RISKS, HYPE, AND FINANCIAL REALITY OF HYDRAULIC FRACTURING IN THE SHALE PLAYS July 8, 2010 A Special Report Jointly Presented By: Ann Davis

8/7/2019 RISKS, HYPE, AND FINANCIAL REALITY OF HYDRAULIC FRACTURING IN THE SHALE PLAYS July 8, 2010 A Special Rep

1/65

FRACATTACK:RISKS,HYPE,

ANDFINANCIALREALITYOFHYDRAULICFRACTURING

INTHESHALEPLAYS

July8,2010ASpecialReport

JointlyPresented

By:

AnnDavisVaughan DavidPursell


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P a g e |1

ToOurInstitutionalClientsandIndustryExecutives:

Goodideasandinformationarewhereyoufindthemandwearepleasedtojointlyauthorthisreport

withAnnDavisVaughanandReservoirResearchPartners.AftermanyyearsofspeakingwithAnninher

WallStreetJournalrole,weareexcitedtobeabletocollaborateonthistimelyreportonthefracturing

businessand

the

various

issues

currently

swirling

around

it.

HappyReading,

DanPickeringandDavidPursell

AboutReservoirResearch:

ReservoirResearchPartnersisanindependentresearchfirmthatprovideshighlycustomized,indepth

intelligenceoncompanies,managersandtrendstoinstitutionalinvestors.Itappliesinvestigative

reportingtools,wellhonedinterviewskillsandsophisticated,targetedanalysistogiveclientsexclusive

insightsin

detailed

reports.

By

drawing

on

areservoir

of

contacts

and

research

know

how,

the

firm

answersquestionsanddetectsproblemsandopportunitiesthatnumbersalonecan'treveal.

Thefirmwasfoundedin2010byAnnDavisVaughanaftertwodecadesasanawardwinning

investigativeandfinancialjournalist,includingnearly14yearsasaseniorwriteratTheWallStreet

Journal.UnderthebylineAnnDavis,sheledTheJournalsglobalenergyandcommoditymarkets

coveragefromHouston.Priorto2006,shecoveredWallStreetandthesecuritiesindustryfromNew

York.SheisarecipientoftheGeraldLoebaward,oneofthehighesthonorsinbusinessjournalism,for

deadlinereportingonthenaturalgasmarketsin2007.

ReservoirResearchiscommittedtotheintegrityandindependenceofitsresearchandadherestoan

industryleading

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best

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Formoreinformation,pleasevisitReservoirResearchPartnerswebsiteatwww.reservoirresearch.com,

[email protected],orcontactthefirmat(713)9514059.


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P a g e |2

TableOfContents

Summary....................................................................................................................................................... 3

Withand

Without

Fracing

.............................................................................................................................

7

TheWorriesAboutFracingandWhyTheyreSurfacingNow.................................................................... 10

TheCompaniesWithTheMostToGainOrLose........................................................................................ 21

IncidentsthatHaveFueledtheFire............................................................................................................ 23

QualityoftheEvidence............................................................................................................................... 28

TheConversationaboutFracingandWhosControllingIt...................................................................... 38

RegulatoryState

of

Play

..............................................................................................................................

47

WhatstheTab?.......................................................................................................................................... 53

Conclusions................................................................................................................................................. 55

Appendix:HydraulicFracturingPrimer....................................................................................................... 56


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SummaryPublicdebateaboutthesafetyofhydraulicfracturing,agasdrillingtechniquethathasunlockedvast

newsourcesofdomesticenergy,hasescalateddramaticallyinrecentmonths.Wesetouttopush

through

the

noise,

inspect

claims

on

both

sides

of

the

gas

drilling

boom,

and

give

investors

a

road

map

totherisksthatproducersmayface.Westartwiththeheadline.

Hydraulicfracturing orfracing isunlikelytobebanned.Giventhescientificevidenceavailabletoday

andtheeconomicimpactofshuttingdownshalegasdrilling,wedontseeanoutrightbansticking

federally,norinNewYorkorPennsylvania,andcertainlynotintheenergypatchesoftheGulfCoastand

theWest.Thejoblosses,higherenergypricesandlandownerrightschallengesthatwouldresultaretoo

unpalatableforDemocrats,eventhosethatdontliketheenergybusiness.PAhasliterallybetitsbudget

ondrillingbyleasingstatelandanutthatshardforafinanciallytroubledstatetomakeupelsewhere.

ThelikelypassageofPAsmuchanticipatednewproductiontaxwillmakeitevenmorerelianton

drilling.Thisreportaddressestheregulatoryclimateinpivotalfracingregions.

ThethreatofnewfederaloversightismoreseriousinthewakeoftheBPoilspilldisaster. Ifyouthink

noonewillconnectdeepwateroiltoonshoreshale,thinkagain.Boththeoilspillandrecentgasdrilling

accidentsspotlighttheinherentlydifficultnatureoftheoilandgasbusinessandhavetarnishedindustry

credibility.Groupsopposedtofracinghavewastednotimemakingconnectionsbetweenthetwo.

Fracturingiscurrentlyregulatedbythestatesvigorously,accordingtoindustry;inadequatelyand

inconsistently,accordingtoopponents.OpponentswantfederaloversightundertheSafeDrinking

WaterAct(SDWA),fromwhichfracingwasexemptedin2005.BPandothershadbeenmakingheadway

thisspringpreservingstatejurisdictioninaSenateclimatebill.ButBPcannolongeraskforfavors,and

itsabigger

risk

today

for

politicians

to

champion

perceived

exemptions

for

drillers.

Injustthepastfewweeks,acampofgasproducersbrokerankstonegotiateapotentialcompromise

withthestaunchestcriticinCongressoffracing,Rep.DianaDeGetteofColorado.Adraftthatsurfaced

mandatesdisclosureoffracingchemicalsundertheSDWA.Industrystalwartsstronglyopposethis,

warningEPAcouldstickitsnosefurtherinthetentandexertcontrolondrilling.Thisriftcouldgetugly.

Whetherornotthefedstakecharge,complianceandenvironmentalcostswillincrease.Theindustry

willhavenochoicebuttospendmoremoneytoprotectitselffromliabilityandreputationalriskasthe

shaledrillingboommarcheson.Somecompaniesareinfactalreadychoosingtospendmore;onemajor

producertoldus,Wedontseethecostsasthatoverwhelming.

