Shale Gas Over-hyped, Under-performing

Over-exuberance about the promise of shale gas is overshadowing the falling profitability and declining productivity of shale gas wells. That’s the message Deborah Rogers is bringing to communities scattered across the Marcellus shale region, and she should know – she’s been analyzing productivity of Barnett shale gas wells around her home in Fort Worth, TX.

Rogers, a former stockbroker for Merrill Lynch, has served on the Advisory Council for the Federal Reserve Bank of Dallas since 2008. She became concerned when the numbers didn’t add up: estimates of reserves didn’t match the actual production-generated tax revenues that Fort Worth and neighboring municipal governments received.

When she started digging into the data she learned that less than six percent of Barnett shale wells met “minimum economic thresholds”. The industry claims that natural gas offers a cheap and abundant energy source that will last 100 years. But data from the Barnett shale gas play show a well failure rate that is increasing over time, says Rogers.

Even as companies drill more wells, the amount of gas produced has been declining. She points to audited records from the City of Fort Worth: in 2008 the city took in $50 million in income from wells drilled on city-owned properties. By 2010 the income was $38 million – based on four times as many wells.

Geologists are finding shale gas reserves to be less homogeneous than once thought.

Unfortunately, all those wells bring heavy environmental and health costs to the communities. Air quality data collected by the Texas Commission for Environmental Quality (TCEQ) show high levels of  two carcinogens, benzene and formaldehyde. Air tests also measured hydrogen sulfide, a potent neurotoxin, at levels 400 times what is usually found in urban air. TCEQ’s conclusion: gas drilling “contributes more air toxins than all cars, trucks and airplanes in the region combined,” says Rogers.

The gas industry continues to promote the conversion of vehicles and power plants to natural gas, claiming this domestic source of energy will result in a cleaner environment. At the same time they are quietly pursuing an export market, seeking permits to convert import terminals to expert terminals. This is happening just as American companies are looking to bring production back home, says Rogers. The promise of cheaper energy costs has car manufacturers ramping up production of gas-powered vehicles and other manufacturers bringing their factories back to the US.

It’s a squeeze play, Rogers says. “It’s only a business transaction for the companies. Their job is to find, extract and sell minerals to the entity paying the highest price.”

But, hey – if you don’t believe her analysis you just have to look at the recent news from the US Energy Information Administration (EIA). On January 23 the agencylowered its estimates of recoverable shale gas reserves in the US and slashed their estimate of  Marcellus reserves by 66 percent. That same day Chesapeake announced that they are cutting drilling andproduction of gas – due to low prices. 

You can read more about what Rogers said here.

EPA Tests Dimock Water Despite Industry Criticism

photo provided; EPA mobile lab in Dimock, PA

As promised, the Environmental Protection Agency (EPA) is testing water in Dimock homes. As expected, the gas industry is fighting back, claiming whatever is in that water was already there. And to further complicate the picture, Cabot Oil and Gas CEO Dan Dingles is accusing the EPA of undercutting President Barack Obama’s “commitment” to developing the nation’s shale gas reserves.

If it weren’t in the news you’d assume this was the plot of a soon-to-be-released midwinter movie.

This week two teams of scientists began sampling well water from homes in Dimock, PA – or at least the homes they’ve been given access to. Of the 66 homeowners they contacted, EPA has received permission from 55 to conduct sampling.

EPA determined that further testing was warranted after reviewing results from testing Cabot conducted last fall. Although Cabot’s tests indicated methane may no longer be an issue, the results raised the Agency’s concern about the potential health threats posed by other contaminants in the water: arsenic, barium, a plasticizer known as DEHP, glycol compounds, manganese, phenol, sodium and others. EPA admits that some of these occur naturally, but notes that all of them are associated with gas drilling.

So why aren’t the other 11 homeowners getting their water tested? For free by scientists with no ties to the oil and gas industry?

