Shale Companies Learning How to 'Get It Right'

Shale Companies Learning How to 'Get It Right'
March 30, 2011 by MGI's Shale Daily
When people talk about "getting it right" in shale development, they usually mean protecting the
environment, and on Tuesday an audience in Pittsburgh heard various ways that the natural gas
industry can get it right in the Marcellus Shale.
One of the best ways is to avoid problems in the first place, John Centofanti, director of safety
and environment for EQT Corp., told attendees at the first day of the Marcellus Shale Gas
Environmental Summit.
EQT uses root cause analysis to understand why something went wrong and how it can be
prevented in the future, Centofanti said, adding that problems can occur during facility
construction, facility operation and at other times. "In all three of these areas, there are
correctable opportunities," Centofanti said.
Centofanti said the five greatest risks identified by EQT are flammable atmospheres, highpressure systems, pit design, well control and well design, but he added that stringent best
management practices, such as proper siting of wells and related facilities, can resolve those
concerns and alleviate local worries about development activities before they begin.
"We're going to meet the regulations," he said. "We may even exceed them."
The existing regulations governing shale development are already more stringent than many
critics contend, though, according to Donald Love, senior technical service and development
specialist for Dow Microbial Control.
Love said the industry must learn how to address concerns in a way that is "convincing and
science-based," a challenge he is familiar with as someone who deals often with biocides, or the
chemicals added to hydraulic fracturing fluids. "They're often held up as one of the reasons why
frack fluids are quote-unquote so toxic," Love said.
Love noted that biocides are regulated by state, federal and international authorities and "they're
among the most thoroughly tested chemicals on the planet." He said biocides are arguably
sustainable, because they help drillers produce more gas from each well, thereby reducing the
amount of drilling, and keep drilling fluids from spoiling.
Shale development is a water-intensive industry, requiring about five million gallons per well, and
the Appalachian Basin is a water-rich area, with Pennsylvania second only to Alaska in terms of
waterways such as creeks and streams.
Companies are increasingly looking for ways to reduce water use, according to Ralph Tijerina,
director of health, safety and environment in the Marcellus region for Range Resources Corp., the
second largest leaseholder in the play. Range is currently reusing 95% of its flowback water and
aims to get that up to 100% this year, Tijerina said.
"Not only does it benefit the environment, but it benefits the operator as well," he said.
Range is looking into solutions such as building a pipeline to connect some large water source
such a major river to storage facilities to reduce road transportation, and finding a way to use acid
mine drainage for drilling operations.
Because Pennsylvania doesn't have as many deep injection wells as Texas, water management
is a greater challenge for drillers in the Marcellus Shale than their counterparts in the Barnett
Shale, according to Chuck Kozora with Aquatech International Corp. Marcellus drillers can truck
wastewater to injection wells in Ohio or West Virginia, but that solution is costly and clogs roads,
and therefore most companies want ways to manage wastewater onsite, he said.
While treatment technologies are available and constantly improving, one challenge is the lack of
a standard for reuse -- each company currently must decide for itself how "clean" recycled water
must be before being sent back downhole. Companies seeking to recycle on-site must decide
what they are comfortable sending downhole, Kozora said. "And that number changes from gas
producer to gas producer," he said.
Until a technology emerges that resolves all water management problems, companies must
consider existing regulations.
Water supplies are protected by state and federal regulations, as well as by industry guidelines,
according to Beth Powell with New Pig Corp., an industrial services supplier based in
Pennsylvania. Understanding those regulations can save companies money in simple ways, she
said, like using drain covers to avoid getting hit with discharge fines.
"One piece of plastic can save hundreds of thousands of gallons from going down the drain," she
said.
Although a technical conference by nature, the event drew several dozen protesters. Most stayed
outside, but three protesters interrupted the presentations to deliver a "bill of indictment" against
the industry and were quickly escorted out
Obama Touts Shale Gas; Taps Energy Secretary to Tackle Fracking Safety
March 31, 2011 by MGI's Shale Daily
In a major speech on national energy security Wednesday, President Obama promoted natural
gas as a way forward for the United States and said he has directed Energy Secretary Steven
Chu to work with other agencies, the natural gas industry, states and environmental experts to
improve the safety of hydraulic fracturing (fracking).
The president defended his energy policy from the ongoing attacks of industry and Republicans
on Capitol Hill, and he championed natural gas as a new source of energy. The threat of a cut in
oil imports due to the political implosions of a number of Middle Eastern countries has added fuel
to the verbal battle between the administration and the oil and gas industry over the de facto
moratorium on Gulf of Mexico (GOM) drilling.
Speaking at Georgetown University in Washington, DC, Obama disputed claims that his
administration was discouraging offshore oil and natural gas production by working at a snail's
pace to issue new permitting, and closing off frontiers to oil and gas development. He also
accused the industry of sitting on millions of acres of leases.
The key to the administration's blueprint for a secure energy future is reducing the nation's
dependence on crude oil. The administration wants to cut the country's oil import dependency by
one-third in a little more than a decade.
