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ENERGY REPORT (Section 5)
9/29/10
Marcellus Shale (Issues and Trends)
Purpose
The purpose of this report is to look at some of the issues and trends that impact of the Marcellus Shale gas reserves.
Violations
Report: Well drilling violations near 1,500 for Marcellus Shale
Tuesday, August 03, 2010
By Don Hopey, Pittsburgh Post-Gazette
A new report by the Pennsylvania Land Trust Association said the state has identified 1,435 violations by 43
Marcellus Shale drilling companies since January 2008, prompting environmental groups to call for quick
legislative action to protect water and land resources.
According to Monday's report, 952 of the violations were identified as having or likely to have an impact on
the environment. Those included 100 violations of the state Clean Stream Law, 268 for improper construction
of waste water impoundments; 277 for poor erosion and sedimentation plans during well pad, road and piping
construction; 16 for improper blowout prevention; and 154 for discharging industrial waste, including drilling
waste water containing toxic chemicals, onto the ground or into streams.
About 500 of the violations were administrative or safety violations and identified as not likely to degrade the
environment.
The report is based on state Department of Environmental Protection enforcement records obtained through a
Right to Know Request filed by the association. The records do not include violations of drilling wastewater
haulers: 669 traffic violations and 818 warnings during a three-day enforcement blitz in June.
Myron Arnowitt, state director for Clean Water Action, an environmental group, called the violations
"widespread" and said they demonstrated the need for updated regulation, such as that contained in House
Bill 2213, introduced earlier this year by Rep. Camille "Bud" George, D-Clearfield, to protect public
resources.
That bill would mandate DEP well inspections before and after drilling, prohibit wells within 1,000 feet of
drinking water wells, add protections for water supplies up to a half-mile from Marcellus Shale gas wells, and
require full disclosure of all hazardous chemicals used in the drilling and hydraulic fracturing of the shale
rock a mile or more below the surface.
DEP has a policy to inspect all wells but is not legally required to do so, and Jeff Schmidt, director of the
Sierra Club's Pennsylvania Chapter, said that has already caused environmental harm and has the potential to
cause more. As an example, he cited 20 Marcellus Shale wells drilled in Dimock, Susquehanna County, by
Cabot Oil & Gas Corp., that, because of poorly functioning well casings, contaminated local wells with high
enough concentrations of methane that water coming from taps inside homes could be set on fire.
"These violations could have been prevented if DEP had conducted timely inspections, Mr. Schmidt said.
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Other legislation awaiting action includes bills to place a one-year moratorium on issuance of all new
Marcellus drilling permits and House Bill 2235, which would impose a moratorium on leasing more state
forest land for drilling.
The report does not attempt to characterize whether the number of violations is high or to compare the
violation number to other industries or drilling operations in other states. Such comparisons are also
complicated by the expansion of DEP's oil and gas inspection staff from 21 to 126 in the past 18 months.
See details http://www.post-gazette.com/pg/10215/1077192-454.stm
Drinking Water Law
Fracturing Responsibility and Awareness of Chemicals (FRAC) Act: S. 1215 and H.R. 2766
(January 25, 2010) http://law.psu.edu/_file/aglaw/Natural_Gas/National_Gas_Legislation_FRAC_Act.pdf
Prepared by Robert Jochen, Research Assistant Under the Supervision of Ross H. Pifer, Director
On June 9, 2009, members of the U.S. Senate and House of Representatives introduced companion bills in Congress to
amend the federal Safe Drinking Water Act (SDWA), 42 U.S.C. § 300h, known as the Fracturing Responsibility and
Awareness of Chemicals (FRAC) Act. The SDWA grants the Environmental Protection Agency the power to set
maximum contaminant levels that may be present in public drinking water supplies and regulate activities so that the
contaminants do not pose serious health risks to the public. Under the SDWA, any entity that adversely affects the
contaminant levels may be subject to civil actions and penalties. Currently, the SDWA provides an exemption for the
oil and natural gas industry and excludes the process known as hydraulic fracturing from regulatory efforts of
underground injection controls. 42 U.S.C. § 300h(d)(1)(B)(ii). If enacted, the bills would remove the exemptions and
increase regulations on the industries.