Thereasonsformoreprecautionsaresimple:Horizontaldrillingandmultistagefracingcanbe

disruptivetocommunities,andaccidentshaveincreasedasdrillingrampsup.Newshaleproduction

needschecksandbalancestogainpublicacceptance.Somestateregulatorswhopubliclydefendtheir

recordtoldusprivatelytheyneedtoupdatedrillingandwastedisposalstandardstofitthesurgeinnew


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activity.Somebigproducerstoldusstifferstaterulesworkintheirfavor,byweedingoutbadactors

whosesometimeshaphazardeffortshelprunenvironmentalistscampaignsforthem.

Theotherreasoncompanieswilltakemoreprecautionsisthatshaledrillingisprofitableevenat$4to

$5gas,wheretempersarethehottest.InPA,wheretheeconomyisalreadytransformedbythedrilling

boom,producers

told

us

it

is

simply

worth

it

financially

to

go

up

against

awall

of

opposition

to

drill

a

well.EveninsomeregionsofNY,webelievecompanieswithstrongnervesandawillingnesstocontrol

theirenvironmentalfootprintwilldrillprofitableleaseseventually. (ItjustwontbeintheNYC

watershed.)

Theaddedtabperwell,withoutfederalregulation,couldreach$200,000to$500,000,ontopof

currentcostsperwellbetween$2.5millionand$10million.Biggerticketitemsincludeextrawell

casing,morerigorouscementingandwatertreatment.Figuresvarywithlocaleandgeology.Thisreport

providesintelligenceonstepsproducershavealreadytakenormayhavetotakelateronandhowthis

affectsshaleeconomics.

IfCongress

does

mandate

EPA

oversight

of

fracing,

the

industry

predicts

further

costs

of

$125,000

to

$250,000perwell.Wethinkcostscouldbelessthanthat,givenchangescompaniesaremaking

voluntarily.Still,federaljurisdictioncoulddramaticallyslowdrillinginPennsylvaniaandNewYork,

whichareamongtheminorityofstatesthatdontalreadyhelpenforceEPAundergroundinjectionrules.

Theywouldneedtoapplyforadelegatedtypeofauthoritycalledprimacy.Itsalsopossiblethe

fracingprocessitselfwillhavetobereengineeredsomewhattogreaterexpense.

AnEPAstudyonfracingisjustgettingunderwayandcouldslowdownthelegislativetrain.Lastyear,

DemocratswhointroducedtheFracturingResponsibilityandAwarenessofChemicalsActorFRACAct,

whichcallsforbroaderfederaloversightoffracingaskedEPAtoreexaminetherelationshipbetween

fracingand

drinking

water.

WeattendedhearingsinAprilonthestudysdesign.EPAofficialsoutlinedplansforakitchensinkstudy

ofshaledrillingsimpactsacrossitslifecycle.Barringamajoronshoreaccident,Democratsmaywait

topushfederaldrillingstandardsuntilscientistsweighin.(Chemicaldisclosurestandardscouldcome

sooner.)Theagencyaimstofinishthestudyin2012.Wethinkitcouldtakelonger,upto2013.

TheEPAstudywillmostlikelyidentifyriskstopublichealthfromsloppydrillingpractices.Weexpect

theagencytocallforbetterwelldesignandmaterialshandling.Statesarealreadystiffeningtheir

standardsinanefforttoheadofffederalaction.

TheEPA

study

may

end

up

as

apositive

for

producers,

by

buying

time

to

achieve

wider

adoption

of

drillingbestpractices.Asonelobbyisttoldus,ifyoucantbeattheenemy,trytowriteitsrules.The

biggerquestionishowfartheindustrywillgo.Wedetectedaschismamongcompanieswhowantto

preemptfederalmandatesbyimprovingpractices,andsmallerindependentswhoarguethatiftheygive

aninch,regulatorswillmakethemgoamile.


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WhiletheEPAstudycontinues,oppositiontofracingandgasdrillingwillescalate,notdiedown.

Attackingnaturalgashasbecomeakeystrategicgoalofmanyenvironmentalorganizations.Whyso,if

gashasacleanenergyimage?Criticsanswer:itsdirtierthanpeoplerealize.Buttheresanother

reason: Widescaleadoptionofnewlyabundant,cheapnaturalgasthrowsoffamassembraceof

renewableenergyforageneration.Evenifattackinggasmeansashorttermwinforcoalandforeign

energy,environmentalists

longer

term

agenda

is

weaning

the

country

off

fossil

fuels.

Coal

requires

less

environmentalistfocusbecauseitistheenemyofthepast;consensushasalreadyturnedagainstit.

Hollywoodwillhelpfanirrationalfearsandraiseawarenessoflegitimateconcerns.Gasland,a

documentarywepreviewedthisspringthatwontheSundancepublicjuryaward,debutedonHBOJune

21.APennStateofficialwhoattendedascreeningcomparedittoshowingamovieofairplanecrashes

toshowwhatairlinesdo.Someofitsdepictionsarenowoutofdate,butviewerswontknowwhathas

improved.Theindustrywillattackitslackofrigor;landownerswillworry.

Thenationalconversationaboutfracingwillcontinuetobeloadedwithdisingenuousargumentsand

wefoundbothsidesguilty.Environmentalistsusethetermfracingforallegedsinsnotdirectlytiedto

thecompletiontechnique.Theyareclaimingthereisnooversightfordrillingprocesseswhichthestates,

infact,doregulate.Theyclaimthereisnoinformationaboutthecontentoffracfluids,whenmuchofit

isdisclosedtoregulators.Why,then,aretheydemonizinga60yearoldtechnique,insteadofsloppy

wastehandling?Itplaysbetterpolitically.FracingwasexemptedfromtheSafeDrinkingWaterActina

2005billoriginallysupportedbythenVicePresidentDickCheneyandhisformercompanyHalliburton.

Theindustryisguiltyoflackofrigortoo.Itkeepsrepeatingthemantrathatnotasinglecasehastied

hydraulicfracturingtodrinkingwatercontamination.Thatsusefulinalawsuit,butnotinthecourtof

publicopinion.Spills,wellblowoutsandinadequatetreatmentofflowbackwaternoneofitfracingper

sehavecausedtroubleforsomecommunitiesandimpactedsomewatersupplies.Stateshavelearned

fromtrial

and

error

that

they

need

to

take

greater

care

disposing

of

produced

water

from

fraced

wells

becauseithasmuchhighersalinityandotherimpuritiesthanfreshwater.Drillinginshalerock

sometimesbringstothesurfacenaturallyoccurringradioactivematerialthatmunicipalwatertreatment

plantsarenotdesignedtohandle.

Overtime,theconversationwillshiftfromahardtoproveallegationthatfracingfluidcanmigrate

fromdeepundergroundtocontaminateshallowaquiferstoabroader,moreaddressablesetof

objections. Drillingopponentsarguethatfracturingfluidsinjected5,000to12,000feetunderground

candefygravityandrockmechanicsandmigratethousandsoffeetupwardthroughsolidrock.

