Hydraulic Fracturing: Some Things to Consider

Transcription

1 Hydraulic Fracturing: Some Things to Consider John P. Martin, Ph.D. JPMartin Energy Strategy LLC Northeast Gas Shale Symposium May 18, 2011

2 Background Shale Gas Development Increasing Complexity Early Development: Natural Fracture Systems 1820s: Fredonia, NY 1860s:Hydraulic Fracturing (HF) with Nitroglycerin (PA, NY,KY,WV) 1880s: 1 st Marcellus wells, NY 1890s: Ohio Shale, Big Sandy, West Virginia 1930s: HF with acids Modern Development: Hydraulic Fracture (HF) Stimulations 1950s 1990s: Napalm, Nitrogen, vertical and limited horizontal applications Barnett Shale, Texas water fracs 2000 Present: High Volume Hydraulic Fracture stimulation using water, propane and possibly CO 2 Shale plays on 6 of the 7 continents State of the Art: Complex engineered systems requiring significant planning, quality control and monitoring

3 Marcellus Well Development At the end of 2009, there were nearly 120,000 producing wells, 97,000 for natural gas, in the four states compromising the Marcellus region (PA, OH, WV, NY). Of these, there is estimated to be 10,000+ shale wells in the region, most dating back decades. Since the 2003, approximately 2,700 new shale wells have been drilled. Expectations for new shale wells in the region range from 40,000 to 60,000 wells in the coming decades. The lower number is derived by the author using current activity, expectations of more stringent regulation in all states and the limits posed by the gas transportation infrastructure. Sources: EIA, PADEP, WVDEP, the Nature Conservancy

4 The Shale Gas Setting

5 Cumulative Impact Assessment Potential Positive Impacts: Jobs Direct and indirect income and tax revenue Company, landowner, associated services, local and state tax collections Community and Cumulative Impacts: Economic development Infrastructure, growth Energy for society and all its ramifications Domestically-sourced, multi-purpose Potential Negative Impacts: Surface Site disruption, spills, water management Subsurface Drinking water table, chemicals Community and Cumulative Impacts: Change in community character Cumulative air, water, noise, visual and ecological (including climate change)

6 Understanding Context: Location, Location, Location Region Topography Rainfall Ecosystem Northeast/midwest USA/Canada Hills and valleys, open flood plains Rain and snow prevalent Deciduous forests Southwest/ midcontinent Relatively flat plain/uplifted plateau Mainly dry with rainy periods Open rangeland Western mountain region USA Canada Upthrusted mountain ranges and foreland basins Mainly dry with winter snows Alpine West Coast USA/Canada Mixed terrain of high mountains and flats Rainy on coast, very dry inland Rainy forests near Pacific, desert

7 Understanding Context: Development Cycles Exploration/Early Development Moderate Development Large/Full-Scale Development Post-Development Production Dispersed pattern of few well pads Multiple well pads, simultaneously in localized area, some production begins Many well pads, multiple operators, regional area, service centers emerge, production begins Overlaps with Moderate and Full- Scale, but also continues post Development Each stage of development results in differing socioeconomic and community character effects, depending on the characteristics of an area and its communities. The stages and transitions between stages are seldom discrete. Each stage has impacts on employment and economic activity, population, housing, taxes. Quality of life and community character.

8 Understanding Context: Community Rural: Types, Some Impacts Likely to be transformational Who benefits and who doesn t Jobs Small Towns/villages Development pressure can cause quality of life concerns Community divisiveness Cities/ urban areas Far less transformational Relative scale makes a difference Cooperation can help mitigate

9 BUT Who Do You Trust? Multistate Landowner Survey by Cornell and Penn State % expressing a great deal of trust in Local natural gas task forces or committees State departments of environmental protection/conservation Local environmental groups*** Natural gas industry*** NY PA *** high level of statistical significance Cooperative Extension or other educators*** Scientists/researchers Richard C. Stedman, Potential Natural Gas Development in the Marcellus Shale: A Land Grant Partnership, presented to the Cornell University Applied Research and Extension Program Council, April 26, 2011

