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Friday, January 22, 2010
Under some of the most beautiful parts of rural New York State in the pre-Jurassic era formation called the Marcellus Shale is an unimaginable fortune in natural gas. Getting that gas to market has become an obsession of Wall Street and the biggest gas drilling companies in the world. In this gas rush, New York is fast becoming a geological science experiment that many experts fear will have profound, dire environmental and health consequences. The drilling companies use a witch’s brew of water, pressure and chemicals to force the gas from the shale. It is the secrecy of what is in that brew that has New Yorkers worried and many suspicious. Even the New York Department of Environmental Conservation (DEC) has not yet identified all of the compounds in products proposed for use in fracturing shale.
Now, the world’s largest drilling fluid supplier is licensing new technologies that have never before been used on a large scale as they work to develop more effective ways to extract natural gas. These new fluids will include nanotechnology, according to the largest supplier of drilling fluids in the world. This potential application of nanotechnology, a branch of science involving the technological manipulation of particles about one-tenth the size of a human cell, has not been thoroughly vetted and tested in natural gas wells.
“What we have done in our group, for example, is to develop nanoparticles that can be used with water-based fluids so that you can put them in water and drill with them,” said Mukul Sharma, a professor in the Department of Petroleum and Geosystems Engineering at University of Texas. “And the advantage of that is that these nanoparticles have the same dimensions as the pores in the shales, so they tend to plug these pores.”
Gas shale development requires the use of oil-based drilling fluids because water-based drilling fluids interact with the shale causing it to expand or contract leading to instability of the wellbore, according to Sharma. Oil-based drilling fluids are expensive and can be harmful to the environment. New developments may reduce the need for oil-based drilling fluids. Sharma and his colleagues applied silica particles about five to 40 nanometers in diameter to different kinds of water-based drilling fluids to plug pores in shale samples reducing water invasion. He and his colleagues filed patents for the use of nanoparticles in drilling fluids earlier this year.
“We’re licensing these things with the intent of applying them,” said Jim Freidheim, M-I SWACO corporate director of fluids research.
M-I SWACO, the largest drilling fluids supplier in the world, licensed this technology a couple of months ago, according to Sharma. None of the drilling fluids M-I SWACO sells commercially utilize these nanoparticles yet, but the company has a “significant effort” on nanotechnology underway with the University of Texas and Rice University, said Freidheim. The use of drilling fluid involving these developments in field operations is at least six months away, he said.
“It’s like we’re conducting an experiment with some of these nanotechnologies,” said Richard Charter, government relations consultant for Defenders of Wildlife. “Nanotechnology is a whole area of – I wouldn’t call it toxicity – but impacts on living organisms which is not yet understood at all.”
The environmental, legal and financial issues surrounding natural gas extraction are complex. Environmentalists fear increased natural gas production has a huge risk of ruining some of the most pristine watershed, park, farm and recreational land in the United States. Investors and some landowners see dollars signs. The share prices of gas companies participating in the Marcellus Shale gas rush are rising even as the price for natural gas is dropping. The price the drilling companies are paying landowners for leases is also rising.
Landowners who do not want to take part in the drilling can be forced into participating under New York law. They may be held liable if the gas company damages the environment dependent on what option they select when selling mineral rights. Vast amounts of fresh water will be turned into waste by the drilling process.
Sedimentation of marine, mud and clay deposits from an ancient river delta formed the Marcellus Shale across the Appalachian Basin around 350 to 415 million years ago. It exists up to 9,000 feet below ground – mainly beneath present day New York, West Virginia, Pennsylvania and Ohio – and covers an area of about 54,000 square miles. The compression and heating of organic matter with the Marcellus Shale over millions of years formed hydro-carbons, including natural gas dispersed throughout the formation.
“The Marcellus is going to require some large frac jobs – they’re going to pump a lot of water into this rock to break it,” said Gary Lash, State University of New York Fredonia geosciences professor.
Drillers create artificial fractures in shale to release natural gas, predominately using a method called hydraulic fracturing. During hydraulic fracturing well operators inject a mixture of water and chemicals – about two to nine million gallons of water with chemicals making up about one to five percent of the total volume – into wells at extremely high pressure to crack and prop open the shale. The degree of risk posed by the chemicals in fracturing and drilling fluids depends on their concentrations and the nature of exposure.
Drillers prefer horizontal wells over vertical wells in the Marcellus Shale for multiple reasons. First, horizontal wells provide a better return on investment. Although horizontal wells cost approximately 80 percent more than vertical wells, they are nearly 400 percent more productive. Additionally, horizontal wells allow drillers to receive the maximum benefit from natural fractures in the Marcellus Shale. Drillers intersect more natural fractures when drilling horizontally, compared to drilling vertically, because most of the existing fractures are orientated vertically in the Marcellus Shale. Out of the total drilling permits applications the DEC received in 2007, about 10 percent were for horizontal wells.
The DEC released a draft assessment on potential risks from the use of horizontal drilling and high-volume hydraulic fracturing in the New York region of the Marcellus Shale on Sept. 30. This draft assessment includes proposed measures to ensure safe operations and mitigate environmental impacts from this type of drilling. The DEC has set an effective moratorium on the issuance of drilling permits utilizing these methods of extraction in the Marcellus Shale until the completion of the public comment period, scheduled to end Dec. 31.
“There’s this huge ecological gem that is about to get industrialized,” said Wes Gillingham, Catskill Mountainkeeper program director. “This is probably one of the biggest landscape changes that the East has seen in a really long time.”