Petroleumengineersandgeologistsmostlysayitsimpossible,buttheirfinancialinterestinthedebate

drawsskepticism.

Meanwhile,

credible

concerns

remain

about

well

design

and

waste

handling.


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Wesetouttoidentifytherelativelylimitedsetofstudiesthateachsideclaimsputsthemintheright.

Wealsotookstockofthemostwellpublicizedincidentswherelandownersblamedfracingfor

contaminatingdrinkingwater.Wedontpurporttobescientistscapableofsnuffingoutthisdebate,but

welistsomesalientfactswithwhichtoevaluatethem.

Investorsmay

rightly

wonder

if

regulators

are

fining

companies

and

forcing

them

to

plug

wells,

is

there

somethingfundamentallywrongwithfracing?Wethinkitsamatteroflearningfrommistakes.

Thegoldrushlikeendeavorcalledshaledrillingwillmorphfromtrialanderrorintoamore

institutionalizedaffair.Newindustriesarealreadygrowingupinshaleterritoriestotreatwastewater

andreplacesomechemicalswithgreeneringredients.Somesteps,suchasrecyclingwater,caneven

savemoney.Biggercompanieswillhaveagrowingadvantage,becausetheycanbetteraffordtoprevent

spillsandleaksandcorrectthemwhentheyhappen.Lesswellcapitalizedcompaniesfacethegreatest

riskfromtighterregulationaPAproducertoldusflatly,Youregoingtohavetohavesomereallybig

pocketstoparticipate.Andtighterregulation,toagreaterorlesserdegree,iscoming.


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WithandWithoutFracingWhatdoesshalegasandhydraulicfracturingrepresenttotheenergysupplyandtheU.S.economy?

Answeraton. Wedontfinditpracticaltoconsiderabanonfracinggivenourviewthat,whendone

properly,

it

does

not

constitute

a

dangerous

or

deadly

activity.

As

regulators

and

politicians

incorporate

therealitiesandimpactoffracing,weexpectincreasedoversightandaslowerandmoreexpensive

drillingandfracingprocess. Buttheworkwillcontinue!

ENERGYSUPPLY

SHALEGASextractedviahorizontaldrillingandhydraulicfracturingHASSINGLEHANDEDLY

TURNEDTHEUNITEDSTATESFROMANATIONOFDECLININGGASPRODUCTIONTO

ONEOFRISINGPRODUCTION.ThePotentialGasCommittee,anindustrybody,saysshalegas

discoveriesaretheprimaryreasonwenowhavegastosupplythenationforthenext100years.

TheBarnettShalegasplayinTexasalreadyproduces6percentofallnaturalgasproducedinthe

Lower48states.1

NINETYPERCENTOFOILANDGASWELLSNOWREQUIREUSEOFHYDRAULIC

FRACTURING,accordingtotheIndependentPetroleumAssociationofAmerica.Horizontal

drillingandfracturingallowoperatorstoproduce10timestheamountofenergybydrilling

fewerthan1/10ththenumberofwells.2

TheU.S.EnergyInformationAdministrationforecastinMayinitsAnnualEnergyOutlook2010

that,WITHFRACINGOFLOWPERMEABLEROCKSUCHASSHALE,GASPRODUCTION

WILLRISEto~26TRILLIONCUBICFEETBY2035,3A24%INCREASEovertheagencys2009

productionestimatesof~21TCF.4

THERECOVERABLE

RESOURCE

BASE

in

the

lower

48

states

WILLINCREASE

WITH

FRACINGBY88%,to~650TCFfrom~350TCF,accordingtothe2010outlook.5

WITHOUTFRACING,GASPRODUCTIONWILLFALL17%,to17.4TCFby2035from~21TCF

in2009.PRICESWILLBESIGNIFICANTLYHIGHER.6

1http://www.api.org/policy/exploration/hydraulicfracturing/shale_gas.cfm

2http://www.energyindepth.org/2010/05/evidenceisnotthepluralofanecdote/

3http://www.eia.doe.gov/oiaf/aeo/pdf/issues.pdf

4http://www.eia.doe.gov/dnav/ng/hist/n9070us2A.htm




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Otherestimateshavefoundtheimpacttobeevengreater.AnAmericanPetroleumInstitute

(API)studyperformedbyIHSGlobalInsightfoundthatinfiveyears,iffracturingwere

eliminated,thenumberofwellscompletedintheU.S.woulddropby79%andgasproduction

wouldfall57%by2018.7Another2009report,publishedbytheU.S.DepartmentofEnergywith

AdvancedResources

International,

found

that

under

astringent

scenario

of

future

regulation,

over35%ofonshorewellsintheU.S.wouldshutdownandexplorationworkassociatedwith

shalegaswouldfallbyasmuchas50%.8

BottomLineIfhydraulicfracturingisbannedorsignificantlyrestricted,NATURALGAS

PRODUCTIONGROWTHWOULDTURNTODECLINEAND$10+/MCFGASPRICESwould

beheretostay. LNGimportswouldincreaseandanytalkofenergyindependencewouldbejust

thattalk!

7http://www.api.org/policy/exploration/hydraulicfracturing/,thenscrollto:Executivesummaryofthenational

effectsoffederalhydraulicfracturingregulation8LettertoU.S.SenatorsHenryA.WaxmanandEdwardJ.Markey,SenateCommitteeonEnergyandCommerce,

fromU.S.RepresentativesDanBorenandTimMurphy,NaturalGasCaucus,March12,2010.


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U.S.ECONOMY

Thenaturalgasindustryemploysover600,000people.9AccordingtotheAmericanPetroleumInstitute,

itsupportsnearly4millionjobsandaddsmorethan$385billiontothenationaleconomy.10

Regionalimpactshavebeenlargeandwillgrow,accordingtoseveralrecentstudies:11

Drilling for Dollars: An Assessment of the Economic Impact of the Barnett Shale (Perryman Group)

The Economic Impacts of the Pennsylvania Marcellus Shale Natural Gas Play: An Update (Penn State

University)

The Energy Sector: Still a Giant Economic Engine for the Louisiana Economy (LMOGA/Scott)

Economic Impact of the Haynesville Shale on the Louisiana Economy in 2008 (La. Dept. of Natural

Resources)

An Emerging Giant: Prospects and Economic Impacts of Developing the Marcellus Shale Natural Gas Play(PSU College of Earth & Mineral Sciences, Dept. of Energy and Mineral Engineering)

(Note:Opponentshavecriticizedsomeofthesestudiesbecausetheyreceivedindustryfunding.)

