By Kris Maher
Since taking over from a Republican administration this year,
Democratic Pennsylvania Gov. Tom Wolf repeatedly has said he
supports the state's booming shale gas industry. But lately, the
industry is questioning his commitment.
State regulators, who have begun reviewing dozens of
environmental cases the previous administration handled, recently
imposed an $8.9 million fine for a gas well they said is
contaminating drinking water--the largest ever against a gas
operator in state history.
The state is also proposing a raft of stricter drilling rules to
prevent wastewater from contaminating drinking water sources. And
industry officials are upset that the Wolf administration earlier
this month slashed its estimate of state jobs supported by the
shale-gas industry to 89,000 from the previous administration's
estimate of more than 200,000.
"This administration's words continue to be alarmingly detached
from its actions as it relates to policy and regulatory matters,"
said Dave Spigelmyer, president of the Pittsburgh-based Marcellus
Shale Coalition.
Jeffrey Sheridan, a spokesman for Mr. Wolf, said the
administration seeks a balance between promoting development and
protecting the environment. Mr. Wolf took office in January after
defeating former Gov. Tom Corbett.
Mr. Sheridan said the prior administration's industry jobs
figures were inflated, including road-construction workers, truck
drivers not employed in the industry, and even state
regulators.
Mr. Spigelmyer said the change appeared motivated more by
politics than economics. Job numbers are a key indicator of the
shale boom's importance to the state economy and are cited in
debates about how much to tax and regulate drilling.
Another sore point for the industry is the governor's
appointment of cabinet members who previously worked for an
environmental nonprofit organization called PennFuture, including
John Quigley, head of the state Department of Environmental
Protection. The group has pushed for tougher drilling rules.
Mr. Sheridan said all the appointees were confirmed by the
Republican-controlled state Senate and none is biased against the
gas drilling.
Hydraulic fracturing, or fracking, has exploded since 2008 into
a main economic driver for Pennsylvania. The state's natural gas
production, mostly from fracked wells that tap the Marcellus Shale,
exceeded 4 trillion cubic feet last year, doubling the state's 2012
output and making Pennsylvania the nation's second-largest gas
producer behind Texas. Fracking involves pumping millions of
gallons of water and chemicals more than a mile underground to free
gas deposits.
This year, state and local governments will receive $224 million
from the fees companies are required to pay on fracked wells. Such
fees have generated a total of $855 million in revenue since they
were enacted in 2012.
Tensions have built as Mr. Wolf and the Republican-led
legislature appear unlikely to agree on a state budget ahead of a
June 30 deadline. The governor has said he will veto a budget
Republicans passed over the weekend because it doesn't include his
top priorities, such as a new 5% severance tax on shale drilling
that he estimates will bring in $1 billion in annual revenue to
fund schools. A budget stalemate could continue for several weeks
before residents begin to notice cuts to services, said
experts.
Republican House Speaker Mike Turzai said he opposes the
severance tax and believes the governor's revenue estimate is too
high. "The governor's proposal will amount to a de facto moratorium
on the development of natural gas in the Commonwealth," he
said.
As the issue is debated, it isn't clear whether a new 5%
severance tax on gas production would replace the current per-well
fee or come in addition to it.
Pennsylvania residents continue to back shale-gas development,
recent surveys show, but they have also supported a tax on
production to help bridge a deficit the governor's office estimated
at over $2 billion. The state's Independent Fiscal Office puts the
shortfall at $1.5 billion.
On June 16, regulators announced an $8.9 million fine against
Range Resources Corp. of Fort Worth, Texas, for allegedly failing
to prevent natural gas and other substances from contaminating
drinking water in Lycoming County.
Since 2008, the state has assessed $20.2 million in fines
against the industry, not counting the latest fine. The highest one
assessed previously was a $4.5 million fine against EQT Corp. The
company is challenging the fine and declined to comment.
Regulators said Range hasn't repaired a defective well casing.
"I cannot speak for why the previous administration chose not to
take action, but this administration will," said Mr. Quigley, the
state's top environmentalregulator.
Range, which is appealing the fine, said its testing showed that
natural gas in 21 nearby residential wells was different from gas
in Range's well. Separate testing concluded the cement casing
around the well was sound.
"We are equally confident that the environment and community are
not at risk," Range said in a statement.
Corrections & Amplifications
The largest fine Pennsylvania assessed against a natural-gas
producer before this month's $8.9 million fine was one for $4.5
million, which is being challenged. A previous version of this
article cited a fine for $4.15 million without clarifying it as the
largest such fine that has been paid. (June 29, 2015)
Write to Kris Maher at kris.maher@wsj.com