"In terms of [developing] new sources of energy, we have a few different options. The first is
natural gas. Recent innovations have given us the opportunity to tap large reserves, perhaps a
century's worth of reserves...in the shale under our feet. [But] we've got to make sure that we're
extracting natural gas safely without polluting our water supply," Obama told the large audience,
which included several Cabinet members and university students. At the federal level, he has
tasked Chu with this responsibility.
Obama said "the potential for natural gas is enormous. And this is an area where there's actually
been some broad bipartisan agreement" in Washington. He noted that last year more than 150
members of Congress from both sides of the aisle offered legislation to provide incentives for
natural gas vehicles.
As the president spoke Wednesday the Environmental Protection Agency released a final rule
easing the vehicle conversion process for alternative fuels, including compressed natural gas
(CNG). Also, stocks of natural gas-weighted production companies jumped, mostly on the order
of 1-3%, but with some pure plays such as Range Resources, Cabot Oil and Gas and Petrohawk
going up 4-5% (see related story).
The mention of natural gas as a key plank in his energy policy was championed by two gas trade
groups: America's Natural Gas Alliance (ANGA), which represents independent gas producers;
and the American Gas Association (AGA), which represents gas utilities. "We were pleased that
President Obama highlighted the 'enormous' potential natural gas offers for our transportation
and power sectors," said ANGA Executive Vice President Tom Amontree.
"We at AGA applaud his commitment to reduce American consumption of foreign supplies of oil
by increasing the role natural gas, renewable energy and emerging technologies can play," said
AGA President Dave McCurdy.
Don Santa, CEO of the Interstate Natural Gas Association of America, applauded Obama for
recognizing the important role natural gas will play in the nation's energy future as well as the
resource's ability to decrease dependence on foreign energy sources. "In fact, when it comes to
natural gas, the United States already has achieved near energy independence, with 98% of gas
supplies coming from either the United States or Canada," he said. "Moving forward, it's about
more than just promoting natural gas vehicles, although that is a worthy effort. It's also about
converting more of our power generation to reliable, clean-burning natural gas to help reach the
president's goals."
And to further "keep reducing that reliance on [oil] imports, my administration is encouraging
offshore oil production and exploration as long as it's safe and responsible," the president said.
"Lately we've been hearing folks say, 'Well, the Obama administration [has] put restrictions on
how oil companies operate [in the] offshore.' Well, yes, because we spent all that time, energy
and money trying to clean up a big mess. I don't know about you, but I don't have amnesia" when
it comes to the blowout of the Macondo well and subsequent oil spill (see Daily GPI, April 22,
2010).
"Today we're working to expedite new drilling permits for companies that meet these higher
[safety] standards," Obama said. So far he reported that his administration has issued 39 permits
for drilling in the shallow waters in the GOM and seven new permits for drilling in the deepwater
Gulf. The latest (seventh) deepwater permit was approved Wednesday for Shell Offshore to drill a
new well.
The Macondo well blowout, which caused the Deepwater Horizon rig explosion and subsequent
halt to drilling, occurred nearly a year ago. Only in the last month has the Interior Department
sanctioned a restart of activity in the Gulf.
Meadow Lands I-79 interchange coming at last
Monday, March 14, 2011 By Jon Schmitz, Pittsburgh Post-Gazette
Work could begin as soon as this month on a long-planned project to complete the Meadow
Lands interchange on Interstate 79 in Washington County.
Swank Associated Companies Inc. of New Kensington has a $22.4 million contract to construct
two new ramps and other improvements at what has essentially been half an interchange since I79 was built in the 1960s.
The two-season project will add a southbound exit ramp from I-79 to Manifold Road, Locust
Avenue and Pike Street and an on-ramp from those roads to the northbound side of the highway.
The two existing ramps will be rebuilt to modern design standards and one-way connector roads
built on both sides of the highway to link the new and existing ramps in what is known as a splitdiamond interchange. A new dual bridge structure will be built on I-79.
Pennsylvania Department of Transportation spokeswoman Valerie Petersen said the road
network at the interchange will be reconfigured, with Manifold Road relocated and widened to
pass under the new I-79 bridge. The Locust Street-Pike Street connection also will be widened.
The bridge on Locust and Pike over Chartiers Creek will be rehabilitated and two culverts near
the interchange repaired or replaced. The project includes a retaining wall along the new
southbound off-ramp and a noise wall adjacent to the northbound ramp.
Traffic signals will be added at four ramp intersections and new lighting installed. The project is
scheduled for completion in late November 2012.
When work begins, Manifold Road will close long-term from Panorama Drive to Locust Avenue. A
few weeks later, Locust Avenue-Pike Street and both existing interchange ramps will close.
PennDOT hopes to reopen Locust and Pike and the ramps in time for the Washington County
Fair in August, Ms. Petersen said.
On I-79, four lanes will be maintained during the day but northbound traffic will cross over to the
southbound side to allow construction of the northbound side of the new bridge. A reduced work
zone speed limit of 45 mph is likely, PennDOT project manager Barry Lyons said.
The crossover will be from the southbound side to the northbound side next year as the other half
of the bridge is built, Mr. Lyons said.
Work that causes I-79 traffic to be reduced to one lane in each direction will occur from 8 p.m. to
6 a.m., he said.
