Coal and Energy Commission/
House Mining and Mineral Resources Committee

November 18, 2001, Richmond

The Coal and Energy Commission and House Mining and Mineral Resources committee held a joint meeting, during which members heard testimony on low-income energy assistance and natural gas prices and discussed coalbed methane legislative proposals.

Low-Income Energy Assistance

The chairman of the Consumer Advisory Board of the Electric Utility Restructuring Act presented the commission with an overview of low-income energy assistance and unmet need. The Consumer Advisory Board was created to assist the Legislative Transition Task Force in its work, including ensuring that residential and small business electricity customers benefit from competition. The board is in its third year of studying low-income energy assistance, including LIHEAP, weatherization, and private-sector programs. One of the board's recommendations for 2001 was introduced as HB 2473.

As introduced, the bill created the Home Energy Assistance Fund, provided for funding through income tax refund checkoffs and contributions to the Neighborhood Assistance Act, and provided for the centralization of administration of low-income assistance programs. Included in the centralization was the requirement that the Department of Social Services collect information regarding the amounts of assistance provided in Virginia and the amount of unmet need. Budget concerns in the 2001 Session led to most funding mechanisms and data collection requirements being removed from the bill, and the board is examining the possibility of renewing these recommendations for the 2002 Session. The current economy and possible changes in federal funding could have an impact on the need for assistance. The chairman noted that the commission will continue to monitor the board's recommendations through the task force and the General Assembly.

Natural Gas Prices

A representative of the Virginia Oil and Gas Association briefed the commission on what has happened to natural gas prices over the past several years. High prices last winter led to the introduction of SJR 481, asking the commission to study the rise in natural gas prices. Since February, prices have dropped dramatically. Producers mine the gas at the wellheads, transmission companies operate the pipelines to move the gas, and local distribution companies (LDCs) deliver the gas to customers. Most gas consumption is in the winter months, but production is all year long, so companies typically store a substantial amount of gas and release it when demand increases. LDCs sell the gas at no profit and are required to act as a prudent purchaser.

Last year, gas prices at the wellhead and to consumers were historically high. Depressed prices over the several years prior to 2000 led to a decrease in development of new gas wells. The unusually hot summer of 2000 also required more gas to be taken out of storage to fuel electric generation plants, leaving less stored gas available for winter consumption. Much of the price of natural gas is dependent on activity outside the Commonwealth, since Virginia produces less than one-half of one percent of the gas produced nationwide. The nation has seen a record number of wells drilled this year, so prices are now back down to where they were for the seven or eight years prior to last year.

Coalbed Methane

A proposal from of the Virginia Oil and Gas Association is a substitute version of Delegate Bryant's HB 2868 from the 2001 Session. The substitute (i) permits a coal operator to require a well operator to move the location of a proposed coalbed methane well to an alternate location within 800 feet of the original location, (ii) creates a hearing process before the Department of Mines, Minerals and Energy to resolve coalbed methane well location issues, and (iii) provides that consent for wells more than 750 horizontal feet from active areas of a coal mine shall be deemed to be granted if the applicant has obtained consent to stimulate from any coal owner holding at least a 50 percent interest in the acreage for each coal seam. Currently, coal operators must give consent to stimulate a coal seam before a permit for a new well can be heard by the department. This bill would provide for operators to object during the permitting process, rather than refusing consent before the permitting process may begin.

Members discussed the proposal at length, with several expressing concern about safety issues, particularly related to the hydraulic fracturing used to stimulate a coal seam. If the roof is damaged in the hydraulic fracturing process, the methane may migrate through the rock into other coal seams. Some members were concerned about taking away the operator's right to consent to hydraulic fracturing. A DMME representative confirmed the unpredictability of hydraulic fracturing and the lack of federal or state standards. Consensus among board members was that more information about the science of hydraulic fracturing was needed, and the commission did not vote to recommend any legislation.

Infrastructure

Senator Watkins, as chairman of the commission's Energy Preparedness Subcommittee, expressed concern about the adequacy and reliability of Virginia's energy infrastructure and has worked with the SCC to develop the details of what information may be needed to understand the state of Virginia's energy resources and infrastructure. The chairman authorized the subcommittee to meet and discuss the issue further, and their meeting will be held December 19, at 1 p.m. in Richmond. The chairman indicated that he would send a letter to Senator Norment, chairman of the Legislative Transition Task Force studying electric utility restructuring, to apprise him of the Energy Preparedness Subcommittee's activities.

Next Meeting

The next full commission meeting will be in January in Richmond before the beginning of the legislative session. Additional information about the commission and any meeting materials may be obtained at http://dls.state.va.us/cec.htm.

The Honorable William C. Wampler, Jr., Chairman
Legislative Services contact: Maureen Stinger

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