Shale Gas: Is Responsible Development an Oxymoron?

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Shale Gas Is Responsible Development an
Oxymoron?

• Elizabeth Paranhos
• Environmental Attorney

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Overview

• Game Changer?
• Real Concerns
• Risk Management
• Crisis or opportunity?

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Game Changer?

• On March 31, 2011 President Obama declared that
  recent innovations have given us the opportunity
  to tap large reserves-perhaps a centurys worth
  of shale gas.
• Shale gas was less than 2 of total U.S. energy
  production in 2001. Now it is approaching 30
  and anticipated to equal nearly 50 by 2035.
• Domestic energy sourcereduced energy
  independence. Cheap 4 gas.
• Jobs.
• Cleanest burning fossil fuel. Is it?

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Ground Truthing

• LCA-the science is still out. Howarth Study is
  on the high end. Recent National Energy
  Technology Laboratory study. Emissions 42 to 53
  percent lower than coal based electricity.
• NREL JISEA harmonization study out spring 2012.
• What about energy efficiency, renewables? Truth
  is gas is here to stay.

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• Economic prosperity, energy independence,
  drilling, cannot come at expense of human health
  and environment

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Risk Management

• How do we protect our air, water, communities,
  farms, and ecosystems?

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Air Pollution

• Oil and gas activities are the single largest
  source of methane emissions in the United States
• In 2009, the methane emitted from oil and gas
  activities equaled approximately 328 million
  metric tons of carbon dioxide equivalent (MMT
  CO2e). This figure is roughly equivalent to the
  carbon dioxide emissions emitted from 78
  coal-fired power plants.
• Potent GHG. Over a 100-year period, methane has a
  warming potential 25 times that of carbon
  dioxide. Over 20 years, 72 times more effective.
  Short life span.
• Contributes to background levels of ozone-also a
  GHG.
• Waste from venting, flaring, fugitives

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Inefficiencies and lost product

• According to a 2010 Government Accountability
  Office report around 40 of natural gas
  estimated to be vented or flared on onshore
  federal leases could be economically captured
  with currently available control technologies.
• Such reductions, if accomplished, could increase
  federal royalty payments by 23 million annually.
  
• Technologies and practices to eliminate this
  waste are available and often result in immediate
  or short-term payback due to increased gas sales.

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Ozone

• Ozone causes suite of health impacts including
  respiratory ailments and premature mortality
• NOx and VOCs are released in abundance from
  natural gas activities
• NOx and VOC emissions from gas production in the
  Barnett Shale are comparable to the combined
  emissions from all the cars and trucks in the
  Dallas Forth-Worth metro area.
• Deterioration air quality previously pristine
  areas

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Ground-level ozone

• Winter-time ozone exceedances have occurred in
  Wyoming near the Pinedale-Anticline natural gas
  field

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Air toxics

• Air toxics cause suite of illnesses including
  cancer
• Studies conducted at various locations in Texas
  and Colorado identified high levels of HAPs
  including benzene, a known carcinogen, at oil and
  gas exploration and production sites
• Benzene detected above TCEQs long-term,
  health-based comparison value of 1.4 ppb
• 11 of 32 unique areas sampled, most containing or
  in close proximity to residences
• One fenceline site reached 1,100 ppb

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EPA Action

• EPA recently proposed suite of standards to
  reduce toxic and VOC emissions. Substantial
  methane co-benefits. Rules due to take effect
  April 3, 2010.
• Scope of rules cover most significant sources of
  emissions
• Ohio General Permit for new production wells.
  Controls for dehys, tanks, combustion devices,
  equipment and pipeline leaks. Not to wells
  during drilling or fracturing phase because are
  temporary.

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• Water concerns. Do residents have reason to be
  concerned?