Gillingham and others with similar concerns fear an influx of drilling in the Marcellus Shale will disrupt a thriving ecosystem, including four mountain ranges and 176 lush state parks frequented by tourists. Around 200 nesting birds and 40 rare animals and plants – like bald eagles, bobcats and broom crowberry – inhabit Sam’s Point Preserve alone, located at the highest point of the Shawangunk Mountains. Water bodies, including 7,500 lakes and ponds and 50,000 miles of rivers and streams, are home to fish – like brown trout, smallmouth bass and bluefish. Hundreds of miles of coastline hug the eastern side of the state; vineyards and farms are scattered throughout the landscape.
Oil and gas extraction supplies half a billion dollars to New York’s economy annually. While last year, tourists spent approximately $53 billion in the state, and New York farmers brought in a total of about $4.4 billion. But it is what Wall Street sees as the potential of New York’s gas industry that has resulted in investments in drilling companies participating in the Marcellus Shale despite current low natural gas prices. From 2000 to 2008, the number of active oil and gas wells in the state nearly doubled from 6,845 to 13,687. New York produced 50.32 billion cubic feet of gas last year. Estimations of the total natural gas content in the Marcellus Shale range from 168 trillion to 516 trillion cubic feet. According to the DEC, about 15 active vertical gas wells and no horizontal wells exist in the New York region of the Marcellus Shale. Texas billionaire George Mitchell, responsible for natural gas production in the North Texas Barnett Shale, is financing wells for Alta Resources, and Statoil and Range Resources Corp. invested $1.25 billion in Chesapeake Energy Corp.’s assets in the Marcellus Shale, according to Bloomberg.com.
Tourism is the second largest economic driver, next to farming, in Ulster County. Richard Remsnyder, director of Ulster County Tourism, said it is “quite an economic development engine” in the county and helps to keep the tax rate down. He said drilling is “highly unlikely” to occur in Ulster County because it is located in the New York City watershed. The New York City water supply serves approximately 9 million people, or half the state’s population. This unfiltered-water supply – fed primarily through surface water from 19 reservoirs and three controlled lakes – delivers about 1.1 billion gallons to the City daily. Chesapeake Energy Corp., which holds leases for about 5,000 acres in the City watershed, announced on Oct. 28 that it will not drill in this area. This announcement is not legally binding. Remsnyder said if drilling were to occur in Ulster County, it would probably impact tourism. Campers may not look at the landscape favorably due to activities associated with drilling, he said.
A variety of potential dangers accompany gas production. Toxic mud and fluids from drilling on site and around the well pads, in addition to wastewater produced during drilling that resurfaces, could contaminate soil and surface water. The transport of fracturing fluids and wastewater to and from the site on public roads may result in tanker accidents having similar effects. Problems associated with casing around drill bits – like improper sealing, breaks or leaks from pressure – may threaten groundwater when well operators drill through water-bearing formations. And Bruce Baizel, oil and gas accountability senior staff attorney for Earthworks, said hydraulic fracturing may also contaminate groundwater due to the existence of natural fractures in the Marcellus Shale. Artificial fractures may track up to existing fractures allowing fluids to travel through them and contaminate water above the natural gas bearing zone when fracturing with high pressure, he said. According to Yancey Roy, the DEC director of communications, it is unlikely fluid will flow out of the Marcellus Shale for the same reasons gas is trapped in the rock: “It has very low permeability.”
“Working with industry and regulators on a task force regarding hydraulic fracturing, it became clear that they don’t know how to control those fractures very well,” said Baizel. “They sort of hope and rely on the formations above and below to buffer those fractures.”
Larry Haskell, head of the Joint Landowners Coalition, which formed so landowners could share information on offers to lease their property for drilling, said environmentalists are “poorly educated” and fail to do an “ample job” of researching their information and the media has presented a slanted view against natural gas production. Haskell said he is willing to lease his mineral rights to gas companies and that groundwater contamination from gas drilling is unlikely. Gas companies do a good job of casing wells, he said. Well casing consists of a series of metal tubes or pipes placed inside one another to transport gas to the surface, prevent blowouts and the collapse of the wellbore, and protect ground water from contaminants involved in gas production, like those in drilling fluids. Haskell said potential for contamination to surface water or soil at drilling sites exists, but he is confident the DEC will handle the problem appropriately.
“We’ve gone into a snag here where the extremists continually try to stop anymore drilling in New York State,” said Haskell. “They call themselves environmentalists, we do not consider them to be the environmentalists – we’re the environmentalists.”
But not all New Yorkers are as willing to lease their land for gas drilling. Nicholas Riolo has lived in Earlville, N.Y., for about 18 years. He said Earlville is a very “rural” area with “nice, wholesome” people, but it is a “low-income” area compared to the rest of the state. Around June 2002, a landman, or salesman, for Nornew, Inc. – with a printed gas lease in hand – approached Riolo at his home requesting he lease his land. Riolo declined the offer because he felt it was an unworthy investment. Over the next six years on several occasions, landmen from Nornew, Inc. came to his home proposing that he lease to them. According to Riolo, they attempted to bypass him by getting his wife to sign a lease when he was not home.
“My outlook of it is they are a used-car salesman,” he said, “they’ll promise you the world, and they’re not standing up to the promises they make.”
New York state law authorized Nornew, Inc. to extract gas from beneath Riolo’s property in the absence of a lease, due to the Compulsory Integration Statute. The Compulsory Integration Statute empowers gas companies that own the mineral rights to 60 percent of the land in a spacing unit, the area of the targeted-rock formation for natural gas extraction, to obtain gas from the remaining subsurface area of the unit without the property owners’ consent.
