potter, Cameron and McKean counties and comes on the heels of similar events in Coudersport and Bradford

To register for any of the events log onto www.naturalgasconnections.com or contact the Cameron County Chamber of Commerce office at 814-486-4314

Pennsylvania Act 13: ‘Impact Fee’, Other Changes

A three-year-long stalemate in Harrisburg came to an end with passage of Pa. Act 13. It is far-reaching legislation that includes an “impact fee” on shale gas production and new limitations on municipal zoning and land use regulations. Counties have the choice of imposing the impact fee – Potter County plans to do so. Early projections show that townships and boroughs in Potter County will split about $1.3 this year for wells that produced in 2011, and the county itself will receive about $730,000. The fee is levied annually per “unconventional” gas well on a sliding scale, with a duration of 15 years for each well, coupled with a schedule based on the price of gas (see table, following). The fee schedule to be used is determined by the average price of natural gas for the prior calendar year, and the overall schedule is adjusted for inflation each year, starting in 2013. The fee for vertical unconventional wells is 20% of the rate for horizontal wells, and ends after the tenth year.

Production

Average Gas Price

< $2.25

$2.25 -$2.99

$3.00 -$4.99

$5.00 -$5.99

> $5.99

Year 1

$40,000

$45,000

$50,000

$55,000

$60,000

Year 2

$30,000

$35,000

$40,000

$45,000

$55,000

Year 3

$25,000

$30,000

$30,000

$40,000

$50,000

Years 4 - 10

$10,000

$15,000

$20,000

Years 11- 15

$5,000

$10,000

Total per well

$190,000

$240,000

$310,000

$330,000

$355,000

Fee Administration

The fee is administered by the Public Utility Commission (PUC). Each producer is to submit payment to the PUC by Sept. 1 for 2011 production; in each subsequent year the fee is due by April 1 for the prior year. All fees collected are deposited in an Unconventional Gas Well Fund, administered by PUC and paid out within three months.

Fee Distribution/Off-The-Top Allotments

Off-the-top distributions include (all annual unless noted otherwise):

--County conservation districts: $2.5M from fees collected for 2011; $5M for 2012; $7.5M for 2013; COLA adjustment 2014 and after. Half distributed equally among conservation districts, half distributed consistent with the Conservation District Fund Allocation Program

--Fish and Boat Commission for costs relating to review of permits: $1M

--PUC for costs to administer, including fees and local ordinance enforcement: $1M

--DEP for administration of this act and enforcement of clean air and water acts: $6M

--Pennsylvania Emergency Management Agency for response planning, training, and coordination relating to natural gas production: $750,000

--State Fire Commissioner for training and grant programs for first responders: $750,000

--PennDOT for rail freight assistance: $1M

--Deposit into the Marcellus Legacy Fund for distribution for the Natural Gas Energy Development Program: $10M for 2011; $7.5M for 2012; $2.5M for 2013

--Housing Affordability and Rehabilitation Enhancement Fund to support projects or provide rental assistance in host counties: $2.5M for 2011 and $5M for each year after.

Fee Distribution To Counties/Municipalities

Following the off-the-top distribution, 60% of the remainder goes to county and municipal government, by formula:

--Host counties receive 36%, distributed pro rata based on the number of wells.

--Host municipalities receive 37%, distributed pro rata based on the number of wells.

--The remaining 27% is distributed among all municipalities in a host county. Half is distributed among host municipalities and non-host municipalities that are either contiguous with a host or are within five miles of a spud well, with half distributed on population and half on road miles. The other half is distributed among all municipalities in the county, based on population and road miles. (There is an anti-windfall cap applied against municipalities, but not counties, limiting shares to the greater of $500,000 or 50% of the total budget for the prior year.)

