A path forward for responsible gas shale regulations

Maryland's new governor should take a measured approach to proposed gas shale regulations.

Editor's note: This piece has been updated with the author's correct email address. 

Newly inaugurated Gov. Larry Hogan and his team have only a few weeks to review and take action on the previous administration's proposed "gold standard" rules governing oil and gas development in Western Maryland, or the regulations will go into effect.

Governor Hogan has every right to thoroughly review, modify or even pull back the draft regulations; at the same time, his team should recognize and credit the exhaustive and productive work conducted by former Gov. Martin O'Malley's Marcellus Shale Advisory Commission.

Almost four years ago, Governor O'Malley created the commission and charged it with assisting state officials in determining whether and how Marcellus Shale gas development could be accomplished without unacceptable risks of adverse impacts to public health, safety and the environment. As commission members, we drove thousands of miles to attend meetings and spent hundreds of hours studying this issue. Members conducted 35 public meetings, debated one another, heard from dozens of witnesses and oversaw development of reports on best management practices, human health impacts and economic effects. In the end, the Maryland Department of the Environment and the Department of Natural Resources, supported by most commission members, concluded that with the proper regulatory framework and a well-funded enforcement commitment in place, responsible natural gas development could take place in Western Maryland.

We did not agree with every commission recommendation nor with every word of the draft regulations. In fact, we believe that as currently drafted, the application of some of the regulations — including elements of the Comprehensive Gas Development Plan — may prove to be unwieldy and problematic for both industry and environmental advocates. Overall, however, we think the commission and the agencies identified the most essential principles that should inform the legislative and regulatory process in the future. These principles include:

•Making a commitment to a well-funded and vigorous enforcement structure;

•Establishing a reasonable amount of baseline monitoring;

•Creating a catastrophic insurance fund to address environmental issues when the responsible party is difficult to identify or is no longer viable;

•Requiring each driller to post adequate financial assurance to cover reclamation and well closure;

•Enacting surface owner protections for Marylanders who do not own or control the oil, gas or mineral estate under their property;

•Requiring "green completions," which reduce the risk of releasing methane gas into the atmosphere;

•Requiring a closed-loop system for all development activities

•Enacting a reasonable severance tax that is used for limited purposes and takes into account the existing 5.5 percent severance tax already levied by Garrett and Allegany counties on oil and gas extraction;

•Recognizing that today's best management practices will continue to evolve.

This last principle is especially important — and also relevant for how the state implements its development framework. There is certainly a place for the General Assembly to gather information, to highlight important issues, to provide general oversight and to enact legislation when necessary. But as much as possible, an adaptable, flexible regulatory program should be the preferred approach. It would be able to take into account changes in technology that could not only economically benefit the state and its citizens but also enable faster implementation of evolving best management practices, further reducing the risk of environmental harm.

It is too early to tell whether there will be renewed interest in oil and gas exploration in Western Maryland. With low natural gas prices and even lower oil prices, the capital budgets of oil and gas companies are contracting, thereby making development in Western Maryland less likely in the near term. But that doesn't mean that Maryland should take a wait-and-see approach, putting off the development of a complete regulatory package. First, it is essential that all stakeholders understand the framework and that interested companies be able to make appropriate business decisions. Second, the market could turn quickly, making Maryland more attractive for exploration companies.

Indeed, it was only a few years ago when Garrett and Allegany Counties had thousands of acres under lease and companies had submitted applications for permits to drill. Thanks to the work of the commission and the responsible state agencies, Maryland has made a lot of progress and is much better prepared to foster responsible shale gas development. Those efforts should be recognized as the General Assembly and the new administration get to work this winter.

Harry Weiss is a partner here at Ballard Spahr; his email is weiss@ballardspahr.com. Jeffrey Kupfer is a former deputy secretary at the U.S. Department of Energy. Both authors were members of Governor O'Malley's Marcellus Shale Advisory Commission.

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