Facing tough budget picture, West Virginia to let companies frack under Ohio River for cash

Energy Associated Press

Facing another tough budget scenario, West Virginia is ready to let companies drill for oil and natural gas deep beneath 14 miles of the Ohio River.

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On Friday, state commerce officials opened bids to drill under the northern West Virginia section of the river, which serves as a natural border with Ohio. Officials said other river tracts could be next, and a wildlife management area is under consideration.

Leasing state land for a drilling technique called hydraulic fracturing, commonly called fracking, is a new venture for West Virginia, and could produce plenty of money during uncertain budget times. A bid by Triad Hunter, for instance, would yield the state $17.8 million up front for a five-year lease, plus 18 percent in royalties from what's extracted.

"It creates what could be a substantial revenue stream at a time when budgets are very tight," said state Commerce Secretary Keith Burdette.

The state used $100 million from its Rainy Day Fund to balance this year's budget, and Gov. Earl Ray Tomblin's administration expects to need another $100 million to help shore up next year's budget, said Tomblin spokesman Chris Stadelman.

Environmentalists and citizen groups are alarmed at the drilling proposal, since it would allow drilling a mile beneath a river that provides drinking water to millions of people. State environmental regulators would have to approve permits for the operations.

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Advocates urged the governor only to think back to January, when a massive chemical spill sullied drinking water for 300,000 people in West Virginia for days. They expressed little confidence that state regulators would be diligent about safeguarding against spills.

"We need not remind you that another large-scale water contamination issue in our state and region could be devastating for West Virginia's economy and reputation, not to mention the human health costs," eight groups, including the Ohio Valley Environmental Coalition and Concerned Citizens Ohio, wrote to Tomblin on Thursday.

Elsewhere, horizontal drilling under rivers is generating state revenues.

In March and in 2010, Chesapeake Appalachia paid Pennsylvania $10.5 million for five-year leases to drill beneath two sections of the Susquehanna River, not counting royalties.

Burdette said additional lands are being considered, but state parks aren't on the table now. The actual drilling will be done off of state land. Currently, the mineral money has to go back to the Division of Natural Resources, Burdette said.

Burdette said there are some state oil and gas leases under the Ohio River dating back 25 years. But none are tied to the Marcellus and Utica shale deposits.

Jerry Mead, who has researched fracking under streams with Drexel University, called the practice a "mixed bag."

"I would say if the mining is done at a low enough density and safety measures are put in place, at least for surface water I wouldn't expect a significant impact on aquatic communities and water quality," Mead said.

Ohio has a system to detect possible contaminants in the river and its tributaries before they hit public water supplies. Its environmental agency still urged caution.

"Even with these safeguards in place, it is important that any industry who is conducting activities near critical surface water resources carefully follow all applicable rules and regulations and make sure best management practices are implemented to ensure those assets are protected," said Chris Abbruzzese, Ohio Environmental Protection Agency spokesman.

Noble Energy, Gastar Exploration and Statoil also submitted bids with 20 percent royalty rates. State officials plan to pick winners in the next week or two.