Fee Distribution/State Share

The 40% state share is deposited in the Marcellus Legacy Fund, and is allocated:

--Commonwealth Financing Authority: 20% for grants for acid mine drainage, orphan or abandoned oil and gas well plugging, compliance with the Sewage Facilities Act, recreational projects, establishment of baseline water quality projects, watershed programs, and up to 25% for flood control projects

--Environmental Stewardship Fund: 10%

--Highway/Bridge Improvement Restricted Account: 25%, to be distributed to all counties (not just shale gas counties) to fund replacement or repair of locally owned at-risk bridges; distribution is pro rata based on population, with a $40,000 minimum payment. Counties can submit either county-owned or municipally-owned bridge projects

--Water and sewer projects: 25%, with half to the Pennsylvania Infrastructure Investment Authority and half to the H2O PA program

--Greenways, recreation, open space and comparable projects: 15%, to be distributed to all counties pro rata based on population with a $25,000 minimum allocation

--Refining or processing facilities, Hazardous Sites Cleanup Fund: 5%, to the Department of Community and Economic Development for 2012, 2013, and 2014 for projects relating to refining or processing natural gas or oil; all funds after 2013 are allocated to the Hazardous Sites Cleanup Fund.

Local Government Uses

County and municipal governments receiving funds are authorized to use them for:

  • Roadways, bridges, and public infrastructure
  • Water, storm water, and sewer
  • Emergency preparedness and public safety
  • Environmental and recreation programs, including conservation districts, open space, and agricultural preservation
  • Preservation and reclamation of water supplies
  • Tax reductions, including homestead exclusion
  • Availability of safe and affordable housing
  • Records management, GIS, and information technology
  • Delivery of social services
  • Judicial services
  • Deposit into capital reserve for use on projects permitted under this section
  • Career and technology centers for training related to the oil and gas industry
  • Local or regional planning initiatives under the Municipalities Planning Code.

Oil and Gas Lease Fund: Allocations are made from the state Oil and Gas Lease Fund, applicable to wells on state-owned land, including a transfer to the Marcellus Legacy Fund for distribution to the Environmental Stewardship Fund of $20M for 2013 and $35M for 2014 and each year after, and a transfer to the Hazardous Sites Cleanup Fund of $5M for 2015 and $15M for 2016 and each year after.

Vehicle Fleet Conversion: A three-year Natural Gas Energy Development Program is created, making competitive grants available for purchasing or converting eligible vehicles to natural gas usage.

Well Permit Provisions: Act 13 provides for, among other things, well permitting and regulation, including setbacks, location restrictions, water management and protection of water supplies. Permits are administered by DEP. Notice of applications is to be furnished to municipalities, which may present comments. Other subject matter in Act 13 includes well capping, orphaned wells, abandoned wells, rebuttable presumptions on pollution, chemical disclosures, bonding, emissions, and others.

Site Restoration: Operators must comply with erosion and sedimentation control plans during drilling, and properly restore the well site within nine months of completion. Conservation districts are not mentioned as enforcement agencies, although DEP can delegate to them.

Small Businesses: Producers are to provide opportunities for small businesses as contractors, subcontractors, and suppliers, maintaining a non-discrimination policy.

Gathering Lines: Owners and operators of gathering lines are required to comply with the One-Call System, registration of the pipelines that carry gas to a transmission line.

Emergency Management: DEP is permitted to enter into contracts with well control specialists for disasters such as casing failure, blowout, fire and explosion. The department is to make information available to county emergency management. Counties retain emergency planning responsibility concurrent with the operator.

Local Ordinances/Pre-emption: The state pre-empts local ordinances that are in conflict with Act 13.

--Statutory provisions supersede local zoning ordinances, allowing well and pipeline location assessment and oil and gas operations in all zoning districts if the well pad is at least 300 feet, and the wellhead is at least 500 feet, from an existing building.

--Compressor stations are permitted uses in agricultural and industrial zoning districts and are a conditional use in all other zones if located at least 750 feet from nearest existing building or 200 feet from the nearest lot line, and the noise level at the nearest property line does not exceed 60 decibels.

--Processing plants are a permitted use in an industrial zone and a conditional use in agricultural zones if located at least 750’ from nearest building or 200’ from the nearest lot line, and the noise level at the nearest property line does not exceed 60 decibels.

--Municipalities are permitted to enact provisions that are not covered by the law. An operator can ask the PUC to review a local ordinance to determine whether it allows for the reasonable development of oil and gas. Should the PUC, Commonwealth Court or the Supreme Court determine that a local ordinance fails to do so, the local government is ineligible to receive funds collected through the fee.

Governor’s Excellence Award To Triple Divide Group

Coming on the heels of U. S. Environmental Protection Agency recognition earlier this year, Potter County’s Triple Divide Watershed Coalition has been chosen to receive a 2012 Governor's Award for Local Government Excellence.

Sharing in the award at the county level are the Commissioners, Planning Commission, Conservation District and Emergency Services.