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Federal Drinking Water Regulatory Regime (for
most industries)

• In 1974, the Safe Drinking Water Act (SDWA) was
  enacted
• The EPAs Underground Injection Control (UIC)
  Program, under the SDWA, protects underground
  sources of drinking water (USDWs) from fluids
  injected into the ground for storage, disposal or
  enhancing oil and gas recovery.
• In 1997, the U.S. Court of Appeals for the 11th
  Circuit (Atlanta) ordered the EPA to regulate
  hydraulic fracturing under the Safe Drinking
  Water Act. This decision followed a 1989 CBM
  fracturing operation in Alabama that landowners
  say contaminated a residential water well. The
  court determined that injection, as used in the
  SDWA, means the act of forcing (a liquid) into
  a passage, cavity, or tissue. Legal
  Environmental Assistance Foundation, Inc. v. EPA,
  118 F.3d 1467, 1474 (11th Cir. 1997).

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The Haliburton Exemption

• While most underground injections of chemicals
  are subject to the protections of the Safe
  Drinking Water Act (SDWA), Congress in 2005
  exempted hydraulic fracturing as the
  underground injection of fluids or propping
  agents (other than diesel fuels) pursuant to
  hydraulic fracturing operations related to oil,
  gas, or geothermal production activities from
  the Acts most protections. Energy Policy Act of
  2005, Section 322.
• Exception if diesel fuel is used as part of
  fracking, operator must obtain a permit.
• Furthermore, the injection of frack fluids, for
  storage purposes, is subject to the UIC program,
  but is permitted into Class II wells rather than
  Class I because drilling fluids and produced
  water are not considered hazardous under RCRA.
  Exception diesel fuel.

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Real Risks?

• DOE Shale Gas Subcommitte determined risk of frac
  fluids leaking into drinking water is slim
  provided large depth of separation between
  producing zone and drinking water source.
• Surface spill migration into shallow drinking
  water formation is however real concerns, as is
  methane migration due to poor well construction.

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PA Department of Environmental Protection
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Whats in frack fluids?

• Fracking fluids are also exempt from disclosure
  requirements that would require oil and gas
  companies to disclose to the public and
  regulators the nature and concentrations of
  chemicals used in fracking.
• Frac fluid is mixture of water, sand and
  chemicals.
• Human and animal health issue. Need immediate
  access to info.

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Disclosure A Modest Proposal

• Full disclosure of all fracking constituents
• Voluntary self-disclosure is no substitute for
  mandatory disclosure under an oversight regime
  that ensures accuracy of the disclosure and
  appropriate penalties for mis-statements.
• A voluntary program offers little or nothing in
  the way of peace of mind or assurances for
  residents, or water providers.
• Companies could opt out as fast as they are
  currently opting in.
• Reporting is a disincentive to use toxic
  chemicals and push companies to be safe, towards
  industry-wide adoption of safe fracking
  substances.
• MSDS not enough. Both composition and
  concentrations
• Wyoming has model rule-Public disclosure of
  everything but proprietary. Latter disclosed to
  state.

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Green Frac fluids

• Companies should use inert, environmentally safe
  constituents.
• Public disclosure of contents of frack fluids
  will help ensure this happens
• If Chesapeakes CEO can drink fluids, all
  companies should use safe, non-toxic constituents

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Legislative fix? FRAC Act?

• 2009 House and Senate bills to remove regulatory
  SDWA exemption and require disclosure
• March 2011 Democrats reintroduce FRAC act
• April 2011 Dems release frack fluid report
  identifying 750 toxic chemicals used in fluids
• No legislative action expected soon.

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EPA action?

• The U.S. EPA is investigating whether drilling
  poses any threats to drinking water. This
  includes an examination of the chemicals used in
  fracturing fluids. Agency officials say they hope
  to have final recommendations by 2014.
• Investigating reports of drinking water
  contamination in Bradford and Susquehanna PA and
  prospective study in Washington county PA

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DOI

• August 2011 BLM announced consideration of new
  regulations for frack fluid disclosure and best
  practices re disclosure, well construction,
  wastewater, protection of drinking water
• DOI has duty to manage public lands, including
  national forests, in manner that protects water
  resources.
• Must also prevent permanent impairment of the
  quality of the environment and by regulation or
  otherwise, take any action necessary to prevent
  unnecessary or undue degradation of the lands.

