Oil and Gas Lawyer Blog

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.

Continue reading "New Report Provides Objective View of Debate Over Hydraulic Fracturing" »

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.

Continue reading "Use of Fresh Water for Fracture Treatment of Horizontal Wells in Shale Plays" »

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.

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.

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.

Continue reading "Movie 'Gasland' Stirs More Controversy About Hydraulic Fracturing" »

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.

Continue reading "ExxonMobil Proxy Statement Addresses Chemicals Used in Hydraulic Fracturing" »

The debate over the safety of hydraulic fracturing continues. The Environmental Working Group, a Washington-based non-profit environmental advocacy organization, has issued a white paper, "Drilling Around the Law," calling for fracking to be regulated under the Safe Drinking Water Act and to require public disclosure of chemicals used in frac fluid. The EWG claims that "companies that drill for natural gas and oil are skirting federal law and injecting toxic petroleum distillates into thousands of wells, threatening drinking water supplies from Pennsylvania to Wyoming." EWG claims that fracking has been linked to drinking water contamination and proeprty damage in Colorado, Ohio, Pennsylvania, Wyoming and other states, citing articles written by Abrahm Lustgarten in ProPublica, another non-profit organization.

Meanwhile, Chesapeake has published on its website a "Fact Sheet" listing the chemicals used in its frac fluids in the Barnett Shale. The list includes "petroleum distillate," which Chesapeake describes as a "friction reducer," describing it as a product "used in cosmetics including hair, make-up, nail and skin products." The website shows that 99.5% of frac fluid is made up of water and sand, and only .5% is made up of additives, including "petroleum distillate." But the site does not show what percentage or volume of "petroleum distillate" or other additives are used in the frac fluid, or what kind of petroleum distillate is being used.

Another energy organization, Energy In Depth, has published a response to the EWG's white paper on fracking, "When Gummy Bears Attack." its author, Chris Tucker, cites data from the U.S. Department of Energy to show that "petroleum distillate" represents .088% of the volume of frack fluid. He says that petroleum distillates are used in lip gloss, sunscreen and gummy bears.

So what is "petroleum distillate"? Purdue University describes "petroleum distillates" as including all products derived from the distillation of petroleum, from diesel fuel to petroleum jelly to waxes and asphalts:

"Petroleum distillates are found in a wide variety of consumer-products including lip gloss, liquid gas, fertilizer, furniture polish, pesticides, plastics, paint thinners, solvents, motor oil, fuels and hundreds of other products. Petroleum distillates listed commonly on labels of general household products are those that distill off around naphthas. Petroleum jelly, a petroleum distillate product, is generally regarded as nontoxic.

"Petroleum distillates contain both aromatic hydrocarbons (carbon rings) and aliphatic hydrocarbons (straight carbon chains). The chemical structure of the hydrocarbon largely defines the nature and behavior of these compounds. Aromatic hydrocarbons are the most toxic compounds found in petroleum products. Most aromatic hydrocarbons are long-term toxins and known cancer causing agents. These aromatic compounds are found in all crude oils and most petroleum products. Many aromatic hydrocarbons have a pleasant odor and include such substances as naphthalene, xylene, toluene, and benzene. Aliphatic hydrocarbons are flammable and may be explosively flammable. Aliphatic hydrocarbons include methane, propane, and kerosene.

"Aliphatics and aromatics pose a special health risk if ingested and vomited. When swallowed, the lighter, more volatile distillate products can be sucked into the lungs interfering with the lung's functions and chemical pneumonia may result. Aspiration of fluid into the lungs can occur both during swallowing and vomiting of the product. Upon skin contact, petroleum distillates can produce local skin irritation and sensitivity to light in some individuals. Environmentally, many of the petroleum distillate products add to smog and water pollution due to improper disposal or during their manufacture and use."

The controversy over frac fluids has made the Wall Street Journal.

The industry claims that hydraulic fracturing is safe and is necessary to tap oil and gas reserves in the U.S. to reduce our dependency on foreign resources. Environmental groups claim that frac fluid can cause contamination of drinking water and should be closely regulated. Much of the debate appears to suffer from a lack of reasonableness and objectivity.

Twenty-two U.S. House Democrats from Texas, Louisiana, Oklahoma, New Mexico, Arkansas, Utah and Idaho delivered a letter to Environmental Protection Agency Director Lisa P. Jackson, cautioning the EPA to do a "reasonable and transparent study" of whether hydraulic fracturing of wells creates risks to drinking water. EPA is required to study whether hydraulic fracturing creates risks to underground sources of drinking water under the 2010 Appropriations Act for the Department of the Interior. The producing-states Congressmen want to be sure that the EPA's study is scientific, systematic, transparent, accurate and valid.