Workers from th eSouthwestern Energy use horizontal drilling and hydraulic fracturing to tap natural gas resources from the Mississippian Fayetteville Shale. Photo: Arkansas Geological Survey
“This whole issue of gas drilling is so new here that even lawyers, like myself, who are quote unquote experts in the environmental arena just have no knowledge or background with these drilling laws,” said Riverkeeper staff attorney James Simpson.
When the DEC issues a well permit, it schedules a public hearing to determine how property owners without gas leases in the spacing unit will integrate with the other properties in the unit. The well operator issues an election form to effected parties with the following three compulsory integration options at least 30 days before the hearing: integration as a royalty owner, integration as a non-participating owner and integration as a participating owner. Property owners have 21 days after they receive the form to elect an option. Those choosing to integrate as either a non-participation owner or a participating owner can be held liable for environmental damage or destruction to other properties.
“We went to Texas and retained an attorney down there,” said Joint Landowners Coalition head Haskell. “For the simple reason, that they have been drilling a lot of gas and a lot of oil wells down in that area, and they have the expertise.”
The Joint Landowners Coalition consists of 24 neighborhood coalitions from nine south-central counties in New York, representing over 15,000 households. Each neighborhood coalition in the Joint Landowner’s Coalition has its own attorney to handle the gas leases. Haskell’s immediate coalition is the Central Broome Landowners Association. He said their attorney works in conjunction with a Texas attorney. Gas companies and landholders from some coalitions put money in escrow when they agree on a lease. Many of the coalition attorneys do not receive compensation for their services until the deeds are cleared on the leases and money from the escrow account is dispersed to landholders. A dollar amount is fixed per acre, and the attorneys’ compensation depends on the number of leased acres.
Haskell said he and other property owners have fought over issues with environmentalists, specifically the full disclosure of chemicals used to fracture shale. He said he wants the chemicals listed on site but fails to see the necessity of making this information public knowledge. Revealing this information stirs public fears, according to Haskel. The DEC considered the Coalition’s proposal to keep the full disclosure of chemicals used to fracture shale inaccessible to the public, he said. “A lot of these – so called contaminants – are used in everyday households.”
Research on wastewater from gas drilling has revealed that the flowback water contains more chemicals than those solely found in household products. For example, the DEC identified high levels of radium-226, a radioactive element, in 13 samples of wastewater from gas drilling in the Marcellus Shale, according to an article in ProPublica. The Marcellus Shale contains natural occurring radioactive material. It also contains material which produces acid, like sulfides and pyrite. This poses the question of whether natural sources from the shale or products involved in gas production led to the existence of radium-226.
The Sept. 30 draft contains a list of chemicals service companies and chemical suppliers submitted to the DEC for use in fracturing operations and another list containing chemicals that were detected in flowback water from drilling in Pennsylvania and West Virginia wells. Anthony Hay, director of Cornell University’s Institute for Comparative and Environmental Toxicology, and Amy Risen, a graduate student in the program, identified chemicals coming out of the Pennsylvania and West Virginia wells that were not listed in the draft. According to Hay, these chemicals were “quite toxic.” Two chemicals they highlighted are 4-nitroquinoline N-oxide, a chemical mostly known for its use in inducing tumors in laboratory animals, and benzene, a known carcinogen.
Hay identified concentrations of benzene in the most contaminated well at 500 times the maximum allowable contaminant level for drinking water established by the U.S. Environmental Protection Agency. According to Hay, it is possible the benzene is coming from natural sources in the ground. But he said it is “extremely” unlikely that the 4-nitroquinoline N-oxide could be attributed to natural ground sources based on the concentrations that have been reported. Hay said 4-nitroquinoline N-oxide is not widely studied and there is little-to-no knowledge of how it behaves and the risk it poses.
“The Department of Health is seriously studying the environmental impact study to ensure that both public and private water supplies are protected,” said Jeffrey Hammond, a spokesman for the New York State Department of Health. But the health department cannot protect the public if it does not know the composition of all the compounds the drilling companies want to use.
Dennis Holbrook, executive vice president for Norse Energy Corporation, which has been engaged in exploration of natural gas in central New York since 1996 and drilled over half of the horizontal wells in New York last year said that the companies try to keep as much information as possible secret .“When you start getting into the detailed particulars, that’s something that sort of falls back on the companies that actually create the product, particularly the composition that they have,” Holbrook said. “And they’ve tried to treat that sort of like the…old Secret Potion #7 for Coca-Cola.”
Alison Sickle discusses the environmental impacts of drilling.
The DEC draft assessment contains the complete composition of components in 152 products, out of 197 products, submitted to the Department for proposed use to fracture shale. It has identified 260 unique chemicals in the products, but 40 additional compounds need further disclosure, according to the draft. Roy from the DEC said that before the Department issues drilling permits for natural gas wells, applicants must disclose all chemicals intended for use.
Some who have reviewed the draft give the DEC credit. Baizel said it is the most thorough state-prepared document of this nature he has examined. Analyses in the draft cover many issues, like the effect of water withdrawal for hydraulic fracturing on stream flow and methods of waste product disposal. Examples of mandatory mitigation measures include on-site, liquid-storage setbacks from surface waters and heightened oversight at drilling sites.
“In a broad sense, I think we believe that it’s a valid attempt on the part of the regulator to safeguard the public and to encourage what they think could be a very significant economic benefit to the state,” said Holbrook.