9 http://www.anga.us/wpcontent/uploads/anga_fs_national_r5_LowRes.pdf

10http://www.api.org/aboutoilgas/natgas/

11http://www.energyindepth.org/library/studiesjobsrevenues/

Texas22%

California

10%

Louisiana5%

Oklahoma4%

Illinois4%

Pennsylvania4%

Ohio3%

New York

3%

Florida3%

Michigan2%

Colorado

2%

Other38%

Natural Gas Jobs


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P a g e |10

TheWorriesAboutFracingandWhyTheyreSurfacingNowSnapshotofFracingConcerns

Groundwatercontamination

Hasslefactor:

traffic

and

industrial

activity

in

densely

populated

areas

Chemicalhandling:increasedaccidentsandsurfacespills Wastedisposal Airquality Wateruse

Whetherfairornot,theissuesabovearefrequentlyraisedasthedangersorproblemsoffracing.Weaddress/discusseachinsomedetailbelow.Weseewelldesignandchemicalhandling/wastedisposalastheareaswheretheindustrywillhavetoworkhardest,ormakethemostimprovements,toquietfears.

Hydraulicfracturingandadvancesinhorizontaldrillinghaverevolutionizedindustrysabilitytoextract

naturalgasfromshalerockatafarlowerpricetagthanimaginedafewyearsago.Fracturinginvolves

pumpingwater,sandandchemicalsunderhighpressureintodeeprockformationsasmuchastwo

milesundergroundtocreatefissuresintherock.Thisallowsthewelltoreleasegasatcommercially

viablerates.(Foraprimeronhowfracingworks,pleaseturntotheAppendixattheendofthisreport.)

GROUNDWATERCONTAMINATION.Theheadlinefearisthatfracingwillcontaminategroundwaterby

accidentalinjectionofchemicalsnearorintoaquifers.Anarrayofgeologistsandengineerssome

affiliatedwiththeindustry,othersindependentsaythisisimplausiblebecausethefracturingtakes

placethousandsoffeetbelowtheaquifer.Theforceofgravityandamilethickceilingofrock,they

argue,keepsfracfluidsfromtravelinganymorethanafewhundredfeet.

Opponentsof

fracing

contend

that

the

chemicals

used

in

hydraulic

fracturing

fluid

such

as

lubricants,

thickenersandbiocides,someofwhichstayundergroundafterafracjob,willmigratetounwanted

placesyearsordecadeslater.Becausefracingoccursunderhighpressure,opponentsarguethesmall

scaleseismicactivitycouldcreatenewpaths.

Thetechniqueismorethan60yearsoldandnocaseshavedefinitivelytiedfracingtogroundwater

contamination.Butthereislimitedpeerreviewedscienceonthetechnique,sothedebaterageson.See

oursectionentitledQualityoftheEvidence,onpage28,wherewesummarizekeystudiesonhydraulic

fracturingandshaledrilling.


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STUDIESUSEDTOSUPPORT

HYDRAULICFRACTURING

Date Author Title

2003 InterstateOilandGasCommission StatesExperiencewithHydraulicFracturing

June2004 U.S.EPA EvaluationofImpactstoUndergroundSourcesofDrinking

WaterbyHydraulicFracturingofCoalbedMethaneReservoirs

April2009 U.S.DepartmentofEnergyandGround

WaterProtectionCouncil

ModernShaleGasDevelopmentintheUnitedStates:APrimer

May2009

U.S.

Department

of

Energy

and

Ground

WaterProtectionCouncil

StateOil

and

Gas

Regulations

Designed

to

Protect

Water

Resources

2009 ICFInternational AnalysisofSubsurfaceMobilityofFracturingFluids

September2009 NYStateDepartment ofEnvironmental

Conservation

DRAFTSupplementalGenericEnvironmentalImpactStatement

June2010 MITEnergyInitiative TheFutureofNaturalGas:AnInterdisciplinaryMITStudy,

InterimReport

STUDIESUSEDTOOPPOSE

HYDRAULICFRACTURING

Date Author Title

April2005 Oil&GasAccountabilityProjectof

EARTHWORKS

OurDrinkingWateratRisk:WhatEPAandtheOilandGas

IndustryDontWantUstoKnowaboutHydraulicFracturing

October2007 NaturalResourcesDefenseCouncil DrillingDown:ProtectingWesternCommunitiesfromthe

HealthandEnvironmentalEffectsofOilandGasProduction

January2009 SouthernMethodistUniversityfor

EnvironmentalDefense

Fund

"EmissionsfromNaturalGasProductionintheBarnettShale

Areaand

Opportunities

for

Cost

Effective

Improvements

December2009 NYCDepartment ofEnvironmental

ProtectionandHazenandSawyer

ImpactAssessmentofNaturalGasProductionintheNewYork

CityWaterSupplyWatershed

December2009 HarveyConsultingLLC ReviewofNYStatesDraftSupplementalGenericImpact

Statement

January2010 TXCommissiononEnvironmental

Quality

HealthEffectsReviewofBarnettShaleFormationArea

MonitoringProjects

Wealsoprovideachartofincidentsthathaveattractedrecentpublicityandtellyouwhatinvestigators

reallyfound. (SeeIncidentsthatHaveFueledtheFire,page23.)

Therhetoricgetsconfusing,sowellgetstraighttoapointmanyaremissing:anydrillinghasthe

potentialtocontaminategroundwaterifthewellisdrilledandcementedimproperly. Infact,any

penetrationofafreshwateraquifer(gaswell,waterwell,coalmine,etc.)hasthepotentialto

contaminatefreshwaterifnotproperlydesigned.

Toimaginepipecasinginawell,thinkofatelescopethatgetsnarrowerasitextendsdeeper.Drillers

placeaseriesofconcentricpipesintotheground.First,alargediameterhole(maybe16)isdrilled

belowthewatertable.Casing(steelpipe)isinsertedintothegroundandthegapbetweentheearthand

thepipe(theannulus)iscemented.Thedrillingcontinueswithasmallerdrillbit(smallerhole)and

anotherstringofcasingisrunandtheannulusiscemented.Thisisrepeateduntilthewellreachesthe

desireddepth.Inmanycasesfourormoreseparatecasingstringsarerun.

Occasionally,acement

job

has

an

incomplete

bond

with

the

walls

of

the

well,

and

that

can

be

big

trouble,becausecontaminantscanthenleakintowatersupplies.Butthishasnodirectconnectionto

hydraulicfracturing,whichoccursafullmileorsobelowthataquiferinthehorizontalpartofthewell.


