The majority of FracTracker’s posts are generally considered articles. These may include analysis around data, embedded maps, summaries of partner collaborations, highlights of a publication or project, guest posts, etc.
The Pennsylvania Department of Environmental Protection’s Bureau of Oil and Gas maintains violation data on their website (download the Excel file). The following is a summary of Marcellus Shale violations issued in the first eight months of this year, including the number of wells that were flagged for violations.
Marcellus Shale violations and offending wells in Pennsylvania: January – August, 2011
It may not seem like it when you head to the pump, but the price of oil has plummeted in recent months. After peaking near $114 in April, the price has fallen all the way to $77.27, as of today. Natural gas, which was $4.27 last month, has fallen 15 percent since then to $3.62. Surely with all of this uncertainty, the Corbett’s proposed impact fee makes more sense than the traditional severance tax which most states use? Perhaps it would be better to take the predictable lump-sum amount than basing that portion of the state’s coffers on the vagaries of the market?
No, not really.
Corbett’s plan allows the counties to charge up to $40,000 per well per year, for a period of up to 10 years per well. According to the Post-Gazette, his administrations figures it could bring in $120 million in the first year, and up to $200 million per year by the sixth year.
Or, as I pointed out in June, we could tax like Texas. Texas imposes a 7.5% severance tax on natural gas and 4.6% tax on oil and condensate. Using yearlong production data for non Marcellus Shale wells in Pennsylvania and the average wellhead price of gas and price per barrel of liquid hydrocarbons for 2010, I estimated that non-Marcellus wells would have brought in $72.5 million if we taxed our resources just like Texas does. What’s more, based on six month production data, I showed that the wells in the Marcellus Shale formation would produce at least $173 million, for a statewide total of $246 million through all formations.
But that was before the bottom fell out of the price of oil and gas. What if we used today’s low prices as a guide?
Estimated six month severance tax from the Marcellus Shale formation in Pennsylvania.
Even with the low energy prices, that six month total is almost as much as Corbett’s administration figures to raise in a year, and it doesn’t even include the tens of thousands of wells that aren’t drilled into the Marcellus Shale.
While the proposed impact fee does more for Pennsylvania than the current nothing-at-all policy, in the scheme of things, it is a great deal for the drilling industry.
And one final aside: does it seem strange to anyone else to let the counties set the impact fee? Is this some sort of attempt to have them compete with each other to keep the prices low? If so, it seems unlikely to work in my opinion. If a county charges the maximum $40,000, that represents only about 0.8 percent of cost of a well that costs $5 million to drill, and that figure is on the low end of the spectrum. The drilling companies will want to drill where the resources are, and whatever fees or taxes are charged will not change that fact.
Reposted from PA Environment Digest
Proposal calls for 75% of fee revenues to remain local, 25% to the state
Gov. Tom Corbett today said he agrees with 94 of the 94 recommendations made by his Marcellus Shale Advisory Commission and will be recommending legislation authorizing counties to adopt a drilling fee whose revenue would be split between the state (25 percent) and local governments (75 percent) to offset costs imposed by natural gas development. The recommendations not adopted by the Governor include: forced pooling, re-writing the authority of local governments to regulate drilling linked to a drilling fee and adding natural gas to Tier II of the Alternative Energy Portfolio Standards. The Governor’s Office did not release legislative language or mention which recommendations would be adopted by legislation, regulation or policy. However, he said about one-third require legislative changes; more than 50 are policy-oriented and can be accomplished within the state agencies. The legislative priorities outlined today will be submitted to the legislative leadership in the near future. The governor has instructed the relevant Cabinet Secretaries to create implementation plans for the policy-oriented recommendations and to submit them to his office within 30 days. “This natural resource will fuel our generating plants, heat our homes and power our state’s economic engine for generations to come,” Corbett said. “This growing industry will also provide new career opportunities that will give our children a reason to stay here in Pennsylvania. We are going to do this safely and we’re going to do it right, because energy equals jobs.”
