Oil and Gas Lawyer Blog

UT's Bureau of Economic Geology has issued a comprehensive report on the estimated reserves in the Barnett Shale Field. The study, funded by the Alfred P. Sloan Foundation, looked at 16,000 wells in the field. It has been submitted for peer review before publication, but a summary of the report can be found on the BEG website.

The BEG created a model with data from 15,000 wells drilled through 2010. Assuming a $4 constant gas price, the model predicts another 13,000 wells through 2030. It predicts total field production of 44 Tcf of gas through 2050. Here are two images showing results of the study:

 

The BEG plans to complete similar studies of the Marcellus, Haynesville and Fayetteville Shales by the end of 2013.

 

 

I recently heard an interview with George Mitchell, the independent operator who found the key for combining hydraulic fracturing technology and horizontal drilling to unlock vast reserves of gas in the Barnett Shale, the first shale play. And it only took him 17 years to figure it out. Now 93 years of age, Mr. Mitchell was interviewed by American Public Media's Marketplace radio program. You can view the interview here.

Mr. Mitchell has some unorthodox views for a wildcatter. First, his foundation, the Cynthia and George Mitchell Foundation, has given millions of dollars to support development of clean energy resources. And he supports a carbon tax on hydrocarbons.

Mr. Mitchell also supports tough regulation of independent operators. "I've had too much experience running independents," Mitchell says. "They're wild people. You just can't control them. And if it doesn't do it right, penalize the oil and gas people. Get tough with them." Earlier this year, Mr. Mitchell told Forbes magazine that he is in favor of federal regulation of hydraulic fracturing by the U.S. Department of Energy. 

Mr. Mitchell and NY Mayor Micheal Bloomberg recently teamed up to write an Op Ed piece in the New York Times supporting the development of natural gas reserves with the new fracing technology and pledging their foundations to support efforts to develop responsible regulations to assure that drilling can be done safely:

Several states, including Colorado, New York and Ohio, are taking the lead in this regard, recognizing the need to establish an appropriate framework for regulatory safeguards. It appears that Texas, as the pioneer of hydraulic fracturing in shale formations, is poised to step forward in developing promising state guidelines as well. More such leadership is needed.

To jump-start this effort, each of our foundations will support organizations that seek to work with states and industries to develop common-sense regulations that will protect the environment -- and ensure that the industry can thrive.

We will encourage better state regulation of fracking around five key principles:

     Disclosing all chemicals used in the hydraulic fracturing process;

     Optimizing rules for well construction and operation;

     Minimizing water consumption, protecting groundwater and ensuring proper disposal of wastewater;

     Improving air pollution controls, including capturing leaking methane, a potent greenhouse gas; and

     Reducing the impact on roads, ecosystems and communities.

The latest research, including peer-reviewed studies out of Carnegie Mellon University and Argonne National Laboratory, suggests that if properly extracted and distributed, the impact of natural gas on the climate is significantly less than that of coal. Safely fracking natural gas can mean healthier communities, a cleaner environment and a reliable domestic energy supply right now.

. . .

We can frack safely if we frack sensibly. That may not make for a great bumper sticker. It does make for good environmental and economic policy.

The Texas Railroad Commission has recently published revised draft regulations specifically aimed at assuring that fracing and well completion operations are conducted safely and adequately protect groundwater resources.

I agree with Mr. Mitchell. Drilling technology is much more complex than it was ten or twenty years ago. Fracing involves managing very high pressures and toxic chemicals. Wells now cost $8 to $10 million. Texas needs to take the lead in assuring that these operations are conducted with the best available technology and safety practices, and the Railroad Commission needs to crack down on operators who don't follow those practices.

 

Reuters published a new story on Chesapeake recently, continuing its series critical of the company and its CEO Aubrey McClendon. In this article Reuters reports on its research of Rule 37 cases filed by Chesapeake. Incredibly, Reuters researchers identified all Chesapeake Rule 37 requests back to January 2005 - all 1,628 of them, more than twice the number filed by the next most-frequent filer, XTO (now owned by Exxon). Reuters also got hold of "hundreds of internal Chesapeake emails and thousands of pages of documents" showing how Chesapeake deals with landmen and landowners in lease plays, and the article cites some of those documents relating in particular to Chesapeake's lease acquisitions in Michigan.

