HB 2834 – Updating and Modernizing the Minimum Spacing Provisions for the Drilling of Horizontal Deep Wells
WVONGA supports HB 2834 and urges the adoption of the bill to encourage and improve efficiencies in the development of deeper shale formations such as the Utica by updating regulatory impediments established for traditional vertical deep well production. The bills modernizes decades old spacing requirements for deep wells that are not now applicable to horizontally drilled deep wells on multi-well pads. This bill provides the opportunity for the Legislature to correct and eliminate unnecessary regulatory hurdles to improve West Virginia’s competitive position for investment in natural resources.
- Deep wells (which are defined to include wells drilled in the Utica Shale) are regulated in WV by the Oil and Gas Conservation Commission (OGCC). The statute and regulations were created decades ago for vertical wells and do not reflect the technological and geological advancements associated with horizontal well development, including the use of multi-well pads (well pads containing more than one well).
- Multi-well pad development produces oil and gas more efficiently and reduces the environmental footprint of production. However, the current deep well spacing laws require 3,000 ft between each well which discourages multi well-pad development for wells drilled in the Utica Shale.
- An operator drilling a multi-well Utica pad must seek an exception from these requirements from the OGCC, prolonging the well development process. This process is time-intensive, requires a hearing in Charleston for every Utica well pad, and costs more than $25K per hearing for outside legal fees and internal resources.
- The current level of regulation for the Utica shale in West Virginia does not take place in any other neighboring shale producing state. In fact, this process is not even used for Marcellus wells in West Virginia (which are considered shallow wells).
- Exploration of wells in the Utica Shale has been minimal in West Virginia because it is much costlier to produce than a well in the Marcellus Shale. Legal resources add an additional burden to producers and could deter future investment into the Utica formation.
- The revised spacing requirement in HB 2834 provides operators the opportunity to produce wells in an environmentally sound and fair practice and gives them the ability to explore the optimal spacing necessary to produce deep wells, without having to seek an exception from the OGCC.
- If WV wants to encourage investment in the oil and gas industry, then deep well spacing requirements must be modified to account for technological advances in horizontal well development. Modifications in WV’s statute will enable future growth in the Utica Shale formation and allow operators the flexibility to use more modern spacing requirements to increase development.
HB 2673 - Creating the Oil and Gas Abandoned Well Plugging Fund
WVONGA supports HB 2673 as it helps resolve the issue of funding the plugging of abandoned and orphaned wells. The bill exempts low volume oil and gas wells from a portion of the severance tax and provides for a special use fee on sales from oil and gas wells which produce more than 5,000 cubic feet of natural gas or one-half barrel of oil per day but less than 60,000 cubic feet of natural gas or 10 barrels of oil per day. The special use fee would be used by the Secretary of the Department of Environmental Protection to plug abandoned oil and gas wells.
HB 2661 - Relating to Natural Gas Utilities
WVONGA supports HB 2661 as it promotes the continued production of natural gas from local wells and provides for the natural gas utility to recover costs, including of converting customers to alternative fuel sources. The bill permits a natural gas utility to make a request for proposal for incentivized gas drilling where dependable, lower-priced supplies of natural gas are not readily available. The bill also permits a natural gas utility to recover the cost reasonably necessary to convert a customer to an alternate fuel source when gas service to that customer has been abandoned.