Saturday, August 27, 2011

NY Hydrofracking Rules Scheduled for Release Wed. Aug 31

Time to sharpen your pencils and get your thinking caps on. According to press reports the NYS Department of Environmental Conservation will finally release the SGEIS (Supplemental Generic Environmental Impact Statement) for high-volume horizontal hydraulic fracturing on Wednesday, the very last day of August. That 1,000+ page document should include all the sections that were labeled "to come" in the previously released (July 8) version. It should include socio-economic data but also some environmental information that was lacking from last month's draft.

Wednesday will also be the day residents learn exactly how long the comment period will be and whether the DEC will hold any public hearings. According to press reports, Governor Cuomo thinks 60 days is plenty long to read and respond to a 1100 or so page document.

Check DEC's website for the latest info, postings or versions of the SGEIS.

Wednesday, August 24, 2011

Marcellus Math: Fun with Frack-tions

It’s official: the Marcellus shale formation, stretching beneath the northern Appalachians, contains about 84 trillion cubic feet of gas – at least that’s what the US Geological Survey said this Tuesday. This is way higher than the figure they published nine years ago- some 42-times higher. Back in 2002 USGS calculated that Marcellus contained about 1.9 tcf of gas.

At the same time, the 84 tcf figure is way lower – some 326 trillion cubic feet lower – than the estimate published by the US Energy Information Agency on July 8, only six short weeks ago. Back then the Energy Department posited that Marcellus shale contained 410.3 tcf.

But yesterday said Philip Budzik, an operations research analyst with the Energy Information Administration, allowed that the folks at USGS are the experts in this matter. “They’re geologists; we’re not,” he said. From here on out, he promised, EIA will use the updated USGS estimate in their models and calculations.

So how did this number get so inflated? It all started back in 2009 when Penn State University geoscience professor Terry Engelder and a Fredonia, NY geology professor by the name of Gary Lash took some well production data and plugged it into a formula. Eureka! they gasped, looking at the numbers they generated. Those numbers indicated that the Marcellus shale could contain anywhere from 168 trillion to 516 trillion cubic feet of gas. That’s a lot of gas – about 80 to 250 times the government estimate.

Engelder’s magic number zipped around the world before the research could catch up. Pro-industry apologists used it to prove claims of potential energy security and secure leases. The NY DEC pasted it into theirMarcellus information pages. “Geologists estimate that the entire Marcellus Shale formation contains between 168 trillion to 516 trillion cubic feet of natural gas throughout its entire extent,” DEC wrote. But, they cautioned, “it is not yet known how much gas will be commercially recoverable from the Marcellus in New York.”

Pennsylvania’s Dept. of Conservation and Natural Resources had the higher estimate posted on their website as well. They added another report, a study co-authored by Kuuskraa and Stevens that estimates Marcellus shale gas recoverable reserves at 100 to 200 Tcf.

Industry PR folks didn’t let the fact that the revised USGS figure is 1/5 of the number they’ve been touting – they simply ignored that inconvenient fact and highlighted the increase over the previous USGS number.

On late Wednesday the Congressman from New York, Maurice Hinchey told the press that back in June he had sent a letter to the US Energy Information Agency questioning its shale gas reserve estimates. “And for good reason,” he said, referring to the USGS Marcellus downgrade.

Though Hinchey applauds the EIA for announcing it will adopt the USGS estimates, he remains  concerned about the process which lead to the original estimates.

“I have additional questions about how this change will impact the outlook for shale gas,” he said. “Considering the reckless way in which hydraulic fracturing has been carried out in other parts of the country, it is important that we understand all of the environmental and economic impacts that would result if drilling were to move forward in our state. That's why it is essential that the public, the markets and policy makers have unbiased shale gas reserve estimates.”

Numbers are important – especially for decision-makers involved in determining our country’s energy future, Hinchey said. “We’ve got to get this right.”

Saturday, August 20, 2011

Fracking the Tar Sands

Alberta, Canada is gorgeous - boreal forest, helicopter skiing in winter for those who can afford it, land of glaciers that provide source water for many ... and the Tar Sands.

Tar Sands contain hydrocarbons (which is how they got their name). They are, like Marcellus and other shales, an "unconventional" source for fossil fuels - and their industrialized extraction is on par with mountaintop removal. Even the industry admits the land will never be recovered.

