Let’s talk about New York. New York has a fairly recent legislative statute that appears to be sufficient to govern large scale horizontal well pooling. However, this statute has been rendered effectively moot by an executive order which placed it into effect a moratorium on horizontal shale well drilling. The current legislature, as well as the new administration in New York, appears to want to take no action to lift this moratorium. So whether this statute is sufficient for such large scale development is still untested. In addition to the moratorium, we also have the Delaware River basin and the Susquehanna River basin which impact development in New York. So, whether or not pooling will be governed by these statutes and will be effective to promote oil and gas drilling is still unknown.
Let’s move to Ohio - another state that has a statute in place that appears to be sufficient to regulate pooling of horizontal shale wells, both in the Marcellus, Utica and all formations. However, the issue with the Ohio statute is mainly process. The first step in the Ohio process is to file your application and have a hearing in front of the Oil and Gas Technical Advisory Board or Committee. However, this committee, meets only once per quarter. In addition, only five applications per entity may be filed in any given year. Now, there is a regulation that allows the committee to meet more than four times per year, either upon petition of the chairman or upon a motion by two of the members, but our research shows over 20 years this has only been done one time. So, while Ohio has a statute that on its face looks like it will promote large scale development, the process may actually impede such large scale development and pooling of horizontal shale wells. In addition, historically, Ohio has not looked at forced pooling as a method by which all units should be formed. They don’t look at pooling as a mechanism to replace what they call fair and aggressive leasing programs. They prefer that forced or statutory pooling only be used in cases where a lessor has been offered very reasonable terms and just refuses to accept or just wants to impede development, or in cases of missing heirs. So, in summary, while Ohio has a statute on its book, it is unknown whether it can be used to promote such large scale development and pooling resources.
Let’s move know to Pennsylvania and West Virginia. Interestingly enough, both states have statutes that have pooling in some form or fashion. However, a look at the statute shows that the pooling statutes in place will not govern the pooling of Marcellus shale wells. They will apply to Utica formations and deeper.
Let’s talk about Pennsylvania. Pennsylvania has discussed pooling and it is very unclear whether or not pooling will be proposed by the new administration of the legislature there. Some view this simply as a taking, this in spite of the fact that they do have a current statute on its book for pooling of deeper formations. The other thing with respect to Pennsylvania’s existing statute – it was adopted in the early 1960s. The board that was statutorily designated to hear such pooling no longer exists. This power has now been transferred to the Department of Environmental Protection, however, it’s only been used 15 times in its history, and the DEP is very reluctant even to use it with respect to the deeper formations. Thus, what will happen in PA with respect to the Marcellus and even the Utica and below is still an unknown.
Let’s move now to West Virginia. West Virginia is very similar to PA. Its statute that is in place for shale development does apply to the Utica and below, however, anything with respect to the Marcellus or above will need a new statute. Our legislature has been very reluctant to introduce such statutes because again, of the issue with respect to a prospective taking. Thus, whether or not West Virginia long term will end up with a statutory scheme that regulates pooling for horizontal Marcellus shale wells is unknown.
So in summary, we have Maryland that has no pooling regime in place. We have New York that appears to have a sufficient pooling regime in place for all formations, but is essentially rendered moot. We have Ohio that again appears to have a statutory scheme that should be effective for all shale formations but the process is an issue there. And moving to PA and West Virginia, they do have statutes in place for the Utica and below, but anything above the Utica, such as Marcellus will need a new pooling statute. Thank you.