Hudak Hill Road, which is owned by South Strabane, will be closed near Forgas Lane and a cul
de sac built.
The new interchange is designed to handle extra traffic generated by anticipated development in
that area. Bass Pro Shops has previously expressed interest in building a store at the
interchange, but whether that will happen remains in doubt.
"There's nothing to announce right now," said Larry L. Whiteley, manager of communications and
outdoor education for the Springfield, Mo.-based chain.
Jon Schmitz: jschmitz@post-gazette.com or 412-263-1868. Visit the PG's transportation blog,
The Roundabout, at www.post-gazette.com/roundabout. Twitter: @pgtraffic.
Texas Examiners Clear Range of Water Contamination
March 9, 2011 from MGI's Shale Daily
Natural gas found in North Texas water wells did not come from the Barnett Shale but rather the
gas-bearing Strawn formation, which is closer to the surface, hearing examiners at the Railroad
Commission of Texas (RRC) said in a report released Monday. If accepted by commissioners,
the finding would exonerate Range Resources Corp., which had been accused of contaminating
the wells with its Barnett drilling activities.
The Range gas wells in question are known as the Butler and Teal wells; the water wells with
methane in them are called the Perdue and Lipsky wells, after their owners. RRC investigators
tested water wells within 3,000 feet of the surface location of the Butler and Teal gas wells except
in cases where homeowners would not allow it.
"In the samples, methane concentrations ranged from non-detect to almost 3 parts per million
(ppm)," the RRC hearings examiners' report said. "The Perdue water well had the highest
methane concentrations, at 2.8 ppm. The Perdue well is the deepest water well in the area,
extending about 100 feet into the Strawn. The Lipsky well had a methane concentration of 2.3
ppm, the second highest concentration found. The concentrations in the various water wells do
not demonstrate any type of plume, which would be expected if the gas was from a single source.
Instead, the concentrations in the wells vary randomly over the area.
"...If Barnett Shale gas were migrating upwards and communicating to shallower zones, some
component of Barnett Shale gas would have been present in the bradenhead samples of the Teal
and Butler wells. Further, the gas found in most of the water well samples has differing degrees of
biodegradation, indicating that gas had seeped into the aquifer over geologic time and not in a
single event."
The RRC began its investigation of the water well contamination last August, and in October the
U.S. Environmental Protection Agency (EPA) began its own investigation. EPA in December
issued an emergency order to Range and ordered the company to ensure that its Butler Unit and
Teal Unit production facilities -- thought by EPA to be the cause of the natural gas in the water
wells -- "pose no imminent and substantial endangerment to public health through methane
contamination of an underground source of drinking water [see Shale Daily, Jan. 21; Dec. 9,
2010]."
State regulators were more skeptical than EPA that Range caused the water well contamination,
and commissioners spoke out against EPA for stepping into what they considered to be a state
regulatory matter.
Last month RRC staff told the hearing examiners that the Strawn formation was the most likely
cause of the water well contamination (see Shale Daily, Feb. 10).
"We're not surprised by the report," said Range spokesman Matt Pitzarella Tuesday. "It's
consistent with every technical expert and scientist who has examined this issue, including those
at the EPA, and they've all concluded that this is a matter of Mother Nature, unrelated to Range's
activities and one that has been effectively managed by state regulators, local businesses and
private citizens in a safe and effective manner. People in Parker, Hood and surrounding
communities deserve the right to know that their water is safe and secure, and the facts are not
out there for anyone to see."
According to the hearing examiners, natural gas is no stranger to water wells in the area, whether
residents realize it or not.
"Prior to the drilling of the Teal and Butler wells in 2009, there is significant evidence of shallow
gas production within a 2 1/2-mile radius of the wells," the hearing examiners' report said. "The
Strawn formation directly underlies the Cretaceous formation, which is the aquifer in the area.
Water well records indicate that numerous water wells penetrated the Strawn formation, while
numerous others are completed within 25 feet of the top of the Strawn. In addition to gas
produced in the numerous water wells, several gas wells were completed in the Center Mill
(Strawn) Field approximately one mile to the southeast of the Butler and Teal wells. These wells
produced gas in the mid-1980s from the Strawn, with depths ranging from 358 feet to 426 feet."
Pennsylvania River Tests Show No Radioactive Red-Flags
March 8, 2011 from MGI's Shale Daily
Water samples taken from seven Pennsylvania rivers showed levels of radioactivity at or below
"background levels," according to the Pennsylvania Department of Environmental Protection
(DEP).
The DEP conducted the tests in November and December downstream from facilities that treat
flowback and produced water from Marcellus Shale drilling operations. The tests sampled raw
river water before it entered public water suppliers' intakes. Those facilities treat the water again
before supplying it to the public.
"Here are the facts: all samples were at or below background levels of radioactivity; and all
samples showed levels below the federal drinking water standard for radium 226 and 228," acting
DEP Secretary Michael Krancer wrote in a statement.
The DEP installed the stations last fall, after implementing new wastewater disposal rules, to
monitor water quality in the wake of Marcellus Shale development (see Daily GPI, Aug, 26, 2010).
