Tag Archive for: Ohio

Unconventional Shale Drilling: What we know, What we don’t know, What we need to know to move forward

April 23, 2013/by Ted Auch, PhD

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By Ted Auch, PhD – Ohio Outreach Coordinator, FracTracker Alliance

A Conference Retrospective

Communities, NGOs large and small, local governments, and even next door neighbors and/or families are dealing with long-term potential and realized environmental, economic, health^*, and social equity damage from the activities of the gas industry in Ohio and beyond. These impacts were vetted at a conference (PDF) recently convened in Warren, OH by FreshWater Accountability Project Ohio, The FracTracker Alliance, and the Buckeye Forest Council. The title of the conference was “Unconventional Shale Drilling: What we know, What we don’t know, What we need to know to move forward.” The premise was to bring together a forum of diverse subject matter experts from academia, industry, government and private organizations to discuss and prioritize – using a knowledge-based approach – the various major issues relating to energy extraction that are facing local, state and national agencies and private citizens.

Conference attendees heard from a variety of researchers and community activist about their successes and failures, data needs, and expectations for how to leverage the conference gathering into a relatively cohesive and largely ego free movement. One highlight was a presentation and informal discussion with Deborah Rogers, former Merrill Lynch and Smith Barney investment banker, Dallas Federal Reserve Advisory Council member, current U.S. Extractive Industries Transparency Initiative (USEITI) advisory committee member, and the woman behind the Energy Policy Forum. Ms. Rogers’ keynote presentation “Shale and Wall Street: Was the Decline in Natural Gas Prices Orchestrated?” focused on the regulatory and high finance parallels between the early aughts real-estate bubble and the current US shale bubble’s red queen predicament (what’s this?) forcing industry to acquire shale assets and repurchase shares in an illusory attempt to inflate their balance sheets and placate Wall Street expectations (while simultaneously overestimating reserves by 400-500% and experiencing 6.5% recovery efficiencies). Ms. Rogers pointed to the fact that the US is home to 181,000 oil and gas jobs Vs. 183,200 renewable energy jobs, however, they account for 45% and 15% of total energy generation capacity, respectively, with the latter “providing significantly more jobs per kilowatt capacity than oil and gas.”

Ms. Rogers was followed by University of Pittsburgh professor Dr. Bernard Goldstein, Biological Mimetics, Inc. President and CEO, Peter Nara, with public health and environmental concerns presentations, respectively. Julie Weatherington-Rice, an OSU adjunct faculty geologist, delivered an Ohio- focused talk on the legal and public policy implications of drilling in public water well fields. Dr. Weatherington-Rice gave an encore performance the following day focusing on shale gas waste, public water supplies, Ohio EPA’s September 2012 advisory regarding disposal of fracking waste in the Great Lake’s waste landfill facilities, and the dangers associated with technologically enhanced radioactive material (TENORM). Dr. Rice was followed by presentations on sustainable communities via “Local Self-Government and the Rights of Nature” by Tish O’Dell of the Community Environmental Legal Defense Fund (CELDF) and Matt Nisenoff exploring the non-binary nature of Ohio advocacy. Mr. Nisenoff addressed the need for persistent organizing and “entering the political ring as candidates rather than voters.”

One of the most novel components of the conference was the presentation by Rumi Shammin, an environmental studies professor at Oberlin College who brought to the floor the concepts of ecosystem services and ecological economics or the monetization of ecological pattern and process [1]. These two lines of research are new to the hydraulic fracturing conversation and potentially integral to policy formulation, community outreach and academic-citizen scientist collaboration in Ohio.

Bowling Green State University professor Andrew Kear offered the final presentation titled “Unconventional Politics of Unconventional Gas: Environmental Reframing and Policy Change.” The presentation highlighted his PhD dissertation work focusing on unlikely bedfellows in the mountain west shale plays and the types of lessons he thought applied to Ohio’s shale fracturing discussion.

The conference closed with attendees coming together to identify the explicit knowns, known unknowns, and unknown unknowns in Ohio relative to economic, environmental, social integrity, and health issues. The results of these break-out groups and discussion will be made available to the public in the next two weeks.

Next steps include crafting two to three white papers, writing a peer review publication, implementing effective collaboration strategies, planning future conferences, and developing policy recommendations. The ultimate goals are to promote fact-based transparency, best in class technologies, and create healthy and sustainable energy resources.

In the face of industry and regulatory inertia that continues to push back against transparency and local control, the conference underscored the need for more education, data, and far more research – all issues of special interest to the FracTracker Alliance – while bridging rifts and fortifying existing bonds.

Contact Information

For more information and notices as to resulting products, please contact:

Leatra Harper, FreshWater Accountability Project Ohio,
Ted Auch, PhD, The FracTracker Alliance, Ohio Program Coordinator
Peter Nara, PhD, Biological Mimetics, Inc.
Julie Weatherington-Rice, PhD, Adjunct Faculty The Ohio State University and Bennett & Williams
Nathan Johnson, Buckeye Forest Council

^* Keynote speaker Deborah Rogers cited health impact costs in the Barnett, Fayetteville, and Marcellus Shale of $73, 33.5, and 32 million per annum.

[1] Arrow et al., 1995; Costanza et al., 1997; Costanza et al., 2000; Costanza, Wainger, Folke, & Mäler, 1993; Daily et al., 1997; Krantzberg & Boer, 2006; Ruhl, 2006

A Year in the Life of Ohio’s Utica Play

April 23, 2013/by Ted Auch, PhD

The Ohio Utica play has taken off in the last calendar year, jumping from 160 permitted wells as of March 2012 to 453 since then. This equates to 1.24 permitted wells per day. (Note: The state’s less exploited Marcellus shale had 13 permitted wells a year ago with an increase of 7 since then.) A year ago Ohio was home to 50 “drilled” wells and is now home to an additional 80 “drilled” wells (Figure 1). Meanwhile 0.65% and 1.14% of permitted wells are what Ohio Department of Natural Resources (ODNR) calls “Inactive” or “Not Drilled” with the latter being relatively similar a year ago vs. today with 3 and 4 “Not Drilled” wells, respectively. According to the latest ODNR data 54 Utica wells were permitted as of 4/1/2012 vs. 342 since then. Plugged wells constitute 1.63% of all Ohio Utica wells although the industry appears to be increasing efficiency with respect to plugging having experienced 7 “Plugged” wells as of 4/1/2012 and only 3 since. Conversely, wells that are “Producing” have declined from 25.63% (41 “Producing” wells) of all permitted wells to 1.32% (6 “Producing” wells) of all permitted wells since then with the latest reported producing well being a Mountaineer Keystone well in Windham Township, Portage County.