A "Rule 37" exception is a permit to drill a well that would otherwise violate the applicable spacing rules for the well because it is closer than those rules allow to an adjacent tract. In the last few years Chesapeake has made extensive use of Rule 37 exceptions, particularly in the urban portions of the Barnett Shale play in Tarrant County, where most lot owners own the minerals under their homes. Some lot owners refuse to lease on any terms. These unleased owners create "holes" in the pooled units Chesapeake puts together for drilling horizontal shale wells, and sometimes there are so many unleased tracts in the units that it is impossible to drill a horizontal well without coming too close to the unleased tracts. So, Chesapeake asks the Railroad Commission to let it put its well closer to those unleased tracts than Barnett Shale field rules would otherwise allow. Chesapeake is required to give the unleased homeowner notice of its application for the Rule 37 exception, but most homeowners don't have the resources to contest the application, and if no objections are filed the Commission typically grants the exception. As a result, the Chesapeake well, when completed, is likely to drain hydrocarbons from under the unleased tract, and the owner of the unleased tract receives no compensation. Reuters characterizes Chesapeake's tactic as "exploit[ing] little-known laws to force owners to hand over drilling rights and sometimes forfeit profits."

In April of this year, Reuters reported on Aubrey McClendon's loans of some $1.5 billion to finance his share of drilling costs on his 1% interest in Chesapeake wells, alleging a conflict of interest. In June, Reuters issued a story questioning whether Chesapeake and Encana had colluded to avoid competition in their rush to acquire oil and gas leases in Michigan, resulting in a Department of Justice investigation of possible anti-trust violations. At least partly as a result of Reuters' stories, McClendon resigned as chairman of the board, and a new set of directors was elected.

Chesapeake was also in the news last month when it settled a long-running claim brought by Dallas/Fort Worth International Airport for underpayment of royalties due on Chesapeake wells drilled under the airport. Chesapeake agreed to pay $5 million in back royalties and the DFW lease was amended to require royalties to be based on an index price for gas.

Reuters' story relates Chesapeake's tactics on leasing in Michigan in some detail. It quotes emails from an independent landman in Michigan hired by Chesapeake to acquire leases, who was subsequently told by Chesapeake to "put on hold" hundreds of leases after a Chesapeake test well had disappointing results. The leases had already been approved, signed, and submitted to Chesapeake. The landman was forced to tell the landowners that Chesapeake had changed its mind and would not pay for the leases, resulting in 150 breach-of-contract lawsuits against the landman's company. Earlier this year, two state court judges in Michigan held that Chesapeake had no legal obligation to pay for the leases and could reject them for any reason. (More recently, an appeals court upheld a $20 million judgment against Chesapeake in Louisiana for attempting to back out of a deal to buy oil and gas leases from another company. See my previous post on that case here.)

While Chesapeake's rejection of leases may not be illegal, it certainly has given the industry a black eye and made it more difficult for other companies to do business with landowners. The landman who got the brunt of landowners' anger in Michigan clearly is not happy. I am personally familiar with Chesapeake's practice of "cold-drafting," a term used for the practice of sending a lease to a landowner with a draft for the bonus, in effect making an offer to lease, but with no present intent to honor the lease; evaluating whether to pay for the lease after the draft has been deposited and the lease signed and returned to the landman; and then picking and choosing which leases the company wants to take and which they want to reject. It allows the company to "lock up" the acreage by committing the landowner to the lease for the (usually 90) days that the draft is outstanding. I'm aware of one case in which Chesapeake even recorded the lease and then attempted to reject it. Landmen should, in my view, refuse to participate in such practices, and they should certainly be considered unethical.