Other individuals who have reviewed the draft express concern. Katherine Nadeau, water and natural resources program associate for Environmental Advocates of New York, said the DEC can make “exceptions from permit to permit.” The draft proposes that permit applicants for horizontal drilling and high-volume hydraulic fracturing provide additional information on applications. It includes mandatory measures to mitigate environmental impacts for all drillers, but the Department determines other terms of a drilling permit, including additional mitigation measures, according to information supplied in the application. Nadeau said this will make it difficult to see terms included in each permit. The Freedom of Information Law requires the DEC to provide the public with the terms of drilling permits upon proper request. Obtaining copies of all the drilling terms would be costly and time consuming.
Many environmentalists are concerned the draft failed to address the combined effects of gas production from multiple wells in one region. “The Department needs to make a reasonable worst-case assessment of how much drilling is likely to be taking place at the same time in particular regions and then analyze what the cumulative impacts of that level of activity would be on, for example, water resources,” said Kate Sinding, Natural Resources Defense Council senior attorney.
Some New Yorkers question the ability of New York water treatment facilities to handle an increase of wastewater from an influx in drilling. According to a 2008 report by the DEC, New York needs approximately $36.2 billion over the next 20 years to upgrade its current municipal wastewater facilities. The draft identifies several water treatment facilities that could consider accepting wastewater from gas production because they have approved pre-treatment programs. The water treatment facilities listed in the draft must perform an analysis and possibly modify their State Pollutant Discharge Elimination System permits before receiving any wastewater, according to Roy.
A tower drilling horizontally into the Marcellus Shale Formation for natural gas. Photo wikicommons / Ruhrfisch
Pete Grannis, the DEC commissioner, said at the New York State Assembly hearing on oil and gas drilling last year that the Department will “certainly” need additional staff if it receives a large number of applications for drilling permits using horizontal drilling and high-volume hydraulic fracturing. The DEC currently has 17 inspectors in its Division of Mineral Resources who have a wide range of duties beyond monitoring drilling company compliance with state laws. Federal exemptions to industrial drilling limit the EPA’s ability to assist state regulators using statutes including the Safe Drinking Water Act and the Clean Water Act.
“If the states are under financial duress, they don’t have time or money or personnel to do risk assessments for all of these chemicals that are not even well characterized,” said Cornell University’s Hay.
http://en.wikipedia.org/wiki/Marcellus_Formation
“What we have done in our group, for example, is to develop nanoparticles that can be used with water-based fluids so that you can put them in water and drill with them,” said Mukul Sharma, a professor in the Department of Petroleum and Geosystems Engineering at University of Texas. “And the advantage of that is that these nanoparticles have the same dimensions as the pores in the shales, so they tend to plug these pores.”
Gas shale development requires the use of oil-based drilling fluids because water-based drilling fluids interact with the shale causing it to expand or contract leading to instability of the wellbore, according to Sharma. Oil-based drilling fluids are expensive and can be harmful to the environment. New developments may reduce the need for oil-based drilling fluids. Sharma and his colleagues applied silica particles about five to 40 nanometers in diameter to different kinds of water-based drilling fluids to plug pores in shale samples reducing water invasion. He and his colleagues filed patents for the use of nanoparticles in drilling fluids earlier this year.
“We’re licensing these things with the intent of applying them,” said Jim Freidheim, M-I SWACO corporate director of fluids research.
M-I SWACO, the largest drilling fluids supplier in the world, licensed this technology a couple of months ago, according to Sharma. None of the drilling fluids M-I SWACO sells commercially utilize these nanoparticles yet, but the company has a “significant effort” on nanotechnology underway with the University of Texas and Rice University, said Freidheim. The use of drilling fluid involving these developments in field operations is at least six months away, he said.
“It’s like we’re conducting an experiment with some of these nanotechnologies,” said Richard Charter, government relations consultant for Defenders of Wildlife. “Nanotechnology is a whole area of – I wouldn’t call it toxicity – but impacts on living organisms which is not yet understood at all.”
The environmental, legal and financial issues surrounding natural gas extraction are complex. Environmentalists fear increased natural gas production has a huge risk of ruining some of the most pristine watershed, park, farm and recreational land in the United States. Investors and some landowners see dollars signs. The share prices of gas companies participating in the Marcellus Shale gas rush are rising even as the price for natural gas is dropping. The price the drilling companies are paying landowners for leases is also rising.
Landowners who do not want to take part in the drilling can be forced into participating under New York law. They may be held liable if the gas company damages the environment dependent on what option they select when selling mineral rights. Vast amounts of fresh water will be turned into waste by the drilling process.
Sedimentation of marine, mud and clay deposits from an ancient river delta formed the Marcellus Shale across the Appalachian Basin around 350 to 415 million years ago. It exists up to 9,000 feet below ground – mainly beneath present day New York, West Virginia, Pennsylvania and Ohio – and covers an area of about 54,000 square miles. The compression and heating of organic matter with the Marcellus Shale over millions of years formed hydro-carbons, including natural gas dispersed throughout the formation.
“The Marcellus is going to require some large frac jobs – they’re going to pump a lot of water into this rock to break it,” said Gary Lash, State University of New York Fredonia geosciences professor.
Drillers create artificial fractures in shale to release natural gas, predominately using a method called hydraulic fracturing. During hydraulic fracturing well operators inject a mixture of water and chemicals – about two to nine million gallons of water with chemicals making up about one to five percent of the total volume – into wells at extremely high pressure to crack and prop open the shale. The degree of risk posed by the chemicals in fracturing and drilling fluids depends on their concentrations and the nature of exposure.