The permitting process has continued along its exponential path since permitting began September 28, 2010 (Figure 2). The gross average number of permitted Ohio Utica wells per month in the last five months is 39 with a total of 195 permitted since November 2012. The quarterly permit average has increased by an order of magnitude of 4.2 permits per month between September 2010 and 2011 to 39 per month since September 2012. In recent months Washington county was added to the list of Ohio counties home to Utica hydraulic fracturing permits, while Carroll remains the state with the most Utica permits followed by Harrison, Columbiana, Guernsey, and Jefferson/Noble with the average number of Utica well permits across the 22 counties home to at least one permit being 28 per county with six counties above and sixteen below this mean (Figure 3). In the last year the four counties that have entered the Utica conversation are Trumbull, neighboring Holmes and Wayne, and Washington, with 4, 3, 1, and 1 Utica permit as of April 1^st, respectively. Meanwhile five other counties have seen no increase in Utica permits including Muskingum, Knox, Ashland, Geauga, and Medina. Conversely Belmont County has seen a 21-fold increase in Utica well permits followed distantly by Harrison, Guernsey, Noble, and Coshocton counties all of which have experienced ≥5-fold increases.

The average number of people per Utica well across the aforementioned 22 counties is 31,808, while the average number of wells per square mile is 0.066. The range is quite broad for both variables ranging from 0.0018 wells per square mile in Wayne – home to the Wayne National Forest – to 0.59 wells per square mile in Carroll County, with the one recent Washington County well placing it 13^th out of 22 counties. The inverse is the case for people per well with Medina County, home to the highest number of people relative to Utica well permits with 172,332 people per well (vs. 124-563 people per well in Carroll, Harrison, Noble, and Monroe counties). Since last we conducted this type of analysis in late January the valuation of Ohio’s major Utica players has actually increased by 11.7%. This is a particularly complex situation considering that Atlas Noble the owner of 6 Utica wells has actually gone private for a variety of reasons and Chesapeake Energy has ousted its CEO Aubrey McClendon due to “philosophical differences and a pending SEC investigation. Meanwhile, Wall Street-types:

… expect well results to vary greatly, given 2012 drilling activity across many fringe areas of the play. We believe weak results from other operators are likely to validate that Gulfport remains the most exposed operator. Source

Additionally, the repeated delay in 2012 production numbers scheduled for the 1^st of April is creating layer upon layer of uncertainty leaving everyone guessing and relying on 2011 production numbers. This leaves public sentiment worried about the unsustainability, uncoordinated, and unbalanced nature of both Ohio’s regulatory framework and highly Utica exposed and/or leveraged balance sheets. Meanwhile Wall Street analysts are contemplating whether market forces, expectations, reality, or collusion is to blame. Our current model of potential Utica production in the form of barrels of oil equivalent speaks to small and discrete highly productive zones in Belmont, Noble, Guernsey, Morgan, and Muskingum counties, rather than the originally estimated zones of highest production in Carroll and Columbiana. An additional hotspot appears to be located in Fairfield, Perry, and Hocking counties. However, due to insufficient data quantity, quality, and methodology, and transparency from ODNR and industry, the opportunities to conduct such exercises are still accompanied by substantial uncertainty in the form of high signal-to-noise resulting from scant and unreliable data. The hope, herein and on Wall Street, is that ODNR and industry will begin to make their production data available in real-time.

This is an especially important consideration given that the aforementioned regulatory environment here in Ohio – as well as the relatively generous severance taxing system [1] – has reached a point that even industry/supply-side think tanks like The Fraser Institute in Canada have determined “the extent of investment barriers (based on All-Inclusive Composite Index values)” are as good as they are ever going to get; Ohio trails only Mississippi in a global investment barrier ranking of 146 countries, US states, and Canadian provinces. Furthermore, in one year the conditions for doing largely hydrocarbon-related business in Ohio improved so much between 2010 and 2011 that Ohio jumped up the league tables from 12^th to 2^nd, according to the institute’s 2011 “Global Petroleum Survey.” This loosening of regulations, combined with decreasing data quality and availability, is the primary concern of The FracTracker Alliance in Ohio.

Figure 1: Utica Permit activity by status to April 1, 2013

Figure 2. Cumulative and Per Month Utica Permits to September 2010 through March 2013

Figure 3. Utica Permit Count by County from September 28, 2010 to April 1, 2013

Figure 4. Utica Permits Per Square Mile and People Per Well by County from September 28, 2010 to April 1, 2013

(Note: This model was constructing utilizing the Geostatistical Analyst Tools “Empirical Bayesian Kriging” tool in ArcGIS)

Figure 5. A map of the current Ohio Shale and Tight Gas Plays, hydraulic fracturing permits in Ohio as of 4/1/2013, and a generalized model of potential production from with light green representing 20 Barrels of Oil Equivalent (BOE) and red approximately 10,000 BOE

Table 1. Distribution of Ohio Utica Shale wells across companies (#, %), Date of First Permit (DFP), and the valuation of the publicly funded companies at their DFP at the close of business 4/9/2013.