Also honored are Potter County Education Council, Penn State Extension, and public water suppliers serving Shinglehouse, Ulysses, Roulette, Austin, Coudersport, Galeton, Genesee, Charles Cole Memorial Hospital and Northern Tier Children’s Home. Technical assistance has been provided by Mark Stephens, a geologist with the Pa. Dept. of Environmental Protection, and other organizations.

Potter County is being recognized for “Building Community Partnerships,” based on the volunteer coalition that has 100-percent support from public water suppliers in the county. The organization’s purpose is to work collaboratively to identify efficiencies, lower operational costs, and protect the public drinking water resources of the area.

Potter is the first Pennsylvania county to have an approved Source Water Protection Plan for all of its public water supplies. The coalition came together to implement those plans. All 19 water sources were tested to establish a baseline and to identify any quality issues.

Other benefits of the coalition are bulk purchasing of supplies and lab services, shared personnel, improved public education and effective advocacy.

Triple Divide Members Tour Treatment Plant

Jonathan Huff (second from right) of Roulette Township and Jim Clark, Penn State Extension educator, represented Potter County’s Triple Divide Watershed Association for a tour of a shale gas hydrofracturing waterwater treatment plant in Williamsport. Quay Schappell (left), chief operating officer for TerrAqua Resource Management, explained his company’s operation to public water supply managers. The facility processes 400,000 gallons daily. All of the water is sent back to the companies for reuse. The TerraAqua facility is similar in some respects to a wastewater treatment plant that is being planned for a site in Ulysses Township, south of Ulysses Borough along Rt. 49. According to information presented to the Potter County Planning Commission, the “Headwaters Reclamation Plant” would be zero-discharge and would process about 450,000 gallons of water daily. Approval by the Pa. Dept. of Environmental Protection is required.

News And Notes Of Interest

Gas Drilling Impact On Dairying Studied. Natural-gas development appears to be associated with falling dairy production in Pennsylvania. Timothy Kelsey, professor of agricultural economics at Penn State, examined changes in dairy cattle numbers and milk production between 2007 and 2010, in connection to the level of gas drilling. Counties with 150 or more shale gas wells on average experienced a nearly 19 percent decrease in dairy cows, compared to only a 1.2 percent average decrease in counties with no wells.
Kelsey said additional research is needed to understand what is occurring. He said he can’t pinpoint whether these declines resulted from farms simply downsizing their herds, whether some farms shifted to other agricultural enterprises, or if they exited farming altogether. “Declining cow numbers mean fewer dollars spent locally by farmers to maintain their herds (and) fewer dollars coming to the local economy from milk sales,” Kelsey said. Feed stores, veterinarians, machinery dealers, milk haulers, dairy processors and supporting businesses are also affected. Kelsey said future research should investigate whether farmers who receive lease and royalty payments and stay in agriculture are using gas-related income to improve their farms, which has the potential to benefit the agricultural economy. To obtain a copy of the report, call (814) 865-6713.

Free Well, Spring Testing Available. Help is available for property owners who are concerned about possible contamination of their wells and springs from nearby gas drilling. A $150,000 Colcom Foundation grant is being used to pay for hundreds of private water source tests. Samples will be analyzed for pH, total dissolved solids, bacteria, barium, chloride, nitrogen, arsenic and corrosivity. If demand for the tests exceeds the amount of available funds, applicants will be accepted based on income. Testing will be conducted in March and April in Cameron and Clinton counties, and in May through June in Potter and McKean counties. Interested owners of wells or springs should contact Kelly Williams at 765-2629 to obtain an application. In Potter County, applications are available from the Conservation District and the Commissioners Office. The sponsors are also providing educational workshops and materials to help owners of wells and springs interpret water quality results and learn about their options if something does happen to their water supply. Penn State Extension’s Bryan Swistock advises property owners to get a baseline test before gas drilling, as well as afterward. "Sometimes people are surprised by what they see, because they have no symptoms in the water,” he said. Substances that cause those problems -- iron, manganese and hydrogen sulfide – often do not pose health issues. But dangerous contaminants, such as coliform, E. coli bacteria and arsenic, can go unnoticed without testing.

This publication is produced by the Natural Gas Task Resource Center. Anyone with story ideas or comments should contact Paul Heimel (paulheimel@yahoo.com).