Under the Governor’s drilling fee proposal, counties with Marcellus or Utica natural gas shales are authorized to adopt a per well drilling fee starting at $40,000 per sell and decreasing to $10,000 per well in four years. A county may provide for a fee credit of up to 30 percent if the driller makes approved investments in natural gas infrastructure, which include setting up natural gas fueling stations or natural gas public transit vehicles. “Estimates show that this impact fee will bring in about $120 million in the first year, climbing to nearly $200 million within six years,” Corbett said. “As the number of wells grows, so will the revenue. Almost all of the money it brings in will go to benefit the places experiencing the impact.” A quarter of the fee revenues would be sent to state government for several specific uses:
Seventy-five percent of the revenues would be retained at the local level and allocated to counties (36 percent), host municipalities (37 percent) and 27 percent to municipalities in shale counties distributed by population and highway miles. Local governments could use the funding for road and bridge repair, water, stormwater and drinking water systems, reclaiming surface and subsurface water supplies, GIS and other information technology, project to increase the availability of housing to low income residents, delivery of social services including domestic relations, drug and alcohol treatment, job training and counseling, court system costs and conservation districts inspection and oversight of natural gas development.
As a part of this proposal, Corbett announced a series of prudent standards related to unconventional drilling, including:
Corbett’s proposal also seeks to help secure energy independence and reduce reliance on foreign oil by developing “Green Corridors” for natural gas vehicles with refueling stations at least every 50 miles and within two miles of key highways; by amending the PA Clean Vehicles Program to include “bi-fuel” vehicles (diesel and natural gas); by helping schools and mass transit systems to convert fleets to natural gas vehicles; by stabilizing electric prices by using natural gas for generating electricity; and by encouraging the development of markets for natural gas and natural gas byproducts, such as within the plastics and petrochemical industries.
A summary of the Governor’s proposal is available online. Visit the Marcellus Shale Advisory Commission webpage for a complete copy of the July report.
Reposted from the Pittsburgh Post-Gazette (August 17, 2011)
A seasoned environmental health professional looks at the Marcellus Shale
By Bernard D. Goldstein, M.D.
Haven’t we learned anything from our past mistakes?
Public health and the environment have been my life since 1966. I have been a U.S. Public Health Service officer stationed in Los Angeles, our most polluted city; an assistant administrator of the U.S. Environmental Protection Agency during the Reagan administration; and the director of an academic environmental health program in New Jersey, arguably our most polluted state.
Before the Marcellus Shale issue, I believed we had learned from past mistakes to approach potential environmental health risks intelligently. But now I’m not so sure.
Let me start by saying I’m in favor of extracting Marcellus Shale gas — but not yet. For reasons that include air quality and global climate change, natural gas is a better energy source than coal. At the risk of offending my environmentalist friends, I don’t believe that conservation measures combined with alternative energy sources will eliminate our need for fossil fuels within the next few decades.
I also agree it is in our national interest to decrease our reliance on fossil fuel imports. The gulf oil commission recently supported a return to drilling in the Gulf of Mexico because if we do not get this oil, Cubans, Venezuela or China will. But unless the Canadians can horizontally fracture under Lake Erie, the gas in the Marcellus Shale is ours for the taking.
The Marcellus Shale’s fixed location and limited amount of gas provides many reasons to go about it thoughtfully. Whenever we begin, we still will have at least the same amount of gas extracted over the same duration of time. In contrast, delaying allows us to prepare for three certainties… Read more
There are a handful of watersheds, predominantly in central Pennsylvania, that the Department of Environmental Protection has deemed to be unsuitable for mining activities.
According to pages 100-101 of the Oil and Gas Operator’s Manual, a region may be determined to be unsuitable for mining if the mining operation will:
Marcellus Shale permits that were issued in areas which were deemed to be “unsuitable for mining” according to the PA DEP in 2002.
