OUR CONVERSATION TODAY

Transcription

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2 OUR CONVERSATION TODAY Why Shale Resources Are Important for a Secure Energy Future & What that Can Mean for You How Existing Regulations & Industry Standards Promote Safety Where Environmental Safeguards Occur Throughout Development How We Can Work Together to Secure Our Energy Future 1

3 People in Billions Quadrillion BTU PLANNING FOR A SECURE ENERGY FUTURE World s Growing Population Increasing Global Energy Demand Oil Natural gas Coal Nuclear Renewables Reuters.com and US Census Bureau, United Nations, Socioeconomic Data and Applications Center, and Populationaction.org US Energy Information Administration Global Outlook 2011 The USA has already overtaken Russia to become the world s largest natural gas producer (Energy Information Administration ) and will pass Saudi Arabia as the world s largest oil producer by International Energy Agency (IEA) 2

4 SHALE ENERGY PROVIDES A NATIONAL OPPORTUNITY Shale Resources, Lower 48 States Current Shale Resources Prospective Shale Resources Basins Stacked Resources Shallowest/ Youngest Mid-Depth/ Mid-Age Deepest/Oldest Current and prospective resources and basins in the continental US Source: EIA based on data from various published studies updated May 9,

5 HISTORY OF SHALE ENERGY DEVELOPMENT 1940s Hydraulic fracturing invented. 1970s: SHORTAGE The Arab oil embargo impacted oil sources and OPEC profoundly affected global energy prices. 1980s: INNOVATION The combination of horizontal drilling and hydraulic fracturing technology made shale energy development financially viable. TODAY: GAME CHANGER The production of shale is the most significant development in the US energy sector in generations, and it affords major benefits that people on both sides of the debate should welcome. - The Washington Post 4

6 WHO BENEFITS FROM SHALE ENERGY DEVELOPMENT? Tens of millions of Americans, such as teachers, police, and firefighters own over 97% of oil and natural gas shares. 0% Shale energy development is creating diverse job opportunities for local communities. Individual Investors 21% Pension Funds 31% Other Institutional Investors 7% IRAs 18% Corporate Management of Oil and Natural 3% Asset Management Companies (including Mutual Funds) 20% Who Owns Oil and Gas? (Holdings of Oil Stocks, 2011) 5

7 SHALE ENERGY CAN LEAD TO ECONOMIC GROWTH & AMERICAN JOBS Jobs supported by shale energy development in 2012 (IHS Global Insight) Average hourly pay of workers associated with shale energy development 34% higher than wages in the general economy (IHS Global Insight) American consumers annual savings due to lower gas prices resulting from shale energy development (IHS Global Insight) Amount saved by US manufacturers by 2025 on energy expenditures through lower feedstock and energy costs (National Association of Manufacturers) 6 Revenues created in 2012 alone for federal, state and local governments created from oil and gas resources in the US (Pittsburgh Post-Gazette)

8 WHAT DOES THIS MEAN FOR THE AMERICAN CONSUMER? Every part of our day is fueled by oil and natural gas. 7

9 MOVING TOWARD FACT-BASED DISCUSSIONS 8

10 OPEN, INFORMED DIALOGUE REQUIRES USE OF COMMON TERMS Shale Energy Development: The process of discovering, planning, developing, and producing natural gas and oil resources trapped within shale formations deep below the surface of the earth. Hydraulic Fracturing: The treatment of a shale formation penetrated by a well by the application of fluids under pressure (to which propping agents may be added) for the expressly designed purpose of initiating or propagating fractures in a target geologic formation in order to enhance production of oil and/or natural gas. Horizontal Drilling: Consists of drilling vertically to a point and then turning to run substantially horizontally within the oil and/or natural gas producing formation. 9

11 COMPANIES, GOVERNMENTS & COMMUNITIES SHARE VALUES $ PEOPLE, FAMILIES & COMMUNITIES JOB CREATION LOCAL ECONOMIES NATIONAL SECURITY ENVIRONMENTAL HEALTH & SAFETY SURFACE USE / LANDSCAPE PRESERVATION WATER QUALITY & AVAILABILITY AIR QUALITY & REDUCED EMISSIONS 10

12 FEDERAL REGULATIONS PROVIDE A BROAD REGULATORY FOUNDATION Key federal regulations governing shale development include: Clean Water Act Clean Air Act Safe Drinking Water Act National Environmental Policy Act Resource Conservation and Recovery Act Emergency Planning and Community Right to Know Act Endangered Species Act Occupational Safety and Health Act 11

