Oil and Gas Lawyer Blog

New Report Provides Objective View of Debate Over Hydraulic Fracturing

2010-07-23T19:05:17Z

A new report on the risks and advantages of hydraulic fracturing by Ann Davis Vaughan and David Pursell, "Frac Attack: Risks, Hype, and Financial Reality of Hydraulic Fracturing in the Shale Plays," provides a much-needed objective summary and analysis of the recent debate over the safety of hydraulic fracturing. Ann Davis Vaughan founded Reservoir Research Partners and is a former investigative journalist for the Wall Street Journal. David Pursell is an analyst with Tudor Pickering Holt & Co., an investment banking firm in Houston specializing in the energy industry.

]]> The recent debate over the safety of hydraulic fracturing has been frustrating in its lack of objectivity and the availability of reliable data. As the development of shale plays has accelerated, especially in the Marcellus Shale in Pennsylvania and New York, the general impact of oil and gas development on populated areas and areas not accustomed to oil and gas activity has increased. Incidents of accidents involving oilfield contamination have been publicized; documentaries like Gasland have raised the temperature of the debate; Congress has weighed in with proposed federal regulations and new studies; and the industry has fought back with lobbyists, websites and studies of its own. Although the Vaughan/Pursell study will likely be dismissed by the environmental community as another industry effort to minimize the risks of hydraulic fracturing, I found it to be an objective overview by an award-winning investigative reporter who did her homework and sought to objectively evaluate, from a layperson's perspective, the evidence and literature on the subject. The purpose of the study was evidently to educate investors following the shale plays in the energy industry and help them to evaluate the potential impact of the debate over hydraulic fracturing on the stock prices of companies who have invested heavily in gas shale development. Potential investors in the industry have no agenda except to predict the success of their investments, and so should be looking for objective analyses of the subject.

"Frac Attack" does not provide any new information or data, but is a summary of the available studies and information on hydraulic fracturing; an analysis of the public debate; and a prediction of the potential cost to the industry of increased regulation. I commend the study for anyone interested in getting a balanced view of the issue. Some highlights from the study:

The authors predict that fracing is unlikely to be banned. "The job losses, higher energy prices and landowner-rights challenges that would result are too unpalatable for Democrats, even those that don't like the energy business."

Increased regulation of well completion practices are likely, and additional costs could reach $200,000 to $500,000 per well.

Environmental organizations see opposition to fracing as part of a larger agenda of weaning the country off of fossil fuels. "Widescale adoption of newly abundant, cheap natural gas throws off a mass embrace of renewable energy for a generation."

Both the environmental lobby and industry are guilty of loading the conversation over fracing with disingenuous arguments. Environmentalists blame fracing for environmental problems not directly tied to the completion technique. "Spills, well blowouts and inadequate treatment of flowback water -- none of it fracing per se -- have caused trouble for some communities and impacted some water supplies." Industry "keeps repeating the mantra that 'not a single case' has tied hydraulic fracturing to drinkig water contamination."

Ninety percent of oil and gas wells completed in the US now require use of hydraulic fraturing. The technique allows operators to produce 10 times the amount of energy by drilling fewer than 1/10th the number of wells, thus reducing environmental impacts. Without fracing, gas production would fall significantly, prices for gas would increase, and gas would have to be imported.

The authors' principal point about the safety of fracing is that "any drilling has the potential to contaminate groundwater if the well is drilled and cemented improperly." As evidenced by the recent blowout of the BP - Macondo Well, improper cementing of wells is the cause of much of the industry's enviromental problems. Improper cementing may allow not only frac fluids, but also hydrocarbons and salt water to migrate up the wellbore and contaminate fresh water sands.

The authors say that waste disposal and safe materials handling are the biggest challenges to producers. "Fracing chemicals and drilliing waste are more hazardous above ground than several miles underground." Above-ground spills pose a more serious environmental hazard than potential contamination of groundwater from fracing.

Fracing has also been criticized as a wasteful use of fresh water resources. The authors conclude that this is a significant issue, but will not be "one of the indusry's top liabilities." Many producers in Pennsylvania have elected to recycle 100% of their produced water. Most shale basins lie in areas with abundant water supplies. And finally, the "water footprint" of fracing is not as large on a relative basis as that for other fuels per unit of energy produced. The table below is from the report, and its source is a report by Chesapeake Energy to the Ground Water Protection Council:

According to Chesapeake, the amount of water it uses in an average frac of a shale well is the same amount consumed by a coal-fired power plant in 12 hours, what New York City consumes in seven minutes, what a golf course uses in 25 days. (This may not be a valid comparison, since these other water uses may not actually "consume" the water permanently, whereas the disposal of spent frac water by injection will permanently place that water beyond human use.)

The authors analyze incidents of contaminaton cited by environmental advocates as evidence of contamination caused by fracing and conclude that most of those incidents are either naturally occurring gas in water sands or problems caused by mistakes in well design -- improper cementing -- not related to fracing. The report also reviews and summarizes studies that support the safety of fracing and other studies that are used to oppose it. Finally, the report summarizes the proposed legislative and regulatory responses to the debate and predicts their future.

One of the authors' conclusions summarizes my position in the debate quite well:

"Underground hydraulic fracturing itself hasn't been proven to contaminate groundwater. However, any time a fresh water aquifer is penetrated (with gas well, water well, or mine shaft) the potential exists to harm aquifers. We believe the conversation will shift away from fracturing to focus on best-practice well design (gas wells and water wells) to address valid landowner concerns."

