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This week, the 430th legislative session of the Maryland General Assembly (MGA) came to order.  During their 90-day session, lawmakers will consider and debate over 2000 bills including a package of legislation related to natural gas drilling.  Geologists have long known about vast supplies of methane trapped in a formation of shale deep below the Appalachian Basin in portions of Western Maryland.  The development of horizontal drilling techniques and high-volume hydraulic fracturing has rapidly accelerated the pace of natural gas drilling in 34 states around the country.  With Pennsylvania and New York quickly working to put in place a regulatory regime to manage the gas boom, Maryland will not be far behind.

Last session, the MGA considered two bills designed to spur state agencies to develop the rules of the road toward responsibly ensuring the natural gas bridge remains narrow and short.  As is so often the case with the initial introduction of broad policy ideas affecting a relatively new industry, the bills died in the state senate.  Undeterred, Governor Martin O’Malley issued an Executive Order creating a commission to study the practices and potential impacts of gas drilling within the state.  Just days before the MGA banged the gavel opening this year’s session, the commission delivered its initial findings.  Part 1 of the report covers sources of revenue and liability standards for gas exploration and production.  Parts 2 and 3, due for future release, will provide recommendations for potential impacts and best practices.

Follow the Money

Delegate Heather Mizeur is expected to champion a legislative package mirroring the Commission’s revenue raising suggestions.  Among them, a fee on existing gas leases to fund Parts 2 and 3 of the Commission’s work.  We also hope to see a severance tax bill that can pay for regional monitoring and an amendment to the state’s bonding requirements that remove statutory dollar amounts in favor of bonding levels set by the Maryland Department of the Environment.

Who’s to Blame?

Who’s to say where the diesel fuel in your drinking water came from?  Just because there’s a gas well injecting many thousands of gallons of chemicals under enormously high pressures in to the ground mere feet from your property line, does not prove that industry chemicals caused your water contamination.  At least not according to Maryland’s current liability structure that relies on old common law notions of nuisance and trespass. 

The Commission report recognized the problem right away.

“A dispute between…an individual and an oil and gas company is a classic example of asymmetry of resources.” (page 19)

“…any legal theory currently available will probably require the individual to produce evidence on complex and cutting edge issues of engineering, geology, and hydrogeology.” (page 19)

Instead, the Commission asks the MGA to pass a law creating a rebuttable presumption that certain damages around the time and place of drilling activities are caused by those activities.  So that what makes sense in terms of every layperson’s notion of cause and effect will also reflect the legal concept of causation.  In addition, the Commission recommends the MGA enact a comprehensive Surface Owners Protection Act.   A dozen states already have something like this.  The purpose is to simply require the industry to provide notice to surface owners of the activities planned related to drilling operations including points of entry, placement of roads, pipelines, and a method of assessing damages to property value.

The state of Maryland has a long way to go before it has in place the right kinds of rules necessary to protect the public health and property values of its residents.  These initial Commission recommendations are a step in the right direction, but Parts 2 and 3 are really where the rubber meets the road.  It is folly to predict what will happen within the Maryland legislature.  But a productive report produced- thanks to the Governor’s initiative- delivered to the MGA in time for session, may provide the necessary momentum for a bit of progress.

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