13 STATE REGULATIONS ARE TAILORED TO GEOLOGICAL & REGIONAL NEEDS Key state regulations include: Review and approval of permits Well design, location and spacing Drilling operations Water management and disposal Air emissions Wildlife impacts Surface disturbance Worker health and safety Inspection and enforcement of day-to-day oil and gas operations 12

14 EACH STATE REQUIRES A COMPREHENSIVE SET OF SPECIFIC PERMITS For example, the following are just some of the permits required in Pennsylvania: Well drilling permit (w/ well location plat, casing and cementing Surface use permit (if in the Allegheny National Forest) plan, PNDI for threatened or endangered species, PASPGP-3 or PASPGP-4 for pipelines crossing streams landowner/water well owner notifications, coal owner or (if < 1 acre) operator notification and gas storage field owner notification) Water Obstruction Encroachment US Army Corps of Water management plan for Marcellus Shale wells Engineers Section 404 Joint Permit Proposed alternate method of casing, plugging, venting or Dam permit for a centralized impoundment dam for Marcellus equipping a well Shale gas wells Bond for Oil and Gas Well(s) (individual or blanket, various GP-11 for non-road engine air emissions bond types allowed) GP-05 for natural gas compression facilities emissions Waiver of distance requirements from spring, stream, body of Earth disturbance permit water, or wetland (to put the well closer than 200 feet) (if 5 acres) Variance from distance restriction from existing building or Erosion and sedimentation control permit (if 25 acres) water supply (to put the well closer than 100 feet) NPDES storm water for construction activities Approval for alternative waste management practices Water allocation (SRBC, DRBC or DEP for Ohio River basin) Approval of a pit for control, handling or storage of production GP-3 for bank rehabilitation, bank protection, and gravel bar fluids removal NPDES GP-1 for discharges from stripper oil wells GP-4 for intake and outfall structures Water Quality Management Permit for treatment facilities GP-5 for utility line stream crossings Alternative pit liners GP-7 for minor road crossings Inactive status GP-8 for temporary road crossings Roadspreading plan approval GP-11 Maintenance, Testing, Repair, Rehabilitation or Transfer of well permit or registration Replacement of Water Obstructions and Encroachments Orphan well classification Off-site solids disposal Residual waste transfer stations and processing facilities Transportation of residual waste Road use permit construction of access to state roadway Road use bond (PennDOT or municipality) 13

15 PROTECTING OUR SHARED VALUES USING INDUSTRY STANDARDS WATER QUALITY & AVAILABILITY CHEMICAL MANAGEMENT AIR QUALITY & REDUCED EMISSIONS PEOPLE, FAMILIES, & COMMUNITIES American Petroleum Institute (API) Standards Uphold Shared Values API Standards documents include: API has over 65 existing standards and recommended practices for onshore oil and gas development, including hydraulic fracturing operations. They address topics ranging from environmental protection through planning and design of wells to post-production reclamation. API is developing guidance for effective community engagement and clear dialogue throughout the life of a well. API HF1, Hydraulic Fracturing Operations Well Construction and Integrity Guidelines (2009) API HF2, Water Management Associated with Hydraulic Fracturing (2010) API HF3, Practices for Mitigating Surface Impacts Associated with Hydraulic Fracturing (2011) API 51R, Environmental Protection for Onshore Oil and Gas Production Operations & Leases (2009) API 65-2, Isolating Potential Flow Zones During Well Construction (2010) 14

16 TAKING ACTION TO IMPLEMENT STANDARDS & PRACTICES Shared Values Sample Company Development Strategies Companies often test surface and ground water and evaluate potential water sources and disposal options prior to drilling. WATER QUALITY & AVAILABILITY Companies increasingly use non-potable water sources and reuse fracturing water to reduce water use. Companies invest to develop greener additive alternatives and disclose the additives used in fracturing fluids on CHEMICAL MANAGEMENT Carefully trained and specialized employees manage fluids according to established protocols. Companies often use cleaner burning fuels or renewables to power on-site equipment. AIR QUALITY & REDUCED EMISSIONS Emission mitigation technologies (e.g. green completion systems) separate gas and liquid hydrocarbons from well flowback to reduce greenhouse gas emissions. COMMUNITY CULTURE & AESTHETIC Companies hold meetings with community members before drilling begins to understand community culture and concerns and to coordinate specific work hours to address traffic, lighting and noise concerns. Companies work with local universities and vocational/technical schools to help train workers for new jobs coming online due to shale energy and to conduct new research to continuously improve operational practices and environmental performance. 15