EOG Proposes New Temporary Field Rules for Oil Wells in Eagle Ford Shale

2010-07-06T18:34:25Z

EOG Resources has filed an application for designation of two new fields and for temporary field rules for oil wells in seven counties in South Texas (Eagle Ford proposed rules.pdf). Unlike its previous application, which sought to consolidate numerous Eagle Ford fields in Railroad Commission of Texas Districts 1, 2 and 4 and provide for temporary field rules for oil and gas, the new application seeks rules oil well rules only, for seven counties -- DeWitt, Karnes, Gonzales, Wilson, Atascosa, LaSalle and McMullen. EOG asks for expansion of the existing Eagleville (Eagle Ford) Field, renamed the Eagleville (Eagle Ford -2) Field for Karnes and DeWitt Counties, and a new Eagleville (Eagle Ford -2) Field for Gonzales, Wilson, Atascosa, LaSalle and McMullen Counties.

The proposed rules would provide for a minimum 330 feet from lease line spacing, no between-well spacing, and a minimum of 100 feet from lease line to the first and last take points in a horizontal well, a "box" rule, and a special rule for off-lease penetration of the producing formation.

The standard proration unit size for oil wells would be 80 acres, plus additional acreage for horizontal wells as allowed by RRC Rule 86. Under the proposed rules, an operator would be allowed to assign up to 360 acres to a horizontal well with a 5,000-foot lateral.

Use of Fresh Water for Fracture Treatment of Horizontal Wells in Shale Plays

2010-06-30T21:49:18Z

A major issue in shale plays is the use of underground supplies of fresh water to fracture-stimulate the well. Horizontal shale wells are fracture-treated with fresh water to which various chemicals are added, and huge volumes of fresh water are needed. A 5,000-foot lateral horizontal well will use up to seven million gallons of fresh water. Depending on the availability of underground water at the lease, the operator's use of that resource could have a substantial adverse impact on the landowner's subsurface water supply.

The impact of fracing in the Barnett Shale was a subject of study by the Texas Water Development Board in 2007. The TWDB concluded that 89% of the water supply for the region of the Barnett Shale field was supplied by surface water sources, and that groundwater used for Barnett Shale development accounted for only 3 percent of all groundwater used in the study area. In East Texas, underground water is more plentiful and using it to frac wells may not place a strain on aquifers. But the Eagle Ford Shale is generally in a more arid part of the state where surface water supplies are more scarce and underground water is a more precious resource. Where the mineral owner also owns the surface estate, attention needs to be paid to the impact of mineral development on underground water supplies.

Companies have developed recycling methods to re-use frac water, which have been tested on an experimental basis. Devon has reported that it has been able to recycle a small percentage of the frac water used in its Barnett Shale wells and in the last three years has recycled nearly 4 million gallons. One obstacle is cost. It was reported that it costs about 40 percent more to recycle the water than to dispose of it by underground injection. Devon has said that its cost of recycling water in Barnett Shale wells is $4.43 per barrel, vs. $2 to $2.50 per barrel for typical water disposal into an injection well. Devon said that less than 5% of Devon's revenue goes toward the cost of handling flow-back water. For a good article on recycling frac water, go to this link.

]]> Concerns have also been raised about potential environmental hazards of the chemicals used in frac water. A bill has been introduced in Congress, the FRAC Act, to impose federal regulatory requirements on companies using frac water, requiring reporting of the chemicals used and possible federal regulation of fracing under the Safe Drinking Water Act. The EPA has announced a new study of the risks frac water poses to underground water supplies. For more about the FRAC Act, see this link.

In Texas, the owner of the mineral estate has the right to use so much of the surface estate as is reasonably necessary to explore for and produce the minerals. This includes the right to use underground water, which is owned by the owner of the surface estate. Therefore the lessee under an oil and gas lease has the right to use subsurface water for drilling and fracing operations, except to the extent that the lease restricts such right. If the lessor is also the surface owner, the lessor should carefully consider what restrictions on rights to use subsurface water should be included in the lease. Before the development of fracing techniques and horizontal wells, a typical oil and gas lease allowed the lessee to use subsurface water, except from the surface owner's wells and tanks, usually without compensation. Where water resources are scarce, some leases, especially in West Texas, are now providing that the lessee may not use subsurface water without the surface owner's consent. Some landowners are requiring that the lessee purchase the water from the surface owner. In some areas of the Eagle Ford Shale there may not be sufficient subsurface water to supply the needs of operators. In other areas, underlain by the Carrizo fresh-water sand, the large volumes of water needed for development of the Eagle Ford may have a substantial adverse impact on the Carrizo aquifer.

Although aquifers are becoming increasingly regulated by the growing number of underground water districts in Texas, Texas law specifically exempts from district regulation water wells drilled for the purpose of supplying water for oil and gas exploration. If oil and gas exploration places a large demand on aquifer supplies, the resulting aquifer depletion may frustrate efforts of underground water districts to regulate and preserve their aquifers for human consumption, farming and other non-industry purposes.

Large ranch owners should consider consulting with a hydrologist before entering into an oil and gas lease, to be sure they understand the extent and limits of their underground water supplies and the possible impact of the demand placed on those supplies by fracing of wells. Possible alternative water supplies and the possibilities of recycling frac water should be discussed with the lessee. The ranch owner should also obtain good base-line data of the level of the aquifer under his property and the quality of his groundwater before any drilling begins, so that the effects of the lessee's activities can be accurately determined. The oil and gas lease could require the lessee, at its expense, to test the depth and quality of water in each of the lessor's wells prior to commencing operations, and could require the lessee to deepen or replace any wells becoming dry as a result of the lessee's withdrawals.

The operators' practice where possible is to construct one large earthen tank to hold frac water for multiple wells and to drill one or more water wells to fill the tank. If the lessor under and oil and gas lease is the surface owner, the lease should address where such a tank will be placed and what will happen to the tank and wells when the drilling operations are completed.