10 Regulation; 1992 GEIS Guides Permitting Statute: Environment, conservation, correlative rights, supersedure 12-year effort; four-volume, 937-pages Common Potential Impacts Surface waters Ground water Agriculture Historical sites Archeological sites Significant habitats Floodplains Freshwater wetlands State lands Coastal zone Streams General habitat loss

11 Gas Shales Controversy Leads to Supplemental GEIS Potential impacts NOT addressed in 1992 GEIS: High-volume fluid management Multiple wells at single site 2009 Executive Order directed to complete a supplemental GEIS: 800+ pages: 9 chapters, 26 appendices, 114 refs cited by DEC staff, 473 refs cited by consultants 13,00+ comments evaluated 12/2010 Executive Order extended moratorium Mitigation measures: Spills:enhanced setbacks Wastewater disposal: fluid disposal plan, tracking Ground water contamination: test water wells, casing rules Chemical disclosure: required Air quality:must meet all air emission regulations Sites: visual/noise impacts mitigation plan, road use agreement or trucking plan, review of local planning documents

12 Reaction from Buffalo, NY (2 nd largest city): Council votes to ban hydrofracking By Brian Meyer, News Staff Reporter Published on February 8, 2011, 2:57 PM Updated: February 8, 2011, 5:24 PM The Common Council has voted to ban any form of natural gas extraction in Buffalo, including a controversial mining technique known as hydrofracking. "We're hoping Southern Tier communities will do the same thing," said North representative Joseph Golombek Jr., the bill's lead sponsor. "This action shows that the lead city in the region is taking a lead role." No known deposits of Marcellus Shale underlie Buffalo. Other Photo Credit: towns and cities have follow including Olean, Geraint Lloyd Marcellus (!), Ithaca, Dryden, Pittsburgh (PA).

13 SGEIS and Jobs; Ecology and Environment Study Versus JOBS

14 So, the REVISED DSGEIS Succumbs to Specific measures to protect the state s drinking water include prohibiting surface drilling: within 2,000 feet of public drinking water supplies; on the state s 18 primary aquifers and within 500 feet of their boundaries; within 500 feet of private wells, unless waived by landowner; in floodplains; on principal aquifers without site-specific reviews; and within the Syracuse and New York City watersheds. Applicants must certify that a proposed activity is consistent with local land use and zoning laws. Failure to certify or a dispute regarding consistency raised by a locality would trigger additional DEC review before a permit could be issued.

15 Brave New World: Creating a DefendableDrilling Operation Permitting Plan in advance -permits define the legallydefendable operating position. Site inspections by regulatory agencies are good for documentation. Employing individuals knowledgeable in the process will help. Best Management Practices Your operations will be compared to the best operators AND the worst operators. You d rather look like the former even at a slightly higher cost. In a world fraught with risks, following the best tested procedures is required. Why is meeting minimum permitting obligations is not enough?

16 Why? Assume every day presents another opportunity for a lawsuit. Though there are no guarantees, taking care to follow best practices, complete testing and document everything is key to staying out of the fray. Your company name here!

17 Conclusion: Expected Cost of Regulatory Compliance at least 30% Cost Increase Improved well design ($285k per well) Additional casing string/cement to further ensure wellbore integrity across fresh water aquifers - $120k Cement bond log (after BP Macondo incident very likely) - $15k Increased regulatory and compliance costs - $150k Surface disturbance mitigation ($85k per well) More robust on-site materials handling (Tarps, liners under pumps etc.) - $30k Road repair - $25k Temporary sound barriers - $30k to $100k Fracturing-related costs ($600k) Treating post-frac flowback water to remove salts/impurities etc. without deep well disposal (Marcellus) or onsite filtering and recycling. - $350k Microseismic on certain wells to show the created fracture path (likely not required on every well) - $100k to $250k per well Tudor, Pickering, Holt & Co. Securities, Inc. and Reservoir Research Partners, FRAC ATTACK: RISKS, HYPE, AND FINANCIAL REALITY OF HYDRAULIC FRACTURING IN THE SHALE PLAYS, 2010