The EPA conducted a similar study of fracing in 2004. That study was done to investigate whether hydraulic fracturing of wells completed in coalbed methane seams posed a risk to groundwater drinking supplies. The study was in response to alleged incidents of groundwater contamination and to a judgment of a U.S. Court that, because hydraulic fracturing of coalbeds to produce methane is a form of underground injection, the EPA is required to regulate it under Part C of the Safe Drinking Water Act. That Act requires states to regulate underground injection of fluids and to develop an Underground Injection Control Program approved by the EPA. The EPA's 2004 study of fracturing of coalbed methane wells found no evidence that any water had been contaminated by fracing of wells or that fracing posed any risk to drinking water. That study was criticized by some, including scientists in the EPA. In 2005, Congress exempted hydraulic fracturing from coverage under the Safe Drinking Water Act, in part at least based on EPA's 2004 study.

The requirement for a new EPA study of fracing in 2010 has been driven, in my opinion, by the development of the Marcellus Shale play in Pennsylvania and New York. New York has placed a moratorium on permits for wells and has published its own draft study of risks to surface and underground water supplies caused by drilling in the area of upstate New York that provides drinking water to New York City. That study is still subject to comment and revision and has caused much controversy in New York. The New York draft study likewise concludes that hydraulic fracturing poses no risk to drinking water if properly regulated. In a related development, a bill in Congress, the FRAC Act, proposes to require companies to disclose the chemical content of frac fluids.

Aubrey McClendon, CEO of Chesapeake Energy, and John Pinkerton, CEO of Range Resources, called for the industry to publicly disclose the chemicals used in hydraulic fracturing.  A bill recently introduced in Congress, the FRAC Act, would require disclosure of frac chemicals.  (See my prior post on the FRAC Act here.)

The safety of chemicals used in fracing wells has been questioned in areas of Pennsylvania and New York, where concerns have been raised about possible contamination of drinking water. The Pennsylvania Department of Environmental Protection recently sent a notice of violation to Cabot Oil & Gas stemming from two spills of LGC-35, a lubricant used in fracing wells. One spill was reportedly between 1,000 and 2,000 gallons, the other between 5,000 and 5,900 gallons. Halliburton has reported that LBC-35 is a potential carcinogen. The Pennsylviania DEP has ordered Cabot to halt all hydraulic fracturing in Susquehanna County until the company has satisfied the DEP that it has taken necessary safety measures.  New York has imposed a moratorium on new Marcellus Shale drilling permits until it completes a study and new environmental regulations.

McClendon said that the industry needs to "demystify" fracing. "We need to disclose the chemicals that we are using and seaqrch for alternatives to the chemicals we are using." Pinkerton said that oilfield service companies impose confidentiality agreements on producers when they contract to provide fracing operations; "It's a little silly to be honest." A spokesman for Schlumberger said that disclosure is limited by agreements with the firms supplying the chemicals. A spokesman for Haliburton said that the different chemical makeup of the compounds is proprietary information. "We make a significant investment in developing effective fracturing fluid systems and we are careful to protect the fruits of the company's research and development efforts."

See Reuters article.

Four legislators from Colorado, New York and Pennsylvania have introduced a bill making hydraulic fracturing subject to regulation by the Environmental Protection Agency under the Safe Water Drinking Act.  Dubbed the Fracturing Responsibility and Awareness of Chemicals Act, or FRAC Act ( FRAC Act.pdf), the bill would amend the Safe Drinking Water Act to require companies to disclose the chemicals they use in their fracturing processes. The press release ( Press Release FRAC Act.pdf) from the legislators states that "It's time to fix an unfortunate chapter in the Bush administration's energy policy and close the 'Halliburton loophole' that has enabled energy companies to pump enormous amounts of toxins, such as benzene and toluene, into the ground that then jeopardize the quality of our drinking water." (Benzene and toluene are not additives to frac fluid.)

An energy lobbying group, Energy in Depth, has denounced the bill as an "unnecessary financial burden" on the industry which could result in more than half of U.S. oil wells and one-third of gas wells being closed, and reduction in natural gas production of up to 245 billion cubic feet per year.

Continue reading "Bill to Regulate Hydraulic Fracturing of Wells Introduced in Congress" »