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P a g e |12

SOURCE:U.S.DepartmentofEnergyandGroundWaterProtectionCouncil,ModernShaleGasDevelopmentintheUnited

States:APrimer,April2009

Weseewelldesignasasignificantpracticalconcernfortheindustry,evenmoresoaftertheMacondo

offshoreoilspillwherewelldesignhasproventobeabigfactor.Oneofthegreatestrisksof

contaminationbyfracfluidscomesfromtheirpotentialtomigrateupwardwithinthewellcasingduring

thefracturingprocess.Themosteffectivemeansofpreventingthatcontactispropercementation.

Allthis,manycompaniesargue,isnotnew.Theyvebeendesigningwellsandhavebeenfracingfor

decades.

Sothenextquestioniswhythiscommontechnologyisattractingsomuchoppositiontoday.Thereare

severalreasonsandtheydontallhavetodowithpolitics.

REASON#1:Todaysfracjobsarenotthefracjobsofold.Whileproducershavelongpumpedfluids

intoboreholestoextracttrappedhydrocarbons,thewellswereverticalandoftenfarshallower.

Companiespumpedsmallerfracjobswhichusedmuchlesswaterandrequiredmuchlessequipment

perwell.Todaysshalewellsaredeeper,andproducersareinjectingfluidsatmuchhigherpressureand

volumesintoimpermeablerock.Moreofthefluidstaysunderground.TobreakopentheHaynesville

ShaleofLouisiana,producersdrilldownmorethantwomiles11,000to13,000feetgrindingthrough

layeruponlayerofsolidrock.Thescaleofeverythingpumptrucksandotherneededequipment,the

milesof

pipes,

the

water

requirements,

and

certainly

the

energy

harvesteddwarfs

your

grandfathers

fracjobs.


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P a g e |13

ComparisonofOldandNewFracJobs*CottonValleycirca1985 HaynesvilleShalecirca2010

Type Vertical HorizontalDepth 10,000 11,000Fracstages 1 10+Sand 2mmlbs 4mmlbsWaterused 0.8mmgals 4mmgals*WecomparedtheCottonValleyandtheHaynesvilleShalebecausetheyareplaysinthesameareasofEastTexasandNorthLouisiana.REASON#2:Theabsolutenumberofaccidentshasincreasedwithmoredrilling,eveniftherateof

accidentshasnot.Regulatorstoldusthisrepeatedlyandthemoreaccidentshappen,theworsethe

industrylooks,sotheregulatorscrackdown.Recordhorizontalgasdirecteddrillingisevidencethatgas

shaledrillingisoccurringatafeveredpitch.Whileevenoneaccidentistoomany,spills,illegaldisposals,

wellblowouts/firesandotherincidentshavehappenedinthepastandtheywillinthefuture.

REASON#3:Todaysbigshalediscoveriesoftenlieindenselypopulatedareasunaccustomedtooil

andgasneighbors.EveningasfriendlytownslikeFortWorth,TXandShreveport,LA,rigsfeeldifferent

nexttochurchesandschools.Morepeopleseeit,smellit,hearit,andwonderaboutitthanwhenthe

rigwasinaflatfieldinrelativelyunpopulatedEastTexas.MostpeopleinPennsylvaniaandNewYork

haveneverdependedonoilandgasforaliving;whattheydependoniscattleanddairyfarming,

timber,manufacturing,tourismWallStreet.Whethertheyareprofitingfromaleaseornot,orneed

themoneyornot,aruralorsuburbantownwheredrillingrampsupfeelsindustrialprettyfast.

U.S.MapofSoutheastandNortheastShaleTerritoriesandproximitytoUrbanAreas.

SOURCE:TPH


15/65

P a g e |14

REASON#4:Becauseofthepopulationsatstake,theprotectionofthewatersupplyisfrontand

center.Thegeographicallylargestshaleterritory,theMarcellus,coversawideswathofAppalachiafrom

northeasternTennesseetoupstateNewYork.PartsofitliedirectlyundertheCatskill/Delaware

watershedswhichsupplywaterto17millionpeople,including90%ofNewYorkCityresidents.

Source:NewYorkCityDepartmentofEnvironmentalProtection

Inshort,aswithanyresourceextraction,therearerealrisksandvalidobjectionsthatmustbemanaged.

Opponentsgetmoretractionbyattackingundergroundfracturing,buttheeverydayrisksofshale

drillingcentermoreonsurfacedisturbance.

THEHASSLEFACTOR.Shaledrillingtodayisa247operation,onandoff,forayearormore.Crews

oftenoperate

all

day

and

all

night.

This

is

why

goodwill

and

small

gestures

will

matter.

SOURCE: Seefootnote.12

SOURCE:seefootnote.13

12http://travel.webshots.com/photo/1271002101034885681rIwrXO

13http://www.aussiestockforums.com/forums/showthread.php?p=521758.(ActivityphotographedisinTexas.)


16/65

P a g e |15

Longbodiedtrucksthathaulfracturingfluid,water,wasteandmultitonloadsofequipmentsharethe

roadwithschoolbusesandcommuters.InthemountainousterrainofPennsylvania,driversgetstuckfor

longperiodsbehindstackedupfractrucksbecausethethoroughfaresaretwolanemountainroads.

Somewaterandwastewatersystemsthatcompaniestapintoaremorethan100yearsold.

Equipmenttrucks

take

aheavy

toll

on

local

roads.

A

New

York

City

Department

of

Environmental

Protectionreportfoundthathaulingofwater,wastewater,andequipmenttoandfromthedrillsite

requiresontheorderof1,000ormoretrucktripsperwell.14 Manymunicipalitieswevisitedhavebegun

sendingbillstodrillersforcrumbledroads.

Althoughhorizontaldrillingallowscompaniestodisturblesssurfaceareathanverticalonlydrilling,the

footprintofadrillpad,fromwhich4to8horizontalwellscanradiate,issignificant.Whenitistimeto

fracthewell,theequipmentassembledonasinglesiteresemblesamassiveindustrialparkinglot.

SOURCE:http://www.marcellusshale.us/ Source:EXCOResources

Thenuisancefactorisanacceptabletradeofftomanylandownerswhobenefitfinanciallyandcheerthe

useofcleanerburning,domesticenergy. (ItmightgooverlesswellinEurope,whereshaleplaysare

justgetting

started

and

many

people

dont

own

mineral

rights

on

their

land.)

But

shale

drilling

poses

other,moreseriousrisksthatneedtobecarefullymanaged.

CHEMICALHANDLINGANDWASTEDISPOSAL.Webelievewastedisposalandsafematerialshandling

posesamongthebiggestchallengestogasproducers.Simplyput,fracingchemicalsanddrillingwaste

aremorehazardousabovegroundthanseveralmilesunderground.