The EPA has issued its draft plan to study the impacts of hydraulic fracturing on drinking water in the U.S. Two state regulatory authorities have absolved frac'ed wells from responsibility for contaminating drinking water in Colorado and Texas. Maryland's top einvornmental regulator urged lawmakers to impose a two-year moratorium on frac'ing, as Maryland's legislature considers additional laws to regulate the practice. Meanwhile, the boom in shale gas drilling continues.

 

Continue reading "More About Hydraulic Fracturing in the News" »

Here is the closing statement of Range Resources filed with the Texas Railroad Commission after its hearing on complaints that Range's Barnett Shale wells in Parker County have contaminated groundwater.  It provides a good summary of the events to date and the evidence produced at the hearing.  Range Production Company Closing Statement.pdf

Here is a link to a summary of the Range dispute prepared by Gene Powell, Editor of the Powell Barnett Shale Newsletter.

Last week, a hearing was held before examiners at the Texas Railroad Commission to determine the source of water well contamination in Parker County. The Environmental Protection Agency had previously entered an emergency order finding that Range Resources was responsible for charging rural water wells with natural gas in Parker County, a finding that Range has vehemently denied. The Railroad Commission called the hearing after the EPA issued its order, to receive facts and testimony on the source of the contamination.

I have posted previously about this controversy, here, here, and here.

Range contends that the water wells are contaminated from gas migrating from a shallow gas-bearing formation just below the water table, the Strawn formation.  The EPA's order says that it did an isotopic fingerprint analysis of the gas found in the water wells matched the gas from Range's nearby wells producing from the Barnett Shale.

Range hired its own experts to do an analysis of gas from the water wells. They concluded that the gas came from the shallow Strawn sands, and that the "fingerprint" of the gas was inconsistent with gas produced from the Barnett Shale. They said the Strawn gas contains high levels of nitrogen not found in the Barnett Shale gas. Nitrogen levels of the gases were apparently not tested by the EPA. Range's expert report can be found here.

EPA representatives declined to attend the hearing. Instead, EPA filed suit in federal district court in Dallas seeking to enforce its emergency order. See copy of complaint here: Range complaint.pdf 

Range sought to depose EPA personnel involved in the investigation for the RRC hearing, but EPA has opposed Range's effort. It removed the motion for subpoena to federal district court in Austin. Last week, Judge Lee Yeakel ordered EPA to produce a representative to answer questions about the investigation. "I think we're dealing with parallel proceedings here [of the EPA and Railroad Commission] that are of extreme significance and will be significant around the country, based on the amount of publicity that [natural] gas and groundwater is getting in virtually every publication and every media outlet that there is," Yeakel said. "This has become a hot-button issue in the country." The RRC has held the record open in its hearing so that the EPA witness's testimony can be included in the record.

Range has also filed an appeal of the EPA emergency order with the U.S. Fifth Circuit Court of Appeals in New Orleans.

In light of the rash of cases being filed by landowners in the Barnett Shale alleging groundwater contamination, the Range-EPA fight may have significance well beyond the water wells involved in the case. Range appears resolved to prove that it is not responsible for the contamination. The case could be the first in Texas, and maybe the first in the nation, to finally have a court determine whether there is any merit to allegations of groundwater contamination being caused by fracing of wells.

Dallas attorney Windle Turley has filed three lawsuits in federal court in Dallas on behalf of landowners alleging contamination of their groundwater by Barnett Shale Wells: one on behalf of Jim and Linda Scoma of Johnson County, against Chesapeake, filed last June; one on behalf of Doug and Diana Harris, against Devon Energy, and one on behalf of Grace Mitchell against Chesapeake and Encana. The suits contend that plaintiffs' groundwater has been contaminated by drilling and hydraulic fracturing operations. A copy of the Harrises' suit can be viewed here.  Turley says more such suits will follow. Turley's website has a page dedicated to such suits, which says that, "when hydro-fracking occurs, it is possible for the property owner's groundwater to become contaminated and/or for gases to be forced into the groundwater. When this happens, the oil company may be liable to the property owner for property damages and injuries. ... The Turley Law Firm is very concerned over the damage done and future risk to property and individuals in the Barnett Shale area, and is filing damage suits on behalf of property owners." Groundwater contamination lawsuits may become new fertile ground for plaintiffs' attorneys.