The testing occurred at stations on the Monongahela, Conemaugh, Allegheny, Beaver and Tioga
Rivers, South Fork Ten Mile Creek and the West Branch of the Susquehanna Rivers, locations
across Marcellus Shale country in Pennsylvania.
Water quality became a public issue in Pennsylvania following a series of critical articles in the
New York Times that accused the DEP of not effectively regulating radium in wastewater disposal
(see Shale Daily, March 1).
Since then policy makers, water companies, industry groups and others in Pennsylvania have
been responding to those stories on two fronts, testing local waterways for radiation while
challenging details in the coverage.
On Monday the Marcellus Shale Coalition called the DEP testing results "encouraging," and
announced a new $100,000 fund to support water testing connected to Marcellus Shale
development.
The industry advocacy group also said it would facilitate an Energy Research Collaborative that
would bring together representatives from academia, government, industry and other stakeholder
groups to focus on "areas in need of more fact-based investigation" starting with naturally
occurring radioactive material.
On Monday Penn State University said it was conducting an "independent, comprehensive
analysis" of the potential for flowback waters from natural gas drilling operations to impact water
quality in the state.
Those results will eventually be made public.
The Marcellus Center for Outreach and Research (MCOR), part of the Cooperative Extension at
Penn State, also called for treatment facilities that process fluids from Marcellus Shale drilling
operations to conduct routine monitoring to ensure adequate water quality protection, and for
public water systems with intakes located downstream from those facilities to also conduct routine
monitoring of drinking water supplies.
While its new study suggests that the MCOR is taking the New York Times' allegations seriously,
the group also offered details about the water treatment process, looking to give some
perspective on the coverage.
For instance, the MCOR noted that Times articles compared levels of radium 226, radium 228,
gross alpha, gross beta and benzene in local wastewater samples to drinking water standards set
by the U.S. Environmental Protection Agency, but did not note that the wastewater was not used
for drinking water.
The MCOR also said the articles didn't consider several "crucial variables" for determining
whether concentrations of radionuclides are adversely impacting water quality, such as "the initial
concentrations in the flowback water, the treatment removal efficiency, and the level of dilution by
the receiving stream."
Radionuclides, or radioactive atoms, are naturally occurring and vary in concentration depending
on geography and drilling, the MCOR noted. Concentrations naturally vary across Pennsylvania.
Because concentrations increase the longer water stays in contact with shale formations, initial
flowback water diluted by hydraulic fracturing fluids tends to have fewer radionuclides than latestage flowback waters.
The MCOR also noted that current treatment options manage radioactivity.
The chemical precipitation process used to remove metals from flowback water at oil and gas
wastewater treatment facilities also removes "a large percentage" of radionuclides. And municipal
treatment centers must dilute flowback water to meet state standards limiting flowback water to
1% of average daily flow rates.
The stories continue to reverberate around Pennsylvania.
On Friday State Rep. Camille George (D-74) of Clearfield County said he plans to introduce
legislation that would require facilities to test for radioactivity before and after treatment, and
before water is released into drinking water supplies. The testing would be paid for by the natural
gas industry and conducted by an independent firm.
On Saturday the Times published a rebuttal from former Gov. Ed Rendell and former DEP
Secretary John Hanger.
"Pennsylvania has the strongest enforcement program of any state with gas drilling. Period,"
Rendell and Hanger wrote. However, they also called for immediate, mandatory testing for
radioactivity in all Pennsylvania public water systems.
The Pennsylvania American Water Co. and the Pittsburgh Water and Sewer Authority both
announced plans to voluntarily test drinking water sources following the publication of the articles.
Natural gas fields have provided a fount of cash for Texas cities
Monday, March 07, 2011 By Bill Toland, Pittsburgh Post-Gazette
FORT WORTH, Texas -- Thirty-nine stories above downtown Fort Worth, in a private penthouse
dinner club built with oil and gas fortunes, Mel LeBlanc endeavored to spell out the mindset of
those who categorically oppose drilling for natural gas in urban areas.
"Where are they coming from, philosophically?" asked the Arlington city councilman and, as it
happens, owner of a philosophy doctorate. "When you really get down to it, they are utopians in
many cases. They accept zero tolerance -- [if] anything that you're talking about could ever go
wrong, we're not going to do it."
Even if something were to eventually go wrong in Arlington -- and so far, he says, it has not -- Mr.
LeBlanc, lunching at the Petroleum Club of Fort Worth, has ample reason to support the concept
of urban drilling: Tapping the Barnett Shale, the 5,000-square-mile reservoir of natural gas
embedded in rock beneath North Texas, has been a boon to his city's finances. In 2007,
Arlington's city stewards set up a nonprofit to handle the city's share of gas royalties and lease
payments. Ten percent of the lease money (and half of the royalty money) goes to the city's
operating fund.
The remainder -- 90 percent of the lease payments and half the royalties -- goes to the Arlington
Tomorrow Foundation, which issues grants that support arts, recreation and historic preservation.
In just three years, the foundation has put $70 million in the bank. In 20 years' time, the balance
may approach $225 million.
