Water Service to Marcellus Natural Gas Wells for Fracturing - PSC Provides Further Guidance



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Earlier this year an administrative law judge (ALJ) for the Public Service Commission of West Virginia (PSC) ruled that a public service district (PSD) violated various state laws and regulations by refusing to provide water service to a natural gas producer (PSC Case No. 11-1514-PWD-C).  The ruling was in response to a complaint filed by a natural gas producer alleging that the PSD discriminated against it by agreeing to provide water service only to a competing natural gas producer.   The ALJ ordered the PSD to file a policy for handling future requests for water service to fracture Marcellus natural gas wells. 

Shortly after the ALJ issued his decision, the PSC stayed the decision upon its own motion.  As explained below, the ALJ?s decision was rejected by the PSC. 

In its recent order, the PSC framed the issue as follows: how should a small water utility that primarily serves residential customers handle short term requests for bulk water service from natural gas producers.  The PSC explained that the best method for addressing the issue is the use of special contracts.  Indeed, the PSC held that the PSD, pursuant to Rule 39 of the Commission?s Rules for the Construction and Filing of Tariffs, should ?negotiate special contracts as needed with drillers on a first-come, first-served basis.?  The PSC explained that a ?special contract should be ?within capacity? or on a ?best efforts? basis with recognition that the supply of water may be interrupted to continue adequate service to traditional, existing customers.?  In other words, the proposed special contract should not ?endanger the service provided to existing customers.?  As for what rate the PSD may charge in such special contracts, the PSC said the negotiated rate may not be less than the existing rates in the PSD?s current tariff.

The first-come, first-served policy emphasizes the need to timely line up water supplies.  Utilities that enter into a Rule 39 special contract must file the contract with the PSC.  Once filed, a Rule 39 special contract usually receives limited scrutiny and is removed from the PSC?s active docket after the review is complete. 


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