Drillers prefer horizontal wells over vertical wells in the Marcellus Shale for multiple reasons. First, horizontal wells provide a better return on investment. Although horizontal wells cost approximately 80 percent more than vertical wells, they are nearly 400 percent more productive. Additionally, horizontal wells allow drillers to receive the maximum benefit from natural fractures in the Marcellus Shale. Drillers intersect more natural fractures when drilling horizontally, compared to drilling vertically, because most of the existing fractures are orientated vertically in the Marcellus Shale. Out of the total drilling permits applications the DEC received in 2007, about 10 percent were for horizontal wells.
The DEC released a draft assessment on potential risks from the use of horizontal drilling and high-volume hydraulic fracturing in the New York region of the Marcellus Shale on Sept. 30. This draft assessment includes proposed measures to ensure safe operations and mitigate environmental impacts from this type of drilling. The DEC has set an effective moratorium on the issuance of drilling permits utilizing these methods of extraction in the Marcellus Shale until the completion of the public comment period, scheduled to end Dec. 31.
“There’s this huge ecological gem that is about to get industrialized,” said Wes Gillingham, Catskill Mountainkeeper program director. “This is probably one of the biggest landscape changes that the East has seen in a really long time.”
Gillingham and others with similar concerns fear an influx of drilling in the Marcellus Shale will disrupt a thriving ecosystem, including four mountain ranges and 176 lush state parks frequented by tourists. Around 200 nesting birds and 40 rare animals and plants – like bald eagles, bobcats and broom crowberry – inhabit Sam’s Point Preserve alone, located at the highest point of the Shawangunk Mountains. Water bodies, including 7,500 lakes and ponds and 50,000 miles of rivers and streams, are home to fish – like brown trout, smallmouth bass and bluefish. Hundreds of miles of coastline hug the eastern side of the state; vineyards and farms are scattered throughout the landscape.
Oil and gas extraction supplies half a billion dollars to New York’s economy annually. While last year, tourists spent approximately $53 billion in the state, and New York farmers brought in a total of about $4.4 billion. But it is what Wall Street sees as the potential of New York’s gas industry that has resulted in investments in drilling companies participating in the Marcellus Shale despite current low natural gas prices. From 2000 to 2008, the number of active oil and gas wells in the state nearly doubled from 6,845 to 13,687. New York produced 50.32 billion cubic feet of gas last year. Estimations of the total natural gas content in the Marcellus Shale range from 168 trillion to 516 trillion cubic feet. According to the DEC, about 15 active vertical gas wells and no horizontal wells exist in the New York region of the Marcellus Shale. Texas billionaire George Mitchell, responsible for natural gas production in the North Texas Barnett Shale, is financing wells for Alta Resources, and Statoil and Range Resources Corp. invested $1.25 billion in Chesapeake Energy Corp.’s assets in the Marcellus Shale, according to Bloomberg.com.
Tourism is the second largest economic driver, next to farming, in Ulster County. Richard Remsnyder, director of Ulster County Tourism, said it is “quite an economic development engine” in the county and helps to keep the tax rate down. He said drilling is “highly unlikely” to occur in Ulster County because it is located in the New York City watershed. The New York City water supply serves approximately 9 million people, or half the state’s population. This unfiltered-water supply – fed primarily through surface water from 19 reservoirs and three controlled lakes – delivers about 1.1 billion gallons to the City daily. Chesapeake Energy Corp., which holds leases for about 5,000 acres in the City watershed, announced on Oct. 28 that it will not drill in this area. This announcement is not legally binding. Remsnyder said if drilling were to occur in Ulster County, it would probably impact tourism. Campers may not look at the landscape favorably due to activities associated with drilling, he said.
A variety of potential dangers accompany gas production. Toxic mud and fluids from drilling on site and around the well pads, in addition to wastewater produced during drilling that resurfaces, could contaminate soil and surface water. The transport of fracturing fluids and wastewater to and from the site on public roads may result in tanker accidents having similar effects. Problems associated with casing around drill bits – like improper sealing, breaks or leaks from pressure – may threaten groundwater when well operators drill through water-bearing formations. And Bruce Baizel, oil and gas accountability senior staff attorney for Earthworks, said hydraulic fracturing may also contaminate groundwater due to the existence of natural fractures in the Marcellus Shale. Artificial fractures may track up to existing fractures allowing fluids to travel through them and contaminate water above the natural gas bearing zone when fracturing with high pressure, he said. According to Yancey Roy, the DEC director of communications, it is unlikely fluid will flow out of the Marcellus Shale for the same reasons gas is trapped in the rock: “It has very low permeability.”
“Working with industry and regulators on a task force regarding hydraulic fracturing, it became clear that they don’t know how to control those fractures very well,” said Baizel. “They sort of hope and rely on the formations above and below to buffer those fractures.”
Larry Haskell, head of the Joint Landowners Coalition, which formed so landowners could share information on offers to lease their property for drilling, said environmentalists are “poorly educated” and fail to do an “ample job” of researching their information and the media has presented a slanted view against natural gas production. Haskell said he is willing to lease his mineral rights to gas companies and that groundwater contamination from gas drilling is unlikely. Gas companies do a good job of casing wells, he said. Well casing consists of a series of metal tubes or pipes placed inside one another to transport gas to the surface, prevent blowouts and the collapse of the wellbore, and protect ground water from contaminants involved in gas production, like those in drilling fluids. Haskell said potential for contamination to surface water or soil at drilling sites exists, but he is confident the DEC will handle the problem appropriately.