John Hanger, Secretary of Pennsylvania Department of Environmental Protection, Comments on Movie Gasland

2010-06-29T22:36:56Z

John Hanger, head of the agency responsible for regulating the oil and gas industry in Pennsylvania, said in an interview by the Philadelphia Inquirer that the movie Gasland, by Josh Fox, was "fundamentally dishonest" and "a deliberately false presentation for dramatic effect," and called Fox a "propagandist." Hanger was interviewed by Fox in the movie, at the end of which Hanger walked out on the interview. Hanger was formerly head of the environmental group Citizens for Pennsylvania's Future (PennFuture). He has sought stricter regulation of the industry over its objections.

Fox's movie has come under criticism by others. Energy in Depth, an industry website, calls his movie "heay on hyperbole, light on facts." Fox blames much of the pollution depicted in the movie on hydraulic fracturing. The movie shows water coming out of a faucet charged with methane and lit on fire.

Richard Stoneburner, President of Petrohawk Energy, commenting on the environmental opposition to hydraulic fracturing, has written that natural gas often occurs naturally in fresh water sands.

America's Natural Gas Alliance, another industry group, has posted an entry on its website titled "The Truth About Gasland," rebutting allegations in the film:

In the film's signature moment Mike Markham, a landowner, ignites his tap water. The film leaves the viewer with the impression the flaming tap water is a result of natural gas drilling. However, according to the Colorado Oil and Gas Conservation Commission, which tested Markham's water in 2008, at his request, methane in his water supply had "no indications of oil & gas related impacts to water well." Instead the investigation found that the cause was "biogenic" in nature, meaning it was naturally occurring due to the fact that his water well had been drilled into a natural gas pocket.

Professor Don Siegel at Syracuse University told reporters in an interview that anti-drilling activists like Fox are distorting the facts about natural gas drilling. "As a hydrogeologist, I really am almost offended by some of the opposition that's trying to paint a picture of what groundwater resources are like that is completely wrong." He proceeded to list the "not-truths" about hydraulic fracturing.

EOG Withdraws Application for Temporary Field Rules in Eagle Ford Shale

2010-06-25T17:46:45Z

At the hearing today before the Texas Railroad Commission for consideration of EOG Resources' application for temporary field rules for a new field consolidating 27 existing fields in the Eagle Ford Shale in South Texas, the applicant EOG Resouces announced that it was withdrawing its application. (See my previous post on this application here.) EOG's lawyer said that the application was filed at the suggestion of Railroad Commission staff in order to have uniform rules for all wells drilled in the Eagle Ford, but because of the number of parties who had appeared in the hearing in opposition to the application, EOG would withdraw the application. He said that EOG plans to file a new application for temporary field rules for the Eagle Ford in eight counties where EOG has acreage: Gonzales, Wilson, Karnes, Atascosa, McMullen, La Salle, DeWitt, and Frio Counties. He said that the rules EOG would propose would apply to oil wells only, as EOG's acreage is in the oil window of the play. Other operators in the gas portion of the play are also expected to file additional applications for temporary field rules for gas wells.

Three Documentaries About Drilling in Shale Plays

2010-06-22T22:37:10Z

Remarkably, three full-length documentaries are in circulation about the perils and benefits of the new shale drilling boom in the US. The first, Gasland, relates stories of the horrors caused by drilling in locations across the country. It won an award at the 2010 Sundance Film Festival, and is now showing on HBO. Its official website is a call for environmental action. The second documentary, Haynesville: A Nation's Hunt for Energy, has been shown at several film festivals and can be seen in Dallas, Houston and Forth Worth in July. The film critic for the Fort Worth Star Telegram calls Haynesville "fairer and smarter" than Gasland. Watch the trailer at its website. The newest film is Gas Odyssey, which advocates development of the Marcellus shale in New York State. Its maker Aaron Price says that the issue of hydraulic fracturing "stopped being about science and facts a long time ago It has become a political monster, and my hope is that this film will transcend politics and restore basic rights to New Yorkers - to develop their land through a tried and true, safe technology." Watch all three and make your own conclusions.

TCEQ Chairman Defends Barnett Shale Air Quality

2010-06-18T15:43:13Z

Bryan Shaw, Chariman of the Texas Commission on Environmental Quality, published a letter in the Fort Worth Star Telegram assuring Fort Worth that there was no immediate health risk from contamination of air caused by oil and gas activities in the region. Shaw assured residents that "the TCEQ can state, without hesitation, that benzene levels in Fort Worth pose no immediate health risk."

The TCEQ has taken extraordinary measures over the past several months to test air quality in and around Fort Worth after Al Amendariz, then an engineering professor at Southern Methodist University and now regional administrator for the Environmental Protection Agency, published a report that air emissions from oil and gas activity in the Barnett Shale play were significantly contributing to reduced air quality in the DFW area. The concerns were exacerbated by reports from the town of DISH, in Denton County, that air emissions from oil and gas facilities were causing health problems in that community.

The TCEQ has also come under more general criticism and scrutiny by the EPA since Armendariz's appointment. The EPA has contended that the TCEQ's air-permitting program violates federal law, and the EPA has threatened to take over the program from the TCEQ. The Texas Attorney General has filed a legal challenge to the EPA's efforts to pre-empt the State's permitting program. The TCEQ and the EPA are in discussions to try to resolve the dispute.