"We're not Fort Worth. We're not Dallas," which have flush, old-money foundations, Mr. LeBlanc
said. In Arlington, three years ago, the biggest nonprofit endowment was just $12 million. "This
gas money [is] a once-in-a-lifetime opportunity as a city to get the financial footing that we need,
[to] become the city that we envision."
Imagine if Pittsburgh, with a budget and population somewhat comparable to Arlington's (our
312,000 people to their 380,000, our $450 million operating budget to theirs, $350 million), were
able to leverage its position over the Marcellus Shale to create instant revenue. What might that
pay for? A solution to the city's pension crisis? More police officers? More regular street paving?
This is the flip side to the anti-drilling argument: There's money to be made, jobs to be created
and -- if you play your cards right -- public institutions to be rescued. To do it, though, requires
drilling in places like Fort Worth and Arlington, already densely populated areas that continue to
grow and sprawl into the disappearing Texas countryside.
As with southwestern Pennsylvania now, deep gas drilling in North Texas began in rural
expanses, for a number of reasons. Land is cheaper and the plots are larger. Political barriers are
lower. Media scrutiny is less intense. Neighborhood resistance is less organized, because in
many cases there are no neighbors to be bothered.
But eventually, drillers crept toward the city. It wasn't necessarily because the energy companies
were itching for a political fight.
"Where they want to drill has a lot more to do with what is below the surface than what is above
the surface," said Paula Knowles, an intern for Democratic state Rep. Lon Burnam doing
graduate research at the University of Texas at Arlington on urban gas drilling.
Energy company geologists look for easily accessible shale and gas formations first "and then
they deal with the other issues accordingly," she said.
And Fort Worth, all 700 square miles of it, happens to be sitting on one of the Barnett Shale's
many sweet spots. The Dallas-Arlington-Fort Worth metroplex is home to nearly 7 million,
growing by 150,000 every year, due in great part to the area's emergence as one of the nation's
energy capitals.
First oil, then gas
It was not always so. Fort Worth was nicknamed "Cowtown" for its cattle stockyards; Dallas was
built on cotton and grain; Arlington had barely 4,000 people living in it by World War II
(Pittsburgh's population at the time was more than 670,000).
Though the first producing Texas oil well was drilled in 1866, three decades passed before oil
was a commercially viable product. In the 1930s, when oilfields were discovered 100 miles to the
east of Dallas, near Kilgore, Texas, it was Dallas that became the industry's nerve center,
financing the development of oilfields in the Texas Panhandle, the Gulf Coast and Oklahoma.
"When oil came gushing into Texas early in the 20th century," writes Mary G. Ramos in the Texas
Almanac, "petroleum began to displace agriculture as the principal engine driving the economy of
the state."
But even though energy sector has been part of the Texas fabric for the nearly a century, drilling
within the cities that financed the sector is a novelty. There are no oil wells in Dallas, nor are there
any gas wells (not yet anyway, though ExxonMobil subsidiary XTO Energy wants a permit to drill
on city land and Dallas city council is considering it). The first gas well in downtown Fort Worth
came in 2008, a decade after deep shale drilling began in suburbs and rural areas.
Still, given the region's infatuation with the energy sector, and a city council and mayor who have
been accommodating, "Fort Worth was just the perfect location for this experiment of urban gas
drilling," said Ms. Knowles.
"And it's a pretty risky experiment, isn't it?"
Urban gas drilling means putting rigs and fracking drainage pits near homes and apartment
complexes, on inner-city industrial tracts and vacant shopping mall lots, and, in Arlington, even on
an urban golf course. In 2010, Marsh Operating Co. laid a pad and erected drilling equipment at
Rolling Hills Country Club, a struggling course hemmed in by commercial and residential
development on all sides.
From that site, the horizontal drilling technique -- which allows for the drilling of L-shaped wells -will allow Marsh access to a vast radius of below-ground mineral deposits, retrieving the natural
gas beneath nearby homes and churches, with their consent.
Wells crowd out greenery
One symbol can mean two different things to two different factions. Drilling advocates point to the
golf course drilling rig and say: See? Gas wells can co-exist with the urban landscape. Opponents
point to the same rig and say, maybe so, but why would you want it there?
"This city has now become an industrial zone, and we've lost thousands of acres of green space
to drilling in the past five years," said Don Young, an anti-drilling activist who lives in Fort Worth.
Mr. Young, a stained glass artist, says he became an instant activist when an energy company
tried to drill in his front yard. In Mr. Young's case, his "front yard" does not belong to him; it is
Tandy Hills, 180 acres of knotty oaks and hip-high bluestem grasses, one of the only authentic
patches of native North Texas prairie you can find nowadays in Fort Worth.
From the front room of his home, you can see the prairie grass swaying across the street. Mr.
Young and concerned neighbors used Tandy Hills to bring public focus to the issue of urban
drilling, but Chesapeake Energy was able to secure the rights to a plot of privately owned land
adjacent to Tandy Hills. It will be able to use that massive pad site to drill extensively for gas
beneath the park.
In rural Texas, a pad site this size -- three football fields in area -- would be barely noticed. In the
city, it can accommodate multiple wellheads and could mean multiple headaches for neighbors:
dust, noise and increased truck traffic initially, and the installation of a pipeline that takes the
natural gas away from the wells and to a main line.
