Marcellus Shale is 'the next big thing'

Carrie Ann Cherry Apr. 19, 2011, 7:22am


CHARLESTON, W.Va. -- It's getting difficult to find a hotel room these days in some parts of rural Pennsylvania. Even harder to buy a Ford F-150 pickup truck.

Marcellus Shale oil drillers essentially have moved in and are buying up everything from sturdy vehicles to pretty landscaping to cover tapped well sites. And the burgeoning industry is showing no signs of stopping.

"This is certainly the next big thing," said Joseph Reinhart, an attorney with BCCZ in Pittsburgh. "It has quite a bit of potential to be a game changer in terms of the economy."

Drillers gathered recently at a conference in Pennsylvania to tout the industry's rapid expansion in Pennsylvania and the northern panhandle of West Virginia where vast amounts of natural gas lie deep beneath the earth's surface. Companies have invested billions to develop the natural resource and are increasing the number of wells at a fast pace.

With the increase in drilling comes an increase in legal activity, from attorneys who help landowners on the front end with leasing issues to lawyers involved in disputes over roads and noise to those drafting industry rules and regulations.

Kathryn Klaber, president of the Marcellus Shale Coalition, says the industry welcomes the scrutiny.

"I challenge you to name another industry this transparent," she said. "Have you ever seen any industry that has more easy access to information?"

Klaber's organization represents nearly 40 drillers and dozens of other businesses related to the oil and gas industry, many of which are facing legislative hurdles as they try to move forward. New York has issued a temporary moratorium on new drilling permits, and some lawmakers in West Virginia are calling for the same.

State and local governments are pushing for more regulations for the industry to ensure safety, protect water supplies and give landowners and municipalities more say. Industry lawyers say their clients are stepping up to the plate when it comes to issues such as noise, road damage and site restoration.

"There's a notion out there that there's a lack of oversight," Reinhart said. "But in Pennsylvania, the DEP has the largest group of lawyers doing monitoring. They've increased their numbers just for Marcellus Shale."

One issue in particular is generating a lot of controversy: road damage. Heavy trucks are required to transport the machinery and rigs to drilling sites on rural, windy roads. Plaintiff attorney Michael Rosenzweig with Edgar Snyder & Associates in Pittsburgh says there are a number of cases right now against local municipalities and state transportation departments for damage to the roads.

"The state is just left holding the bag when these drillers come in and put all this heavy traffic on these roads," he said. "It's a recipe for disaster."

Industry lawyers say many companies are making repairs themselves, particularly to landscaping on property once they are finished with a well. Many municipalities are considering charging drillers impact fees to make necessary repairs.

"There are inconveniences in the short term," Reinhart said. "But communities realize the benefits of Marcellus Shale drilling can be quite large."

Lawyers are also getting involved in the leasing aspect of Marcellus Shale, specializing in deals for landowners with the oil and gas industry. Energy companies often come into a community looking for land to lease so they can have access to the minerals underneath. The deals, which range from hundreds of dollars an acre to thousands per acre and can include royalties, are often complex. Landowners have been advised to seek legal counsel before signing.

"It's been interesting because in the places where they are drilling and leasing, there aren't a lot of lawyers," said Joel Bolstein, an attorney with Fox Rothschild in Philadelphia. "We're seeing these relatively good country lawyers, general practitioners who do a lot of different work, are the lawyers representing large landowners. They've become very smart and sophisticated at it."

More than a dozen law firms have joined the Marcellus Shale Coalition, as partners in the oil and gas industry. Several firms have designated teams of attorneys who work solely on Marcellus Shale issues and litigation.

Many of the attorneys who work in the industry say their clients are working to develop best practices and consider landowners and residents of the communities that will benefit from the jobs and increase in tax revenue to be their business partners.

"These are people -- landowners and farmers -- who are making a lot of money off this," Bolstein said. "These are not companies making this money. These are landowners. Mom and pops who own a farm, just struggling to get by are now making $80,000 a month in royalty payments. No one wants to see a wave of plaintiff lawyers try to end this industry."

Julia LeMense, an attorney with Weitz & Luxenberg in New York who specializes in the environmental fallout from drilling, says clients aren't necessarily trying to end the industry. She said the overriding goal is for drilling to be done safer. She deals with residents who are worried about contaminated water supplies and health issues that may result from the oil extraction process.

"They want to see the oil and gas industry move forward in a way that is more responsible toward the public, their health and the environment," LeMense said.

Klaber says as the industry looks to the future, they are trying to be proactive in dealing with litigation, providing as much information to the public as possible. Reports on water testing at well sites, chemical makeup and other drilling information are often posted online.

"We are under a high level of scrutiny," she said. "We are confident. We are not hiding. We are practicing what we preach."

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