The federal Safe Drinking Water Act provides the individual States the power to enforce minimal regulations,
established by the Administrator of the EPA, within their own boundaries. The federal SDWA seeks to prevent the
injection of any substance underground which may pollute or otherwise endanger sources of drinking water. Under the
Act, potential water wells or wellfields which provide drinking water to the public are to be identified and recorded.
The SDWA then grants individual States the power to enact regulations to prevent any contaminants from coming into
contact with this well or wellfield. Such regulations often consider such factors as the wells’ radius of supply, the
depth of the wells and other geologic information that may affect the possibility of contamination when enacting
protective regulations. Within these designated zones, the underground injection of potentially harmful chemicals or
fluid constituents is highly regulated, so as to prevent harmful levels of contaminants from infecting the public water
supply. Currently, the SDWA excludes the process known as hydraulic fracturing (a process commonly used by
natural gas producers whereby fluids are pumped underground under extreme pressures to fracture layers of shale
containing gas deposits) from underground injection regulations.
The FRAC Act proposes two major changes to the federal Safe Drinking Water Act. The first change relates to section
1421(d)(1) of the SDWA (42 U.S.C. § 300h(d)(1)(B)(ii)) which specifically excludes the underground injection of
fluids to be used in the hydraulic fracturing process. With this exemption, natural gas drilling companies can inject any
fluid or propping agent that is necessary for hydraulic fracturing into the ground, whether the fluid or propping agent
may impact surrounding water supplies or not. In practice, this exclusion enables companies to use certain fluids
which may bring contamination levels above federally proscribed limits without facing potential penalties. The
proposed amendment within the FRAC Act would remove this exemption, and explicitly include the underground
injection of fluids and other agents used in hydraulic fracturing within SDWA regulations. Therefore, any oil or
natural gas producer seeking to use hydraulic fracturing techniques would be required to apply for permits with the
States’ regulatory bodies.
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The second change the FRAC Act proposes is a two-fold amendment of § 1421(b) of the Safe Drinking Water Act (42
U.S.C. § 300h(b)). First, the FRAC Act proposes to insert a clause in 42 U.S.C. § 300h(b)(1)(C), requiring natural gas
development companies that employ the hydraulic fracturing method to disclose the chemical constituents that they
use. In addition to propping agents, hydraulic fracturing requires a fluid predominantly made up of water, but that
includes chemicals that assist in the fracturing of the shale containing oil or natural gas deposits. Currently, the federal
SDWA does not require companies to release the chemical make-up of the less than 1% of fluids that they use in
natural gas development. If enacted, the FRAC Act would require the companies to disclose the chemicals used in
hydraulic fracturing, although the exact formula will not have to be revealed. The chemical make-up is to be submitted
to and recorded by the Administrator of the individual State’s Safe Drinking Water Act, and is to be disclosed to the
public on appropriate internet sites.
The second amendment to § 1421(b) of the Safe Drinking Water Act would require the immediate disclosure of tradesecret chemicals and proprietary formulas of hydraulic fracturing fluids used in the case of an emergency. Should an
emergency arise, this portion of the FRAC Act would require companies to immediately disclose the exact
components and quantities used in its hydraulic fracturing fluids, if a treating physician believes the information is
necessary for emergency treatment. Any request for this information would require a statement of need, as well as a
confidentiality agreement, to be issued as soon as reasonably possible.
Currently, the FRAC Act bills await the approval of the committees to which they were assigned, the Senate
Environment and Public Works committee and the House Energy and Commerce committee.