These seem like worthy goals. So if these areas are unsuitable for coal mining, why is it OK to put gas wells there?
Surface coal mine. Source: http://en.wikipedia.org/wiki/File:Coal_mine_Wyoming.jpg
Granted, drilling a well is not quite the same impact as a surface mining operation, but to protect an area from one mode of mineral extraction and not the other seems inconsistent. After all, many of the problems with coal are still relevant for gas drilling, since the drilling operator must go through the coal seam to get to the gas. The pyrite associated with the coal is still exposed to air, meaning that the drilling mud and drill cuttings probably contain sulfuric acid, the key component of acid mine drainage (AMD).
And it’s not just the drill cuttings that could be a source of problems…it could be the well bore itself. Consider the Hughes Bore Hole, which, according to Wikipedia was drilled in the 1920’s to drain underground mines in the area, then capped in the 1950’s. So what’s the big deal? In the 1970’s, pressure built up and the hole burst open, and has been spewing about 800 gallons per minute of acid mine drainage ever since.
Hughes Bore Hole releasing acid mine drainage. Source: http://en.wikipedia.org/wiki/File:Hughe%27s_Bore_Hole_071.jpg
Could drilling a gas well in the wrong place have the same effect?
Maybe to be safe we ought not drill in areas where geologists have determined that AMD could exist. That wouldn’t affect that many wells, would it?
Marcellus Shale permits in areas with acid mine drainage potential. Please click the map for a dynamic view and more information.
Oh. Well then let’s hope the well casing experts don’t have any bad days.
[Note: if you want to watch a video of Hughes Bore Hole and don’t mind salty language, click the Youtube link on the “Hughes Well Bore” link above.]
Three new West Virginia datasets have been added to the DataTool to keep up to date with Marcellus Shale activities in that state. The West Virginia DEP is the source for all three datasets. Included are:
Marcellus Shale permits in West Virginia through September 6, 2011. Please click the image for a dynamic view.
The permits list was filtered online to include only Marcellus Shale permits, then filtered on the desktop to reflect only “Permit Issued” actions, thereby ignoring applications, renewals, and other actions for the same well. I also converted the coordinate system from UTM’s to the more familiar system decimal degree latitude and longitude. There are 1,868 records in the dataset. One well apparently was given the wrong coordinates, and appears to be in Pennsylvania instead of West Virginia.
Marcellus Shale drilled wells in West Virginia through September 6, 2011. Please click the image for a dynamic view.
Each triangle in the map above represents a Marcellus Shale gas well that was listed as an active well. Location data was determined by matching the unique well numbers to the permits list, above.
Marcellus Shale violations in West Virginia through September 6, 2011. Please click the image for a dynamic view.
The violations list did not mention whether or not the well was a Marcellus Shale well, nor did it give location information. Both of these categories were determined by matching the well number to the permits list.
There are now three different Marcellus Shale production reports available on FracTracker’s DataTool:
The production data, which is self-reported by the drilling operators, is also available from the Pennsylvania Department of Environmental Protection.
In this post, we will explore the change in production from the 756 Marcellus Shale wells that reported positive (nonzero) production on each of the three reports. Of these, exactly 300 were flagged as horizontal wells on the most recent report, leaving 456 to be classified as vertical wells.
Marcellus Shale production in Pennsylvania from January to June, 2011. Please click the image to see a zoomable and dynamic map.
Caveats
It is important to note that the first of the three production cycles is for a one year period, while the other two are for six months each. Luckily, each report includes not only production in thousands of cubic feet (Mcf), but also the number of days for which each well was in production. Therefore, we can look at the data in terms of thousands of cubic feet per day (McfPD), which solves not only the 12 month vs. 6 month problem, but also makes sure that we aren’t comparing six months of production to just a handful of days.
One important factor that this analysis does not account for, however, is when the well first entered production. This is significant, because gas wells typically have a very high initial production, which falls steeply in the months and years ahead. This produces a hyperbolic decline curve, such as this Department of the Interior graph found on Wikipedia.