Peer pressure, say some Dimock residents. Email and Facebook comments mention intimidation and pressure from both gas industry representatives and other residents. And while industry criticism against EPA for what they consider “meddling” is to be expected, the outcry by fellow residents against their neighbors illustrates just how deeply gas drilling can divide a community.

There are residents who support Cabot’s drilling and who, either because they already have leases or are hoping to cash in on future activities, criticize the continued attention on water problems as “baseless” and “hyped-up allegations”. These are the same folks who were outraged that the PA Department of Environmental Protection ordered Cabot to build a water line to bring fresh water to Dimock – even though Cabot would foot the bill.

Apparently nixing the water line was not enough for Enough is Enough. Their most recent campaign is “Dimock Proud”, featuring signs proclaiming that “the water IS clean and the people are friendly.”

Industry-backed Energy in Depth has been posting up a storm, claiming that the water’s safe and the testing is nothing more than politics – a “decision by EPA to spend hundreds of thousands of taxpayer dollars supplying water to people who don’t need it.”

But, hey – didn’t the President of the United States just say, in his State of the Union address, that we should drill for more gas? Apparently that was the take-away message for Cabot CEO Dan Dinges. In a letter to EPA Administrator Lisa Jackson, Dinges cited Obama’s support for domestic natural gas. He criticized EPA’s water testing in Dimock as an action that threatened to “undercut the President’s stated commitment to this important resource”.

Dinges later released another statement to the press, calling EPA’s work in Dimock “more of an attempt to advance a political agenda hostile to shale gas development rather than a principled effort to address environmental concerns in the area.”

But with a file full of Pavillion, WY tests to back them up, EPA responded that its actions are based solely on science – and the law.

As for that State of the Union comment? Anyone who was listening knows that the President emphasized that any drilling would be limited by “developing this resource without putting the health and safety of our citizens at risk.”

EPA Trucks Water to Dimock

Water Delivery on Carter Rd, Dimock. photo by Tom Frost

On Friday, January 20 the US Environmental Protection Agency showed up at the Sautner residence on Carter Road in Dimock, PA for a press conference and to deliver water. Yup, the federal agency has determined that there are 4 homes, including the Sautner’s that need replacement drinking water immediately. The reason: results from water tests raised health concerns, says EPA.

Not only are they supplying water to these four families who have been left by their state government without water since the end of November, but EPA will begin testing water supplies for 61 homes in Dimock this Monday and Tuesday.

Lots of people showed up on Friday to celebrate the water – and the raised awareness that EPA’s actions will bring to the potential for shale gas drilling to contaminate drinking water. Just last year EPA found that hydrofracking was responsible for contaminating drinking water in Pavillion, WY.

Craig Sautner thanked the EPA, but noted that water shipments is a temporary fix. The ultimate goal is to get a permanent water pipe to bring fresh water to the homeowners who can’t drill new wells in a contaminated aquifer.

Victoria Switzer, whose well has also been contaminated, criticized the PA Department of Environmental Protection for failing the citizens who lost their water due to faulty casings – for which DEP fined Cabot Oil & Gas. “I hope EPA is here to protect us,” she said, noting that she is not one of the four that EPA will be delivering to.

Filmmaker Josh Fox was also on hand. “This represents a monumental failure of Governor Corbett and the DEP,” he said, warning that similar cases of water contamination are unfolding across the state.

You can watch the press conference here.

 EPA’s documents relating to Dimock are here

Keystone Pipeline Nixed

This afternoon the Obama administration put the final (at least for now) kibosh on the proposed Keystone XL pipeline  that would carry crude oil 1600 miles from the Alberta, Canada tar sands to refineries in Houston and other Texas port cities.

GOP candidate Mitt Romney decried this decision as a job-killer, but the state department denied the permit because there was not enough time to review the plans. The project had been delayed because of objections from environmental groups and farmers who feared the proposed route would impact their water resources.

During the congressional "impasse" on payroll taxes last month, Republicans forced the Obama administration to agree that they'd make a decision on the pipeline within two months. It should have come as no surprise that 60 days wouldn't be enough time to carry out the environmental studies required to approve the project.