17 HYDRAULIC FRACTURING USUALLY TAKES LESS THAN A WEEK APPROXIMATE DEVELOPMENT TIMELINE * DISCOVER, EVALUATE & GAIN ACCESS PLAN & PERMIT WELL CONSTRUCTION HYDRAULIC FRACTURING PRODUCTION RECLAIM 3 5 Years Months 2 Months 3 5 Days Years Ongoing 16

18 A COMMUNITY S PERSPECTIVE OF SHALE ENERGY DEVELOPMENT 17

19 DISCOVER, EVALUATE & GAIN ACCESS 3 5 YEARS Companies diligently review local geology and hydrology both in the field and through records research. 2 Engineering and environmental teams evaluate opportunities according to environmental and infrastructure considerations. 3 Company representatives engage with landowners and stakeholders. 18

20 PLAN & PERMIT MONTHS Company dialogue with communities and regulators continues. 2 Horizontal drilling permits flexibility in well site selection. 3 Multiwell pads mean fewer roads and drilling locations. 4 Regulations establish a safe distance for wells. 5 Before issuing permits, regulators review detailed corporate plans covering factors like safety, water use, and waste disposal. 6 Baseline testing of private water wells and surface water may occur. 7 Companies may establish a field office. 19

21 LAND USE & ENERGY EFFICIENCY Companies can reduce their surface presence by as much as 90% by consolidating multiple wells onto one small pad site using horizontal drilling. Acres of land needed to produce the fuel and generate enough electricity to serve 1,000 households for one year. SMALL FOOTPRINT 6 6 VS Source: R.W. Beck and Black and Veatch for NGSA 20

22 PERMITTING OPERATIONAL CONSIDERATIONS Companies develop detailed water and waste management plans, emergency response plans, and traffic management plans. Companies can have multiple choices for water sourcing and wastewater reuse or disposal. Add Fracturing additives Proppants (sand) Municipal water source Transport Fracturing fluid Gas well Reuse Produced water Transport Analysis and treatment Chemical treatment Filters Regulated Deep Disposal Well Source: / October 15,

23 CONTEXT: WATER USE AT STATE & SITE LEVEL Pennsylvania Annual Water Usage Example Site Level The amount of water used during hydraulic fracturing for one well is typically the equivalent of the volume of three to six Olympic sized swimming pools THERMOELECTRIC POWER 6.43 BILLION GALLONS PER DAY PUBLIC WATER SUPPLY 1.42 BILLION GALLONS PER DAY LIVESTOCK 61.8 MILLION GALLONS PER DAY IRRIGATION 24.3 MILLION GALLONS PER DAY SHALE ENERGY DEVELOPMENT 1.9 MILLION GALLONS PER DAY Each American Golf Course Uses More Than 4 Million Gallons of Water Per Summer Month Sources: U.S. Geological Survey Circular p. and Marcellus Shale Development Water Use: June 1, May 21, 2010; Energy in Depth, October 8, 2012; Aboutnaturalgas.com 22

24 WELL CONSTRUCTION: PREPARATION & DRILLING 2 2 MONTHS All operations at the site must comply with federal law, state law, and corporate policies incorporating good industry practices. 2 Companies plan with communities to reduce noise and traffic disruptions. 3 The land needed for well construction is cleared and the well is drilled. 4 To protect water, state regulations based on local geology may specify important construction details like the depth, strength, and cementing of casing. 5 Any waste from the well site is disposed of according to federal and state safety and environmental regulations. 6 The well must pass operator testing and inspection before hydraulic fracturing. 23

25 PROTECTING GROUNDWATER: STRONG WELL CONSTRUCTION REGULATED BY JURISDICTION Well Construction: Material selection;* Performance; Evaluation* - e.g., cement quality,* casing and cementing depth,* etc. SPOTLIGHT Over 1 million wells have been constructed and hydraulically fractured since the 1940s. A typical natural gas well is constructed with 3 million pounds of steel and cement. Each layer of steel casing is cemented into place to create a seal that is air tight. A horizontal well is drilled like a conventional vertical well until it reaches a kickoff point where it extends horizontally. The kickoff point is normally over a mile below the surface. Well integrity*: Protect groundwater Redundant steel casing* Cement sheaths,* Mechanical isolation devices* Well testing and logging* *Also covered by API Standards, Recommended Practices, or Guidance 24