EPA's order against Range Resources for allegedly charging groundwater with gas from its Barnett Shale wells has caused quite a stir.

The Texas Railroad Commission has issued two news releases, one on December 7 and one on December 8.  Commission Chairman Victor Carrillo said that he has told EPA Regions 6 Administrator Al Armendariz that "EPA's actions are premature as the Railroad Commission continues to actively investigate this issue and has not yet determined the cause of the gas. This EPA action is unprecedented in Texas, and commissioners will consider all options as we move forward." Commissioner Michael Williams said "this is Washington politics of the worst kind.  The EPA's act is nothing more than grandstanding in an effort to interject the federal government into Texas business." The December 8 press release said that the Commission has called a hearing for January 10 and "expects both parties, the EPA as well as Range Resources representatives, to appear before Hearings Examiners and testify as to the allegations made yesterday." Range has said it will attend the hearing, but it understands that the EPA will not.

Continue reading "Update on EPA Order Against Range Resources, Parker County" »

The Dallas Office of the Environmental Protection Agency issued the following press release today:

The U.S. Environmental Protection Agency (EPA) has ordered a natural gas company in Forth Worth Texas to take immediate action to protect homeowners living near one of their drilling operations who have complained about flammable and bubbling drinking water coming out of their tap. EPA testing has confirmed that extremely high levels of methane in their water pose an imminent and substantial risk of explosion or fire. EPA has also found other contaminants including benzene, which can cause cancer, in their drinking water.

EPA has determined that natural gas drilling near the homes by Range Resources in Parker County, Texas has caused or contributed to the contamination of at least two residential drinking water wells. Therefore, today, EPA has ordered the company to step in immediately to stop the contamination, provide drinking water and provide methane gas monitors to the homeowners. EPA has issued an imminent and substantial endangerment order under Section 1431 of the Safe Drinking Water Act. Parker County is located west of Fort Worth, Texas.

In late August, EPA received a citizen's complaint regarding concerns with a private drinking water well. During the inspector's follow-up inquiry, EPA learned that the homeowner had previously complained to the Texas Railroad Commission as well as the company, but their concerns were not adequately addressed by the State or the company. EPA then conducted an on-site inspection of the private drinking water well with the homeowner and a neighboring residence, and returned to collect both water and gas samples. These samples were sent to an EPA certified laboratory for analysis. The data was received in late November 2010 and was carefully reviewed by EPA scientists. The EPA scientists have conducted isotopic fingerprint analysis and concluded the source of the drinking water well contamination to closely match that from Range Resources' natural gas production well.

EPA has asked the company to conduct a full scale investigation. EPA is requiring Range Resources under this order to:

• Immediately deliver potable water to the two residences;
  
• Immediately sample soil gas around the residences;
  
• Immediately sample all nearby drinking water wells to determine the extent of aquifer contamination; and
  
• Provide methane gas monitors to alert homeowners of dangerous conditions in their houses.
  
• Develop a plan to remediate areas of the aquifer that have been contaminated.
  
• And, to investigate the structural integrity of its nearby natural gas well to determine if it is the source of contamination.

EPA has data showing the presence of natural gas at two wells. EPA is ordering Range to investigate other nearby properties to determine if their drinking water is at risk. EPA has been in contact with a rural water system operator approximately 1 mile away, and they are taking steps to test their water for natural gas constituents. Residents of other homes are advised to contact EPA immediately if their wells seize up or if their water begins to effervesce. EPA will contact nearby private well home owners to advise them of our actions and to let them know that we've required the company to test their wells.

The uncontrolled release of natural gas can be dangerous since it is odorless and flammable and it escapes facilities. Uncontrolled release of natural gas inside a building or home can cause a fire or explosion. Drinking water contaminated with natural gas impurities such as benzene is unhealthy.