“We’ve gone into a snag here where the extremists continually try to stop anymore drilling in New York State,” said Haskell. “They call themselves environmentalists, we do not consider them to be the environmentalists – we’re the environmentalists.”
But not all New Yorkers are as willing to lease their land for gas drilling. Nicholas Riolo has lived in Earlville, N.Y., for about 18 years. He said Earlville is a very “rural” area with “nice, wholesome” people, but it is a “low-income” area compared to the rest of the state. Around June 2002, a landman, or salesman, for Nornew, Inc. – with a printed gas lease in hand – approached Riolo at his home requesting he lease his land. Riolo declined the offer because he felt it was an unworthy investment. Over the next six years on several occasions, landmen from Nornew, Inc. came to his home proposing that he lease to them. According to Riolo, they attempted to bypass him by getting his wife to sign a lease when he was not home.
“My outlook of it is they are a used-car salesman,” he said, “they’ll promise you the world, and they’re not standing up to the promises they make.”
New York state law authorized Nornew, Inc. to extract gas from beneath Riolo’s property in the absence of a lease, due to the Compulsory Integration Statute. The Compulsory Integration Statute empowers gas companies that own the mineral rights to 60 percent of the land in a spacing unit, the area of the targeted-rock formation for natural gas extraction, to obtain gas from the remaining subsurface area of the unit without the property owners’ consent.
Workers from th eSouthwestern Energy use horizontal drilling and hydraulic fracturing to tap natural gas resources from the Mississippian Fayetteville Shale. Photo: Arkansas Geological Survey
“This whole issue of gas drilling is so new here that even lawyers, like myself, who are quote unquote experts in the environmental arena just have no knowledge or background with these drilling laws,” said Riverkeeper staff attorney James Simpson.
When the DEC issues a well permit, it schedules a public hearing to determine how property owners without gas leases in the spacing unit will integrate with the other properties in the unit. The well operator issues an election form to effected parties with the following three compulsory integration options at least 30 days before the hearing: integration as a royalty owner, integration as a non-participating owner and integration as a participating owner. Property owners have 21 days after they receive the form to elect an option. Those choosing to integrate as either a non-participation owner or a participating owner can be held liable for environmental damage or destruction to other properties.
“We went to Texas and retained an attorney down there,” said Joint Landowners Coalition head Haskell. “For the simple reason, that they have been drilling a lot of gas and a lot of oil wells down in that area, and they have the expertise.”
The Joint Landowners Coalition consists of 24 neighborhood coalitions from nine south-central counties in New York, representing over 15,000 households. Each neighborhood coalition in the Joint Landowner’s Coalition has its own attorney to handle the gas leases. Haskell’s immediate coalition is the Central Broome Landowners Association. He said their attorney works in conjunction with a Texas attorney. Gas companies and landholders from some coalitions put money in escrow when they agree on a lease. Many of the coalition attorneys do not receive compensation for their services until the deeds are cleared on the leases and money from the escrow account is dispersed to landholders. A dollar amount is fixed per acre, and the attorneys’ compensation depends on the number of leased acres.
Haskell said he and other property owners have fought over issues with environmentalists, specifically the full disclosure of chemicals used to fracture shale. He said he wants the chemicals listed on site but fails to see the necessity of making this information public knowledge. Revealing this information stirs public fears, according to Haskel. The DEC considered the Coalition’s proposal to keep the full disclosure of chemicals used to fracture shale inaccessible to the public, he said. “A lot of these – so called contaminants – are used in everyday households.”
Research on wastewater from gas drilling has revealed that the flowback water contains more chemicals than those solely found in household products. For example, the DEC identified high levels of radium-226, a radioactive element, in 13 samples of wastewater from gas drilling in the Marcellus Shale, according to an article in ProPublica. The Marcellus Shale contains natural occurring radioactive material. It also contains material which produces acid, like sulfides and pyrite. This poses the question of whether natural sources from the shale or products involved in gas production led to the existence of radium-226.
The Sept. 30 draft contains a list of chemicals service companies and chemical suppliers submitted to the DEC for use in fracturing operations and another list containing chemicals that were detected in flowback water from drilling in Pennsylvania and West Virginia wells. Anthony Hay, director of Cornell University’s Institute for Comparative and Environmental Toxicology, and Amy Risen, a graduate student in the program, identified chemicals coming out of the Pennsylvania and West Virginia wells that were not listed in the draft. According to Hay, these chemicals were “quite toxic.” Two chemicals they highlighted are 4-nitroquinoline N-oxide, a chemical mostly known for its use in inducing tumors in laboratory animals, and benzene, a known carcinogen.
Hay identified concentrations of benzene in the most contaminated well at 500 times the maximum allowable contaminant level for drinking water established by the U.S. Environmental Protection Agency. According to Hay, it is possible the benzene is coming from natural sources in the ground. But he said it is “extremely” unlikely that the 4-nitroquinoline N-oxide could be attributed to natural ground sources based on the concentrations that have been reported. Hay said 4-nitroquinoline N-oxide is not widely studied and there is little-to-no knowledge of how it behaves and the risk it poses.
“The Department of Health is seriously studying the environmental impact study to ensure that both public and private water supplies are protected,” said Jeffrey Hammond, a spokesman for the New York State Department of Health. But the health department cannot protect the public if it does not know the composition of all the compounds the drilling companies want to use.
Dennis Holbrook, executive vice president for Norse Energy Corporation, which has been engaged in exploration of natural gas in central New York since 1996 and drilled over half of the horizontal wells in New York last year said that the companies try to keep as much information as possible secret .“When you start getting into the detailed particulars, that’s something that sort of falls back on the companies that actually create the product, particularly the composition that they have,” Holbrook said. “And they’ve tried to treat that sort of like the…old Secret Potion #7 for Coca-Cola.”
