Hydraulic fracturing test drilling could begin in Maryland within a year, said the chair of the House Environmental Matters Committee.
Delegate Maggie McIntosh, D-Baltimore, said drilling on a handful of test wells could potentially begin following the release of the Marcellus Shale Safe Drilling Initiative Advisory Commission’s next report, set to be issued Aug. 1.
The report, the second of three studies assigned to the commission, will recommend best practices for fracking in the state.
McIntosh testified at a House Ways and Means Committee hearing for HB 907, which would create a 15 percent severance tax on the wholesale market value of natural gas extracted from the Marcellus Shale region in Western Maryland.
The bill would also create a designated section in the Oil and Gas Fund to hold this revenue. Some studies estimate the natural gas industry in the state could be worth about $7.5 billion over 30 years.
Video by Richelle Gonzalez/Capital News
The major debate over the legislation is not about whether there should be a severance tax, but what that rate should be.
Some argue the rate in McIntosh’s bill, co-sponsored by Delegate Sheila Hixson, D-Montgomery, is too high.
Local severance taxes are already in place in both Allegany and Garrett counties, where the drilling would occur.
Garrett County has set the tax at 5.5 percent, and Allegany’s is slightly higher at 7 percent.
Combining both local and state severance taxes, the cost to companies could be more than 20 percent of the wholesale market value of the natural gas they drill.
Sen. George Edwards, R-Garrett, has proposed his own legislation, which calls for a 2.5 percent severance tax.
Combined with local severance taxes, the overall price under Edwards’ bill would hover at around 8 percent.
Maryland has not yet issued permits for drilling in the Marcellus Shale formation using the controversial gas extraction method known as hydraulic fracturing, or “fracking.” O’Malley’s creation of the Marcellus Shale Safe Drilling Initiative Advisory Commission introduced an effective moratorium on fracking in the state.
The commission’s final report is set to be released in August 2014.
The Marcellus Shale cuts across much of northern Appalachia and underlies a portion of Maryland’s western panhandle, including all of Garrett County and part of Allegany County.
If permits are approved, energy companies would drill horizontally into the shale layer and inject a pressurized mix of water, sand and chemicals to release the trapped gas — a process that some say endangers the environment.
McIntosh emphasized the importance of creating a severance tax before drilling commences. She said all other states with a severance tax have set it up beforehand.
After drilling for years, Pennsylvania is now having difficulty imposing a severance tax through its state legislature, McIntosh said.
“We do not want to do it like Pennsylvania,” she said repeatedly.
Drew Cobbs, executive director of the Maryland Petroleum Council, said a 15 percent severance tax could make Maryland less attractive to the fracking industry.
A 15 percent rate is significantly higher than other states within the Marcellus Shale area, Cobbs said.
“We’re sort of a captive audience here in Maryland because there isn’t activity (yet),” Cobbs said. “The question is can we attract (companies) here?”
By ELLEN STODOLA and AMANDA YEAGER