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BLM Regulatory Protections

• The scope of review, recommendations and new
  policies should define the fracking process and
  associated resource concerns as broadly as
  possible. For all wells on federal leases, BLM
  should follow the example of the STRONGER program
  and cover
• Baseline surveys
• Casing and cementing plans
• Chemical information availability
• Prior notification of fracking operations
• Pit construction, maintenance and inspections
• Source STRONGER (State Review of O NG
  Environmental regulations) PA review

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Stronger Protections

• Setbacks from domestic water wells and streams
• ¼ or preferably ½ mile
• Knowledge is key A Comprehensive baseline
  studies of hydrological conditions, including an
  assessment of the potential pathways for fluid
  movement into groundwater, and plans to prevent
  such movement
• Tracers in fracking fluids to establish whether
  drilling and development operations are the cause
  of contaminating water resources.

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Well construction

• Key to limiting methane migration is proper well
  completion (cementing and casing) and pressure
  management (pressure tests of casing and
  state-of-the-art cement bond logs). Isolate
  gas-producing zone from overlaying formations.
  Sufficient casing to prevent communication
  between hydrocarbons and aquifers.
• Also microseismic surveys to ensure fracturing is
  limited to gas-producing formations
• Proper inspections and regulations are needed.

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Susquehanna County, Pennsylvania

• Date 2009
• Company and Nature of Operations There were
  several reports of methane gas migrating to the
  surface and of drinking water well exploding.
  Upon testing, the PA DEP found that nine wells
  contained methane.
• Isotopic analysis was conducted by the PA DEP
  and it was determined that the gas did indeed
  originate from a drilling formation of Cabot Oil
  Gas Corp.

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Susquehanna County, Pennsylvania

• Case Resolution and Current Status The PA DEP
  issued Cabot a notice of violation on February
  27, 2009, citing the companys failure to comply
  with Pennsylvanias Oil and Gas Act. The Notice
  also stated that PA DEPs investigation
  revealed that Cabot had caused or allowed gas
  from lower formations to enter fresh
  groundwater. Cabot must now get all casing and
  cementing plans approved by the PA DEP. (PA DEP,
  DEP Continuing Investigation Into High Methane
  Levels in Susquehanna County Wells, PA DEP Daily
  News Releases, Jan. 23, 2009)

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Bradford PA

• State fined Chesapeake Energy 1 million for
  contaminating water supplies of 16 families.
  Likely cause? Methane migration due to poor
  casing and cementing that allowed gas to migrate
  into shallow gas formations and contaminate
  wells.
• Chesapeake agreed to pay for water treatment for
  the families and stated it has enhanced its well
  construction and completion designs.
• Did not admit liability, however.

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State Regulation Casing

• Surface casing shall be cemented into or through
  a competent bed and at a depth that will allow
  complete well shut-in without fracturing the
  formation immediately below the casing shoe.
• Production casing This casing shall be
  cemented and, when required by the Division,
  tested for fluid shutoff above the zone or zones
  to be produced (CCR 1722.3)
• Must be in compliance with 3.13 and done in
  such a manner that the injected fluids will not
  endanger oil, gas, or geothermal resources and
  will not endanger freshwater formations not
  productive of oil, gas, or geothermal resources.
  (T.A.C. Title 16, Part 1, 3.46(f))
• CO requires requires operators monitor and record
  bradenhead annulus pressure during fracking to
  alert them to well construction failures. COGCC
  Rule 341

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• Fracking fluid containment ponds is pitless
  drilling a better management practice?

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Flowback and produced water

• Impoundments cause spills and release VOCs
• NYS Impoundments significant source of HAPs
• New Mexico Over half of incidents of ground
  water contamination due to faulty pits
• In Pennsylvania, state authorities were forced to
  quarantine cattle after a pit leaked into their
  field, pooling in a smelly pool that killed the
  grass.
• In Colorado, leaky pits with torn liners spilled
  more than 6,000 barrels of waste, and one leaking
  pit contaminated drinking water with benzene.
• And in Ohio, compromised pit liners and pit wall
  failures have sent pollution spilling out into
  the environment.