EPA believes that natural gas plays a key role in our nation's clean energy future and the process known as hydraulic fracturing is one way of accessing that vital resource. However, we want to make sure natural gas development is safe. As we announced earlier this year, we are in the process of conducting a comprehensive study on the potential impact of hydraulic fracturing on drinking water.

In the meantime, EPA has made energy extraction sector compliance with environmental laws one of EPA's National Enforcement Initiatives for 2011 to 2013. The initiative focuses on areas of the country where energy extraction activities such as hydraulic fracturing are concentrated, and EPA's enforcement activities will vary with the type of activity and pollution problem presented.

To my knowledge, this is the first time the EPA has directly intervened in response to a complaint by landowners of groundwater contamination from horizontal shale wells. The EPA's press release emphasizes that the Texas Railroad Commission did "not adequately address" the landowners' complaints.

The EPA's letter to Plains Resources may be found here:  http://www.epa.gov/region6/6xa/pdf/range_letter.pdf 

The EPA's emergency order may be found here: http://www.epa.gov/region6/6xa/pdf/range_order.pdf 

The two Range wells are the Butler Unit 1H and the Teal Unit 1H, both Barnett Shale wells drilled in 2009. The owner of one water well first noticed gas in his water in late December 2009, about four months after the Range wells began producing.  One of the water wells lies about 120 feet in horizontal distance from the track of the Butler well bore, and the other about 470 feet from the Butler well bore.  The EPA did a chemical analysis of the gas found in one domestic water well and found that it was substantially likely that it came from one of the Range wells.

The EPA order says that it consulted with the Railroad Commission and shared its findings with the Commission, and that "appropriate State and local authorities have not taken sufficient action to address the endagerment described herein and do not intend to take such action at this time."  The EPA ordered Range to (1) provide replacement potable water supplies for the owners of the affected water wells, (2) install meters in the landowners' dwellings to detect gas, (3) provide EPA a list of all private water wells within 3,000 feet of the two Range wells along with a plan to sample the water in those wells, (4) submit a plan to conduct testing of soils and indoor air around the dwellings served by the water wells, and (5) submit a plan to identify the gas flow pathways to the aquifer, eliminate such flows, and remediate areas of the aquifer impacted by the gas flows into the aquifer.

Update:  Range Resources has denied that its wells have contaminated groundwater in Parker County.  "The investigation has revealed that methane in the water aquifer existed long before our activity and likely is naturally occurring migration from several shallow zones immediately below the water aquifer," the company said. Two producing Range natural gas wells in the area "are completed in the Barnett Shale formation, which is over a mile below the water zone." The Texas Railroad Commission has scheduled a hearing on the matter for January 10.  http://www.star-telegram.com/2010/12/08/2690723/range-resources-denies-epa-allegation.html 

 

Arthur Berman, a geological consultant, has once again blasted the economics of gas shale plays -- this time the Marcellus.  At the annual conference sponsored by the Association for the Study of Peak Oil & Gas - USA, held on October 7-9 in Washington, D.C., Mr. Berman made a presentation: "Shale Gas--Abundance or Mirage? Why the Marcellus Shale Will Disappoint Expectations."  His power-point from that presentation may be found here:  Arthur Berman on Marcellus.pdf  Mr. Berman argues that only a small percentage of the areas now being touted as productive in shale plays -- the "core areas" are economic at any price; that even within the core areas, performance is not uniform and the geology is complex; that the wells are very expensive and the break-even gas price is as high as $8-$12/mcf; that reserves have been overstated by the companies in the plays; that the industry is not properly estimating estimated ultimate recoveries from the wells; that changes in reporting rules recently adopted by the Securities and Exchange Commission allow companies to "book" estimated reserves prematurely; and that the economies of the plays will ultimately be reflected in lower share prices of the companies participating in the plays. 

For the Marcellus in particular, Mr. Berman asserts that infrastructure limitations -- lack of pipeline and gas processing capacity -- will slow development, that environmental issues -- fears about groundwater contamination, proximity to urban areas, and regulatory restraints -- will not go away, and that economics for drilling in the Marcellus Shale are no better than in the Barnett Shale. Mr. Berman says that shale gas is the nation's next speculative bubble likely to burst.