EOG Resources Proposes Temporary Consolidated Field Rules for Eagle Ford Shale

2010-06-10T13:03:27Z

EOG Resources has filed an application with the Texas Railroad Commission proposing the adoption of temporary field rules for wells drilled in the Eagle Ford Shale in South Texas that could have a significant impact on thousands of oil and gas leases in the field. The application proposes to consolidate 27 designated fields that produce from the Eagle Ford Shale formation, and the proposed rules will replace any field rules previously adopted for those fields. The consolidated rules would apply to Eagle Ford Shale wells drilled in Railroad Commission of Texas Districts 1, 2 and 4. A copy of the notice of the Railroad Commission hearing for the adoption of the proposed rules may be found here: eagle ford field rules.pdf. The hearing is scheduled for June 25, 2010, at 9 am in the William B. Travis Sate Office Building, 1701 Congress Avenue, Austin. Persons wishing to participate in the hearing must file a notice of intent to appear at least five working days in advance of the hearing date and serve a copy of the notice on the applicant and any other parties of record. More information can be obtained by calling the Office of General Counsel of the Railroad Commission at 512-463-6848.

Field rules are adopted by the Railroad Commission to govern the spacing of wells in a field. They specify how far wells must be from each other, how far wells must be from the nearest lease line, and how much acreage must be assigned to a well in order to obtain a permit to drill a well. The acreage assigned to a proposed well is known as a "proration unit." Well spacing and density rules were developed by the Commission after it was given jurisdiction over oil and gas operations in Texas in the early days of the oil industry, principally because of unregulated drilling in the East Texas Field. Because of unregulated drilling in that field, wells were being drilled that were not necessary for the efficient development of the field, and oil prices plummeted. The Commission was also given authority to "prorate" production from a field -- that is, to limit production, and to allocate or "prorate" the specified limit of production from a field among the wells in a field. The stated purposes of spacing and density rules are to avoid waste and protect the correlative rights of producers in the field. Theoretically, field rules should designate a size for proration units that approximates the amount of acreage in the field that can be efficiently drained by a single well.

The field rules proposed by EOG would provide:

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No well may be drilled nearer than 330 feet to any property or lease line.

The "standard" proration unit for an oil well shall be 80 acres.

The "standard" proraton unit for a gas well shall be 320 acres. An operator is permitted to form optional drilling units for gas wells of 80 acres.

Proration units for horizontal gas wells may contain additional acreage, determined by the following formula: A= (L x 0.16249) + 320 acres, where L = the horizontal drainhole distance measured between the first take point and the last take point.

Proration units for horizontal oil wells may contain additional acreage, determined by a separate rule previously adopted by the Commission, Statewide Rule 86. Under that rule, an operator is allowed to assign additional acreage to a well, depending on the length of the lateral. For the proposed new Eagle Ford field rules, for example, operators would be able to assign an additional 160 acres to the proration unit if the horizontal drainhole displacement is between 2,482 feet and 3,308 feet; an additional 200 acres if the horizontal displacement is from 3,309 to 4,135 feet; and 240 acres if the horizontal displacement is from 4,136 to 4,962 feet.

So how would these proposed rules work? Suppose an operator drills a horizontal gas well in the Eagle Ford, with a horizontal displacement (the horizontal portion of the well, from the first "take point" to the last "take point" in the well) of 4,000 feet. Under these proposed rules, the operator could assign to the well a proration unit of up to 997 acres (A = (4,000 x .16429) + 320). For an oil well with a 4,000-foot horizontal displacement, the operator could assign to the well a proration unit of up to 320 acres (the "standard" 80 acres for an oil well plus 240 acres allowed by Rule 86). But the field rules would also allow the operator to assign a proration unit of only 80 acres to such a well, whether classified as an oil well or a gas well. The proposed rule would therefore give the operator huge leeway in how much acreage to assign to a proration unit: for a gas well with a 4,000-foot lateral, between 80 and 997 acres; for an oil well, between 80 and 320 acres.

How would these proposed rules affect mineral owners in the field? The effect on mineral owners depends on the interplay between the field rules and the pooling clause in the mineral owner's oil and gas lease. Most oil and gas leases allow for pooling of the leased premises with other lands, and the pooling clause usually specifies a maximum size for pooled units. A typical pooling clause will say that the maximum size for pooled units for an oil well is 40 acres, "plus 10% tolerance," and for gas wells, 640 acres "plus 10% tolerance." These maximum sizes for pooled units may be negotiated between the mineral owner and his lessee. But almost all pooling clauses contain language similar to the following:

"Should governmental authority having jurisdiction prescribe or permit the creation of units larger than those specified, for the drilling or operation of a well at a regular location or for obtaining miximum allowable from any well to be drilled, drilling or already drilled, units thereafter created may conform substantially in size with those prescribed or permitted by government regulations."

In other words, if the field rules adopted by the Railroad Commission "prescribe or permit" proration units for wells in the field greater than the pooled unit size limits provided in the lease, the lessee may create pooled units up to the size permitted by the Railroad Commission for proration units. Therefore, one effect of the field rules proposed by EOG will be to greatly increase the size of pooled units allowed under many oil and gas leases in the field.

While development of the Eagle Ford Shale is in its early stages, I do not believe that any operator in the field believes that a 4,000-foot horizontal well is capable of draining 997 acres. Most drilling plans I have seen contemplate much more dense development. Assume that an operator creates a pooled unit of 160 acres for a 4,000-foot lateral well. Each end of the lateral would have to be 330 feet from the unit boundary, so the dimensions of the pooled unit could be 4,660 feet by 1,496 feet. If the wellbore is located in the middle of the unit, then the wellbore would have to drain an area 748 feet from the wellbore in order to fully drain the oil or gas within the area of the unit. I believe it is doubtful that wells in the Eagle Ford will drain an area that distance from the wellbore. If the same well were included in a 997-acre pooled unit, and the end points of the lateral were located 330 feet from the edge of the pooled unit, the unit would have to be 9,320 feet in width, and the well would have to drain a distance of 4,660 feet to fully drain the unit.