				Company Valuation
Company	#	%	DFP^†	Share Price DFP	Share Price 4/9/2013	% Change
Anadarko^•	12	0.019	09/07/2011	69.88	86.70	1.241
Antero	21	0.034	03/23/2012
Atlas Noble^††	6	0.010	09/24/2012	31.14
Carrizo	2	0.003	07/26/2012	24.02	26.26	1.093
Chesapeake Energy^•	389	0.626	12/23/2010	25.61	19.99	0.781
Chevron Appalachia	2	0.003	07/31/2012	109.58	118.71	1.083
Consol Energy^•	25	0.040	06/17/2011	45.86	33.85	0.738
Devon Energy	13	0.021	11/02/2011	65.46	55.28	0.844
Eclipse Resources	1	0.002	12/21/2012	—	—
Enervest^•	16	0.026	06/30/2011	9.37	8.79	0.938
EQT	3	0.005	09/13/2012	57.76	69.59	1.205
Gulfport Energy^•	46	0.074	02/28/2012	35.49	48.09	1.355
Halcon	2	0.003	11/02/2012	5.003	7.69	1.537
Hall Drilling	1	0.002	09/17/2012
Hess Ohio	24	0.039	09/28/2010	53.63	73.50	1.371
HG Energy	16	0.026	09/14/2011	—	—	—
Hilcorp Energy	3	0.005	12/14/2012	—	—	—
Mountaineer Keystone	7	0.011	07/13/2012	—	—	—
PDC Energy^•	9	0.014	05/25/2012	25.67	47.59	1.854
R E Gas Development^•	13	0.021	03/19/2012	—	—	—
Sierra Resources	3	0.005	07/02/2012	—	—	—
SWEPI	1	0.002	06/20/2012	—	—	—
XTO Energy	5	0.008	04/09/2012	0.28	0.01	0.036
BP	1	0.002	03/20/2013
	613					1.083

^† DFP = Date of First Permit; “—“ not a publicly traded company

^†† Atlas Noble has since gone private

^• Corporations that have reported production numbers as of this post: 1) Anadarko – 3, 2) Chesapeake – 14, 3) Consol Energy – 1, 4) Enervest and PDC Energy – 2, 5) Gulfport – 10, R E Gas Development – 4.

[1] Ernst & Young in a 2011 report found that Ohio’s hydrocarbon taxing rates were the most favorable of the eight states they investigated with a total state and local tax of 1.8% vs. 10.9-11.0% in neighboring West Virginia and Oklahoma, respectively. The average across the seven other states was 9.2% or 5.12 times that of The Buckeye State.

To Severance Tax or not to Severance Tax, that is the question!

February 25, 2013/by Ted Auch, PhD

By Ted Auch, PhD – OH Program Coordinator, FracTracker Alliance

Million Cubic Feet (MCF) as measured over industry standard test periods.

Figure 1. Ohio’s Producing Utica Wells & Primary Shale Geology – plus non-reporting, drilled, or producing Utica & Marcellus Wells.
“Million Cubic Feet” (MCF) as measured over industry standard test periods.
“Barrels of Oil Equivalents” (BOE) as measured over industry standard test periods.

The economic opportunities provided by Ohio’s Utica Shale play via hydraulic fracturing have been cited repeatedly by the Ohio Oil and Gas Association and industry think-tanks like IHS Inc [1]. Numbers published by the latter last October [2] predicted 143,000 Ohio jobs and $18 billion in state revenue by 2020. However, these projections are accompanied by substantial amounts of error. Given that the state’s Utica Shale well movement is now more than 500 wells permitted strong, we thought it was time to take a closer look at the demographics and economics of the Utica Play, given that there will be a strong geographic component being inserted into the “To Drill Or Not To Drill” and waste disposal debate here in Ohio. This is an especially important issue given that the state is wrestling with either implementing an ad valorem [3] tax or raising the state’s industry-low severance taxes, which currently stands at 0.5-0.8% but would be raised to 1% under the governor’s budget. In contrast, proposals from Policy Matters Ohio and northeast Ohio Democrats seek 5% – 7%, respectively.

In comparison to most other states producing oil and gas, even 5% may be a trivial amount, or what The Cleveland Plain Dealer called “indefensibly low.” It amounts to 97 cents per Ohioan (i.e., $275 mi²) [4]. According to an Ernst & Young analysis of eight states that produce dry gas and natural gas liquids and/or dry gas and oil…

Ohio currently imposes the lowest combined state and local taxes of the states included in the analysis.
…Ohio’s overall effective tax rate (measured as total taxes divided by sales) is 80% below the average rate for the other 7 states for a well producing dry natural gas and natural gas liquids.
For a well producing dry natural gas and oil, Ohio’s effective tax rate is 65% below the other-state average…
With the [proposed] increase, Ohio’s effective severance tax rate (ETR) would be 16% lower than the other states’ average for the well producing dry natural gas liquids and 4% lower than the other states’ average for the well producing dry natural gas and oil.

The governor’s proposed “Severance Tax Changes” will not apply to any Marcellus Shale wells, even though the state is home to five producing Marcellus wells (two in Monroe County) and eight permitted wells across Belmont and Monroe Counties. Additionally, the governor and his staff included a severance tax exemption for all “small-volume gas wells” (gas wells with average daily production of under 10 million cubic feet [MCF] would be exempt from the tax). If early industry production reports – and the Ohio Business Roundtable requested Ernst & Young report – are any indication, only 19% of wells will be subject to this tax. Our own analysis revealed that of the 32 industry reported production wells, the average production value is 7.5 MCF (Figure 1).The Kasich administration admitted the exemptions would apply to – by their estimation – 45,000 gas wells.

Another nuance of the Kasich administration’s severance tax complicated mélange is that rates will be 1% for natural gas and 4% for oil, natural gas liquids, and condensate. However, according to the administration:

… there will be a lower tax rate of 1.5 percent for the first year of production, in order to allow producers to recover the cost of preparing the well site and drilling the well.

Coincidentally, “the first year of production” is generally the time of greatest gas yields. Anonymous sources in Ohio’s Utica sweet spot have spoken of 50% declines in royalties within 6 months of production.

