Learning from coal to regulate Marcellus Shale

Saturday, February 18, 2012

While the coal and Marcellus Shale industries are different in terms of their methods and their histories, some parallels can and have been drawn between the two industries to prevent history from repeating itself.
"We are very mindful of the lessons we have learned from the past legacy of coal. We live in a different time and era today," Department of Environmental Proection Secretary Mike Krancer said. "Today we have stringent environmental regulations in place that did not exist generations ago. Also, there is a different culture today.
"So today, we are fortunate that we do not face an 'either/or' choice of developing our domestic energy supplies or protecting the environment. That is a false dichotomy," Krancer said. "We are doing, and will continue to do, both."
State Rep. Sam Smith, R-Punxsutawney, said from a public policy perspective coal versus Marcellus involves different circumstances with similar challenges.
First, coal extraction was well established as an energy source by the mid-1960s, when his father, former state Rep. L. Eugene 'Snuffy' Smith was first elected. Minimal regulation existed for the industry, and Smith said he was told that, during World War II, the industry was actually encouraged not to reclaim strip mines because of the dire need for energy to fight the war.
Additionally, deep mines had always been developed to allow for the drainage of water, or acid mine drainage, because pumps did not exist to keep the mines from filling with water.
"In my father's era of dealing with coal mining, our country was just learning of the impacts of AMD (acid mine drainage), learning of new equipment for mining and using advanced engineering as a way to minimize the environmental impacts of mining," Smith said. "The public's concern with the 'old mining practices' and the unreclaimed mine lands and AMD, which were a result of the country's demand for energy, resulted in the mining industry becoming one of the most heavily regulated industries in the country."
Secretary of Community & Economic Development C. Allan Walker said about all the two industries have in common is that they're natural resource based industries. From Bigler, Walker was a former president and CEO of Bradford Energy Company Inc.
The coal industry started in Clearfield after the Civil War, and its development was driven by the advent of the railroad, with the original mines existing to supply the railroad.
"The difference is, the coal industry developed at a time when there really weren't safety regulations and there really weren't environmental regulations," Walker said. "The problems we have with mining, scars from reclamation, abandoned deep mines and the bad streams are what we call legacy costs of the industry."
Since the 1960s the problem of abandoned mine land has been remedied as mining companies must put a large bond on the land as well as pay a fee per ton to the government, a black lung fee, and a reclamation fee. The money goes to the federal government and is put in a trust fund to help to fix lands which were abandoned before the 1960s.
"I do not see any legacy costs associated with the gas industry," Walker said.
Walker said the inventory of abandoned mines in Pennsylvania continues to drop as a result of projects completed with this funding.
"I think between the timber industry and the coal industry, we've learned a pretty valuable lesson. That is why I think the gas industry is going to be regulated much heavier," Walker said.
Walker said he doesn't foresee any large environmental impacts to occur because the regulations and staff are in place to monitor it.
"The old saying those who ignore the lessons of the past are condemned to relive it. I think with the gas industry we're not going to relive it, I think we're going to have an industry where it's going to be done environmentally and in the right way," Walker said.
Smith says although the demand for energy drives the Marcellus industry, as it did the coal industry, it is an energy resource being developed with new technology and with an understanding that proper permitting, proper monitoring, and responsibility for mistakes or accidents is important.
"Keep in mind that since the mid-1980s, when these three elements were fully used in the oversight of the coal industry, new permits have resulted in virtually no new acid mine discharges or un-reclaimed mine lands," Smith said. "Additionally, since implementation of full cost bonding 12 years ago, there have been no new bond defaults and zero AMD discharges. In fact, many of the permits issued today involve cleaning up an existing discharge or reclaiming an old high wall."
Smith said currently both industries pay all of the corporate, capital, sales and use taxes as every other business and industry in the state pays, along with the workers and unemployment compensation rates that apply to their respective industries. In addition, both industries pay permit fees after purchasing or leasing the resource and paying for the engineering of the mining or drilling plan. Both are required to post bonds related to performance and closure or reclamation of the site.
"In the case of coal, because of the national interest in cleaning up the environment, there is a federal severance tax levied on every ton of coal mined. That tax is used to reclaim high walls and treat AMD from abandoned mine lands," Smith said. "It should be noted, since Pennsylvania competes with other states for these funds, we established programs like my Growing Greener legislation and we use state funds, regulations and laws to encourage the current mining companies to clean up old problems via re-mining and other cooperative measures."
In terms of paying it forward, only recently has an impact fee been imposed on the industry. Until that point, Pennsylvania was the only natural gas producing state that did not tax natural gas coming from its soil.
Based on 2011 natural gas prices, drillers will pay $50,000 for every horizontal well "spud-ded" before 2012, and $10,000 for each vertical well. With the impact fee, the counties apply for the money and the amount received is dependent on how many wells are in the county. In total, 60 percent of the fee will go back to the counties who are impacted by the activity and 40 percent will return to the state.
"The counties are allowed to use that money on local projects to correct any impact drilling would have within their jurisdiction," Walker said. "The coal industry didn't have that until the 1960s."
Another difference in the industries is the impact they will have on communities. Walker said at its peak in the 1920s, there were 10,000 people working in the mining industry in Clearfield County.
"It's not going to be as manpower intensive as coal mining was. You're not going to see the old company towns," Walker said. "You're not going to see that with the gas industry. They're going to be more integrated into the communities."
Despite this difference in employment and the way it will impact communities, Walker said by 2020 there could be as many as 225,000 jobs involved with gas drilling in the state. This represents 4 percent of the labor force in Pennsylvania.
"On one hand, our county craves cheap energy, and lots of it. On the other hand, we have a constitutional mandate to protect our environment. We must respect private property rights," Smith said.
"The balance between energy demands and a clean, safe environment lies in conservation, versus preservation, complimented with science-based permitting, conscious oversight and a long-term financial commitment to performance and reclamation," Smith said.
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Reported by Katie Weidenboerner, Tri-County Sunday. Email: katiew@thecourierexpress.com.