In truth, the operators in the Eagle Ford want the flexibility to form large proration units in order to be able to consolidate leases into large pooled units, and to hold those leases by drilling only one well on the pooled unit. The operators would later be able to drill additional wells on the pooled unit to fully develop the acreage. This allows operators to retain more acreage with fewer wells, reducing the need to renew expiring leases.

Few landowners understand the import of the language in their pooling clauses and how that language is affected by special field rules. It is very unusual for any party to oppose field rules proposed by operators for a field, and it is even more unusual for the Railroad Commission to refuse to adopt the rules proposed by operators. But in adopting such large "optional" units for horizontal wells in the Eagle Ford field (and for other shale fields in Texas), I believe that the Railroad Commission is failing to follow the original purpose and intent for which field rules are intended. The Commission should require operators to prove that the proration unit sizes they propose have some relationship to the amount of acreage that can reasonably be drained by a single well in the field.

Pennsylvania Suspends EOG's Right to Drill Wells after Blowout

2010-06-10T12:41:02Z

The Pennsylvania Department of Environmental Protection (PDEP) on Monday ordered EOG Resources to suspend all drilling operations in Pennsylvania pending investigation of an EOG well blowout on June 3 in Clearfield County, Pennsylvania. EOG had previously said it planned to drill 40 wells in the Marcellus Shale in 2010, and it not operates about 265 wells in Pennsylvania. The blowout shot gas and drilling mud and some 36,000 gallons of frac fluid 75 feet into the air. There was no fire, and no one was hurt. The PDEP banned EOG from drilling for up to seven days and from using hydraulic fracturing techniques for up to fourteen days. EOG said the blowout appears to have been caused by leaking seals in a blowout preventer.

PDEP also ordered C.C. Forbes, a unit of oilfield services contractor Forbes Energy Services, a Canada drilling company, to stop all work on Marcellus Shale wells. Forbes provided post-hydraulic fracturing services for EOG on the well that blew out. Forbes has idled to rigs in the Marcellus Shale.

This is the second time PDEP has banned an operator from drilling wells in the Marcellus Shale. Previously, PDEP banned Cabot Oil and Gas from conducting hydraulic fracturing operations in Susquehanna County after three spills of a chemical used in hydraulic fracturing at Cabot wells. PDEP also fined Cabot $56,650 and ordered the company to submit a new Pollution Prevention and Contingency Plan and Control Disposal Plan for its wells.

The failure of EOG's blowout preventer is reminiscent of the environmental disaster now taking place in the Gulf of Mexico.

Texas Report Shows No Evidence of Health Problems in Town of Dish

2010-05-19T18:45:22Z

The Texas Department of State Health Services issued its report on results of blood and urine samples taken from 28 residents of the tiny town of Dish, in Denton County, Texas. The report concludes that there is no evidence from those tests that the residents have elevated levels of airborne toxins in their bodies.

As has been widely reported, the Mayor of Dish has been complaining that oil and gas operations around the town have resulted in exposure to airborne contaminants and health problems among citizens in the town. The town commissioned an air quality survey by a company named Wolf Eagle Environmental, which reported in December 2009 that the town "continues to show high levels of atmospheric VOCs known to have both carcinogenic and neurotoxin capabilities in concentrations that exceed TCEQ ESLs. High atmospheric concentractions of Methane were confirmed at various locations in both the August 2009 and December 2009 Air Quality Studies performed by Wolf Eagle." The town also conducted a health survey of its citizens, and the survey results were analyzed by Wilma Subra, a Louisiana chemist, for Earthworks' Oil and Gas Accountability Project. Ms. Subra's report concluded that a significant number of residents reported health effects associated with toxics measured in excess of TCEQ screening levels, and it recommended that the Texas Department of State Health Services (TxDSHS) test the blood of community members.

TxDSHS reported that, although elevated levels of volatile organic compounds were found in some of the blood samples, "the pattern of VOC values was not consistent with a community-wide exposure to airborne contaminants, such as those that might be associated with natural gas drilling operations," and could have come from other sources such as cigarette smoking, metal cleaners, degreaser and lubricants. TxDSHS also tested water samples from residents' homes and found one home with an elevated level of a chemical derived from chlorine added to drinking water. The TxDSHS report cautioned that its investigation was limited to a one-time sampling event, that VOC's stay in the body for only a short time, so the tests could reflect only recent exposures and not historical exposures.

Mayor Tillman, interviewed by the Fort Worth Star-Telegram, commented that he does not think the results of the tests should be taken to assume that drilling in the rest of the Barnett Shale is being conducted safely. "He is convinced that gas companies were severly polluting the air in Dish but cleaned up their act when they saw state regulators were starting to take an interest. "They've done something and I don't know what it is and I don't care,' Tillman said. 'All I care is the air is getting cleaner.'"

Gene Powell, Editor of the Powell Barnett Shale Newsletter, estimated that the tests conducted to investigate Mayor Tillman's complaints have cost the State $400,000, or $6,667 per resident.

Movie 'Gasland' Stirs More Controversy About Hydraulic Fracturing

2010-05-14T21:00:10Z

Gasland is a film documentary about the dangers caused by hydraulic fracturing of gas wells being drilled in shale plays across the U.S. It won a Special Jury Prize at the Sundance Film Festival this year. It was filmed by Josh Fox, whose family owns land in Pennsylvania that is in the Marcellus Shale Play. Gasland is now being screened across the country.

Josh Fox was recently interviewed about his film on the PBS program NOW. The film asserts that frac'ing of wells has caused underground aquifers to be charged with methane in Pennsylvania and Colorado and poses severe risks of contamination to the water supply. Josh Fox notes that hydraulic fracturing is exempt from federal regulation, and he advocates for passage of the FRAC Act now before Congress that would give the EPA jurisdiction over hydraulic fracturing.

