Good morning. My name is Sharon Flanery and I’m an attorney at Steptoe & Johnson here in Charleston, West Virginia. I am also the lead of the firm’s energy team. What I want to talk to you about today is pooling in a five state area. Specifically, I want to focus on New York, Pennsylvania, Ohio, West Virginia and Maryland. Now the good news is that 4 of these 5 states address pooling in some form or fashion. The bad news is that one of these states, Maryland, does not have any pooling statute in place whatsoever. It has no foundation from which pooling can be pulled upon even as a resource to help develop pooling laws that may be appropriate or may be applicable to the development of horizontal Marcellus shale wells.
Let’s go to 2 of the remaining 5 states – New York and Ohio and talk about their pooling statutes and their applicability to horizontal Marcellus well drilling or Utica shale well drilling. New York. New York appears to have a favorable statutory scheme that would promote horizontal well drilling. However, if you’ve been following the recent activity in New York, you know that an executive order has put a moratorium on shale well drilling in the state of New York that is effective until sometime this summer. There’s been no action by the legislature to try to impact this moratorium or by the recent new administration. So whether the statutes in New York will be sufficient to promote large scale horizontal Marcellus or Utica shale well drilling is still unknown.
Let’s go next to Ohio. Ohio does have a statutory scheme in place that seems to promote the large scale horizontal well drilling in both the Utica and the Marcellus. However, Ohio’s statutory issues are more with the process. Currently, the Technical Advisory Committee meets only once per quarter. That is the first step of the pooling application process. Now, the Committee could meet more often upon a motion by the chairman or by two of the committee members upon motion to the chairman of the Technical Advisory Committee. However, this has only been done once in 20 years. So, whether Ohio will support large scale horizontal drilling under its pooling statutes is also still in question.
Let’s move now to West Virginia and Pennsylvania. West Virginia and Pennsylvania both have pooling statutes in place, however, an in depth look at their statutes shows that neither will support horizontal well drilling in the Marcellus shale. The pooling statutes do support the pooling of the Utica shale, so that’s good news. Let’s focus a little bit now on Pennsylvania. Pennsylvania’s existing statute which does promote or does apply to Utica well drilling or pooling thereof, has not been used very often since its adoption in the early 1960s. As a matter of fact, it’s only been used 15 times. The board that is set forth to govern pooling applications no longer exists and this authority has been transferred to the Department of Environmental Protection. However, in conversations with the DEP in Pennsylvania, they are very reluctant to utilize this statute. With respect to Marcellus shale well pooling, a new statute will have to be adopted. Current indications from legislators indicate that even though they have a pooling statute in place that applies to deeper formations, they are reluctant to tackle pooling of the Marcellus because of the viewpoint of some that it could be a taking.
West Virginia. Likewise, in West Virginia, its statute only applies to deeper well shale drilling. Marcellus will need a new statute to have pooling in place so that large scale development can take place. This was discussed at committee meetings and by the legislature, but similar to Pennsylvania, the legislature in West Virginia has been reluctant to tackle the pooling issue with respect to Marcellus shale wells because of the viewpoint that it also can be viewed as a taking.
So where does this leave us. It leaves us with Maryland, with no statute in place to impact pooling of any formations; New York and Ohio that appear to have pooling statutes in place that should promote large scale horizontal shale well development in all formations, although, both state statutes are untested as of yet for such large scale development. And finally that brings us to West Virginia and PA, have existing statutes that can apply to the Utica horizontal well and deeper formations, but again, with respect to pooling in Marcellus or shallow formations, new statutes will be adopted – need to be adopted in both states. Thank you.