Local Laws/Ordinances Superseded by Oil & Gas Act
Oil and Gas act supersedes most local ordinances
Oil & Gas Act 602
“Except with respect to ordinances adopted pursuant to the . . . Municipalities Planning Code, and the
. . . Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and
gas well operations regulated by this act are hereby superseded. No ordinances or enactments
adopted pursuant to the aforementioned acts shall contain provisions which impose conditions,
requirements or limitations on the same features of oil and gas well operations regulated by this act
or that accomplish the same purposes as set forth in this act.”
See details
http://law.psu.edu/_file/aglaw/Marcellus_Shale_in_Your_Present_and_Future_Pitt_Bradford_Outrea
ch_Nov_3_2009.pdf
Other Legislation with Possible Impact
According to a Aug 2010 article from the Williston Herald,……
http://www.willistonherald.com/articles/2010/08/02/news/doc4c56efd181735293630120.txt
While a U.S. House bill intended to address the Gulf oil spill doesn’t have language containing restrictions on
hydraulic fracturing, portions of a Senate bill are of concern to industry groups.
Energy In Depth, a company that promotes the energy industry, says they have serious concerns about the
Clean Energy Jobs and Oil Company Accountability Act of 2010. Portions of Section 4301 in the Act are of
particular concern to them.
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Energy In Depth Executive Director Lee Fuller expressed his concern with the bill that they feel conflict with
existing regulations.
He said there are serious concerns about disclosing confidential business information and doing so could have
a chilling effect on technology innovation. “The entire universe of additives used in the fracturing process is
known to regulators and the public, as is mandated as such under federal rules enforced by OSHA. The
problem with this provision is that it has the potential to create a series of legal responsibilities that operators,
and even service companies, might not be able to fulfill, especially under a scenario where folks are asked to
post information that doesn’t even belong to them,” said Fuller.
The company pointed out that if passed, companies would have to report information on additives used in
fracking, purchased from manufacturers, that they don’t have the right to disclose.
The company asserts that this would have a chilling effect on furthering fracking technology as well as
infringe on protections covering business information.
The text of the Senate bill can be found at
democrats.senate.gov/pdfs/The_Clean_Energy_Jobs_and_Oil_Accountability_Act_of_2010.pdf.
Taxes
According to a Sept 2010 article in Farm and Dairy,…..Recognizing, however, that drilling comes at a cost,
the governor pushed for a severance tax placed on drillers to be enacted Jan. 1, 2011.
He said Pennsylvania faces three challenges because of the drilling: road damage, environmental protection,
and the lack of training for emergency workers in case of a disaster.
The tax would help to fund these challenges, giving local governments funding for road transportation, and
money for fire and safety forces training.
Severance tax
Rendell said his proposal is for a severance tax to be enacted similar to the state of West Virginia. He added
almost every state has a severance tax on resource producers.
The tax would be levied on the gas companies and would be 5 percent on the sale of gas, plus an additional
4.7 cents for every 1,000 cubic feet of gas produced.
The money collected would then be paid to the state where proceeds would be divided between state and
local governments. Rendell said he would like to see a 40/50 split between local and state governments.
Rendell described the drilling that has occurred this year and planned for next year as a “modern day gold
rush” and that the money to be made by the gas companies is staggering.
“I don’t want to kill the golden goose. I just want to make sure the golden goose is paying their share,”
Rendell said.
“I will not pass something that is a giveaway for the gas companies,” Rendell said.
The governor expects a battle in the state legislature, but he hopes a vote can be taken in the House by the end
of September and then it would move to the Senate.
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See details http://www.farmanddairy.com/uncategorized/battle-begins-to-place-severance-tax-on-pamarcellus-shale-drillers/15753.html
Example of Other Technical Challenges – not in the Lime Light
According to this July 2010 article from Greening of Oil.com, …. Steel-based technologies helped start
the shale gas revolution in the United States, and shale gas producers are returning the favor by demanding
new and better steel products.
The tables are now turning, though, as seen by presentations at the Steel Business Briefing Shale Play
Tubulars Conference in Pittsburgh in June, where natural gas producers met with pipe and tube companies to
talk about the future of shale plays.