The rejection of the pipeline permit isn't a judgement on the merits of the project, Obama told the press. It is a judgement on what he called "the arbitrary nature of a deadline that prevented the state department from gathering the information necessary to approve the project and protect the American people." You can read more here.

Methane found in More PA Wells

This past August methane was found in three private water wells in Lenox Township, located about 10 miles east of Dimock, PA. Investigators from the PA Department of Environmental Protection determined that the gas migrated from a flawed well drilled by Cabot Oil and Gas Corp.  

Local news reports that video taken inside one of Cabot’s wells shows that steel casing was improperly constructed. Also that methane was found between the cemented strings of casing in all three gas wells on the well pad – evidence, state regulators note, of flaws in construction.  

How much methane are we talking about? Before drilling, the methane level in one well was 0.3 milligrams per liter (about 0.3 ppm). Post drilling those levels shot up to 49 ppm (measured on Aug. 16) and 57 ppm (measured on Aug. 18).

At this time Cabot has installed methane detection alarms in the homes, vented the affected water wells, and is delivering replacement drinking water to two of the homes. The methane level in the third well has decreased to a level not requiring an alternate water supply, explains DEP.

Cabot spokesman George Stark told the press that “Cabot is committed to safe and responsible operations and takes matters like this very seriously.”

Until a journalist followed up on this investigation, DEP had not posted the results of their investigation. That, DEP says, was an “oversight”. Read more here.

" Withdraw the SGEIS" says Hinchey

 Today Congressman Maurice Hinchey sent a letter to NY Governor Andrew Cuomo urging him to withdraw the SGEIS – the draft Supplemental Generic Environmental Impact Statement (dSGEIS) on high-volume horizontal drilling and hydraulic fracturing in the Marcellus Shale and other shales. His reason: failure of the dSGEIS to take into account new information that has been discovered about the environmental, public health and economic risks associated with the natural gas drilling activity.

In his letter Hinchey wrote, “… I believe this document falls far short of what is needed to protect local communities from the risks posed by shale gas drilling and does not fully mitigate potential threats, including those to public health, drinking water, air quality, and municipal infrastructure.” He highlighted 10 specific problems that must be addressed before the state permits any drilling:

1.      The lack of a cumulative impact analysis of natural gas drilling in the Marcellus formation to understand the full impact drilling could have on our water resources, air quality, local roads and other public infrastructure.

2.      The lack of a full assessment of the public health impacts of gas drilling through an independent Health Impact Analysis, as called for by more than 250 health care professionals in an October 2011 letter to Governor Cuomo.

3.      The lack of a comprehensive wastewater treatment plan that details where and how large amounts of flowback and produced water will be treated or disposed, including how toxic or radioactive contaminants will be removed.

4.      The failure to prohibit the use of toxic chemicals in all fracturing fluids in order to prevent groundwater and surface water contamination.

5.      No requirement to publicly disclose all chemicals used in hydraulic fracturing fluid at each well site, including a proposed list of chemicals made public before drilling operations begin and the final list of chemicals and quantities used made public no later than 30 days after drilling operations are completed.

6.      The absence of a plan to identify New York areas prone to higher seismic activity and measures to prevent earthquakes potentially associated with horizontal hydraulic fracturing.

7.      The failure to require a dramatic increase in DEC resources and staffing devoted to the permitting and oversight activities related to high-volume hydraulic fracturing.

8.      No complete ban on land spreading of shale gas drilling waste fluids or prohibition on the use of reserve pits or centralized impoundments for fracking fluids and flowback water.

9.      No alignment of DEC's gas drilling permit rules with the requirements of secondary lending institutions covering oil and gas activity on mortgaged properties. These include pre-approval from banks and other lenders before signing gas leases, minimum setback requirements from residential structures, prohibition on certain drilling and process equipment, title insurance requirements, property assessments, and more.

10.  A failure to provide for an enhanced role for local governments to prohibit gas development that is incompatible with local land-use and zoning regulations.

You can read his entire letter here.