Mr. Berman created a stir just a year ago when he published a similar gloomy analysis of the Barnett Shale, at the ASPO conference in October 2009.  At that time he was a contributor to a trade publication called World Oil, which is sent free to top oil & gas E&P executives. In early November 2009, World Oil was about to publish another article by Mr. Berman critical of shale plays, but the president of the publication ordered that it not be published. Mr. Berman resigned, and his editor Perry Fischer, who insisted that the article be published, was fired. All of this created a stir in the blogosphere. Fischer contended that World Oil executives were pressured by CEOs of two public E&P companies not to publish any more of Mr. Berman's critiques. Tudor Holt & Pickering, who analyze the oil and gas industry, published a critique of Mr. Berman's analysis, and two oil executives from Devon and Chesapeake wrote newspaper op ed pieces critical of his work. Chesapeake CEO Aubrey McClendon said at the time that he expected gas prices to continue to rise, which would lead to an increase in drilling and production in the shale plays. "We think all of the elements are in place for gas prices to be higher in 2010 than they are today," McClendon said.

McClendon's predictions have not held true. Gas prices have continued to slide, although drilling in the shale plays has continued. Particularly in the Haynesville, wells are being drilled that are surely not economic at current prices. The only explanation I know of for this continued drilling is that the companies who paid $10,000 to $25,000 per acre for leases in the play must drill the wells to prevent the leases from expiring. The result is that gas production and drilling remains high despite lower prices, resulting in a continued glut in supply, further reducing prices.  In the meantime Mr. McClendon, always quick on his feet, has moved to the Eagle Ford Shale play, a "liquids-rich" play, because oil prices, unlike gas, have not declined. Chesapeake acquired a large position in the "oil window" of the Eagle Ford and quickly made a deal with China's national oil company to sell them one-third of its acreage for $10,000 an acre. If indeed, as Mr. Berman believes, the shale plays are the next speculative bubble, maybe it will be national oil companies like China's who are left holding the bag.

A royalty owner in the Barnett Shale has sued Chesapeake in Oklahoma federal court for failure to properly pay royalties. The suit, Robyn Coffey vs. Chesapeake Exploration, L.L.C. and Chesapeake Operating, Inc., Civil Action No. CIV-10-1054-C, was filed on September 27 in the U.S. District Court for the Western District of Oklahoma, in Oklahoma City. A copy of the complaint can be viewed here: Coffey v Chesapeake.pdf  The plaintiff seeks to bring the case on behalf of all royalty owners in the Barnett Shale formation, as a class action.

The plaintiff alleges that Chesapeake "employs a scheme" to reduce royalty payments by selling the gas to its wholly owned subsidiaries at a price "substantially less than either the market value at well or the amount actually received by Chesapeake Operating."

The royalty clause in the plaintiff''s oil and gas lease is unusual. It provides for payment of royalties based on the "market value at the point of sale," but not less than "the actual amount realized by the Lessee." The clause says that all royalty paid to the lessor "shall be free of all costs and expenses related to the exploration, production and marketing of oil and gas production from the lease including, but not limited to, costs of compression, dehydration, treatment and transportation." Most gas royalty clauses provide that gas royalties will be based on "the amount realized by Lessee, computed at the mouth of the well," or similar language.

The plaintiff's lease does not expressly address sales by a lessee to a company which is affiliated with the lessee. The plaintiff in this case will therefore have to prove in effect that the sale to Chesapeake's affiliate is a sham designed to cheat its royalty owners. It is possible to draft a royalty clause that would deal with sales to affiliates -- in effect providing that royalties shall be based on the proceeds received by the lessee or any affiliate of the lessee -- in other words, based on the price received in the first arms-length sale to an unrelated third party.

