Oil and Gas:

Marcellus Shale Coalition's Klaber talks chemical disclosure, drilling fees and exports

With the Energy Information Administration recently drastically lowering its expectations for the country's natural gas resources, what's the future of the Marcellus Shale? During today's OnPoint, Kathryn Klaber, president of the Marcellus Shale Coalition, weighs in on the Pennsylvania Legislature's action on shale exploration and projections for natural gas in the Marcellus Shale. She also discusses the Bureau of Land Management's proposal to require oil and gas producers to disclose hydraulic fracturing chemicals being used on public lands.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Kathryn Klaber, president of the Marcellus Shale Coalition. Kathryn, thanks for coming back on the show.

Kathryn Klaber: Thanks.

Monica Trauzzi: So, the Pennsylvania legislature is voting on drilling fees this week for the Marcellus Shale wells. We're hearing that there may be a compromise on collecting a local impact fee. Right now, Pennsylvania is the only state that doesn't collect money from natural gas production. So would this sort of just level the playing field?

Kathryn Klaber: Well, first of all, Pennsylvania does collect a lot of revenues from natural gas production, to the tune of over a billion last year alone, but that's in the other taxes that employees and employers pay. The package this week is really comprehensive. It's an impact fee that has been discussed for quite a long time, as well as additional environmental protections and some certainty around uniformity in local government operations and ordinances. But, yes, the fee is one that I think brings to closure a lot of the discussion about having Pennsylvania -- having the companies in Pennsylvania reimburse the local governments for impacts that may go above and beyond all those taxes and fees already paid.

Monica Trauzzi: So, staying on the subject of money, New York Governor Andrew Cuomo, in his latest budget proposal, did not budget money for hiring new regulators. And his argument is that it doesn't make sense to hire people when they're not even quite sure if the state move forward with the practice of fracking. What's your take on the governor's move and the message that he's sending?

Kathryn Klaber: Yeah, it's very important for the industry to be in close coordination about those expectations. And for the governor, Governor Cuomo to not put that in, I think does reflect that we are not ready yet to be drilling in New York. The experience in Pennsylvania has been the industry has worked closely with the administration, both the Rendell and now the Corbin administration, that that gear up matches the needs of the, you know, of the permits and of the enforcement. And that matching makes for most effective spending of both the industry's dollars from the fees and from the public sector perspective too.

Monica Trauzzi: And he says he's really listening to the public on this one. And there seems to be a lot of resistance in the state.

Kathryn Klaber: Well, I think that when he first indicated that it was time to do some development, and that there was a lot of bullishness among the landowners and among the small businesses who have looked not so far south and seen that it really can be done safely, but it comes with an incredibly important economic development. So I do think that there's got to be a future there for New York, but it's got to be done on New York's terms.

Monica Trauzzi: There's such wide-ranging disagreement on who exactly should regulate fracking, who knows the areas best, who can do it best. Are state inspectors knowledgeable enough to go ahead and do it or is it something that the federal government really needs to oversee?

Kathryn Klaber: I would posit that the state is the only one to do it, because it's very difficult for federal regulators to understand the nuances and the geological differences when state regulators have done this for a long time, not just in oil and gas, but air, water, land. And those things all go together to do the right kind of regulation for the industry. The package that's going through Pennsylvania this week really takes that issue and pounds it home, because you've got additional state protections that are very customized to what the people of Pennsylvania want and what is required to further modernize the regulations on the books in Pennsylvania.

Monica Trauzzi: But are those state regulators too closely tied to industry?

Kathryn Klaber: No, I mean I think the state regulatory programs have long regulated air, water, waste, as well as oil and gas. And their job is to put the -- implement the rules on the books, whether they be, you know, the old ones or the new ones or the ones yet to come. So I think we have to have faith in any enforcement capabilities, state or federal, that they need to be putting in -- implementing, not politically, but putting in place the rules that are on the books.

Monica Trauzzi: The EIA recently drastically lowered its expectations for the country's natural gas resources based on new data coming out of the Marcellus Shale. How do you account for that huge number disparity that we saw? It went from 410 trillion cubic feet to 141 trillion cubic feet.

Kathryn Klaber: Well, those numbers -- and, you know, we look at them as they go up and down and I mean I think we all have to recognize that they're a snapshot in time with data that has been interpreted based on the information, you know, right then and there. You know, some of the folks behind the 400 and some numbers, standing behind those still, but the bottom line is this is still a lot of gas, as reflected right after that announcement in the president's State of the Union Address, still talking about over a hundred years of gas supply and that's been transformational. And I think we'll continue to hone the numbers and there'll be new shale gas plays that'll be explored and used to the benefit of Pennsylvanians.

Monica Trauzzi: And with all that in mind, there's a lot of talk right now about exporting LNG to the Asian and European markets. Do you think that the supply of natural gas that we have here in the United States could support that without seeing huge price fluctuations for U.S. consumers?

Kathryn Klaber: Well, I mean it is a commodity and by the nature of that commodity and others, we're operating in a global, you know, marketplace. There certainly will be as long as the price differential is as large as it is now with the problems that the Europeans are seeing, with very, very high gas prices. And, you know, with the fact that we are at record lows, you know, there's got to be some evening out of that. But I think the real key is to see how we, in this country, can have a policy that does embrace that local, you know -- or domestic energy production. That's probably the best answer.

Monica Trauzzi: Concerns over the link between fracking and earthquakes is growing. Arkansas, Ohio, Oklahoma have all been hit by earthquakes that seem to be tied to or attributed to the injection of wastewater underground. So, what's the plan of action moving forward to preventing future occurrences of earthquakes?

Kathryn Klaber: Well, I have not seen that conclusive causality between those two. For instance, the Ohio well was one of nearly 200 of those kind of wells in Ohio. There's 144,000 of them in the country. I don't think there's been yet the conclusive evidence that says this is even the problem. And if it is and there's additional precautions taken in the meantime, which I think is appropriate, if we find out what it is then I think implementing, you know, what that -- with the source of those problems is the next step. But that's -- we're not there yet.

Monica Trauzzi: BLM recently drafted a proposal to require oil and gas producers to disclose fracking chemicals being used on public lands. How does that play into the Marcellus Shale?

Kathryn Klaber: Yeah.

Monica Trauzzi: How does that affect Marcellus states?

Kathryn Klaber: Yeah, so this disclosure issue has been one that, you know, we keep putting more and more data out there, but I think that the public understanding of that data just needs to catch up. Recently the Marcellus Shale Coalition Board of Directors, end of last year, passed a resolution that our members would all disclose and register on Frac Focus, a national database that is, frankly, very easy to use and has a lot of that -- probably more information than you can get through in a short amount of time. I think that there are multiple prongs now to encourage that additional disclosure. We not only have it in the state of Pennsylvania, in our new state regulations passed last year, but even more additional disclosure requirements in the bill that's being considered this week. So, I think we're beyond the point of whether or not and now it's at a point where let's absorb all this data that's out there and use it to answer the questions that may be on people's minds.

Monica Trauzzi: All right, we'll end it right there. Thank you for coming on the show, nice to see you again.

Kathryn Klaber: Thanks, yeah, good, thank you.

Monica Trauzzi: Thanks for watching. We'll see back here tomorrow.

[End of Audio]

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