The comments about the NOW story posted on its website evidence the growing controversy over frac'ing.

]]> A couple of examples:

From Gail Bloomer, PhD: Your coverage of "Gasland" and interview with Mr. Josh Fox was disappointing in it's distortion of facts and anecdotal examples of malpractices on the part of a few oil and gas companies. "Fracking" of hydrocarbon reservoirs has been an accepted practice for more than a century. The technique does not represent a company's desperate attempt to extract oil or gas, only a technique to optimize the benefits of the initial capital expenditure. There are so many distortions of the truth in this documentary it is difficult to know where to start. Mr. Fox represents the swarms of lawyers, politicians, PR people, personalities, economists and many other non-qualified people hi-jacking scientific studies with very few facts and a large vacuum of knowledge of the subjects on which they speak.The method of fracking commonly used today does not include the use of any strange, toxic chemicals. It uses the same water that is compatible with the reservoir water plus a simple surfactant (viscosity breaker or detergent). The fluids that contain the toxic chemicals are found in the drilling fluids prior to the fracking, and they are kept in EPA approved liner pits (leaks occur rarely and they are simply cleaned up with vacuium trucks for proper disposal). Today it is rare to find a well that is not fracked. Having done a geologic thesis in the subject reservoir formations in the Mohawk Valley and southward, I can call to mind the many farmers that had methane in their well waters long before drilling started in the area. They even used it to fuel local generators for their lights and milking machines. The water supply for the New York and Philadelphia metroplex is from the surface watershed found in the Catskill and Delaware Basins, not from subsurface wells. No contamination need be feared from drilling, perhaps from highways, fertilizer from farms, and other industrial activity, but those watersheds are well protected by New York's DEP. Arkansas was mentioned as an area of fracing pollution and I can find no reference to that at all. Oklahoma, like many oil- and gas-rich areas have had hydrocarbons in their aquifers since th earliest settlers. No doubt, there are rare times when an aquifer is contaminated due to poor drilling and completion practices, and those operators should be required to fix the problem, and it can be fixed. As the co-founder of one of the earliest, if not the first, envrionmental consulting companies in the United States, I find Mr. Fox's film suggestive of an agenda in which he or his sponsors are complicit. That is not unusual nor illegal, but the mis-use of facts is not what I would expect of PBS or Sundance. If that is what you like, I can make up all sorts of things and sprinkle them with anecdotal facts to weave a believable story involving the big bad wolf stalking the average citizen.

From TomL in Pa: Maybe Mr. Gail Bloomer should volunteer to go on 'NOW on PBS' ASAP to *PROVE* all his selectively-worded points on his "truths of fraking." Think about this: That part of 2005 US Energy Policy Act that EXEMPTS gas drilling and fraking from the regulations and oversights of the national Safe Drinking Water Act, the Clean Air Act, and various regulations on waste disposal is often called the "Halliburton Loophole".

If the process is so clean, force the oil & gas industry to follow the same regulations based on the existing laws that apply to everyone else!

As far as drilling and fraking, it makes much more sense that if you:
A) punch a hole in the ground (and even through or near small aquifers and/or the surrounding groundwater saturation level), you create a draining point, then,
B) you drill the hole deeper to frak the rock stratas BELOW that drain by injecting millions of gallons of then "chemically-enhanced" local water under enormous pressures, and then,
C) pump that newly-contaminated water back out to "clean(?)" it up and put back into our water cycle (but it's impossible to get all that tainted stuff out, or cleaned entirely)... that CAN'T be GOOD.

It becomes a point of contamination.

Even an occasional drilling/fraking "mistake" still may cause problems that have far-reaching (and long-term) bad impacts. If not now, then later.

A recent article in the Syracuse Times provides a good summary of the debate. The paper reports that a hydrology professor from Syracuse University and two retired colleagues expressed frustration that the debate fails to investigate the facts and weigh the risks against the benefits. The intensity of the debate is exacerbated by the recent events in Dimock, Pennsylvania, where groundwater became charged with methane from wells drilled by Cabot, causing a water well to explode and forcing residents to find alternate sources of drinking water. The Pennsylvania Department of Environmental Protection has imposed heavy fines on Cabot.

There's a saying in Texas: whiskey is for drinking, water is for fighting. When citizens percieve a threat to their water resources, the debate is likely to be lively, and it is often not rational. Aubrey McClendon, CEO of Chesapeake, spoke recently at Harvard. One of the questions to him was how many people Chesapeake had killed. He had to cut his speech short and was escorted off the campus.

The recent huge oil spill in the Gulf of Mexico is not likely to quiet the debate over frac'ing. The industry has been arguing that federal regulation of fra'cing is not necessary because state regulation is adequate and the technique has been used for years by the industry without any proven resulting groundwater contamination - similar to industry arguments that deep-water drilling offshore has been proven safe.

In his interview on NOW, Josh Fox argues that our country should simply eliminate its dependency on fossil fuels and get all its energy from renewable resources. That, unfortunately, is not a realistic possibility. We must face the fact that, for many years to come, our nation will be heavily reliant on fossil fuels for a substantial part of its energy needs. Extraction of fossil fuels carries risks to human safety, human health and the environment. We can reduce but not eliminate those risks. One way to reduce the risks, in my opinion, is to reduce our dependence on oil by increasing our production of natural gas. While there are risks in natural gas drilling and production, those risks pale in comparison to the devastation now being caused by the BP spill in the Gulf of Mexico, to the environmental costs of strip-mining and burining coal, and to the strategic and geopolitical risks caused by our dependency on foreign oil. The fact is that frac'ing of wells, when done properly, is a proven and safe process, and the technological advances in the field have unlocked huges reserves of natural gas in the U.S. Natural gas is indeed a fossil fuel, and a byproduct of its combustion is CO2. But it produces much less CO2 (and less other airborne pollutants) than an energy-equivalent amount of coal or gasoline. It is clearly a better alternative than coal or oil, from an environmental standpoint. If our nation wants to reduce its dependence on foreign oil and reduce its emissions of greenhouse gases, natural gas is a necessary and benefical alternative.