BillKappel,aU.S.GeologicalSurveyofficial,arguedthisspringthatcontaminationofwatersuppliesis

morelikelytohappenascompaniesprocessthewastewaterfromfracing.Insomeinstances,municipal

watersystemsthattreatthewaterhavereportedhigherlevelsofheavymetalsandradioactivity.15Here

isabreakdownoftheissues.

14http://www.nyc.gov/html/dep/pdf/natural_gas_drilling/12_23_2009_final_assessment_report.pdf,pageES1.

15IanTalley,DowJonesNewswires,EPALaunchesHydraulicFracturingStudyonWaterSupplies,March18,

2010.


17/65

P a g e |16

Flowbackwaterandaquatichabitat.Shalerockwasoncepartofanancientseabed.Thebrinyfracturing

fluidthatflowsbackoutofashalewellwithnaturalgasknownasflowback,orproducedwater

canbefivetimessaltierthanoceanwater.InTexasandLouisiana,itiscommontodisposeofproduced

waterbyinjectingitintodeepundergrounddisposalwellswhichareregulatedbytheEPA.In

Pennsylvania,whichhasfewoftheseinjectionsites,producedwaterismorecommonlycollectedin

tanksor

retention

ponds,

treated

(if

allowed)

via

municipal

water

treatment

facilities

and

released

into

lakes,riversandstreams.Propertreatmentiscritical:disposalofwaterwithhighsaltconcentrations

intoriversandotherbodiesofwatercanthreatenaquaticlife.

Flowbackwaterandhardtoremovecompounds.Shalerockreleasesnaturallyoccurringradioactive

material(NORM)intotheproducedwater. Benzeneandotherhazardoussubstancesmaybepresent.

TheconcentrationsofNORMintheMarcellusShalehaspresentedchallengesformunicipalwastewater

treatmentinPennsylvaniabecausetheyareoftennotequippedtoeffectivelyremoveitorthesaltsand

minerals.Asaresult,theriskofsurfacepollutionincreases.

http://www.gwpc.org/meetings/forum/2009/proceedings/Li_Liang.pdf

Produced Water

Dissolved Dispersed

AcidAromatics AliphaticsAcidAromatics Phenols

BTEX

PAHs

Fatty Acids

Naphthenic

Mainly PAHs

Salt ContentHeavy

Metals

Chemical

AdditivesTotal Oil

Radioactive

Materials

Other

Compounds

Mostly Sodium

Chloride

Fatty Acids

Naphthenic


18/65

P a g e |17

Chemicalspills. Producersuselined,openairpitscalledimpoundmentsnearmanywellsitestostore

freshwater,producedwater,andsometimesdrillingmudsusedwhendrillingthewells.Thelinerscan

tearandthepitscancollectstormwaterandoverflow.Truckshaulingfracturingchemicalsand

producedwatersometimesoverturn.Tanksorpipesmayleak.Someproducersstillusediesel,which

containsknowncarcinogens,indrillingmudsorfracfluid.Wedonthaveaproblemwithhydraulic

fracturingwedont

see

it

as

aproblem,

aPennsylvania

regulator

told

us.

We

do

see

aproblem

with

spills.

GasdrillingpituphillfromhomesinPennsylvania.

SOURCE:http://www.marcellusshale.us/impoundments.htm

Volumeofwaste.Thevolumeofwastebeingcreatedtodayisgrowingwiththemarkedincreasein

drilling.

ChesapeakeEnergymetwithcontroversythisyearwhenitappliedtodisposeofwaterfrom

PennsylvaniainaconvertedgaswellnearSyracuse,N.Y.;concernsflaredabouttheoldwellsproximity

totheFingerLakes.ResidentslikenedthedisposalplantoLoveCanal,theiconicchemicalwaste

dumpinggroundsinNiagaraFalls,N.Y.thathelpedspawntheSuperfundActandwhereapopulation

hadtobeevacuated.16Chesapeakecallsthecomparisoncompletelyinaccurateandirresponsible

becauseitwasmerelyapplyingforadisposalwellthatwouldhavebeenstrictlyregulatedbytheEPA.

MarcellusdisposalchallengeshaveledmanyPennsylvaniaproducerstorecycle100%oftheirproduced

waterfornewfracingjobs.Thosewhorecyclenowcallitacompetitiveadvantage.Butthatoption

worksbestforcompanieswithcontiguousdrillingsites,becauseitcanbecostlytomovefluidsbetween

locationsandthetruckingoffluidcanleadtospills.

16http://en.wikipedia.org/wiki/Love_Canal


19/65

P a g e |18

AIRQUALITY.Thisisavalidworry,butcorrectablewithbettersafeguards.

Concernshavesurfacedrecentlyaboutairborneemissionsofhazardouschemicalsfromtanksatwell

sites,openairpitsandgascompressionandprocessingstations.Inregionswherethegasiswet,it

naturallycontainsotherhydrocarbonsthatcanformliquidsatsurfaceconditions(ethane,propane).

Somehydrocarbons

and

produced

water

itself

contain

benzene,

aknown

carcinogen.

The

Texas

DepartmentofEnvironmentalQualityrecentlyreleasedairmonitoringresultsaroundtheBarnettShale

inFortWorthandfoundelevatedlevelsofbenzeneandotherchemicals,andithassaidsome

subsequenttestsnearthatregionhavewarrantedfurtherreview.17Producersandregulatorsin

LouisianaandPennsylvaniatoldustheyexpectfewerissueswithbenzeneemissionsbecausetheyhave

driergasthantheBarnettshale.

Recenttestssuggestthatoncehazardousemissionsaredetected,companiesinstallequipmentto

controlthem.(Tip:GolongcompaniesthatsellvaporrecoveryunitsinFortWorth.)Evenawidely

discussed2009paperonairqualityintheBarnettShalebyDr.AlArmendariz,thenanengineering

professoratSouthernMethodistUniversityandnowRegion6AdministratoroftheEPA,argues:Cost

effectivecontrolstrategiesarereadilyavailablethatcansubstantiallyreduceemissions.18

WATERUSE.Nosmallissue,butwatermanagementisrapidlyimproving.

Wateriscriticaltoshalegasextraction.AtypicalwellinoneoftheBigFourshalesuses4to6million

gallonsofwaterforthedrillingandfracturingprocess,accordingtoChesapeakeEnergy.Weagreewith

thisstatistic.

Producersareconstantlylookingfornewsourcesofwatertofracawell.Somecompanieshavedrawn

firefordepletingwaterfromsmallstreams.Muchofthewaterusedtofracshalewellsstays

underground

and

isnt

recovered

and

returned

clean

to

its

source.