The Ohio Oil and Gas Association, the industry’s lobbying arm, has weighed-in against higher severance taxes, stating that:

a 4% severance tax on oil and gas would be equivalent to a 40% income tax and 16 times more than the commercial activities tax (or CAT). It would also burden economically challenged area throughout the state and landowners who want to lease their land and receive royalty streams.

(Total of 4,037 individual donations, Data courtesy of Common Cause Ohio’s “Deep Drilling, Deep Pockets: Campaign Cash and Fracking Regulation in Ohio” spreadsheet)

Figure 2. Ohio’s Big Energy individual or Political Action Committee (PAC) political donations from 2001 to 2011. (Total: 4,037 individual donations. Data courtesy of Common Cause Ohio’s Deep Drilling, Deep Pockets spreadsheet.)

The anonymous BizzyBlog took the OOGA position one step further proclaiming that energy companies “won’t do business in a state with a newly-enacted punitive severance tax.”

Such arguments against a “hefty tax increase” don’t have much empirical support. OSU oil and gas development expert Douglas Southgate called such taxes “definitely affordable for the industry.” Even with the increases proposed by some, Ohio would still rank lowest among the eight shale gas producing states investigated by Ernst & Young in 2012.

Whereas an ad valorem tax would be redistributed directly back into the communities from which the hydrocarbons are extracted, a severance tax would be distributed throughout the state, even to communities and counties that prohibit Utica Shale drilling and/or injection activity. Theoretically, the entire state could benefit from the toils and environmental risks taken on by Ohio’s Appalachian region. According to a Quinnipiac pole, Ohioans support (52 to 38%) an increase in drilling-related severance taxes. Bipartisan voter support for a severance tax increases (60 to 32%) when the prospect of offsetting state income taxes is proposed.

Either levy – an ad valorem tax or severance tax – would be based upon the industry’s headline well production, even though USGS research recently spoke to the substantial well-to-well production variability in the Appalachian Shale Basin: 250-600% [5]. There are quite a few short- and long-term costs and benefits associated with exploitation of the Utica Shale; however, as it stands the risk burden is disproportionately being shouldered by Appalachian Ohio. Thus, the severance tax being proposed by the governor and House Democrats could add to the regional schisms evident in the state.

But maybe geography is immaterial. The likely big winner of the tax decisions will be energy companies and, according to data on recent campaign contributions, those politicians they deem worthy of their political donations – many of whom are on the fringes or completely outside the Utica Shale (Figure 2).

[1] IHS Global Insight is the brainchild of Daniel Yergin.

[2] This work was funded by the US Chamber of Commerce’s Institute for 21^st Century Energy, the American Petroleum Institute, the American Chemistry Council, America’s natural Gas Alliance, and the Natural Gas Supply Association.

[3] Ad valorem taxes are assessed according to the value of the natural gas extracted.

[4] The Kasich “Ohio’s Jobs Budget 2.0: Jobs. Momentum. Transformation” highlights this aspect of their proposed severance tax, explicitly noting that it “has researched the severance tax structures of other states with significant oil and gas production, particularly those states with shale resources, and has found that even with a 4 percent tax rate, the tax burden on the revenues from these horizontal Utica wells will be lower than in other states.”

[5] According to the USGS, production from the most productive wells in the Appalachian Basin’s shale formations is commonly 50 times larger than the poorest producing wells, with the same value being 250-600 times larger for the Marcellus Basin. However, the only numbers presented to individual landowners – but less frequently to collectives given that energy firms are increasingly aware of the legal advice that land aggregators are seeking out – when the subject of royalties comes up are near-term gushers. For example:

GPOR’s “’King’ of Utica Well” the Shugert 1-1H at 4,913 barrels of oil equivalents per day (BOEPD),
CHK’s Buell well in Harrison County, OH producing 1,040 BOE[5],
GPOR’s Boy Scout 1-33H in Wagner, Harrison County producing 3,456 BOE, the Ryser 1-25H producing 2,914, or the Groh 1-12H producing 1,935 BOE,
Anadarko’s 9,5000 BOE, and
The Wagner 1-H well producing 4,650 BOE. Yet, wells like the Frank unit in Stark County owned by Enervest producing 515 BOE or the non-producing wells across Ashland and Medina Counties are barely discussed – what a JP Morgan energy analyst called a “funding gap.”

The Ohio Utica Shale Play Turns 500… Almost!

January 29, 2013/by Ted Auch, PhD

Drilling Trends

Ohio’s first Utica well was permitted by ODNR on behalf of Hess Ohio Resources on 9-28-10. As shown in Figure 1 (right), the major uptick in well permitting began in the summer of 2011 with 23 wells permitted during that period, ramping up to 24 wells in November 2011. There was a brief reduction in permitting during the winter of 2011-12, followed by the boom-boom summer and fall of 2012, with an average of 37 wells per month and a total of 261 wells permitted between June and December 2012.

Production

As of the end of 2012, only 30.4% of the 487 permitted wells had been drilled or are currently being drilled. Forty-seven are currently producing gas, with the Ohio Department of Natural Resources (ODNR) reporting production data for only 9 of the 47 producing wells. All of these wells are owned by Chesapeake, 2/3 of which are in Carroll County. On average, these wells produced 61 barrels of oil, 1,875 million cubic feet of gas, and 8,905 gallons (i.e. 37 tons) of brine per day over an average production period of 88 days. Twenty of the permitted wells are classified as inactive (not drilled) or plugged, with the remaining permitted but yet to be drilled (Figure 2). The top five Utica counties based on number of well permits are Carroll, Harrison, Columbiana [1], Jefferson, and Guernsey [2]; while on the other end, Ashland, Geauga, Medina, and Wayne are each home to one Utica well at this point (Figure 3). According to Columbus, OH-based Huntington Bank’s first Midwest Economic Index, early returns in these parts are mixed in Ohio: “58 percent of respondents agreed that the industry would bring opportunity, with 15 percent of those saying it would be a significant opportunity, while 42 percent said they did not see it bringing economic opportunity to their communities.”