In Mr. Young's view, drilling near Tandy Hills is not much different than drilling in it.
"The very landscape [of the region] is going to be altered," he said.
'You can't be undrilled'
Later, on a driving tour of Fort Worth and Arlington, he motions to the golf course and calls it an
eyesore. While the rig was disassembled a few weeks later, the pad site and wells will remain
there for years, decades, to come, all but prohibiting any future uses for that chunk of the golf
course property. And on larger pad sites, you can drill multiple gas wells; the rig may be
disassembled today, but another one may be built in a few years, once prices come up.
"Once you've been drilled," Mr. Young said, "you can't be undrilled."
Of course, the alternative to a drilling rig (and, later, gas wells) on a golf course might have been
no golf course at all. Prior to striking the lease and royalty deal in 2007, Rolling Hills was under
pressure from city officials and some country club members to sell the land to developers for $34
million; it was said to be the preferred site of the George W. Bush Presidential Library.
The $800,000 in gas lease revenue helped save the course, built in 1954 when outer Arlington
was orchards and dairy farmland, when Interstate 30, which traces the course's south edge, didn't
exist.
"There's just not many locations left like this, green belts left in the city," said John McGowdy,
general manager of Rolling Hills' 97-acre golf course. But even though drilling helped preserve,
and upgrade, this bit of green space, the decision to drill was controversial. Mr. McGowdy said his
golf club lost 10 percent of its members because of the execution of the gas lease.
"That split the club down the middle," he said. Some left because they thought the course -which is member-owned -- would be devalued, others because they simply didn't want to golf in
the shadow of a rig.
But in the end, the golf course needed the money and Marsh Operating, which drilled and fracked
six wells and may someday return to drill a dozen more, was willing to spend it, with upfront
payments and the promise of future royalties.
Buying their way in
This is how drillers are often able to get their way, even in densely populated parts of the city:
They flash a lot of green to people who need it. Sometimes it's an aging city golf course.
Sometimes it's a poorer residential neighborhood.
Sometimes, it's an institution of higher learning. The University of Texas at Arlington, where Ms.
Knowles was pursuing her master's degree, is within Arlington's city limits. But because it is on
state-owned university land, it isn't bound by local municipal rules governing urban gas drilling.
Carrizo Oil & Gas Inc. operates 22 wells on university property.
"I was driving down to Austin several years ago and began to notice all these rigs popping up,"
said Rusty Ward, who just retired as UTA's chief financial officer and business affairs vice
president. He learned that the drills were probing for natural gas, and began probing whether
energy companies would be interested in the wooded 400 acres on the southeast edge of the
campus.
That site is also within 500 feet of a YWCA, a day care and the nearest home. Neighbors worried
about accidents, noise, even radiation and asthma -- one report, released in 2010 by the
Community-wide Children's Health Assessment and Planning Survey, suggested that 1 in 4
children ages 8 and 9 has asthma in North Texas counties where Barnett Shale drilling is the
heaviest. Drilling skeptics latched onto this survey as evidence that drilling was damaging air
quality in the region.
"Once we decided to do this, all hell sort of broke loose," Mr. Ward said.
"People said I was going to blow up the place."
The place hasn't blown up, but its scholarship fund has. Since 2007, when the first rig arrived,
UTA has made millions in royalties and upfront, per-acre lease payments, money that was
directed toward endowments and matching funds for student scholarships.
And technology improvements have minimized the footprint of the drilling site. Several years ago,
a pad to accommodate 22 wells might have been 5 acres or more, but Carrizo was able to install
the wells on 2 1/2 acres, preserving additional acreage for future drilling.
Talk of the town
Despite success stories, people remain wary about urban gas drilling, and it's hard to overstate
the degree to which gas drilling dominates the news cycles.
The local newspaper, the Fort Worth Star-Telegram, runs a weekly report on all the newly active
rigs in the 24-county area -- usually there are several dozen new rigs put up each week. In a
three-day span three months ago, the newspaper and TV news reported on the city school
district's ongoing gas lease negotiations, city council's long-debated air quality study, lawsuits
over polluted water wells, and an early morning gas leak (and resulting vapor cloud) at an XTO
Energy well site north of Fort Worth.
Some in Fort Worth object to urban drilling notionally, concerned about long-term water quality
and health effects. But others object to the way they've been treated by the industry and its
"landmen" -- the free-agent real estate negotiators who gather signatures on behalf of drillers,
bundling them and then selling the waivers, titles and leases to energy companies.
The process sometimes pits neighbors against one another.
"I would describe myself as very pro-drilling, pro-oil, pro-gas," said Laura Reeves, a Fort Worth
resident who lives in an impeccably decorated townhome and can't remember the last Democrat
she voted for.
"I have friends who work for Chesapeake. I know people who need their jobs. I don't disagree
with drilling for gas. I disagree with drilling for gas in the middle of a (populated area)."
Chesapeake Energy wants to drill on a vacant tract of land to the immediate south of her new,
gated townhome community. Her complex, and that empty tract --being called "Westridge" by
Chesapeake -- are just a few hundred yards west of Como, a historically black neighborhood.