The case is obviously drafted to be a class action. The amount of the individual plaintiff's claim is not stated in the complaint, but the plaintiff owns royalties on only about 3 acres. If the plaintiff is able to get the case certified as a class action on behalf of all Chesapeake royalty owners in the Barnett Shale, millions of dollars of royalty will be at issue in the case.  It is evident that the lawyers elected to file in Oklahoma because the Texas Supreme Court has been very hostile to royalty owner class actions in Texas. In light of the unusual language in this royalty owner's lease, it will be interesting to see if the federal court in Oklahoma will be willing to certify this case as a class action.

RigData has compiled the numbers of active drilling rigs by county for each of the major shale plays in Texas: Barnett, Haynesville and Eagle Ford. These serve as a good measure of the degree of activity in each of the counties within these plays.

The Barnett Shale rig count  shows a total of 81 rigs in July. The rig count has held steady around 80 for the last several months. Activity is concentrated in the core area, Tarrant and Johnson Counties.

The Haynesville Shale rig count  has a total of 184 rigs working in both Texas and Louisiana, with 56 of those rigs in Texas - 12 in San Augustine County, 11 in Harrison County, 10 in Shelby County, and 9 each in Nacogdoches and Panola Counties. This count also has remained steady at around 180 rigs over the last several months.

The Eagle Ford in South Texas has 84 rigs running , up from 49 rigs in April, including 22 rigs in Webb County, 12 in La Salle County, and 10 deach in Dimmit and De Witt Counties. Operators are clearly moving rigs into the oil-rich portions of the Eagle Ford, to take advantage of the oil and liquid-rich portions of that play in light of low gas prices.

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.

 

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. 

The Bureau of Land Management has signed a settlement agreement in which it agreed to "suspend" oil and gas leases covering BLM lands in Montana until it has completed a review of the effect of oil and gas development on greenhouse gas emissions.

The settlement was entered in Montana Environmental Information Center, et al. v. United States Bureau of Land Management, Case No. 08-178-M-DWM, in the U.S. District Court for the District of Montana, Missoula Division, on March 11, 2010. The case was brought by citizens groups who contended that federal law required the BLM to consider the cumulative impacts of oil and gas development on the environment, and specifically the greenhouse gas emissions caused by oil and gas well drilling and production, before granting oil and gas leases on lands in Montana.

The plaintiffs' petition contains some interesting facts:

The State of Montana published a Greenhouse Gas Emissions Inventory and Reference Case Projections 1990-2020G, in 2007; it estimated that oil and gas operations in Montana released 4.7 million metric tons of CO2 or its equivalent in 2005, more than 12% of the state's total GHG emissions.

According to the Inventory of U.S. GHG Gases and Sink: 1990-2006, by the Environmental Protection Agency, oil and gas systems are the largest human-made source of methane emissions and account for 24% of methane emissions in the U.S. - 2% of the U.S.'s total GHG emissions. (Methane - natural gas - has 21 times the global warming impact of carbon dioxide.)

The EPA has a program called the Natural Gas STAR Program, designed to encourage oil and gas companies to voluntarily reduce their GHG emissions by following GHG reduction technologies and practices. EPA reported that industry partners in its STAR Program achieved GHG emission reductions totaling 92.3 billion cubic feet. This is equivalent to the annual greenhouse gas emissions from approximately 6.8 million passenger vehicles.

Companies producing oil and gas have reported success in utilizing a number of methane reduction measures, including replacement of high-bleed pneumatic controllers with low-bleed pneumatics, installing plunger lifts, using "green" completions (not venting gas produced during completion operations), replacing gas-actuated pumps with solar electric pumps, and utilizing vapor recovery units (devices that capture vapor emitted from storage tanks and recycle it back into the production stream), and conducting regular inspections of facilities to identify and reduce fugitive leaks from valves, flanges and other connectors.

We may expect that federal agencies like the BLM and the Minerals Management Service, who are responsible for leasing of federal lands, will move toward imposing requirements on oil and gas operators to reduce their GHG emissions by using best available technologies like those enumerated in the plaintiffs' petition in this case. Those same technologies could be used to reduce emissions in and around the Barnett Shale, where residents are increasingly complaining about emissions from oil and gas compressors and other facilities.