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Federal regulations worry state’s oil and gas industry leaders



CHARLESTON, W.Va. —  Leaders of West Virginia’s oil and natural gas industry praise state regulators but worry about federal regulations and environmentalists who use regulatory processes to try to halt projects.

Steve Mueller, chairman and chief executive officer of Southwestern Energy Co.

Steve Mueller, chairman and chief executive officer of Southwestern Energy Co., recalled how the state Legislature cleared the way when his company entered West Virginia, calling the state one of the top two for favorable business regulations. Mueller was one of several industry leaders and lawyers who addressed the issue during the recent West Virginia Oil and Natural Gas Association annual meeting at Oglebay Resort.

Southwestern bought drilling assets owned by Chesapeake Energy in West Virginia and southwest Pennsylvania for more than $5 billion late last year. An existing legislative rule prohibited the transfer of permits, which meant Southwestern would have to go through the same permitting process Chesapeake went though.Mueller said he was pleasantly surprised when state legislators heard about the problem and acted within two weeks to fix it. Mueller said that when he recently was asked which states rank best for business regulation, “I said it was a toss-up between Texas and West Virginia.”

Antero Resources Corp. came to West Virginia in 2008 when it bought Marcellus drilling rights on 205,000 acres in West Virginia and western Pennsylvania from Dominion for about $552 million.

Al Schopp, Antero’s chief administrative officer, regional vice president and treasurer, said, “Regulation is necessary. What we’ve found here is the Legislature is willing to work with you on common problems.

“What that means is you need to talk to people and there is no place in the United States where your legislators are more accessible than West Virginia,” Schopp said. “I would encourage you to reach out to them because they have been very helpful in solving some of those common problems.”

Federal regulations are different story.

Karen Harbert, president and chief executive officer of the U.S. chamber’s Institute for 21st Century Energy, showed meeting attendees a bingo card filled with federal Environmental Protection Agency regulations and proposed regulations affecting the oil and gas industry.

Harbert said access to federal lands is becoming increasingly restricted. Referring to the fight over the proposed Keystone XL Pipeline, she said some opponents have concluded that the easiest way to prevent oil from getting out of the ground is to stop the industry from putting in a pipeline.

Richard Gottlieb, managing member of the law firm Lewis Glasser Casey & Rollins, heads the firm’s natural gas practice. He said several federal agencies regulate pipelines and sometimes it isn’t clear which agency is in charge.

Furthermore, “The U.S. Department of Labor has declared war on the oil and gas industry — in particular, pipelines,” Gottlieb charged.

He said that under the federal Fair Labor Standards Act certain employees have to be paid overtime for all hours worked in excess of 40 hours in a workweek. But many pipeline contractors traditionally pay employees a day rate “whether they work no hours, two hours or ten hours,” he said.

“Pipeline companies realize that the way to ensure a reliable workforce is to ensure that these people are paid a very good rate. We’re not talking about minimum wage workers. In West Virginia they’re all paid in excess of $100,000 a year.

“Notwithstanding that, the Department of Labor started conducting an audit,” Gottlieb said. “The Department of Labor is being as forceful and unreasonable as any federal agency I’ve ever encountered in my years of practice. The Department of Labor has decided they’re going to make an example of service companies in the oil and gas industry.”

Kelley Goes, a member of the law firm Jackson Kelly, practices in the firm’s Environmental Practice Group. She said there are 1,700 miles of pipeline projects currently under review by the primary federal regulator, the Federal Energy Regulatory Commission.

In 2012 the commission permitted just three miles of pipeline, she said.

Goes said environmentalists are targeting the commission’s permitting process and they’re extremely well-funded. “At every step of the way you will find environmental groups active in commenting, protesting, proposing alternatives,” she said. They’ve even shut down the commission by staging protests in front of its headquarters, she said.

“Environmental groups will try one thing and, if it doesn’t work, you’ll see them pivot” to another, she said. “Environmental impact is their primary concern.”

Any agency that considers a project that impacts the environment must produce an environmental-impact statement. “The draft statement is put out there for review,” she said. “It is designed to generate comment. The best you can do is have a very detailed statement because you know it’s going to be challenged.”

The ultimate goal for companies with pipeline projects is to receive a certificate of need from the Federal Energy Regulatory Commission “because once you have it, it gets great deference” in the courts, Goes said. In addition, federal pipeline regulation preempts state and local regulatory authority.

Stephen Miller of the law firm Steptoe & Johnson discussed the federal Environmental Protection Agency’s Clean Power Plan, designed to reduce carbon pollution from power plants.

The nearly 4,000-page plan “is one of the biggest pieces of regulation this country has ever seen” and billions of dollars are at stake, Miller said.

Under the plan, “all of the power plants without environmental controls will be gone” and the only coal-fired plants that will be left will be those equipped with millions or billions of dollars of technology, he predicted.

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Stephen Miller of the law firm Steptoe & Johnson told industry executives at the West Virginia Oil and Natural Gas Association convention that the federal Environmental Protection Agency’s Clean Power Plan “is one of the biggest pieces of regulation this country has ever seen” and billions of dollars are at stake.

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