Josh Fox recently produced a short video for a "Stop the Tar Sands" campaign  that shows what mining Tar Sands in Alberta looks like. It does not matter whether you are pro-gas or not, you should know where your energy comes from.

I'm not advocating that you drive to DC to protest.
I'm not advocating that you sign a gas lease.

But if we are determined to continue our dependence on fossil fuels, we must understand where our  energy comes from.

Tar Sands Action/ Josh Fox from JFOX on Vimeo.

Monday, August 15, 2011

What NY Landowners Can Learn from TX

New York landowners hoping to cash in on the projected Marcellus wealth beneath their feet may want to pay attention to what's happening in Texas. 

Some Barnett Shale royalty owners who leased to Chesapeake will get a surprise with their next royalty check: less money. That’s because Chesapeake Energy recently announced that they will begin deducting post-production costs of shipping gas through their gathering lines.

Why? Well, says Henry Hood, senior vice president and general counsel for the huge gas corporation, post-production costs run from 70 cents to $1 per 1,000 cubic feet (mcf) of gas produced. And with gas prices sagging around $4 per mcf, they’ve got to do something to recoup their costs (besides leave the gas in the ground until it’s needed).

According to the Dallas/Fort Worth Star Telegram, Chesapeake’s decision to assess royalty owners for post-production costs was triggered by its agreement with Total – the French oil giant that forked over $2.25 billion for a 25 percent interest in Chesapeake's Barnett Shale operations. The French company is deducting post-production costs from its share of the royalty checks so Chesapeake figured this was a good time to jump on the bandwagon. You can read their notes to royalty owners here.

Of course, if you have a lease that doesn't allow them to deduct post-production costs, you're all set.

Saturday, August 13, 2011

What NY Can Learn from PA

A couple months ago NY Department of Environmental Conservations (DEC) Commissioner Joseph Martens and five senior staff members visited PA to learn what’s gone wrongwith Marcellus drilling. On that list:
  • improperly cemented casings
  • excessive fracking pressures
  • wellhead equipment failure
  • lack of appropriate stormwater controls
  • inadequate blowout prevention equipment
  • high TDS (total dissolved solids) associated with disposing drilling waste fluids into public wastewater treatment plants
 All of these problems, says Martens, will be adequately addressed in the revised SGEIS.

But John Quigley, former Secretary of Pennsylvania’s Department of Conservation and Natural Resources thinks NY state and municipal officials need to pay attention to some of the other lessons they could learn from PA. At last month’s Finger Lakes Institute conference in Geneva, Quigley warned that PA’s experiences with shale drilling should provide a cautionary tale to NY. Not just about Marcellus shale, he said, but about resource extraction in general.

Pennsylvania has seen waves of natural resource extraction as companies have drilled for oil, mined coal and cleared millions of acres of timber to fuel the industrial revolutions. “In each case PA got it wrong,” Quigley said. “They privatized profits and socialized the costs.” The end result, he said, is a blighted environment, un-cemented and unplugged abandoned wells, 5,000 miles of dead streams (acid mine waste), air pollution, blighted communities and a declining population.

“The boom-bust cycle has ravaged the state,” Quigley said.

Marcellus shale underlies two thirds of Pennsylvania. Right now 7 million acres are tied up in gas companies – that’s a quarter of the state’s land mass, Quigley said. Energy companies estimate that over the next two decades they’ll drill 60,000 to 200,000 new wells. For every 60,000 wells they’ll need 15,000 miles of gathering lines, he explained, and 1700 miles of pipelines that will fragment the landscape.

Marcellus shale is only part of the story, Quigley said. Industry leaders predict that they’ll be drilling Utica shale for the next 100 years. “That will have more cumulative impact than all of the previous extractive industries combined,” he said.

With only 3300 Marcellus wells drilled so far, it’s hard for people to visualize the implications of large-scale industrialized shale-gas drilling, Quigley said. The important question is whether states can adequately regulate the drilling, monitor the activities and mitigate the impacts. Pennsylvania, he said, was slow to regulate the industry and has been “playing catch up”.

“We need to have disclosure of chemicals,” Quigley said. Other things on his must have list include: protecting local government authorities; reducing surface impacts that fragment the landscape; monitoring drilling wastes and groundwater. “We need an abundance of caution in protecting irreplaceable resources,” he said.