Alison Sickle discusses the environmental impacts of drilling.
The DEC draft assessment contains the complete composition of components in 152 products, out of 197 products, submitted to the Department for proposed use to fracture shale. It has identified 260 unique chemicals in the products, but 40 additional compounds need further disclosure, according to the draft. Roy from the DEC said that before the Department issues drilling permits for natural gas wells, applicants must disclose all chemicals intended for use.
Some who have reviewed the draft give the DEC credit. Baizel said it is the most thorough state-prepared document of this nature he has examined. Analyses in the draft cover many issues, like the effect of water withdrawal for hydraulic fracturing on stream flow and methods of waste product disposal. Examples of mandatory mitigation measures include on-site, liquid-storage setbacks from surface waters and heightened oversight at drilling sites.
“In a broad sense, I think we believe that it’s a valid attempt on the part of the regulator to safeguard the public and to encourage what they think could be a very significant economic benefit to the state,” said Holbrook.
Other individuals who have reviewed the draft express concern. Katherine Nadeau, water and natural resources program associate for Environmental Advocates of New York, said the DEC can make “exceptions from permit to permit.” The draft proposes that permit applicants for horizontal drilling and high-volume hydraulic fracturing provide additional information on applications. It includes mandatory measures to mitigate environmental impacts for all drillers, but the Department determines other terms of a drilling permit, including additional mitigation measures, according to information supplied in the application. Nadeau said this will make it difficult to see terms included in each permit. The Freedom of Information Law requires the DEC to provide the public with the terms of drilling permits upon proper request. Obtaining copies of all the drilling terms would be costly and time consuming.
Many environmentalists are concerned the draft failed to address the combined effects of gas production from multiple wells in one region. “The Department needs to make a reasonable worst-case assessment of how much drilling is likely to be taking place at the same time in particular regions and then analyze what the cumulative impacts of that level of activity would be on, for example, water resources,” said Kate Sinding, Natural Resources Defense Council senior attorney.
Some New Yorkers question the ability of New York water treatment facilities to handle an increase of wastewater from an influx in drilling. According to a 2008 report by the DEC, New York needs approximately $36.2 billion over the next 20 years to upgrade its current municipal wastewater facilities. The draft identifies several water treatment facilities that could consider accepting wastewater from gas production because they have approved pre-treatment programs. The water treatment facilities listed in the draft must perform an analysis and possibly modify their State Pollutant Discharge Elimination System permits before receiving any wastewater, according to Roy.
A tower drilling horizontally into the Marcellus Shale Formation for natural gas. Photo wikicommons / Ruhrfisch
Pete Grannis, the DEC commissioner, said at the New York State Assembly hearing on oil and gas drilling last year that the Department will “certainly” need additional staff if it receives a large number of applications for drilling permits using horizontal drilling and high-volume hydraulic fracturing. The DEC currently has 17 inspectors in its Division of Mineral Resources who have a wide range of duties beyond monitoring drilling company compliance with state laws. Federal exemptions to industrial drilling limit the EPA’s ability to assist state regulators using statutes including the Safe Drinking Water Act and the Clean Water Act.
“If the states are under financial duress, they don’t have time or money or personnel to do risk assessments for all of these chemicals that are not even well characterized,” said Cornell University’s Hay.
http://en.wikipedia.org/wiki/Marcellus_Formation
Exxon Mobil to buy natural gas specialist
Purchase would boost reserves of a fuel with a growing market
Purchase would boost reserves of a fuel with a growing market
Exxon Mobil moved to bolster its U.S. natural gas reserves by announcing a $41 billion agreement Monday to acquire XTO Energy, a 23-year-old independent oil and gas company.
Analysts called the acquisition a bet on future demand for natural gas as the nation looks for energy sources with lower greenhouse-gas emission levels than coal and oil. It also reflects growing confidence among utilities and industry that recent advances in exploiting natural gas from widespread deposits of shale rock have unlocked vast supplies of gas for wider use at reasonable prices.
The deal reflects the "long-term energy view, which would be that natural gas would be the fastest-growing fuel over the next 30 to 40 years," said Deutsche Bank oil analyst Paul Sankey. "We're moving from a 20th century driven by gasoline to a 21st century driven by electricity, and the way you're going to generate it is through natural gas as much as anything."
"Natural gas . . . is the transition fossil fuel," said Larry Goldstein, a trustee with the Energy Policy Research Foundation.
The deal, which is subject to XTO shareholder approval and regulatory review, would be the fifth-largest acquisition of a U.S. energy company since 1995. It comes as global leaders meet at this week's Copenhagen summit focused on ways to slow climate change. Under its co-founder and chairman, Bob Simpson, a former accountant, XTO has specialized in buying up natural gas properties, including unconventional shale gas prospects and gas fields beyond their prime but with years of steady output ahead. And XTO has used financial devices to hedge against the risk of fluctuating prices.
To date, XTO has accumulated about 14 trillion cubic feet of proven gas reserves. The company produces more than 4 percent of total U.S. natural gas. The acquisition would double Exxon Mobil's U.S. natural gas reserves and boost Exxon's worldwide natural gas reserves by 10 percent, a hefty chunk for a giant that has dominated the industry for more than a century.