Bird’s Eye View

From an area perspective, Carroll County has 0.45 wells per square mile – 0.39 more wells per square mile than the next ten counties with the most wells (Figure 4) – while the bottom four counties currently contain 0.0023 wells per square mile. The relationship between population and wells is generally the opposite of the previous two relationships with the bottom four counties having an average of 108,345 citizens for every well drilled. Carroll County has 163 residents per well, while the remaining top ten counties have an average resident-to-well ratio of 7,057 (Figure 4, Inset). This means that any potential ad valorem-based tax structure would benefit – on a per capita basis – less populated counties rather than those with more wells such as Carroll.

Companies Involved

Chesapeake and its subsidiaries is the dominant player in the Ohio Utica play, with 320 of all wells permitted, followed by Gulfport Energy with 25, Enervest and HG Energy with 16, and Hess Ohio with 14 permitted wells. These five firms account for 80.3% of all permitted wells in Ohio, with an additional eighteen firms splitting the remaining 19.7% (Table 1, below). However, the firms that are publicly traded have been experiencing an average decline in share price of 3.41% since the time their first wells were permitted to the close of business on January 22^nd, 2013. The biggest financial losers have been some of the Ohio Utica play’s biggest participants – including Chesapeake (CHK, -27%), Consol Energy (CNX, -29%), and Devon (DVN, -17%) [3]. Meanwhile, Anadarko (APC, +14%), Gulfport (GPOR, +19%)), and the upstart PDC Energy (PDCE, +55%) are the biggest beneficiaries of wading into Ohio’s Utica Shale play. However, the industry is displaying quite a few characteristics of an unsustainable boom; Wall Street analysts have been skeptical of big Utica Shale energy operations from soup to nuts as reported by Reuters last fall. but Wall Street voted in favor of the removal – either voluntary or forced – of CHK’s founder Aubrey McLendon to the tune of a 10% share spike the day of the announcement. Even the aforementioned winners have been outperformed by the S&P 500 and Dow Jones Industrial by 12.6% since permitting began in September 2010.

Will the boom continue to boom? It may be too soon to tell, but one thing is for sure, shale gas extraction to-date has made an indelible mark on many communities in eastern Ohio.

Figure 1. Ohio Utica Well Development per Month & Cumulatively as of January 1, 2013. Click on the image to view full-screen.

Figure 2. Ohio Utica Well Status as of January 1, 2013. Click on the image to view full-screen.

Figure 3. Ohio Utica Wells by County as of January 1, 2013. Click on the image to view full-screen.

Figure 4. Ohio Utica Wells Per Square Mile by County and People Per Well by County as of January 1, 2013. Click on the image to view full-screen.

[1] Thanks to the surge in Columbiana County wells, the Texas-based Santrol will be opening a frac sand terminal with direct access to Ohio State Route 11 open 365 days a year and equipped to handle 500,000 tons annually.

[2] Guernsey and Noble are home to the Muskingum Watershed Conservancy District that is currently in negotiations with Antero to drill beneath Seneca Lake – even though there is a substantial and vocal opposition in the region in the form of the Southeast Ohio Alliance to Save Our Water.

[3] Devon recently had to plug yet another disappointing well in Knox County along with two in Medina and Ashland Counties.

Table 1. Distribution of Ohio Utica Shale wells across companies (#, %), Date of First Permit (DFP), and the valuation of the publicly funded companies at their DFP at the close of business 1/22/2013.

				Company Valuation
Company	#	%	DFP^†	Share Price DFP	Share Price 1/22/2013	% Change
Anadarko	12	0.025	09/07/2011	69.88	79.49	1.138
Antero	11	0.023	03/23/2012
Atlas Noble	5	0.010	09/24/2012	31.14	30.315	0.974
Carrizo	2	0.004	07/26/2012	24.02	22.43	0.934
Chesapeake Energy	320	0.657	12/23/2010	25.61	18.73	0.731
Chevron Appalachia	2	0.004	07/31/2012	109.58	115.91	1.058
Consol Energy	19	0.039	06/17/2011	45.86	32.74	0.714
Devon Energy	13	0.027	11/02/2011	65.46	54.28	0.829
Eclipse Resources	1	0.002	12/21/2012	—	—	—
Enervest	16	0.033	06/30/2011	9.37	9.37	1.000
EQT	1	0.002	09/13/2012	57.76	60.43	1.046
Gulfport Energy	25	0.051	02/28/2012	35.49	42.3	1.192
Halcon	1	0.002	11/02/2012	5.003	5.815	1.162
Hall Drilling	1	0.002	09/17/2012
Hess Ohio	14	0.029	09/28/2010	53.63	58.87	1.098
HG Energy	16	0.033	09/14/2011	—	—	—
Hilcorp Energy	1	0.002	12/14/2012	—	—	—
Mountaineer Keystone	7	0.014	07/13/2012	—	—	—
PDC Energy	4	0.008	05/25/2012	25.67	39.8	1.550
R E Gas Development	8	0.016	03/19/2012	—	—	—
Sierra Resources	3	0.006	07/02/2012	—	—	—
SWEPI	1	0.002	06/20/2012	—	—	—
XTO Energy	4	0.008	04/09/2012	0.28	0.027	0.096
Sum	487				Average	0.966

^† DFP = Date of First Permit; “—“ not a publicly funded company.

Ohio’s Waste Not, Want Not!

