GRANTSVILLE — With the regulatory future of hydraulic fracturing very much in doubt in Maryland, energy companies are backing away from hundreds of ground leases covering more than 120,000 acres in Garrett and Allegany counties that would have allowed them to drill into the Marcellus Shale, a mile-deep storehouse of natural gas.
Many local residents and elected officials in Western Maryland had hoped that the subterranean gas deposits would become the new economic engine for this beleaguered region. But up to half of energy company leases — five-year deals signed as early as 2006 — are not being renewed, leaving those same people fearing that the fracking-fueled boom they envisioned will bypass Maryland.
“What company’s going to come in here?” asked Del. Wendell R. Beitzel, a Western Maryland Republican, over apple butter-topped biscuits at the 188-year-old Casselman Inn here Monday.
“As far as I’m concerned, we’re dead in the water,” answered Delmer R. Yoder, a 76-year-old farmer and head of a community co-op trying to lease land for drilling,
Natural gas prices are at a 10-year low. From the industry’s perspective, observers say, if drilling is ever allowed in Western Maryland, the state will likely have some of the toughest regulations and perhaps the highest severance tax in the country, a heavy price to pay for access to just 1 percent of the nation’s 95,000 square miles of Marcellus Shale.
So, as executives of lease holders Chevron Corp., Enerplus Corp. and Samson Resources Co. consider what is to come after the 2014 expiration of Gov. Martin O’Malley’s executive order declaring a moratorium on drilling, they wonder: Why bother doing business here?
“We decided to allow the leases in Maryland to expire,” said Dan Larson, a spokesman for Canada-based Enerplus. The company had leased 17,000 acres in the state, but is letting leases that expire in 2012 — 40 percent of the total acreage — to terminate.
“We never got to that stage of drilling that first exploratory well,” Larson said. “Given the fact that demand is down … we’re focusing where a good solid return is expected.”
Years of delay
Amid a national debate on United States energy independence — which includes whether to exploit the Marcellus Shale for its limited but cheap natural gas reserves — Maryland has fallen far behind neighboring West Virginia and Pennsylvania, which have thousands of wells being drilled across their states.
Skeptics fear the environmental impact of hydraulic fracturing, or fracking, the controversial drilling technique that involves blasting a mixture of water, sand and chemicals a mile deep and then drilling horizontally for a mile in potentially every direction.
Drilling mistakes may have caused water contamination in Dimock Township, Pa., where residents suing Houston-based Cabot Oil & Gas Corp. agreed to a settlement in August after state and federal reports came to different conclusions on contamination of the town’s water wells.
O’Malley’s 2011 executive order mandates that a best practices study and a scientific safety study be completed to the satisfaction of the legislature before a final decision is made on fracking in Maryland.
Sen. George C. Edwards, a Republican who has represented Western Maryland in Annapolis since 1983, said he is not opposed to safety studies. But years of legislative delay — stall tactics, Edwards said — have given gas companies little reason to hope they’ll do business in Maryland anytime soon, he says.
“It will be decades,” Edwards said. “Everybody wants this done right. I’ve lived here my whole life. We don’t want to do something that is going to screw something up.”
But Edwards wants the economic opportunity that drilling creates, too.
In a remote, mountainous region of Maryland that has recently depended on the tourism industry centered around Deep Creek Lake — an industry that has declined since the Great Recession — fracking is heralded by elected officials as the area’s chance to achieve meaningful economic growth.
Extra spending money
Edwards said the industry — at the least — would put extra spending money in the pockets of locals who reap per-acre lease fees and gas-production royalties from companies granted the right to drill.
Drilling also would create jobs — truck drivers and site workers would largely be hired locally — and bring engineers from Texas and Oklahoma who would, in turn, spend money in the community.
A 2012 analysis by the Sage Policy Group, a Baltimore consulting firm, and commissioned by the Maryland Petroleum Council predicted that gas production could span 30 years, creating 1,800 jobs at the industry’s peak. The industry expects between 300 and 400 wells could be drilled in Garrett and Allegany counties.