Unlike vertical wells, which simply go straight down into the earth, horizontal and direction wells create new
technical challenges, like increased torque and compression as well as changes in direction as drillers snake
wells through flat shale deposits.
“We’re actually pushing this pipe down, rotating it, turning it and we’re really pushing this material to its
limits,” said John Shoaff, president of Tulsa-based Sooner Pipe.
These are known in the industry as Oil Country Tubular Goods, or OCTG. OCTG, though, must be
specifically calibrated for regional geology, according to Vicki Avril, president and CEO of the pipe and tube
company TMK-IPSCO. “Drillers need different products for different wells. It’s not one product fits all,” she
said.
The five big shale plays in the United States each have unique characteristics. The Haynesville Shale on the
Texas-Louisiana border is the deepest of the five and as a result has the highest pressure. The Fayetteville
Shale in Arkansas is shallower, but the thickness of the shale varies significantly across the play. The
Marcellus Shale in the northeast also varies in thickness, but covers a much larger area than the Fayetteville.
These factors place different demands on OCTG. Deeper wells, higher pressures and thinner shales require
thicker tubes and stronger connections. Avril showed a variety of threading options to keep joined lengths of
pipe from bursting apart under extreme conditions. The diagrams resembled very complex zigzags to keep
pipes locked together.
The demands placed on OCTG also drive the technology, according to Doug Matthews, president of U.S.
Steel Tubular Products. Matthews pointed to several factors that guide product development, including longer
lateral sections of pipe, extreme torque, high pressures during the fracturing process and multiple fractures on
the same well. Pipe and tube companies are responding to an industry that remains fairly new in the United
States.
“It is still developing,” Matthews said.
See details http://www.greeningofoil.com/post/Shale-Report-Out-of-sight-but-not-out-of-mind.aspx
Note that the company mentioned in the article above (Sooner Pipe) is the biggest customer of U. S.
Steel http://pagasdrilling.com/tag/gas-production/
Big Impact
All of this natural gas drilling, especially in the newly discovered Marcellus Shale in Pennsylvania, is
having a dramatic effect on sales of tubular steel for drilling rigs. Steel may be one of the best ways to
play the growing love affair with natural gas. New drilling rigs, pipelines, valves and more are all needed
to build up this new natural gas infrastructure.
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Recent analysis run by Credit Suisse shows that U.S. Steel's (NYSE:X) book orders for tubular steel
have drastically risen and that company could see a return to profitability in the second quarter all due to
upticks in natural gas related projects. Steel manufacturers such as POSCO (NYSE:PKX) and ArcelorMittal (NYSE:MT) could see their tubular pipe business grow as natural gas becomes more than 24% of
the United States energy pie. http://stocks.investopedia.com/stock-analysis/2010/The-Hottest-Thing-InNatural-Gas-Steel-SLX-TS-XOM-XTO-CHK-TOT-X-PKX-MT-SID0324.aspx
Trends:
-
The drilling moratorium in New York opens markets for Pennsylvania gas.
According to an Aug 2010 article from Bloomberg Businessweek,….. Dominion
Transmission and Tennessee Gas Pipeline Co. have reached a 10-year lease
agreement to move Marcellus shale natural gas from northern Pennsylvania to
upstate New York.
Dominion Transmission's parent, Dominion Resources Inc., announced the
agreement with Houston-based Tennessee Gas Pipeline, which is owned by El Paso
Corp., on Monday.
Richmond-based Dominion says the Ellisburg-to-Craigs project includes
construction of additional compression facilities and new regulating facilities.
If federal regulators approve the project, construction would begin in March 2012
and operations would begin Nov. 1, 2012.
Dominion says it plans to file in December for a certificate from the Federal Energy
Regulatory Commission. See details
http://www.businessweek.com/ap/financialnews/D9HG410O1.htm
-
According to this survey from PSU extension, significant proportions of people had
yet to form opinions or report knowledge about Marcellus development.