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Solution? Pitless drilling

• Storage tanks-reduce likelihood of spills and air
  toxic emissions
• WY requires 98 control of HAPs and VOCs from
  tanks
• CO 90 pitless operations in both the DJ and
  Piceance basins as of 2011.
• Pitless drilling may not always be an option for
  horizontal frack jobs-where not feasible, all
  pits should be lined, fenced, and recycling or
  injection should be required as much as possible
  to reduce truck traffic, minimize spills and air
  pollution.
• Multi-well pads encourage recycling. Water
  should be piped, not trucked, in between wells.

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EPA Action

• EPA recently announced rules to regulate
  wastewater. Rules will require wastewater meets
  certain standards before being sent to POTW.
  Proposed shale rule in 2014.
• Also rules for injection of diesel into
  underground injection wells

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Ecosystems

• Gas fields fragment the landscape, interfering
  with migratory routes, breeding, nesting and
  winter ranges.

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Essential protections

• Landscape level planning that provides for
  connectivity between important corridors and
  considers cumulative impacts over broad
  geographic area
• Comprehensive drilling plans. Plan must describe
  wildlife resources and proposed BMPs to mitigate
  impacts. COGCC Rule 216.
• Science-based identification of crucial wildlife
  habitat and corridors should be developed and
  disclosed and used to inform CDPs. CO/NM
  coordination.
• Adequate enforcement and monitoring of surface
  use stipulations, mitigation measures

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Wayne and other State Forest

• Insist on landscape level planning
• Ohio NEPA review?
• Adequate mitigation measures to protect streams,
  wildlife, fisheries.
• Setbacks
• Baseline monitorin
• NSO stips?

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Boom Bust Cycle
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Then what?

• A growing body of credible research evidence in
  recent decades shows that resource dependent
  communities can and often do end up worse off
  than they would have been without exploiting
  their extractive reserves. Cornell Dept. of
  City and Regional Planning, CaRDI report. David
  Kay The Economic Impact of Marcellus Shale Gas
  Drilling What Have we Learned? What are the
  Limitations?

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Who should pay and how much?

• Severance tax is a tax imposed on the value of
  nonrenewable resources that will be used the
  state from which they are extracted
• All states except NY and PA impose severance tax
• Bill in PA legislature proposed to impose impact
  fee on wells and toughen clean water protection
  laws and penalties for environmental violations.
  
• Severance tax should pay for short and long-term
  impacts of drilling to avoid undue burden on
  local communities and governments

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Do taxes and regulation deter investment?

• WY suggests no. State has some of the most
  stringent environmental regulations and a
  severance tax. Over same period of time when WY
  increased tax rate to approx 50 that of MT, and
  MT lowered it, the production value (product of
  price times volume) in WY was 5 times as high as
  CO.
• WY and CO have experienced considerable growth in
  gas production, in some cases higher than US
  overall, despite having some of toughest regs.

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Should we follow France?

• Estimated 55 municipalities have some ban
• Santa Fe ordinance
• Pittsburg, Morgantown, and NJ have banned
• NY recently lifted ban. No drilling in NYC and
  Syracuse watersheds, buffers of 500-4000 ft

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Some places are too special
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Communities need protections
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Know your rights!

• Negotiate lease terms.
• Lease term?
• Access?
• Baseline soil, air and water monitoring
• Record crop production, animal fertility rates
• Require companies clean up and compensate for any
  contamination
• Ohio has mandatory pooling. If acquire 90 of
  mineral rights, may force owners of 10 to
  participate. But no surface access to holdouts.

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No mud, no lotus

• Where do we go from here?
• Stay informed!
• Know your rights. Negotiate lease terms
• Support tough rules that protect human health and
  the environment environmental review
  state/federal lands
• Make injured plaintiff whole. Stronger fines and
  enforcement
• Protect special places and communities
  moratorium, setbacks, NSO stipulations
• Conserve and reduce energy. Energy independence
  starts with each one of us