26 PROTECTING AIR QUALITY REGULATED BY JURISDICTION Emissions are regulated by states and by federal laws like the Clean Air Act. HEALTH CONSIDERATIONS? Constantly studied by regulators and academics; closer look typically reveals no statistically significant impacts. SPOTLIGHT Companies often use cleaner burning fuels or renewables to power on-site equipment. Water and other mixtures can minimize dust and particulate matter. Green completions separate gas and liquid hydrocarbons from produced water. The hydrocarbons can then be treated and used or sold. Automated gas chromatograph (AutoGC) monitors in the Barnett measure over 45 VOCs and have yet to reveal chemicals above the level of concern for public health. Northeast Pennsylvania air quality report did not identify any concentrations of any compound that would like trigger health issues associated with Marcellus drilling activities. 25

27 AIR QUALITY: GREENHOUSE GAS CONSIDERATIONS REDUCED EMISSION TECHNOLOGIES minimize methane emissions when the well is first brought into production. They have both economic and environmental benefits: they allow both air emissions and flowback water to be recaptured and reused. THE END GAME: ELECTRICITY GENERATION Increased access to affordable, domestic natural gas has already been credited with reducing emissions from power plants in 10 Northeast states. In some remote regions, if gas cannot be recovered, FLARING or burning the gas in a slow, controlled fashion is preferable to releasing it into the atmosphere from both a greenhouse gas and safety perspective. 26

28 HYDRAULIC FRACTURING: ABOVE GROUND 3 5 Days Hydraulic fracturing occurs during completion. To protect groundwater, personnel at the well site continually monitor chemical mixing and management as well as variables including fluid injection rates and pressures throughout the fracturing process. 2 Local water sources may be tested again in accordance with regulatory requirements and the extensive corporate environmental programs that govern routine site maintenance at drilling sites. 27

29 HYDRAULIC FRACTURING: BELOW GROUND 3 5 Days 5 6 Hydraulic fracturing usually takes place over a mile below the surface of the earth. 1 1,000ft 3 Multiple layers of cap rock separate drinking water from formations where hydraulic fracturing occurs. 2 2,000ft 3,000ft 4,000ft Redundant layers of steel casing and cement provide a shield between hydraulic fracturing operations and the environment. The horizontal part of the well is perforated and fluids consisting of mostly water and sand are pumped into the well to create small fissures in the shale held open by sand. 5,000ft Oil or natural gas travels through the enclosed well to the surface where it is collected for production. 5 6,000ft 1 A combination of valves controls flow from the well. Blowout preventers stop all flow in the unlikely event of an emergency. 6 28

30 PROTECTING GROUNDWATER DURING SHALE ENERGY DEVELOPMENT Lined impoundments and storage tanks provide impermeable barriers between waste water, groundwater, and top soil. 1,000ft 2,000ft 3,000ft 4,000ft Today s gas wells have redundant layers of cemented steel piping, called casing, to provide a shield between gas production, groundwater and the environment. Cap Rock Produced water is collected at the surface and recycled for future use, or carefully disposed of according to regulations. 5,000ft 6,000ft 29

31 UNDERSTANDING FRACTURING FLUIDS 0.5% Additives Typical Shale Fracturing Mixture Makeup 9.5% Sand Typical hydraulic fracturing fluid additives are also used in common household items. Additives are disclosed on 90% Water fracfocus.org. Source: Shale Energy: 10 Points Everyone Should Know, March

32 SEISMICITY CHALLENGES ARE MINIMAL & MANAGEABLE Seismic activity from hydraulic fracturing is minimal compared to vibrations caused by many other everyday activities. Seismicity is more common to produced water disposal at the end of the process, rather than hydraulic fracturing. Injection for disposal of produced water is regulated by the EPA, state regulations, and the Safe Drinking Water Act (SDWA) Compared to a magnitude +3 earthquake The magnitude of a +3 earthquake feels similar to the passing of a nearby train. Sources: and 31

33 PRODUCTION Years Oil or natural gas travels through the enclosed well to the surface where it is collected for processing. 2 All of the drilling equipment is removed - leaving only the well head, storage tanks, and sensors for remote monitoring. 3 The well pad is reduced and reclaimed to the extent practical for production and a fence may be added. 4 Regular site visits and remote sensors (often run by solar power) allow companies to monitor production. 5 Communities can apply increased revenues to school improvement, business development, libraries, etc. 32

34 RECLAIM ONGOING Wells are sealed into place with cement according to environmental regulations Well pad areas are restored Land is reclaimed Communities can continue to benefit for decades. 33

35 WORKING TOGETHER TO SUPPORT OUR COMMUNITIES The American Petroleum Institute is developing guidance for community engagement and planning. DIVERSIFYING JOB OPPORTUNITIES INVESTING IN ECONOMIC DEVELOPMENT MAINTAINING AND PROTECTING COMMUNITY CULTURE TRAINING AND COUNSELING FOR NEW JOB SKILLS PROMOTING COOPERATION AND EDUCATION RELATED TO DEVELOPMENT CONDUCTING REGIONAL OUTREACH WORKSHOPS & CONTINUED TECHNICAL WORK PROTECTING THE ENVIRONMENT & SHARED VALUES 34