It will take a long time, a lot of science, and a many congressional hearings to restore our citizens' confidence in the petroleum extraction industry. We cannot leave the decisions about if, when and how our resources should be exploited to fuel our cars, our factories and our homes to the experts; but nor can we ignore the advice of those experts and naively assume that wind energy, solar energy and/or nuclear energy can immediately replace our current dependence on fossil fuels. Unfortunately, reason and calm seem to be in short supply in these debates.

News of "Super Extended Laterals" in Woodford Shale, and ConocoPhillips' First Well in Eagle Ford Shale

2010-05-07T13:56:01Z

Newfield Exploration has reported that it is drilling horizontal wells with "super extended laterals" in the Woodford Shale in Oklahoma -- wells with laterals exceeding 5,000 feet. Newfield has so far drilled 14 super-extended lateral wells, with an average length of 9,000 feet. Those wells had an average gross initial production rate of approximately 9 MMcfe/day.

ConocoPhillips reported that it has completed the drilling of four horizontal wells in the Eagle Ford shale play, in its "liquids-rich" core. The first of these wells was put on production in March and flowed at an initial rate of 3.8 mmcf/day and 1,200 barrels/day of condensate.

All of the new shale gas production continues to put downward pressure on gas prices. Natural gas futures for June delivery fell 36.8 cents, or 8.5 percent on Thursday, April 29 on NYMEX. So far this year, natural gas futures have fallen 29 percent. The Energy Information Administration reported that the supply of gas in storage increased by 83 Bcf for the week ended April 30. Gas in storage is 315 Bcf above the 5-year average.

ExxonMobil Proxy Statement Addresses Chemicals Used in Hydraulic Fracturing

2010-05-03T12:05:41Z

The Park Foundation has submitted a resolution for consideration at ExxonMobil's annual meeting urging ExxonMobil to prepare a report on the environmental impact of fracturing operations and what can be done to reduce or eliminate environmental hazards caused by hydraulic fracturing. The proposal, and ExxonMobil's response, provide a good summary of the state of the debate in the U.S. over potential environmental impacts of hydraulic fracturing. I have reproduced the entire statement from Exxon's proxy statement below.

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ITEM 10 - REPORT ON NATURAL GAS PRODUCTION

This proposal was submitted by The Park Foundation, 311 California St., Suite 510, San Francisco, CA 94104, as lead proponent of a filing group.

"Whereas,

Onshore 'unconventional' natural gas production requiring hydraulic fracturing, which injects a mix of water, chemicals, and particles underground to create fractures through which gas can flow for collection, is estimated to increase by 45% between 2007 and 2030. An estimated 60-80% of natural gas wells drilled in the next decade will require hydraulic fracturing.

Fracturing operations can have significant impacts on surrounding communities including the potential for increased incidents of toxic spills, impacts to local water quantity and quality, and degradation of air quality. Government officials in Ohio, Pennsylvania and Colorado have documented methane gas linked to fracturing operations in drinking water. In Wyoming, the US Environmental Protection Agency (EPA) recently found a chemical known to be used in fracturing in at least three wells adjacent to drilling operations.

There is virtually no public disclosure of chemicals used at fracturing locations. The Energy Policy Act of 2005 stripped EPA of its authority to regulate fracturing under the Safe Drinking Water Act and state regulation is uneven and limited. But recently, some new federal and state regulations have been proposed. In June 2009, federal legislation to reinstate EPA authority to regulate fracturing was introduced. In September 2009, the New York State Department of Environmental Conservation released draft permit conditions that would require disclosure of chemicals used, specific well construction protocols, and baseline pre-testing of surrounding drinking water wells. New York sits above part of the Marcellus Shale, which some believe to be the largest onshore natural gas reserve.

Media attention has increased exponentially. A search of the Nexis Mega-News library on November 11, 2009 found 1807 articles mentioning 'hydraulic fracturing' and environment in the last two years, a 265 percent increase over the prior three years.

Because of public concern, in September 2009, some natural gas operators and drillers began advocating greater disclosure of the chemical constituents used in fracturing.

In the proponents' opinion, emerging technologies to track 'chemical signatures' from drilling activities increase the potential for reputational damage and vulnerability to litigation. Furthermore, we believe uneven regulatory controls and reported contamination incidents compel companies to protect their long-term financial interests by taking measures beyond regulatory requirements to reduce environmental hazards.

Therefore be it resolved,

Shareholders request that the Board of Directors prepare a report by October 1, 2010, at reasonable cost and omitting proprietary information, summarizing 1. the environmental impact of fracturing operations of ExxonMobil; 2. potential policies for the company to adopt, above and beyond regulatory requirements, to reduce or eliminate hazards to air, water, and soil quality from fracturing.

Proponents believe the policies explored by the report should include, among other things, use of less toxic fracturing fluids, recycling or reuse of waste fluids, and other structural or procedural strategies to reduce fracturing hazards."

The Board recommends you vote AGAINST this proposal for the following reasons:

ExxonMobil's Environmental Policy states that we will comply with all applicable laws and regulations and apply responsible standards where laws do not exist, including precautions specific to hydraulic fracturing. The Board believes the minimal environmental impacts of hydraulic fracturing have been well-documented and regulatory protections are well-established; therefore, an additional report is not necessary.