In this case, we only know that the initial production was some time since 2006 and before June 30, 2010. Add to that fact that there are only three date ranges, and the result is definitely not a proper decline curve.
Results
However, there are results, and they do show decline over time. Interestingly, there are some differences to note between horizontal and vertical Marcellus Shale wells.
Average Marcellus Shale production in thousands of cubic feet (Mcf) for wells on all three production reports.
Average Marcellus Shale production showing rates of decline.
The overall production of the sample decreased 40.7 percent from the period ending June 2010 to the one ending one year later. Interestingly, the vertical wells are declining at a sharper rate than horizontal wells, although not dramatically so.
The chart also highlights the amazing difference in production that horizontal drilling provides to Marcellus Shale wells, with average production values 5.6 to 6.9 times higher than their vertical counterparts.
What’s Missing?
Not all of the Marcellus Shale wells from the July ’09 to June ’10 list were still reporting production for the period that ended one year later. These wells were not included in the above analysis, but are interesting in their own right:
Number of Marcellus Shale wells on the production report for the period ending June 2010 that are also reporting production one year later.
Surprisingly, the rate for horizontal wells no longer producing gas is more than twice as high as their vertical counterparts. Does this mean that a side effect of horizontal drilling is a shorter well production life, as all of the gas is extracted faster? We’ll have to wait and see what future data shows to find out.
Citizen David Tames Gas Goliaths on the Marcellus Shale Stage: Citizen Action as a Form of Dispute Prevention in the Internet Age
A NY colleague of ours recently published an article on the issue of natural gas drilling and public engagement in New York State. The potential for environmental and public health issues were discussed in great detail for those who are interested in becoming more versed on the topic. (FracTracker was mentioned as a tool for dispute prevention, so that is exciting for us, too!)
“Water, water everywhere and not a drop to drink.” This could soon become the lament of millions of people who derive their drinking water from sources located near the latest natural gas boom site in the East, known as the “Marcellus Shale” region. Drilling is underway in Pennsylvania and West Virginia, but not yet in New York. The focus here is New York.
Horizontal hydraulic fracturing holds promise for accessing shale gas. But with the current state of the industry practices, it also promises certain devastation to the environment and human health unless all local, state, and federal government officials immediately begin to take seriously the already documented risks associated with this unconventional drilling method. Every citizen has an interest in protecting our natural resources, water included. In this real life drama, David is played by U.S. citizens and Goliath is played by the rich and powerful oil and gas industry. Members of the oil and gas industry and land-owning citizens seeking to lease their property for gas extraction prefer the circumscribed definition of the term hydraulic fracturing or “fracking,” which refers only to the actual gas drilling. Environmental groups and individuals advocating for conservation of natural resources opt for a broad interpretation of the term, reasoning that every step in the hydraulic gas drilling process is worthy of attention since adverse impacts can and do result from steps before and after the actual drilling occurs. The future environmental and human …
If you have a LexisNexis account, you can view the entire article online.
The Debate: Can the process of hydraulically fracturing underground natural gas wells contaminate groundwater?
Industry Position: There has never been a documented case of groundwater contamination due to hydraulic fracturing; the process occurs thousands of feet below drinking water aquifers. Therefore, the chemicals used in the fracturing process pose no threat to drinking water.
Opposition Position: It can and has contributed to pollution of underground drinking water sources.
The Data: Previous lawsuits from landowners were settled by the industry and the data kept private for various litigation reasons. A U.S. EPA report now indicates that hydraulic fracturing has been linked to at least one case of drinking water contamination in West Virginia in 1987 and could feasibly contribute to future problems.
