Western Maryland sits atop the Marcellus Shale and, since approximately 2008, several companies have leased lands in anticipation of conducting hydraulic fracturing (fracing) operations in the area. Those operations have been on hold since March 2011 because of a de facto moratorium on fracing that Governor O'Malley and the Legislature put in place to give officials time to complete a two-year study of potential environmental and health impacts, and to propose rules for how fracing operations in the state should be conducted. That study is due to be completed in 2013, but in the interim Maryland legislators have proposed almost 20 bills aimed at fracing activity in the State. Stakeholders should be aware of recent actions taken on two of these legislative proposals.
First, $1 milion reportedly is required to finish the administration’s study, and funding has not been provided for in this year's state budget. To close this funding gap, Governor O'Malley recently proposed legislation that would have imposed a one-year fee of $10.00 (Senate version) or $15.00 (House version) per acre on all lands already leased in western Maryland for potential fracing activity. After the General Assembly rejected that fee legislation, Governor O'Malley announced that his administration will complete the study with funds from other (yet undisclosed) sources. The issue for stakeholders is that, the lack of funds may delay the study’s completion -- meaning that Maryland stakeholders may have to wait until 2014, or longer, to see if fracing will be allowed and under what rules.
Indeed, whether fracing takes place at all may be the next battle in Maryland. Representative Heather Mizeur (D-Montgomery County), who introduced the fee legislation in the Maryland House, has warned that she may now seek a permanent ban on fracing in light of industry's opposition to the fee bill. Fracing stakeholders with an existing (or potential) interest in Maryland may want to keep an eye on Annapolis in the coming months before committing resources to the Old Line State.
Second, on April 6, the Maryland General Assembly passed another of Rep. Mizeur's legislative initiatives, a bill that creates a "presumptive impact area" around a well that has been hydraulically fractured. Under this new rule, well operators will be presumed responsible for any contamination that occurs within 2,500 of a well for one year after the last operational activity on that well. The operator will bear the burden of proving that any such contamination was not caused by its fracing operations. If this burden cannot be met, the operator will be required to install a new water supply well (or retrofit the existing supply well) for anyone impacted by the contamination. Burden-shifting rules exist in several states for contamination caused by leaking underground storage tanks, and legislation similar to Maryland's also has been proposed in New York. Because such rules make it easier for property owners to sue for alleged impacts to their private water supplies, they may encourage litigation – something fracing stakeholders may want to take into account before setting up shop in Maryland.