Speakers say road work emerging issue in Marcellus development

Nick Snow
OGJ Washington Editor

STATE COLLEGE, Pa., Oct. 13 -- Speakers at the 2010 Marcellus Summit continued to emphasize the importance of steady and open communications will all interested parties as the conference at Penn State University moved into its second and final day. Road work is a critical issue, two producers said.

“Traffic becomes a major issue as we encroach on more populated areas,” observed Jim Cannon, public affairs manager for Range Resources Corp. in Cannonsville, Pa. “We work with local governments to hire flagmen to direct traffic.” Road construction bonds cost $12,500/mile “which barely gets the driver out of the truck,” he continued. Range works with local governments directly to solve the problem, he said.

George Stark, external affairs director for Cabot Oil & Gas Corp. in the region, said that the Houston independent producer concentrated its Marcellus shale holdings in Susquehanna County, where it has drilled 120 wells. “We're spending $8 million on roads there this year alone,” he said. “Several miles of roads there were badly deteriorated before we arrived. We would like to see some understanding from Harrisburg about work we've done before our trucks could use them.”

A day earlier, state regulators also told conference participants that roads had become a problem. “If there's been one complaint, it's that they weren't designed to handle the heavy trucks necessary to develop the shale gas,” said Louisiana Conservation Commissioner Jim Welsh. “The industry had to pitch in and do some repairs.”

The problem apparently stems from not having road impacts covered in oil and gas or environmental regulations. New York encourages producers to work with local governments on developing road plans before they arrive, according to Brad Field, director of the mineral resource division in the state's Department of Environmental Protection.

And in Ohio, which is in a much earlier Marcellus development stage than Pennsylvania or New York because it's near the formation's edge, state officials are working with counties on bonding issues and road safety issues, noted Richard Simmers, statewide enforcement manager in the Department of Natural Resources' mineral resources management division.

Communications critical
Such issues make full and open communications critical, panelists agreed at an Oct. 12 session on the oil and gas industry's perspective. “We face a huge challenge because we are fundamentally dealing with a lack of good information,” said American Petroleum Institute Chief Economist John C. Felmy. “Our opponents are heavily organized and ready to do street theater or try to bamboozle state legislatures. We have to get out in force.”

When an audience member asked him if he wasn't being overly dramatic himself using such expressions, Felmy replied: “That's what I've seen at several hearings. I, for one, am not going to sit back and see nonsense performed without calling it that.”

Insensible, also, is the severance tax that Pennsylvania's House recently passed, Felmy stated. “It would contribute to a slowdown in the growing activity here, particularly if it's combined with the $40 billion of taxes on the oil and gas industry which the Obama administration has proposed,” he said.

Range, which pioneered Marcellus production with a vertical well in 2004, now works with officials from 28 southwestern Pennsylvania townships, Cannon said. “It can be a problem when your lease is in two townships and each has different procedures and attitudes toward the industry,” he said. “Communications is the key. We've solved several problems by simply picking up the phone and asking someone, 'What's bothering you?'”

Stark said Cabot is encouraging Pennsylvania counties where gas production is growing to find ways to use it locally. Procter & Gamble drilled some wells for its plant in Wyoming County and produced enough that it could sell some gas to UGI Corp., the local utility, he noted. “If P&G decides to expand its product manufacturing capacity, it probably will look first at Wyoming County because its operation there has become so profitable,” he said.

“We need to keep working on our image,” said Felmy. “We have the opportunity to do something really great up here. If we all work together, we have a chance to be part of one of the biggest success stories in our nation's history.”

The 2-day Marcellus Summit was cosponsored by the Interstate Oil & Gas Compact Commission.

Contact Nick Snow at nicks@pennwell.com.

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