Monday, August 8, 2011

Chesapeake's Force Majeure Letters Strike Again

At the Finger Lakes Institute conference a couple weeks ago a representative from NY's Department of Environmental Conservation (DEC) mentioned that Chesapeake had served the Agency with a "force majeure" letter. In case you don't know what force majeure is, it's a clause in a contract that allows a contractor extra time to complete work (without penalty) in the event an act of God, labor strike, or other unlikely event prevents him from meeting the contract deadline.

Chesapeake Energy has been using "force majeur" as a blunt weapon to extend gas leases on land they have not yet drilled. The company claims that for the past 3 years they have been prevented from drilling because NY doesn't allow high volume horizontal hydraulic fracturing. They're already engaged in two lawsuits with landowner groups. Now they've rattled the cage of the very agency that approves drilling permits.

Back in February, Chesapeake wrote a letter to DEC stating that the agency should extend the leases until "certain types" of drilling were allowed. They threatened to use "force majeure" to extend the leases they have on some 15, 470-plus acres of state-owned land. Those leases, signed in 2006, are set to expire in just three months.

But visit DEC's oil and gas searchable database and you learn that over the past five years DEC has issued 166 permits to Chesapeake and the company has been actively drilling in the state - particularly in Chemung County.

It leaves one wondering whether Chesapeake understands what force majeure is - or whether they just selectively invoke it when they think they can intimidate landowners into accepting illegal lease extensions.

It also leaves one wondering: did they just threaten to extend leases on the agency that will be reviewing their permit applications? Way to win friends and influence your regulatory agency, Chesapeake! You can read Jon Campbell's article here and archived blog posts by clicking on "force majeure" in the list of topics to the right.

Thursday, August 4, 2011

Signs of the Times

Rt. 29 South Montrose, PA
On January 1, 2009 an 8-foot cement slab near Norma Fiorento's house in Dimock, PA was blown into the air. the reason: gas migrating from nearby gas wells that were being drilled.

That was 31 months ago and the people of Dimock are still waiting for their water to be fixed. At  one point the PA Dept. of Environmental Protection ordered Cabot - the company responsible for the accident - to construct a pipeline to bring water to the 14 homes that had lost their well water. The $12 million price tag shocked Cabot into making a counter offer: to pay people lots of money and install some kind of home filtration device - a strategy that had already failed in some homes.

So yesterday a group of Dimock residents, frustrated with Cabot's lack of response, installed a billboard on Route 29 in South Montrose. The reason: if you break something, you fix it. Especially, as one person said, if it says in the lease that you'll restore the water.

Apparently "restoring" water is not possible. But even if it was - according to George Stark, a Cabot spokesman, their water isn't contaminated. The billboard is a lie, he told the people - this was caught on tape by a local reporter for WBGN. He also offered to drink the water coming out of their tap - but residents later said he never did.

So, the people got together and created a sign to display so that people will not forget them. It stood for 24 hours. As of today, they say, the billboard is coming down.

Why? Because the good folks who own  PJ's Restaurant and Bar, who rent the space to the sign company, don't like the sign. They fear it will offend their gas-drilling cash-paying customers.
Rt 220, Bradford County, PA
 If they had a billboard like this one, it would probably be OK.

Monday, August 1, 2011

Gas Companies Mortgaging Mineral Rights

A story in the Towanda Daily Review reveals that Chesapeake has mortgaged the mineral rights on over 1,000 leased properties in Bradford County, PA. In a couple of cases the minerals mortgages have prevented property owners from taking a mortgage on their home.

While the Chesapeake mortgage is technically on the mineral rights, in most cases there is no separation between mineral and surface rights so the mortgage is filed on the property as a whole. And most property owners aren’t aware that gas companies can – and do – mortgage the minerals from right beneath their feet.

Chesapeake, of course, says mortgaging mineral rights shouldn’t have any effect on the landowner’s right to get loans or mortgages.

Appalachia Midstream Services, a subsidiary of Chesapeake Energy, has jumped into the game too,  mortgaging the pipeline rights of way on over 2,000 properties in Bradford County.

What is Chesapeake going to do with the $5 billion line of credit it received? According to a written statement from Brian Grove, the company will fulfill its obligations to leased landowners and …. stockholders.

Landowners who have not leased will want to make sure that their lease agreements stipulate that minerals may not be mortgaged without express permission (if ever).

What’s next: slicing and dicing mineral mortgages to create “rock solid” credit default investments?

You can read James Loewenstein’s excellent reporting here.