State ignored previous warnings about drilling inspector shortage
CHARLESTON, W.Va. -- Long before most West Virginians had ever heard the words "Marcellus Shale," outside auditors were warning that the state's oil and gas regulatory agency was greatly underfunded and severely understaffed.
In December 1993, a review by the Interstate Oil and Gas Compact Commission warned that lack of funding and a shortage of inspectors were among the chronic problems facing the state Department of Environmental Protection's Office of Oil and Gas.
"The OOG does not have enough inspectors or funding to fully meet its statutory mandate," said the 98-page review report, written by a team of regulators from other states, industry officials and environmental group representatives.
A decade later, another outside examination found that little had changed. The state oil and gas office still "does not have enough inspectors or funding to fully meet its statutory mandate," said a 110-page report issued in January 2003.
Lawmakers are considering a proposal for another outside study of West Virginia's oil and gas regulatory system, but they have yet to implement important recommendations from prior reviews over the last two decades.
Today, just 19 state inspectors police thousands of natural gas wells across West Virginia. That's just four more than DEP had two decades ago, before the race to tap the Marcellus Shale's vast reserves greatly increased and complicated the inspection force's workload.
"The best written rule is no good if you don't have enforcement, if you don't have inspectors in the field overseeing the operations," said Don Garvin, lead lobbyist for the West Virginia Environmental Council.
DEP inspectors are supposed to examine drilling operations at seven key points in the process, to monitor things like well-casing construction, pit waste disposal and site reclamation. But agency officials admit that doesn't always happen.
Overworked staffers have to prioritize those inspections with increasing numbers of citizen complaints, checking on abandoned wells, and wrestling with the growing complexity of horizontal drilling and advanced hydraulic fracturing, or fracking, DEP officials say.
"It was likely only due to our financial ability to allow significant amounts of overtime hours to be worked in the field that we were in a position to provide the regulatory oversight that was conducted," DEP said earlier this year in an internal report on the oil and gas office's workload and budget. "Our current financial condition is bleak and while overtime is being approved it is at a lower level."
Last year, the state dedicated $3.1 million to running the DEP's oil and gas division. That's 40 percent more than the division's 1994 budget, but it's also barely enough to keep up with inflation, according to a Gazette analysis of state financial data.
Still, increased funding for oil and gas inspections and permit reviews remains one of the major sticking points that could again block passage of any legislation to reform oil and gas regulatory requirements. Major industry lobby groups oppose significant permit fee hikes included in the bill, even though the current language calls for smaller fees than DEP Secretary Randy Huffman himself had proposed earlier this year.
West Virginia business and political leaders have for several years been promoting a potential boom in Marcellus Shale gas drilling, saying it will provide a huge economic boost to the state.
During a U.S. Senate hearing on Monday, Tomblin general counsel Kurt Dettinger said the Marcellus "presents tremendous economic opportunities for West Virginia and other states." Staffers for Sen. Joe Manchin, D-W.Va., handed out media packets from the West Virginia Manufacturers Association, touting the potential for thousands of spin-off jobs, especially if one or more "cracker" plants are built to extract process natural gas byproducts.
Environmental and citizen groups have warned about impacts, both to the state's water and land and to homeowners who don't have title to gas reserves beneath their land. New studies are also questioning whether natural gas really has the greenhouse gas advantages over coal that have frequently been cited in the past.
Industry officials and their supporters talk about the need for updated rules that would provide all sides with "certainty," about drilling standards. But lawmakers have been working for three years on such rules with no legislation passed to date.
Across the country, the boom in oil and gas drilling is mostly regulated by state agencies, with rules and staffing levels that vary from place to place. No federal statute sets standards for the drilling process itself, though the environmental impacts do fall under several national laws.
To help monitor how well states are doing their job, the Interstate Oil and Gas Compact Commission in the 1990s conducted reviews of such programs. Those reviews were later continued by a nonprofit organization called State Review of Oil and Natural Gas Environmental Regulations, or STRONGER.
As part of their proposed legislation, some lawmakers would mandate that DEP seek a STRONGER review of West Virginia's existing program to regulate natural gas drilling. Two such reviews were done in 1993 and 2003.
The 1993 review reported that the state's oil and gas office had the equivalent of 26.5 full-time employees, including 13 inspectors and two supervisors. It reported an annual budget of $1.7 million, or about $2.5 million in 2010 dollars.
"Most field staff remain motivated in spite of being overworked," the report of that 1993 review said. "However, because of limited resources, some issues are not being dealt with adequately and there is significant reliance on operator self-inspection (i.e., the frequency of periodic inspections is not always commensurate with risk)."
A decade later, a follow-up review reported, "West Virginia has not significantly increased OOG funding to allow OOG to meet its statutory mandate."
The 2003 STRONGER report found a decrease in the number of oil and gas staff and "no significant increases in funding" since the initial report. "The review team strongly suggests that the state increase the amount of funding for OOG to assure that the OOG is able to meet its statutory mandates," the report said.
West Virginia funds the oil and gas office partly through permit fees paid by drillers. Currently, those fees are set by law at $650 for deep wells like those drilled into the Marcellus.
In January, DEP proposed legislation to increase permit fees for horizontal wells to $10,000 per well. At the time, DEP Secretary Randy Huffman said the move would give his agency enough money to double the oil and gas office's 34-person staff, including hiring 18 new inspectors. Tomblin, then the acting governor, did not endorse the proposal, but allowed DEP to seek legislative sponsors on its own.
After industry complaints, the current bill would now set permit fees at $10,000 for the first well on any drilling pad and $5,000 for each subsequent well on that pad.
Last month, the West Virginia Oil and Natural Gas Association wrote to lawmakers to complain that that the permit fee language "sends a clear message to the industry that West Virginia is an uncompetitive business environment."
But during Monday's U.S. Senate hearing, representatives of Chesapeake Energy and EQT Corp. did not publicly criticize the proposed increase in permit fees.
"It is the standard that the regulated community has to be paid to be regulated," said Chesapeake vice president Scott Rotruck. "What that amount is has to be an amount that has the agency properly staffed to regulate us. It has to be the right amount."
DEP spokeswoman Kathy Cosco said Tuesday that agency officials estimate the current legislation would generate enough funding to hire 14 additional oil and gas staffers -- fewer than half what Huffman proposed in January.
And Delegate Tim Manchin, D-Marion and co-chairman of the Legislature's Marcellus committee, told the U.S. Senate hearing that the current bill would allow DEP to hire just nine more inspectors and permit writers.
"We do not know if this is sufficient to address regulating the thousands of existing wells in the state and properly permitting and inspecting these new wells," Delegate Manchin said.
Reach Ken Ward Jr. at email@example.com or 304-348-1702.