Despitethis,wedontconsiderwateruseoneoftheindustrystopliabilitiesforseveralreasons.First,

thestateandregionalwaterauthoritiesweinterviewedtoldustheyhavelearnedonthejobandmade

permittingconditionsstrictertopreventunnecessarydepletions.Necessitythenbecomesthemotherof

goodideas:EXCOResourceshasstruckadealwithInternationalPapertorecyclewaterfromamillin

LouisianasHaynesvilleshaleregion.EXCOreduceswaterwithdrawals,and,insodoing,getswastewater

lowinoxygen.This,inturn,sharplyreducesitsneedtousecontroversialbiocidesinfracfluidtocontrol

bacteria.

17Forongoinginformation,check:http://www.tceq.state.tx.us/implementation/barnettshale/fw_sampling

18AlArmendariz,Ph.D.,EmissionsfromNaturalGasProductionintheBarnettShaleAreaandOpportunitiesfor

CostEffectiveImprovements, January26,2009,http://www.edf.org/documents/9235_Barnett_Shale_Report.pdf


20/65

P a g e |19

Inaddition,mostshalebasinslieinareaswithmoderatetohighlevelsofannualprecipitationnatureis

replenishingthewatersupply.

SOURCE:U.S.DepartmentofEnergyandGroundWaterProtectionCouncil,ModernShaleGasDevelopmentintheUnited

States:APrimer,April2009

Lastly,whilewaterwithdrawalsmuststillbejudgedbasedonlocallimitations,thewaterfootprintof

fracingisntaslargeonarelativebasisasotherfuelsperunitofenergyproduced.


21/65

P a g e |20

Energy ResourceRange of Gallons of Water Usedper MMBTU of Energy Produced

Shale Natural Gas* 0.60-1.80

Natural Gas 1-3

Coal (no slurry transport) 2-8

(with slurry transport) 13-32

Nuclear (processed uranium ready to use in plant) 8-14

Conventional Oil 8-20

Synfuel-Coal Gasification 11-26

Oil Shale Petroleum 22-56

Tar Sands Petroleum 27-68

Synfuel-Fisher Tropsch (Coal) 41-60

Enhanced Oil Recovery (EOR) 21-2,500

Fuel Ethanol (from irrigated corn) 2,510-29,100

Biodiesel (from irrigated soy) 14,000-75,000

Source:ChesapeakeEnergy2009presentationtotheGroundWaterProtectionCouncil,citingChesapeakewellestimatesfor

shalegasandaU.S.DepartmentofEnergywaterusereport(footnotedbelow).

Chesapeakesaysthatthewateritusestofracanaverageshalewellisthesameamountconsumedbya

coalfiredpowerplantin12hours.ItiswhatNewYorkCityconsumesinsevenminutes.Evenrecreation

comparesunfavorably:

agolf

course

drinks

the

same

amount

in

25

days

and

then

drinks

that

same

amounteverymonth,yearafteryear.19

19Chesapeakegaveusitssourcesonthesefacts.Coalplantwaterconsumption:EnergyDemandsonWater

Resources,U.S.DepartmentofEnergy,December2006,http://www.sandia.gov/energywater/docs/121

RptToCongressEWwEIAcommentsFINAL.pdf.NYCwaterconsumption:NewYorkCityDepartmentof

EnvironmentalProtection.Golfcourseconsumption:ColoradoStateUniversityAgriculturalandResourcePolicy

Report,April2004.


22/65

P a g e |21

TheCompaniesWithTheMostToGainOrLoseThefollowingtablesshowthecompaniesthataremostleveragedtoshaleplays,andthereforethemost

exposedtoregulatoryissueshighlightedinthisreport.

CompaniesexposedtoBarnettTotal Barnett

NAV Barnett %ofNAVCRZO $31 $14 46%

KWK $21 $8 39%

CHK $43 $4 10%

EOG $140 $4 3%

DVN $93 $5 5%

RRC $65 $1 2%

NAVcurrentasof6/30/2010

CompaniesexposedtoEagleFordTotal EagleFordNAV EagleFord %ofNAV

ROSE $24 $12 50%

HK $47 $20 43%

GDP $27 $8 29%

EOG $140 $31 22%

PXD $81 $17 21%

NFX $72 $6 8%

*GDPhasvalueinEagleFord onlyifweinclude4PvalueNAVcurrentasof6/30/2010

CompaniesexposedtoHaynesvilleTotal Haynesville

NAV Haynesville %ofNAVGMXR $20 $15 74%

GDP $27 $20 73%

XCO $26 $14 55%

HK $47 $23 49%

PXP $46 $11 24%

CHK $43 $7 17%

QEP $53 $7 13%

EOG $140 $10 7%DVN $93 $2 3%

SWN $55 $1 1%

APC $75 $1 1%

*GDPhasmorepotentialexposureifweinclude4PvalueNAVcurrentasof6/30/2010

CompaniesexposedtoMarcellusTotal Marcellus

NAV Marcellus %ofNAVRRC $65 $38 59%

REXX $15 $8 50%

COG $61 $24 40%

CHK $43 $13 31%

XCO $26 $6 23%

CRZO $31 $6 20%

SGY $21 $3 15%

APC $75 $11 14%

UPL $66 $9 14%

SWN $55 $2 4%

EOG $140 $4 3%

NAVcurrentasof6/30/2010CompaniesexposedtoFayetteville

Total Fayetteville

NAV Fayetteville %ofNAVSWN $55 $43 77%

HK $47 $3 6%CHK $43 $1 2%

NAVcurrentasof6/30/2010


23/65

P a g e |22

Wedrilleddownbyregion,becausetherisksaredifferentineachoftheshales.Weseecostsforahost

ofitemsrisinginPennsylvaniaandNewYorkbecausenewproposalsandregulatoryreviewsarealready

onthetable.TheflipsideisthatitischeapertodrillthereatleastinPAbecausewellsarentasdeep

asintheHaynesvilleanditisclosertohighpricedmarkets.

InLouisiana,

Arkansas

and

Texas,

the

friendlier

regulatory

climate

means

more

of

the

new

costs

could

beoptional.

Iffracingwithstandsthescrutinyandgasdrillingcontinuesattodaysstrongpace,howdotheadded

costschangereturns? SeeWhatsTheTab?sectiononpage53.


24/65

P a g e |23

IncidentsthatHaveFueledtheFireTherearemanyallegationsoutthereaboutfracingsomewithlittlesupportingevidence.Butindustry

rebuttalscanalsodownplayproblems.Sowetooksomeofthemostwellpublicizedincidentsthathave

hurt

the

industrys

reputation

and

categorized

them

for

this

report.