Mrs. Reeves says the industry has tried to take advantage of the poverty levels in Como.
The landmen wanted Mrs. Reeves and neighbors to sign waiver agreements, allowing
Chesapeake to drill within Fort Worth's prescribed setback radius if city council subsequently
approves the variance request. The "setback" is the minimum distance that a well must be from
the nearest home; in order to drill inside the city's 600-foot setback radius, an energy company
has to get enough neighbors to sign waiver agreements, and it often sweetens the pot with waiver
bonuses.
The waiver payments are thank-you notes written in cash, because the people who sign the
waivers -- townhome residents, renters, business owners -- often won't see any other money from
the drilling. They won't get royalties, because most don't own any mineral rights, and they won't
receive a surface lease payment, because the drilling isn't happening on their property.
The first offer that Mrs. Reeves received from the landman that knocked on her door in autumn
2009? Sign the waiver and she gets $74.
Small potatoes to her -- but more attractive to those living in poverty, she said. Waiver bonuses
can increase dramatically if you live closer to a drilling site, or if you live in a more well-to-do
neighborhood, but generally landmen want to get the best lease and waiver terms, at the lowest
price, for the companies they represent.
"You may as well sign," the landman told her, because "78 percent of your neighbors have
signed." Turns out only three of her 70 fellow townhome owners had signed waivers, she said.
But because landmen aren't employed by the energy companies, and because there is no state
board that licenses or regulates these middlemen, punishing them for misrepresentations is
difficult, according to foes.
"I realized some of them had signed the waiver and didn't have a clue what they signed," said
Mrs. Reeves. "They felt stupid because they just believed what the landmen told them."
When Mrs. Reeves and others tried to fight off the Chesapeake project -- organizing community
meetings, attending city council hearings, going door-to-door in Como -- she says she was
caricatured by some in the energy industry as a bored, blonde housewife.
"I was insulted," she said. "They were counting on me, the white blonde, not [setting] foot in a
black neighborhood."
But she did, and for a time, it appeared that the drilling project near Como would be rebuffed;
Chesapeake withdrew its drilling request last August. In February, though, landmen made
headway with one of the neighbors to the west of the Westridge site, a prominent businessman,
and Chesapeake now intends to drill a few hundred feet to the west of its original location.
Ms. Knowles, the master's student -- whose boss, state Rep. Lon Burnam, called for a
moratorium on new Texas drilling permits -- said the landmen are often accused of
misrepresenting the degree of neighborhood unanimity as well as the scope of the drilling
projects. They say that the rigs will be up for only a few months, which is often true.
What they don't say is that the rigs can return again and again to drill new wells, as long as they
have an active lease. Or that a "few months" of disruption can turn into a few years, or that your
home value could decline.
"Nothing can be done if they lie, cheat or steal," she said.
Gas lines another issue
Another thing that landmen may or may not bring up is the issue of gas lines. To get the raw gas
to market, the energy companies or subcontractors will also eventually have to build "gathering"
lines from the pads to the nearest processing plant.
In Texas, energy companies and private pipeline owners are treated more or less like public
utilities, and they have the ability to condemn pieces of private property, if need be, in order to lay
the gathering lines.
"That creates a whole new issue," said Democratic state Sen. Wendy Davis, a former Fort Worth
city councilwoman.
"You get lines crisscrossing all over your city ... and once you've laid a line that's carrying natural
gas, you can't develop it" or put other utilities beneath it, like electric or sewage. "The most you
can do is put a surface parking lot on it."
And that's just the lines they know about. Pipeline maps and surveys have proven unreliable, and
records from the Texas Railroad Commission, which issues the operating permits for the raw gas
lines, are often incomplete, critics say.
"There are lines all over the place that really no one at the city levels were ever told," Ms. Davis
said. "And we may find that it inhibits" future development -- or, worse, could cause an accident
when someone tries to dig a backyard swimming pool and finds that the gathering line is not
where the pipeline company thinks it is.
Add the 360,000 miles of gathering line in Texas to the 20,000 Barnett gas wells, all of it being
monitored by just a handful of state inspectors, and people have good reason to worry. "Who can
feel safe [when] that's the way it's functioning?" Ms. Davis said. "You can't trust these companies
to self-police."
Mr. LeBlanc, the Arlington city councilman, said issues such as setback distance and pipeline
mapping are regulatory matters that can be tackled with a bit of legislative foresight. But no
amount of regulation can eliminate risk.
"To apply the standard of zero tolerance and perfection to an industry such as this -- so important
to our geopolitical situation worldwide, so important to our local economy, so important to cities
like Arlington," makes no sense to him.
Accidents can and will happen, but they happen in steel mills and coal mines, too, and nobody
ever talks about a moratorium on steel production, or banning air travel after a crash.
"I have been on American Airlines flights. They've exploded in the past. They're going to explode
in the future. I'm still going to get on them -- that's just modern life."
Bill Toland: btoland@post-gazette.com or 412-263-2625.