January 23, 2013/by Ted Auch, PhD

By Ted Auch, PhD – Ohio Program Coordinator, FracTracker Alliance

The Akron Beacon Journal’s Bob Downing has just published an investigative report looking at the recent advisory put forth by the Ohio Environmental Protection Agency’s (OEPA) Division of Materials and Waste Management – along with the Ohio Department of Natural Resources (ODNR) Division of Oil and Gas Resources Management and the Ohio Department of Health (OHD) [1] Bureau of Radiation Protection – to all of Ohio’s municipal solid waste landfills. The advisory suggests that the landfills statewide – including 17 industrial residual waste, 40 municipal solid waste, 36 orphaned landfill facilities along with 64 transfer stations – should prepare to start receiving solid Utica and Marcellus shale drilling waste, “including drill cuttings, drilling muds, and frac sands,” (especially since Pennsylvania seems to be cracking down on some of its traditional drilling waste disposal practices). This new waste stream is in addition to the millions of barrels of potentially radioactive liquid waste already being trucked in from PA and WV [2] for deep well injection – and potentially shipped into Washington County, OH along the Ohio River [3]. This advisory is concerning because the same regulatory bodies have been conveying to other media outlets (e.g. The Columbus Dispatch) that such activities are strictly prohibited and that injection of Technologically Enhanced Naturally Occurring Radioactive Materials (TENORM) is “almost the perfect solution” compared to to landfill disposal.

If the advisory is correct, however, there are complications associated with using this disposal method relative to the waste’s viscosity, elevated levels of Total Dissolved Solids (TDSs), and/or concentrations of TENORM. Materials deemed suitable for municipal landfills must not exceed five picocuries per gram radium above background levels; however, early returns speak to the potential for shale wastewater to be:

… 3,609 times more radioactive than a federal safety limit for drinking water…[or] 300 times higher than a Nuclear Regulatory commission limit for industrial discharges to water. Learn more

Additionally, Marcellus brine may have salinity and radium levels three times that of traditional sandstone/limestone oil and gas wells of the Cambrian-Mississippian age. To put this Marcellus data in perspective, the range was 0-18 picocuries per gram with a median value of 2.46 picocuries per gram. Issues associated with brine disposal, however, are not new here in Ohio where researchers like The Ohio State University’s Wayne Pettyjohn reported excessive levels of freshwater chloride (35-320,000 mg/l) pollution in Morrow, Delaware, and Medina counties. These results prompted Pettyjohn to write “ground-water resources may be seriously and perhaps irreparably contaminated long before landowners are even aware that a problem exists” (Pettyjohn, 1971).

The solution proposed by the authors of this advisory is to use the US EPA’s “paint-filter test” bringing materials into compliance with Code of Federal Regulation (CFR) 264.313 and 265.313, which basically ended the practice of disposing of “liquid waste or waste containing free liquids” in 1985. The EPA’s Paint Filter Liquids Test (Method 9095B) is summarized as follows:

Material is placed in a paint filter [Mesh number 60 +/- 5% (fine meshed size)] [4]. If any portion of the material passes through and drops from the filter … the material is deemed to contain free liquids.

Figure 1. Ohio’s Registered Non-Hazardous & Hazardous Waste Landfills

This advisory is likely due to the backlash associated with injection well incidents, including the Youngstown earthquakes attributed by some scientists to the lubrication effect that injected materials have on geologic faults. Additionally, rural communities – and researchers – in Ohio’s Utica Shale basin are beginning to raise questions around the practice of spreading shale gas brine on roads as a substitute for salt in the winter and approved disposal method during the summer. Concerns revolve around elevated levels of chlorides in excess of 2-5 times EPA public drinking-water standards (Bair and Digel, 1990). Unfortunately, the OEPA advisory is ambiguous about post-disposal monitoring, suggesting only that:

… the landfill may need to perform monitoring of landfill systems, such as those related to leachate collection, to determine potential impacts to human health or the environment associated with these [TENORM] waste streams.

This inclusion of the word may rather than must further alienates communities already skeptical about the ability or will of ODNR – and now OEPA and ODH – to regulate and/or ensure adequate monitoring of unconventional natural gas drilling activities. If this advisory is any indication related activities will be spreading beyond the Utica Basin to the state’s 21 hazardous and 121 non-hazardous waste facilities (Figure 1), with specific focus on the 57 industrial residual and municipal solid waste facilities throughout the state (Figure 2 below). Such a regulatory development has serious ramifications for PA’s 40+ municipal waste landfills, 5 construction/demolition waste landfills, 3 residual waste landfills, and 6 resource recover/waste to energy facilities (see full PA stats) and the nation’s 1,908 Municipal Solid Waste (MSW) landfills as reported in BioCycle (2010).

As drilling intensifies in the Utica Shale, nearby states may be further burdened by the mounting waste stream. Communities once thought to be disconnected from hydraulic fracturing will be forced to debate the merits of allowing such waste in their communities, similar to the situation facing non-Utica Shale cities in Ohio. Such a discussion will be unavoidable given that 84% of the state’s waste treatment facilities are located outside what could liberally be referred to as the Ohio Shale play (Figure 2 Inset).

Figure 2. Ohio’s Registered Non-Hazardous Waste Facilities by Type (% of the state’s 121 facilities)

[1] The ODH co-signed the OEPA advisory even though its own radiation-protection chief Michael Snee told The Columbus Dispatch that “wastes trucked to landfills pose a bigger threat to groundwater” relative to injection wells only days prior to the OEPA advisories release last September.

[2] 53% of the 12.2 million barrels of brine injected into Ohio’s 160 injection wells came from these neighboring states (PA and WV).

[3] The company proposing the Washington County landfill in New Matamoras is confident that the shipping of shale gas drilling waste is safe because “barges ship hydrochloric acid,” as their VP of Appalachian business development told The Columbus Dispatch.

[4] Mesh number 60 is in the lower third of the US Sieve size distribution with an opening of 0.250 mm or 0.0098 in, with the smallest sieve size being No. 400 at 0.037 mm. or 0.0015 in. Learn more>

Lakes in Appalachian Ohio’s Utica Play: A Snapshot

January 16, 2013/by Ted Auch, PhD

By Ted Auch, PhD – Ohio Program Coordinator, FracTracker Alliance

Ohio’s southwest Appalachian counties – namely Carroll, Harrison, Guernsey, and Noble Counties – are home to two significant resources:

the state’s Utica Shale Triple Play – defined as the extraction of “natural gas and natural gas liquids…from the Marcellus Shale…Upper Devonian Shale…and the Utica Shale about 1,000 to 2,000 feet below the Marcellus” (Range Resources CEO, John Pinkerton); and
many of the state’s premier lakes, including Atwood in Carroll and Tuscarawas and Senacaville in Noble and Guernsey counties (Figure 1).