Community Satisfaction Survey
Brasier said, based on the responses of nearly 2,000 participants, the survey
revealed that significant proportions of people had yet to form opinions or report
knowledge about Marcellus development. However, she said that those who have
formed opinions were pretty strong in their feelings, responding in the extreme
ends of the attitude items.
When asked about overall support for natural-gas extraction in the Marcellus,
about 45 percent support it; 33 percent neither support nor oppose it, and 21
percent oppose Marcellus exploration. She said that there was more opposition
among New York respondents, with nearly 31 percent opposing Marcellus gas
extraction. In contrast, 19 percent of Pennsylvania respondents oppose drilling in
the Marcellus. See details
http://extension.psu.edu/naturalgas/news/2010/September/webinarpressrelease
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- According to an article from Wiserearth.com, …Environmental impact
Pollution from hydraulic fracturing operations can occur by air pollution,
mishandling of toxic materials, well blowouts and migration of gas and fracking
fluids.
A well blowout in Clearfield County, PA on June 3, 2010 sent more than 35,000
gallons of fracking fluids into the air and onto the surrounding landscape. It
happened in a forested area. Campers were evacuated and the company EOG
Resources (formerly Enron Oil and Gas) and the well completion company C.C.
Forbes have been ordered to stop all of their operations in the state of Pennsylvania
pending investigation. The Pennsylvania Department of Environmental Protection
has called this a "serious incident". [1] [2]
Industry groups dispute whether hydraulic fracturing has a significant environmental
impact, with arguments centered around the extent to which fracturing fluid used far
below the earth’s surface and isolated from fresh water zones, could contaminate
surface or near-surface water supplies, impact rock shelf causing seismic events or
lead to surface subsidence.
However in April of 2010 the state of Pennsylvania banned Cabot Oil & Gas Corp.
from further drilling in the entire state until it plugs wells believed to be the source of
contamination of the drinking water of 14 homes in Dimock Township PA. The
investigation was initiated after a water well exploded on New Year's Day in 2009.
The state investigation revealed that Cabot Oil & Gas Company "had allowed
combustible gas to escape into the region's groundwater supplies."[3] See details
http://www.wiserearth.org/resource/view/396c9e3583ef73b042506895e417820a
-
According to an article from Wiserearth.com, …
Many reports, fails to recognize the difference between specific, proprietary
formulation and chemical composition as well as long standing OSHA Safety and
Health Standards. OSHA Standards – 29 CFR Part 1910.1200(i) specifically states
that "The chemical manufacturer, importer, or employer may withhold the specific
chemical identity, including the chemical name and other specific identification of a
hazardous chemical, from the material safety data sheet, provided that: The specific
chemical identity is made available to health professionals, employees, and
designated representatives in accordance with the applicable provisions of this
paragraph."[4]
On 6/8/10 the Wyoming Oil and Gas Conservation Commission voted to require full
disclosure of the fracking fluids used in natural gas wells[5] Wyoming regulators
will not share the proprietary information with the public. They will be able to use
the information to track migrating pollutants from hydraulically fractured gas
wells.[6]
See details
http://www.wiserearth.org/resource/view/396c9e3583ef73b042506895e417820a
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- According to an Aug 2010 article from the Poughkeepsie Journal,…..
To help resolve the many discrepancies between the gas industry and activists, the
EPA announced on Feb. 24 it would begin a $1.9 million study of the hydraulic
fracturing process. On July 22, the EPA held a public meeting in Pennsylvania to
discuss the direction of research. The results of this study should be available by late
2012.
http://www.poughkeepsiejournal.com/article/20100829/NEWS04/8290358/EcoFocus-Hydraulic-fracturing-poses-risks-to-us-ecosystems
-
According to a late 2009 article from Basin Oil & Gas, ……
Proppant demand rising, technology improving
In addition to naturally occurring frac sand, manmade or specially engineered
proppants, such as resin-coated sand or high-strength ceramic materials like sintered
bauxite, may also be used for fracs, according to Schlumberger’s online oilfield
glossary.
