It’s All About the Bonding Requirements

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Back during the Marcellus Shale debate, PA Republicans passed bonding requirements for gas companies that are totally insufficient. This is basically a subsidy from taxpayers to natural gas companies that makes it artificially cheap for small drillers to get in the game. Low barriers to entry for small businesses is ordinarily a good thing, but in the natural gas market we want to see large well-capitalized firms who can completely cover the cost of any environmental accidents. Taxpayers should not bear any of the downside risk.

As always, Democrats should copy what Maryland’s doing if they take over in 2014:

• A minimum amount should be established for a performance bond that would be required of drillers attempting to extract natural gas by what is known as fracking.

• Drilling companies that have sufficient assets and financial stability should be allowed to self-insure.

• There should be a mechanism to verify that funds will be available to address environmental cleanups that are not covered by comprehensive liability insurance.

• The Maryland Department of the Environment should be allowed to periodically adjust required bond amounts based upon changing costs of reclamation.

This entry was posted in Environment.

4 Responses to It’s All About the Bonding Requirements

  1. Steve McIntire says:

    There are no commercial wells operating in MD presently. MD’s rules were designed to prevent gas drilling, and will be quite effective in doing so, at least until gas prices move significantly higher. But they are not a real regulatory effort since they have nothing to regulate.

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