Hydraulic fracturing provides significant environmental benefits compared to conventional drilling to include drilling fewer wells to access equivalent reserves; lower drilling waste volumes; smaller environmental footprints; less land disturbance; and, reduced air emissions.

Hydraulic fracturing technology has been used for more than 60 years in nearly one million wells drilled in the United States. The Groundwater Protection Council and the U.S. Environmental Protection Agency have both stated that there exists no significant risk to groundwater as a result of proper hydraulic fracturing.

Hydraulic fracturing is highly regulated at the state level to effectively protect drinking water wells and groundwater aquifers while achieving the economic and energy security benefits of natural gas resource development. In 2009, the Groundwater Protection Council surveyed the regulatory frameworks of 27 states, representing over 99.9 percent of U.S. oil and natural gas production, and concluded that "state regulations are adequately designed to directly protect water resources."

ExxonMobil has had detailed guidelines in place since 1998 for the assessment and mitigation of potential environmental impacts. In the case of hydraulic fracturing, these assessments inform drilling plans, well design, and permit applications.

The American Petroleum Institute has published guidance on well construction and integrity for those wells that will be hydraulically fractured, and is developing guidance on industry best practices to minimize environmental impacts associated with the use, management, treatment, and disposal of water and other fluids used in hydraulic fracturing.

ExxonMobil supports the disclosure of the identity of the ingredients being used in fracturing fluids at each site. While we understand the intellectual property concerns of service companies when it comes to disclosing the proprietary formulations in their exact amounts, we believe the concerns of community members can be alleviated by the disclosure of all ingredients used in these fluids.

We understand that some communities and homeowners new to drilling operations may have concerns. We are committed to working with them to demonstrate that we can address environmental concerns they may have, while providing good jobs and income associated with the safe and efficient production of natural gas.

While ExxonMobil unsurprisingly opposes the proposed resolution, its response states that it "supports the identity of the ingredients being used in fracturing fluids at each site." The frac fluids used in well completions are manufactured by service companies like Halliburton that provide the fluids to the well operator, and those companies compete against each other to provide fluids that will maximize the efficacy of a well frac. In that competition, the chemical makeup of frac fluids is one way for the service companies to obtain a competitive advantage, and they therefore want to preserve the proprietary nature of their chemical recipes. But if ExxonMobil, by far the largest oil and gas exploration company in the world, really wants the service companies to disclose the chemical makeup of their frac fluids in order to head off federal regulation of hydraulic fracturing, it is likely that the service companies will comply.

Oil Field Pollution in South Texas

2010-04-23T13:06:48Z

An interesting article by Joe Carroll of Bloomberg News explores the problems faced by South Texas Ranchers seeking to require cleanup of old oilfield contamination. These problems are widespread in Texas and in my opinion the Texas Railroad Commission is ill equipped to address the problems.

Gatti vs. State of Louisiana - a Challenge to Multiple-Well Pooling Orders in Louisiana

2010-04-23T12:20:13Z

An interesting case has recently been filed in Louisiana challenging the authority of the Louisiana Department of Conservation to approve pooled units containing multiple wells. In Gatti et al. vs. State of Louisiana, et al., Number 589350, Division 23, filed in the 19th Judicial District Court in East Baton Rouge Parish, the plaintiffs sued the State Department of Conservation and several operators in the Haynesville field, including Chesapake, Encana, Exco, Conoco Phillips, Petrohawk, SWEPI, EOG, Questar, Forest and XTO, claiming that the Department of Conservation was routinely allowing the drilling of "alternate unit wells" on previously established units, in violation of Louisiana law. A copy of the petition may be found here. Gatti v. St of Louisiana.pdf.

Louisiana has a forced-pooling statute that allows an operator to propose to the Department of Conservation a unit for a well which, if approved, forces all mineral owners in the unit to pool their interests for the drilling and production of that well. According to the plaintiffs, this statute only authorizes the Department to approve units large enough to cover an area drained by one well. The practice in Lousiana for the Cotton Valley and Haynesville fields is to obtain orders for 640-acre units, and later obtain approval to drill additoinal "alternate unit wells" on those units. The suit contends that this practice is unfair to the owners of minerals and royalties in the unit, and violates state law. The suit seeks certification of a class action on behalf of all owners of mineral rights in Haynesville Zone in Louisiana. It seeks a declaration that the Department has no authority to establish a unit having an area in excess of the area drainable by one well, and that any such unit is "null and void." The suit also seeks unspecified damages against the defendant companies.

An interesting article describing the history of forced pooling in Louisiana and arguing that multiple-well units are illegal may be found at fairdrilling.com.

I have written previously about the proceeding before the Texas Railroad Commission for adoption of field rules for the Carthage (Haynesville Shale) Field. In that proceeding, the applicants sought and obtained field rules establishing a standard proration unit of 640 acres for wells in the field, with "optional" 40-acre units. The examiners who heard the evidence opined that Devon had produced no evidence that a well in the field could drain 640 acres, and they recommended a 320-acre standard unit, but the Commissioners overruled them and agreed to Devon's request for 640-acre units.

It appears that in both Lousiana and Texas the regulators are going along with the fiction advocated by operators that wells in the Haynesville should be developed with 640-acre units, despite the fact that everyone knows the wells will in fact be drilled with 160 or 80-acre spacing. Everyone understands that this fiction is intended to accommodate the desires of the operators to construct larger units in order to (i) have more flexibility in how they space their wells and (ii) hold more acreage with a single well. I have sympathy with the first objective, but not with the second. It is impossible to drill wells with horizontal legs of 5,000 feet or more unless fairly large units are created. Conversely, it is unfair to the mineral owners in a large unit for their leases to be held by production from a single well in the unit where several wells are necessary to fully develop the reservoir under their lands.