Local businesses would likely benefit, as well — perhaps none more than Accident-based Beitzel Corp. Owned by Olen Beitzel, a third cousin of the state legislator, the company provides equipment and workers to gas companies already fracking in West Virginia and Pennsylvania.
The firm is primed to aid gas companies if they begin work in Maryland, primarily through equipment rentals, but about 40 Beitzel employees work in oil and gas, and could be sent to work at a drilling operation, too.
Beitzel said workers on a fracking job can make 50 percent more than other employees.
“They’re willing to pay if you’ve got the skills,” Beitzel said. “It’s more spendable income for community people.”
Fracking is a natural fit in a Western Maryland economy that has long been tied to energy production, including coal mining, Edwards said.
“It’s part of our heritage, these things,” he said. “If you talk to the landowners, I think you’ll find most approve it.”
Going against the grain
Perhaps most, but not all. Paul Roberts, owner of Deep Creek Cellars, a winery in Friendsville, is part of the vocal opposition to fracking. Roberts said there are many more like him — they just do not have the desire to go against the political grain in a county of 30,000 residents.
A member of the Marcellus Shale Safe-Drilling Initiative Advisory Commission, appointed by the governor to study fracking practices and safety issues, Roberts said any short-term jobs bonanza would be offset by potential future environmental consequences. He also questioned the business sense of companies spending millions of dollars to drill for such a small share of the overall national supply of Marcellus Shale.
“The people who stand to benefit most directly are a small number of large landowners, along with some of the largest corporations in the world,” Roberts said. “I don’t think the biggest questions are the environmental ones. It’s the financial model and how the risks … are going to be properly calculated and distributed.”
Roberts — at the very least — wants up-front guarantees that gas companies will be held responsible if drilling is allowed and years later it is proven the drilling contaminated water wells or caused other environmental hazards.
The winemaker has found an ally in Del. Heather R. Mizeur, a Montgomery County Democrat who is planning to sponsor legislation in the 2013 General Assembly that would impose a legislative moratorium on fracking until a safety study is completed — essentially giving force of law to the governor’s temporary moratorium.
The bill would give the Maryland Department of the Environment and Department of Natural Resources the authority to impose a per-acre fee on natural gas companies to pay for the study. Companies have balked at paying such a fee unless they’re allowed to drill test wells to determine how much natural gas is available in Maryland’s Marcellus Shale.
In the region’s blood
Yoder, the head of the community leasing co-op, said he wants to know how much gas there is, too. A farmer who also drives a school bus, Yoder said he has no agenda except to ensure that those who decide to lease their land get fair compensation. He trusts that, if allowed, MDE could develop regulations that ensure drilling is done safely.
“Do you think I want my water messed up?” he asked, rhetorically. “Do you think I want my property messed up?”
In the 1950s, natural gas wells were drilled all around Deep Creek Lake. By the 1960s, that gas was depleted, but Spectra Energy Corp. still uses the underground pipelines for natural gas storage. Area residents say there was no serious damage during and after that round of drilling, so why would there be this time?
Driving through the lush forests and rolling farmland across the mountains and valleys of Garrett County, Del. Beitzel points out a landscape dotted with natural gas compressor stations — almost invisible if you don’t know they’re there — and sections of dense forest parted by underground gas lines, similar but less noticeable than sections carved by lines carrying electricity.
Gas and coal extraction is in this region’s blood — the people know and understand the problems and challenges associated with it, Beitzel said, after decades of energy extraction — and fracking could make Western Maryland, also home to the state’s wind energy program, an energy powerhouse.
Why then, has fracking not garnered more political support in the General Assembly?
Beitzel drilled in on what he sees as the reason from his vantage point 200 miles west of the State House.
“There are 188 legislators in Annapolis,” he said, “and only two represent this area.”