Number of Permits Issued & Wells Drilled in Select PA Counties, including the County with
the Most Wells
March 7, 2011 from Marcellus Drilling News
In a story about how Armstrong County, PA has to keep the County Courthouse open late one
night a week so researchers can review property records for potential Marcellus shale gas well
development, we get some interesting numbers on recent drilling activity in PA:
According to the state Department of Environmental Protection, 1,386 deep gas wells operated in
Pennsylvania in 2010, with permits issued for 3,314 more.
Eighty-seven permits have been issued in Westmoreland, where 46 wells have been drilled.
Nineteen wells have been drilled in Fayette, where 77 permits have been issued.
Washington County has 136 Marcellus shale wells drilled—the most in the region—and 239
permits for future wells issued.
There are 80 wells drilled in Greene County, where 178 permits have been issued.
In Somerset, four wells have been drilled and 18 permits have been granted. In Indiana, nine
wells were drilled and 27 permits were issued. In Armstrong, 29 wells have been drilled and 42
permits were issued, according to the DEP.
In Bradford County, the recorder’s office for more than a year has received compensation from
gas drilling firms to remain open an additional six hours every week. According to the DEP,
Bradford has the most Marcellus shale wells in the state—355—with permits for 830 wells.
Range Resources Taking Bite Out of Marcellus Layer Cake
March 7, 2011 from NGI's Shale Daily
Some producers wouldn't have sold their Barnett Shale assets and instead would have flat-lined
activities there while they headed for the greener pastures of the Appalachian Basin's Marcellus
Shale, Range Resources Corp. CEO John Pinkerton conceded. But Range wanted to straighten
its balance sheet and go at the Marcellus full bore, which its recent Barnett asset sale sets it up to
do.
..."[A]t $4.50 flat Nymex [New York Mercantile Exchange] gas prices, our drilling projects in the
Marcellus, where we are spending 86% of our [2011] capital budget, generate over a 50% rate of
return," Pinkerton enthused to financial analysts during an earnings conference call. "It's pretty
amazing."
By comparison, in the Barnett the company can expect a rate of return in the high teens or about
20%, he said. "So the question is pretty easy for me, not being the brightest bulb in the package.
I'd rather spend the money in the Marcellus. So that's why I sold the Barnett [see Shale Daily,
March 2]."
What makes the Marcellus particularly attractive, besides the liquids-rich component of the play,
are the Upper Devonian and Utica shales -- the Upper Devonian above the Marcellus and the
Utica below. It's a three-layer cake of gas and liquids. "We like it because it's really three plays in
one," Pinkerton said.
"A very significant advantage we will have in developing the Upper Devonian [and] Utica will be
that we will be drilling where we've been drilling Marcellus wells. We've already incurred the cost
of acreage, roads, surface location, water management, gas lines and compression."
Pinkerton said the incremental cost to develop the Upper Devonian and Utica will be about onethird of that to develop each the three zones on a standalone basis.
"...[W]e don't have most of the acreage [in the Marcellus] held by production," Pinkerton said.
"And so that's one of the primary reasons we want to sell the Barnett is to term out all those
leases. We're about 46% held by production in the Marcellus...We will hold 700,000 acres
through the plan..."
To keep costs down it's important that the company block up its acreage, Pinkerton said. "If you
have to drag rigs all over creation up there and then your pipelines and your gathering, your water
impoundments and your water gathering, it really drives up your cost," he said. Other Marcellus
producers are coming to the same conclusion, he said, so the attitude toward acreage swaps
among producers is softening and it's easier to get deals done.
Range takes credit for the first horizontal wells in the Upper Devonian and the Utica Shale. The
company's first Utica Shale well averaged 4.4 MMcf/d on a seven-day production test, Range
said recently.
"Our focus is going to be almost all on the Marcellus," said COO Jeffrey Ventura. "We're really
encouraged by what we see in the Upper Devonian. We've drilled and completed a couple of
wells. We're in the process of testing the second well, and the same with our first Utica well...[I]t
was Range alone leading the charge in the Marcellus and then several other companies coming
in and helping to de-risk our acreage. You're going to see the same thing, I think, happen with the
Utica and Upper Devonian."
The Utica is 2,000-2,500 feet deeper than the Marcellus, and very few wells in the basin reach
the Utica, Ventura said. "So by definition the Upper Devonian is lower risk; there's a lot more
control, a lot more data than in the Utica. Plus, it's somewhat of an advantage in that it's
shallower, so the wells are going to be less expensive...But it's early, and I'm sure there's going to
be a number of Utica wells drilled this year by others, plus the couple of wells we may drill."
Much of Range's acreage is in the wet portion of the Marcellus, Ventura said, noting that the "wetdry line" in the Upper Devonian will be similar to that in the Marcellus, giving the company liquidsrich gas from the Upper Devonian, too.
Pinkerton allowed that the company could have done a joint venture in the Marcellus to soften its
costs -- instead of selling the Barnett assets -- however, he said selling the Barnett was a more
accretive move given the promise of the Marcellus. "...I'm telling you, it's a world-class field.
We've got the tiger by the tail. The good news is I think we've got a plan, and I think that we've
connected the dots...
"We think ultimately we'll get to 2 Bcf or 3 Bcf a day net to our interest. That will be huge, and our
shareholders are going to make a whole bunch of dough from that, including yours truly..."