36 PARTICIPATE IN OUR ENERGY FUTURE How can you get involved? LEARN SHARE DEVELOP SUPPORT THE FACTS & SCIENCE OF SHALE ENERGY DEVELOPMENT. THE FACTS WITH OTHERS IN YOUR COMMUNITY. POLICIES AND PLANS THAT ENABLE SAFE & RESPONSIBLE DEVELOPMENT. THE SHALE ENERGY DEVELOPMENT PROCESS TO ENSURE AMERICA'S ENERGY SECURITY. 35

37 BACKUP SLIDES 36

38 INDUSTRY GOALS Our goal is to work effectively with communities and governments to ensure the safe and responsible development of U.S. shale energy resources. API s existing body of rigorous standards and recommended practices supplements the extensive state and federal regulations governing virtually every aspect of resource extraction including hydraulic fracturing. Over 65 of API s existing standards and recommended practices for onshore development apply to hydraulic fracturing operations. They address topics ranging from environmental protection through planning and design of wells to post-production reclamation. API is pioneering a recommended practice for effective community engagement and clear dialogue throughout the development process. 37

39 UNDERSTANDING FRACTURING FLUIDS Typical hydraulic fracturing fluid additives are also used in common household items. Additives are disclosed on fracfocus.org. 38 Source: energytomorrow.org: Big Screen Energy: A Fracking Film Festival

40 DOMESTIC ENERGY FROM SHALE IS ESSENTIAL TO NATIONAL SECURITY President Obama s 2012 State of the Union Address We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy. NATIONAL SECURITY Pittsburgh Post-Gazette According to the federal government, the U.S. could contain tremendous oil and gas resources that would advance America's goals of energy independence, generate $193 billion in revenues for federal, state and local governments; lower our trade deficit; and ensure stable prices for consumers. International Energy Agency The United States will overtake Saudi Arabia as the world s leading oil producer by about 2017 and will become a net oil exporter by 2030 increased oil production, combined with new American policies to improve energy efficiency, means that the United States will become all but self-sufficient in meeting its energy needs in about two decades. IHS Global Insight Hydraulic fracturing and horizontal drilling technology make it commercially viable to recover natural gas and oil. Without these advanced technologies, we would lose 45% of domestic natural gas production and 17% of our oil production within 5 years. 39

41 SHALE ENERGY CAN LEAD TO AMERICAN PROSPERITY Jobs supported by shale energy development in 2012 (IHS Global Insight) 40

42 SHALE ENERGY CAN LEAD TO AMERICAN PROSPERITY Average hourly pay of workers associated with shale energy development 34% greater than average wages (IHS Global Insight) 41

43 SHALE ENERGY CAN LEAD TO AMERICAN PROSPERITY American consumers annual savings due to lower gas prices resulting from shale energy development (IHS Global Insight) 42

44 SHALE ENERGY CAN LEAD TO AMERICAN PROSPERITY Amount saved by US manufacturers by 2025 on energy expenditures through lower feedstock and energy costs (National Association of Manufacturers) 43

45 SHALE ENERGY CAN LEAD TO AMERICAN PROSPERITY In revenues in 2012 alone for federal, state and local governments created from oil and gas resources in the US (Pittsburgh Post-Gazette) 44

46 PROCESS & MARKET: NATURAL GAS YEARS 45

47 PROCESS & MARKET: OIL YEARS 46

48 INNOVATIONS PROMOTE SAFE & ENVIRONMENTALLY FRIENDLY PRACTICES Pitless drilling - use of aboveground tanks for managing well fluids so that there is limited danger of well fluids getting into groundwater Sound control and surface management allows for safe drilling in close proximity to people Centralized water management systems remove trucks from roads Closed loop drilling systems (all drilling fluid stored in steel tanks) and whole site liners Green frac fluids featuring more environmentally friendly additives Photovoltaic solar telemetry to transmit well date from remote locations to central office (reduces use of diesel fuels) 47

49 CRITICAL SUCCESS FACTORS FOR WORKING TOGETHER OPEN DIALOGUE TRUST BETWEEN GOVERNMENT & INDUSTRY PARTNERING TO DEVELOP COMMUNITY PLANS UNDERSTANDING OF SHARED VALUES USE OF COMMON TERMS FACT-BASED POLICY MAKING 48