Future Obligations: Some improved regulations and protections have been put in place since 1987, but the risk still exists if natural gas drilling is done hastily or if abandoned wells exist nearby. Once pollutants are introduced into underground water aquifers they are very difficult to remove, so significant care and review must be taken if drilling is going to continue. The EPA report further supports the need for increased government and industry transparency across the board. It should also be stated that a large-scale health impact assessment is needed to comprehensively determine the risk that the entire natural gas drilling operation poses to public health.
Compiled by: Samantha Malone, MPH, CPH – Communications Specialist, Center for Healthy Environments and Communities (CHEC), Environmental and Occupational Health (EOH) department, University of Pittsburgh Graduate School of Public Health (GSPH); and Doctoral Student, GSPH
I was recently contacted by a resident of New York State who was concerned about Marcellus Shale gas drilling moving into his area. He found a report by geologists Dr. Gary Lash from SUNY – Fredoinia and Dr. Terry Engelder from Penn State that showed the shale layer thinning substantially as it heads north across the Pennsylvania-New York border.
What’s more, this report breaks up the Marcellus Shale into several substrata, including the Union Springs shale and the Oatka Creek shale, which are separated by a thin and intermittent layer of limestone.
On a cursory level, the thickest parts of the Union Springs substratum of the Marcellus Shale seemed to correspond with the highest production areas in Bradford and Susquehanna Counties. Even though there was another high production area in Southwestern Pennsylvania in a relatively thin portion of the Union Springs (and Marcellus Shale in general), it seemed like a reasonable hypothesis to explore. Does the thickness of the shale layer effectively predict the production values from wells in those areas?
Thickness of the Union Springs substratum of the Marcellus Shale and daily production values. As the shale layer gets thicker, it is represented by darker brown bands, while production values range from blue (lowest production) to red (highest production). For more information and a dynamic view, click the image to visit our DataTool.
Karen Edelstein, FracTracker’s New York Liason, digitized the Union Springs thickness map from the Lash-Engelder report, and then I was able to correlate the production values of all Marcellus Shale wells to the average thickness of each category. For the purpose of this exercise, only wells reporting positive (non-zero) production values between July and December 2011 were included. To account for wells in production for only part of that period, I calculated the average daily production in thousands of cubic feet (Mcf) per day.
Thickness of the Union Springs substratum of the Marcellus Shale in feet versus average daily production in thousands of cubic feet (Mcf) per day.
Overall, the correlation isn’t very strong. While the trend line does show moderate increases in production as the Union Springs shale layer thickens, the low R-squared shows that there is a good bit of randomness involved. Part of this was expected, due to the large number of productive wells in Southwestern Pennsylvania, where the formation is quite thin. This would be the notable bump in the plot chart above between 20 and 60 feet of thickness.
Thickness of the Union Springs substratum of the Marcellus Shale and average daily production values. Click the image for more information and a dynamic view.
However, there is another factor that contributes to the poor correlation. As I mentioned above, the trendline does indicate that on average, wells in the thicker formations produce more gas than those in thinner formations, but there are also a large number of duds from the most robust parts of the Union Springs. That is to say, there are a lot of blue dots in the dark brown regions of the map below.
It is likely that if the whole thickness of the Marcellus Shale were considered, the results would have been even worse. In fact, some of the thickest parts of the whole Marcellus, at least according to Lash and Engelder, are in Pike County, which drillers have left alone so far.
So we have not cracked the nut of predicting which areas will yield the highest production returns, but at least we have good company in that regard. Despite the huge amount of data that the oil and gas companies possess, the results that they report to the Pennsylvania Department of Environmental Protection show that they still don’t really know what they’ll find at the bottom of a hole until they drill it.
Although there is clearly more to gas yields than thickness of the shale, it was an interesting exercise, and if the industry ever does figure it out, it will be a multi-billion dollar discovery–keep in mind that each of the thousands of wells planned cost at least $5 million to drill. Here’s hoping that they do figure it out someday, and not just because of the economics. If drilling wildcat wells can be minimized, then many of the significant adverse effects of the industry would also be mitigated as well, at least in areas where production values were estimated to be low.
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