Analysts called the acquisition a bet on future demand for natural gas as the nation looks for energy sources with lower greenhouse-gas emission levels than coal and oil. It also reflects growing confidence among utilities and industry that recent advances in exploiting natural gas from widespread deposits of shale rock have unlocked vast supplies of gas for wider use at reasonable prices.
The deal reflects the "long-term energy view, which would be that natural gas would be the fastest-growing fuel over the next 30 to 40 years," said Deutsche Bank oil analyst Paul Sankey. "We're moving from a 20th century driven by gasoline to a 21st century driven by electricity, and the way you're going to generate it is through natural gas as much as anything."
"Natural gas . . . is the transition fossil fuel," said Larry Goldstein, a trustee with the Energy Policy Research Foundation.
The deal, which is subject to XTO shareholder approval and regulatory review, would be the fifth-largest acquisition of a U.S. energy company since 1995. It comes as global leaders meet at this week's Copenhagen summit focused on ways to slow climate change. Under its co-founder and chairman, Bob Simpson, a former accountant, XTO has specialized in buying up natural gas properties, including unconventional shale gas prospects and gas fields beyond their prime but with years of steady output ahead. And XTO has used financial devices to hedge against the risk of fluctuating prices.
To date, XTO has accumulated about 14 trillion cubic feet of proven gas reserves. The company produces more than 4 percent of total U.S. natural gas. The acquisition would double Exxon Mobil's U.S. natural gas reserves and boost Exxon's worldwide natural gas reserves by 10 percent, a hefty chunk for a giant that has dominated the industry for more than a century.
"Bob Simpson is a very clever guy," said Fadel Gheit, oil analyst at Oppenheimer & Sons. "He's like a guy betting on real estate in the run-down part of town. Eventually this place turns into a good place to live." The result, Gheit said, is that "Bob Simpson has created more value than any living person. The company's value is up 29-fold in 10 years."
Exxon Mobil agreed to pay $31 billion in stock and to assume $10 billion in XTO debt, even though gas prices have been sharply down for much of the year. The price represents a 25 percent premium over XTO's recent stock price, and the stocks of other big and medium-size independent domestic oil and gas companies jumped after the news. Exxon Mobil would issue 0.7 shares of stock in exchange for every share of XTO stock. XTO's stock jumped 15 percent Monday, to $47.86 a share.
Simpson, 61, would benefit handsomely from the deal. The XTO chairman, who relinquished the chief executive post last year, earned $65.5 million for the year in salary, bonus, stock awards and options. He owns 6.8 million shares of XTO Energy stock, now worth $325 million. (Only 14 months ago, Simpson was forced to sell 30 percent of his holdings when he faced a margin call.) His nephew is also a senior executive at the company.
Gheit said XTO Energy's expertise in exploiting shale gas resources in the United States would also help Exxon Mobil develop similar resources in areas it owns in Poland, Hungary and Germany.
XTO produces substantial amounts of gas from the Barnett shale region of Texas and has started producing in the Bakken formation in North Dakota. It is also stepping up drilling in the Marcellus region, which stretches through much of Pennsylvania, New York and West Virginia.
But some analysts worried about Exxon Mobil's ability to hang on to XTO's skilled employees. "Exxon Mobil is buying one of the highest-regarded management teams in U.S. [exploration and production], and a major challenge could be retaining talent in a big and process-driven organization," said Paul Sankey, research analyst at Deutsche Bank Securities.
Analysts also attributed Exxon Mobil's decision to buy XTO Energy to the challenges of operating overseas. Exxon Mobil has exited Venezuela after a dispute with President Hugo Chávez and has been pressed by other governments eager to make sure their state-owned oil companies control their domestic resources. Source;http://www.washingtonpost.com/wp-dyn/content/article/2009/12/14/AR2009121403505.html
Exxon Mobil agreed to pay $31 billion in stock and to assume $10 billion in XTO debt, even though gas prices have been sharply down for much of the year. The price represents a 25 percent premium over XTO's recent stock price, and the stocks of other big and medium-size independent domestic oil and gas companies jumped after the news. Exxon Mobil would issue 0.7 shares of stock in exchange for every share of XTO stock. XTO's stock jumped 15 percent Monday, to $47.86 a share.
Simpson, 61, would benefit handsomely from the deal. The XTO chairman, who relinquished the chief executive post last year, earned $65.5 million for the year in salary, bonus, stock awards and options. He owns 6.8 million shares of XTO Energy stock, now worth $325 million. (Only 14 months ago, Simpson was forced to sell 30 percent of his holdings when he faced a margin call.) His nephew is also a senior executive at the company.
Gheit said XTO Energy's expertise in exploiting shale gas resources in the United States would also help Exxon Mobil develop similar resources in areas it owns in Poland, Hungary and Germany.
XTO produces substantial amounts of gas from the Barnett shale region of Texas and has started producing in the Bakken formation in North Dakota. It is also stepping up drilling in the Marcellus region, which stretches through much of Pennsylvania, New York and West Virginia.
But some analysts worried about Exxon Mobil's ability to hang on to XTO's skilled employees. "Exxon Mobil is buying one of the highest-regarded management teams in U.S. [exploration and production], and a major challenge could be retaining talent in a big and process-driven organization," said Paul Sankey, research analyst at Deutsche Bank Securities.
Analysts also attributed Exxon Mobil's decision to buy XTO Energy to the challenges of operating overseas. Exxon Mobil has exited Venezuela after a dispute with President Hugo Chávez and has been pressed by other governments eager to make sure their state-owned oil companies control their domestic resources. Source;http://www.washingtonpost.com/wp-dyn/content/article/2009/12/14/AR2009121403505.html
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