In the past couple of weeks, oil and gas news has indicated growth and challenges for the industry in West Virginia. According to the West Virginia Department of Environmental Protection, oil and gas production has increased for 13 consecutive years in a row, based on recently issued 2016 production data. At a time of low commodity prices, continuing production increases speaks to the evolution of technology and engineering among oil and gas professionals.
However, production, tax revenue and royalties are not increasing at rates they once were in West Virginia, or at rates at which our neighboring states are increasing. Ohio had a 43 percent increase in natural gas production from 2015 to 2016. Pennsylvania also saw big increases in 2016. On what do we blame the difference between West Virginia, Ohio and Pennsylvania? Well, both Ohio and Pennsylvania have mineral efficiency laws in place. Ohio has pooling laws. Pennsylvania has co-tenancy and joint development. These types of laws allow producers to continue to drill for oil and gas even in low price environments by drilling wells with longer lateral lengths. In turn, West Virginians continue to work even in lean times for the industry. The lack of mineral efficiency laws in West Virginia, along with a higher severance tax than Ohio and Pennsylvania, will continue to erode the economics for West Virginia producers
In addition to a need for mineral efficiency laws in West Virginia, there is a dire need for increased pipeline infrastructure in the Appalachian region to transport our abundant oil and natural gas to the market where it can be sold and used. The good news is that there are many projects in the works to make this happen. There are nine major pipeline projects that will run through West Virginia. The bad news is that right now, the federal agency that must give the green light before these projects can begin construction is at a standstill. The Federal Energy Regulatory Commission (FERC) regulates and permits interstate pipelines.
While the permitting processes are coming along, the final approvals cannot be given right now due to a lack of a quorum at FERC. For the first time in 40 years, FERC cannot make a final decision because they are missing two Commissioners. In order to fill those vacancies, the Trump Administration must move now to finalizing the appointment process. These are such big construction projects that any delay in the start dates will create a bottleneck effect of delays, resulting in tens of thousands of jobs and huge investments being placed on hold. The rippling effect of these delays is astronomical, a discussion which deserves much more than a blog post. WVONGA is reaching out to our state representatives and urging them to help push this along. These are big projects, resulting in big jobs and big economic changes for West Virginia. The development of these pipeline projects should be top priority.