The boom in shale plays and other unconventional gas plays has been a key driver in
the evolution of proppants, and the technology is still evolving. The use of resincoated proppants and, in particular, curable resin-coated proppants has “really taken
off in the last few years,” according to Bill Kemp, sales and marketing manager for
Hexion’s Oilfield Technology Group (www.hexion.com/oilfield), which provides
resin-coated sands and ceramics for fracture stimulation.
Kemp said the demand for proppant around the world is growing exponentially.
“In 2008, there was a shortage of proppants in the industry,” Kemp continued. “It led
companies like ours to develop expansion plans to meet the needs for the industry
In the Haynesville Shale, it’s not uncommon to see 4 million pounds of resin-coated
proppant per well, or more than 2,000 tons. And that volume is growing all the time
because operators are realizing better wells with more proppant per stage, and more
stages being pumped.
Demand for uncoated sand is also bouncing back after the drop in business in 2008
and early 2009, said Justin Thomas of Vista Sand (www.vistasand.com), located in
Granbury, Texas.
Resin coating, frac tracking
So what’s hot in proppant technology these days and what’s new on the horizon as
far as new developments in proppants? For one thing, resin-coated sands continue to
gain ground.
“Once you pump the proppant down into the reservoir, the closure stress on the
proppant tends to crush the proppant,” said Hexion’s Kemp. "Resin coating makes it
stronger and also reduces the amount of proppant fines that are generated and/or
migrate through the proppant pack.”
The consumption of these ceramic proppants worldwide is a little more than one
million metric tons a year, according to China Ceramic Proppant (Guizhou) Ltd., a
manufacturer of Ceramic Proppant in Guizhou, China. The company states that this
volume is growing higher each year, as oil and gas wells go deeper and deeper.
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Smart ProppantTM technology using non-radioactive tracers is another area Kemp
sees developing. For example, Hexion’s PropTracSM fracture diagnostics technology
uses a non-radioactive tracer in the resin coating of the proppant to help operators
trace where the proppant is placed in the reservoir.
New nanoproppants
One company that says it has developed a light, strong proppant is Oxane Materials
Inc. (www.oxanematerials.com). It has created a highly conductive, ultra light
nanostructured ceramic proppant. The technology grew out of work originally
developed by professors Andrew Barron of Rice University and Mark Wiesner of
Duke University.
Oxane will commercialize two patented proppants in 2010, OxFrac™ and OxBall™.
OxFrac™ will be focused on shales of intermediate depth, such as the north Texas
Barnett Shale, and OxBall™ will be focused on deeper shales, such as the
Haynesville and Eagle Ford.
“They’re both 40/50 mesh materials and they both exhibit substantially reduced
specific gravity relative to competing products,” Coker said. “Modeling conducted
by Professor Jennifer Miskimins at the Colorado School of Mines suggests OxFrac™
could transport as much as 60 percent deeper into a gas shale, relative to competing
materials. The particles are strong because they’re ceramic and light because they’re
hollow. Given their superior sphericity, roundness, and tight size distributions,
OxFrac and OxBall should afford compelling Darcy and non-Darcy conductivity.”
While the new nanoproppants will most likely cost more than some other types of
proppants, Coker believes the extra cost will be more than offset by improved
recovery and reductions in pressure pumping, water sourcing and water disposal
expenses.
“We think operators could reduce water consumption perhaps by 30 percent in some
slick water type applications,” Coker explained.
See details http://www.fwbog.com/index.php?page=article&article=196
-
According to this website, it appears that at least one company provides
environmentally compliant frac fluids.
BJ Services PPT http://www.pogam.org/presentations/0407_06_Bricco_Environmental_Stewardship.pdf
Author
Mike Chmela (Project Director, Market Research)
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