Senacaville and Atwood Lakes provide countless ecological and economic benefits (a.k.a., Ecosystem Services) at a regional, state, and local level contributing substantially to the state’s $3.6 billion wildlife tourism economy – a number that is increasing by 2% per year according to the US Fish & Wildlife Service’s Wildlife & Sport Fish Restoration Program (WSFR). Needless to say, the unconventional natural gas industry, which uses approximately 5 million gallons of fresh water per drilled well, relies heavily on Ohio’s lakes, wetlands, and to a lesser degree vernal pools – all of which are concentrated in the Utica Shale sweet spot counties on the Pennsylvania and West Virginia borders. These same counties are home to nearly all the state’s 440+ Utica Wells and more than half its 160+ injection wells (used for waste fluid disposal) (Figure 2).

Recently – for these and other environmental reasons – many in the area have grown concerned that Appalachian Ohio’s entire lake network is at risk due to current and proposed hydraulic fracturing and injection wells. In an attempt to assess these risks, we analyzed the proximity of current Utica drilled wells and Class II/III [1] wells to these two lakes specifically and to the state’s inland perennial water bodies. Atwood Lake is the lake with the most wells – either injection or fracturing – within a five-mile radius with 19 total (Figures 3 and 4). Meanwhile, M.J. Kirwan Reservoir, Guilford, and Senacaville Lakes each have 12 wells within a five-mile radius. The Cuyahoga River, Lake Mohawk, Tappan Lake, and Berlin Lake are the remaining water bodies currently within five miles of 10 or more wells. Four of these 19 wells are within two miles of Atwood and Guilford Lake’s shores. In the case of Tappan and Berlin Lakes, 3 wells sit within two miles (Figure 4). Interestingly Tappan Lake’s integrity from a water quality perspective has come under pressure thanks to the Chesapeake Energy Dodson well according to Charles Fisher, administrator of the Harrison County Health Department and organic farmer John M. Luber as “a stream…that empties into Tappan Lake becomes discolored during periods of rainfall or melting snow…the pollution did not happen until drilling operations began.”

In researching previous natural resource activities in the Utica Shale Basin, we found that in addition to the many shale and injection wells in the vicinity of these lakes, most are surrounded or sit atop abandoned, underground coal mines (AUCM). One example is Senacaville Lake, where Seneca Coal’s Klondyke, Rigby, and Walholding AUCMs are within feet of the lake’s western shore. In addition, Akron Coal, James W. Ellsworth, and Cambridge Collieries’ AUCMs just to the west of Senecaville Lake lie directly beneath two Utica and two Class III wells, bringing into question the reported discrete nature of these types of extraction procedures with respect to their proximity to primary freshwater sources. The same is true for Atwood Lake, with six AUCMs less than a mile of its eastern extent – previously owned by the Ohio Central Mining Co., Burns Coal Co., White Barr Coal Co., Marshall Harvey, etc. (Figure 5).

The possibility for the disruption of regular inputs/outputs of these lakes’ hydrological cycles – specifically from a water quality or quantity perspective – is growing. This is the case because the interconnectivity (Setbacks Press Release V 3) between Utica and injection wells is increasing and due to the fact that many AUCM exist in the very areas where hydraulic fracturing is currently being conducted or has been proposed. As a result, many community organizations and non-profit environmental groups are looking to construct and implement a comprehensive water monitoring protocol in Ohio’s Utica Basin. However, given funding limitations and the lack of data being made available from Ohio’s Department of Natural Resource (ODNR) and Ohio Environmental Protection Agency (OEPA), these groups are being forced to prioritize water bodies of concern. Our research suggests that some of the state’s largest and most economically beneficial lakes – namely Senacaville, Atwood, Guilford, Tappan, and Berlin – are at the top of the list of stressed and/or potentially susceptible inland waters.

Figure 1. Eastern Ohio Utica Shale Basin	Figure 2. Ohio lakes, wetlands, & vernal pools relative to Utica Shale & Class II/III injection wells	Figure 3. The distribution of Ohio’s Utica Shale and Class II/III Injection wells with respect the region’s primary perennial water bodies at 1, 3, and 5 mile intervals
Figure 4. Senecaville & Atwood Lake Region of Ohio’s shale geology, state parks, Utica Shale & Class II/III wells	Figure 5. Senecaville & Atwood Lake Region of Ohio’s shale geology, state parks, Utica Shale & Class II/III wells, plus Abandoned Underground Coal Mines	Note: Pink & Green Circles in Figures 4 and 5 represent a 1 mile radius around Utica Shale & Class III Wells.

1. From the ODNR: “Class II disposal wells include conventional brine injection wells, annular disposal wells, and enhanced oil recovery injection wells. Enhanced recovery injection wells are used to increase production of hydrocarbons from nearby producing wells… Additionally, DMRM also regulates Class III salt-solution mining wells, which are used to produce saturated brine from the salt deposits that occur from 2000 to 3500 feet below Ohio’s ground surface. The saturated brine is then used to make table salt, water softener salt, and salt blocks. All types of injection wells are designed to ensure safe injection into permitted formations.”

Jobs Impact of Cracker Facility Likely Exaggerated

June 22, 2012/by Matt Kelso, BA

This past January, when Ohio was still in the midst of the bidding war for the proposed cracker facility, Toledoans saw the following blurb in their paper, the Toledo Blade:

Gov. John Kasich is pursuing the multibillion-dollar ethane-cracker facility that Shell Chemicals LP plans to build in Ohio, West Virginia, or Pennsylvania to capitalize on the increasing harvest of natural gas from Marcellus shale. The American Chemistry Council estimates that the plant would generate 17,000 jobs in chemistry and other industries as well as $1 billion in wages and $169 million in tax revenue.

That’s some financial impact, right? And now we are hearing the same figure coming out of Harrisburg via the Post-Gazette:

Estimates from the American Chemical Council have projected that a $3.2 billion ethane-processing facility, similar to the one that Shell is considering for Beaver County, would create more than 17,000 new jobs at the plant itself and among spinoff businesses along the supply chain.

Too bad it is isn’t very realistic.

Although the planned Monaca plant is one of several new cracker facilities planned in North America, currently, there are just a handful on the continent. In January, I posted about one of them, a Shell facility in Norco, Louisiana. On their website, the multinational giant proudly proclaims the following, in bold type:

Shell Chemicals’ Norco facility is located in St. Charles Parish. The facility has over 600 full-time employees, more than 160 contractors, and generates an annual payroll of $50 million. The company pays more than $16 million in state and local taxes and $6M is property taxes that help fund public education as well as police and fire departments.

As I mentioned five months ago, those are significant contributions, to be sure. But it is a far cry from the projections of the American Chemistry Counsel (ACC) state above. Shell also operates another cracker in Deer Park, Texas, which claims:

Shell Deer Park is a 1,500-acre complex located in Deer Park, Texas, approximately 20 miles east of downtown Houston along the Houston Ship Channel. Founded in 1929, Shell Deer Park is now home to 1,700 employees who operate a fully integrated refinery and petrochemical facility 24 hours a day.

That’s a lot of jobs, but as an integrated facility, it already accounts for some of the “spinoff businesses along the supply chain”.

Nova Chemicals operates another cracker in Sarnia, Onterio, which according to their website employs about 900 people who earn an estimated $86 million in wages and benefits each year.

So how silly is the claim of 17,000 jobs and $1 billion in wages? Consider that with all of its existing crackers and other facilities,

“Shell chemicals companies staff total 8,500 worldwide. The majority of these support our manufacturing operations. This does not include joint venture employees.”

Even with the JV employees not being counted, we are talking about major petrochemical plants in nine locations around the world, plus three technology centers. So just who are these experts at the ACC who keep getting quoted for the 17,000 job figure? According to website:

The American Chemistry Council’s (ACC’s) mission is to deliver business value through exceptional advocacy using best-in-class member performance, political engagement, communications and scientific research.

Well played, ACC. You have put on a best-in-class performance with your exceptional advocacy. But for the rest of us, it is time to start considering more realistic jobs numbers when talking about the proposed ethylene producing facility.

Stepping into the Utica Shale

March 16, 2012/by FracTracker Alliance

By Samantha Malone, MPH, CPH

I recently had the honor of presenting to a well-informed and concerned audience of residents, media, academics, non-profits, and industry personnel in the town of Alliance in Northeastern Ohio. The reason I was asked to participate in this public meeting was to provide some insight into how drilling has progressed in Pennsylvania from a public health perspective. While Ohio doesn’t really have much Marcellus Shale activity, the industry has been ramping up their efforts in the Utica Shale, which is situated approximately 6,500 feet beneath Alliance and below the Marcellus formation. See the map below of all known U.S. shale plays; the Utica has been shaded blue.

Shale gas plays in continental U.S., with Utica in blue

Also on the agenda that evening were two experts in their fields: Dr. Jeffrey Dick, Chair of the Geology and Environmental Science department at Youngstown State University, who spoke about the hydraulic fracturing process and the available research regarding its impacts from a geological and hydrological perspective; and Dr. Theodore Voneida, professor emeritus of Neurobiology at Northeastern Ohio Universities College of Medicine, who discussed medical concerns with a very moving talk and follow-up video.

The event began as expected – with an air of fear present as to what this consortium of speakers would say about such a potential money-maker for certain mineral rights owners and the local economy. What surprised me by the end of the presentations was the intuitive discussion among residents and attendees of their experiences with the industry and landsmen. (Landsmen are the personnel hired by the gas drilling companies to persuade mineral rights owners to lease their property for natural gas extraction purposes. Historically, there have been many complaints raised about the transparency of the process and the unscrupulous nature of these contracted employees.) Alliance’s residents reported similar experiences. Some were told, “all of your neighbors have leased, so we’ll get the gas out one way or another.” When, in fact, those neighbors (also present at the meeting) had not signed, but were given the same spiel about why they should lease their mineral rights to one company in particular.

The most unfortunate part about witnessing this discussion was the realization that I had heard it all before: in 2009 and 2010 when drilling activity intensified in PA and WV. In fact, residents’ concerns and frustrations were significant driving forces behind the development of FracTracker. People craved access to easy to understand and transparent information about the pace of lease, drilling, and its associated risks. I truly hope that we’ve begun to provide what is needed to make well-informed decisions about natural gas drilling since that time.

Shale gas drilling activity is increasing quickly in Ohio. According to Dr. Dick, there were six drilling rigs working the region in November 2011. By late February 2012, 18 rigs were at work and 76 wells have been permitted. At least 10 different companies are aiming to exploit the Utica Shale in 18 counties of Eastern Ohio. With no end to this surge in site, FracTracker will strive to respond with an increase in Ohio data sets, snapshots, and stories that will keep everyone better informed.

Additional Resources:

Ms. Malone’s Presentation: PowerPoint (PDF)
Dr. Dick’s Presentation: PowerPoint (PDF)
Dr. Voneida’s Presentation: Testimony (PDF) | Video (Link)
News coverage of the meeting: Page 1 (PDF) | Page 2 (PDF)

Author Information:
Samantha Malone, MPH, CPH — Communications Specialist, FracTracker; Doctorate of Public Health Student, University of Pittsburgh Graduate School of Public Health, Environmental and Occupational Health Department. Samantha can be reached by email: malone@fractracker.org or phone: 412-648-8541.

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