This

list

is

not

meant

to

be

exhaustiveandcontainsprimarilyrecentincidents.20

Thecaseswheremethane(naturalgas)appearstohaveinfiltrateddrinkingwaterarenttiedto

undergroundfracing,regulatoryinvestigationshavefound.Instead,gasmuchclosertothesurface

seepedintowatersuppliesbecauseoffaultywellcasingandcementjobs.Thisdistinctionhasallowed

industrytoclaimtherearenoconfirmedincidentsthattiedeepundergroundfracingtoaquifer

contamination.Butmistakesinwelldesignanageoldtopicintheoilandgasindustryareproblems

thatshaledrillerscantaffordtokeeprepeating forbothsafetyandimagereasons. Worthrepeating

anytimeanaquiferispenetrated(gaswell,waterwell,coalmine),thepotentialexiststocontaminate

drinkingwaterifnotdoneproperly.

Severalincidentsinvolvehandlingofdrillingchemicalsandwaste. Theseillustratewhytheantifrac

cornerisabletokeepblamingactivitiesassociatedwithfracing.

Incompanyinterviews,weheardlotsoffrustrationfromindustryexecutivesaboutbadactorswho

weresloppy,orevenworse,unapologetic.Thesavvierplayerscitedtwocardinalrulesonaccidents:1)

Never,ever,EVERmakearegulatorlookbad.Ifyoumessup,fessupandletthestateagencylook

proactive. 2)Dontdismisspublicconcernsjustbecauseyoureworriedaboutliabilities.Goingabove

andbeyondtomakeamendsquicklymakesahugedifferenceevenifyoudontacceptblame.

LawyersmaydisagreebutseeoursectioncalledTheConversationAboutFracingandWhos

ControllingIt,Page38.Onecompanyhadseveralspillswithinatighttimeperiodandregulatorsalleged

itallowedgastomigrateintowellwaterinonePennsylvaniatownship.Thestaterepeatedlyaccused

thecompanyoffailingtomakefixespromptly.Thecompanysaysitmetapplicablestandardsandpoints

outthatthegasthatmigratedintowellscamefromshallowdeposits,notMarcellusShale.Butthe

presenceofpreexistinggasishardtoprovewithoutpredrillwatersampling(whichisanowroutinely

beingperformed).Meanwhile,environmentalistshaveseizedonthesituationtoattacktheoverall

fracturingandwelldrillingprocess.Bycontrast,whenEXCOResourceshadtoevacuateover100

LouisianahouseholdsinApriloveranothergasleak,itmovedrapidlytostoptheleak,pluggeditswells,

andpaidhotelcostswithoutprodding.RegulatorstoldusEXCOearnedtheirgoodwillevenasmistakes

came

to

light.

20Fordiscussionofotherincidents,seeareportpreparedfortheEPAbyTheCadmusGroup,HydraulicFracturing:

PreliminaryAnalysisofRecentlyReportedContamination,September2009.Reportdoesntappeartobeposted

onlinebutauthorswebsiteis:http://www.cadmusgroup.com/home.


25/65

P a g e |24

IncidentsthatHaveFueledtheFireWhere When IncidentandCompanyInvol ved As ses smentofIncident

IsUnderground

Hydraulic

Fracturing a

DirectCause?

AreOther

Drilling

Practicesat

Issue?

Well

IntegrityDimock

Township,north

centralPA

2009/2010 CABOTOIL&GAS.Issuesbeganwithawaterwellexplosion.Gasescapedinto

aquiferandbuiltupuntilpressure

causedexplosion. Residentsand

nationalenvironmental groupsalleged

Cabotdrillingcontaminatedthisand

otherwellsandcomplainedoffoul

smellsandflammablewater.Cabotsaid

deepundergroundfracingcouldnthave

beenthecauseandonthispointPA

regulatorsagree:theytoldusitwas"not

Marcellusgas."Cabotprovidedwaterto

residentsinvolvedandlitigationis

ongoing.Attractedintensenational

mediacoverage

and

attention

from

environmentalists.

PAregulatorsblamedCabot'swell

designandcementjobfor

allowingnaturallyoccurring

shallowgastomigrateintowater

suppliesof14homes;itpointed

outlastyearthatdespitefinding

wellproblems,"hydrofracturing

activityhasnotimpactedlocal

wells."ItforcedCabottoplug

threewellsinApril,finedthe

company, barreditfromdrilling

newwellsinDimockforayear,

andcriticized itsslowresponse.

Cabotacknowledges itdidn'ttest

waterwells

for

pre

existing

gas

(commoninthisregion).Itsaysit

believesitsoperationsdidn't

causethegasmigration,and

subsequenttestsshowthata

majorityofareawellscontain

measurablequantitiesofnaturally

occurringgas.

NO YES

CaddoParish,

near

Shreveport,LA

2010 EXCORESOURCES.EXCOResourcescontactedauthorities andover100

homesweretemporarilyevacuatedat

companyexpenseinAprilwhenthe

companystruckalayerofgasthousands

offeetabovetheHaynesvilleshaleand

itescapedintotheairandbubbledup

throughthe

ground.

EXCO

had

not

yet

doneanyfracingofthewell.

LAregulatorsworkedwith

companytoinvestigate causeof

gasmigration;officialstoldus

theybelieveacementjobfroman

adjacentwellisatfault.EXCOhas

agreedtoplug2wellsandsaysit

iscontinuing totestthewater;it

saysit

will

incorporate

lessons

learnedintonewwelldesigns.

NO YES

Bainbridge

Township,

GeaugaCounty,

OH

2007 OHIOVALLEYENERGYSYSTEMSCORP.Naturalgasseepedintoanaquiferand

ledtoanexplosioninthebasementofa

home.Thediscoveryofgasinwater

suppliesdrewallegationsthatfracingby

OhioValleyEnergySystemsCorp.had

pushedgastothesurface. Residents

weren'tinjuredandthecompanyworked

withregulatorstoevacuateandhouse

thedisplacedresidents, andstopgas

flow.

OHregulatorsconcludedina

lengthyreportthatthecausewas

adefectivecementjobinthewell

casing,compoundedbyoperator

error.Theinvestigationfoundno

evidenceofhazardousdrilling

chemicalsinthewellsandsaid

theproblemwouldhaveoccurred

evenifthewellhadneverbeen

hydraulically fractured.

NO YES

Clearfield

County,PA

2010 EOGRESOURCES.AJune3blowoutofagas

well

sent

gas

and

at

least

35,000

gallonsofdrillingwastewaterintothe

skyandoverthegroundfor16hours.

Thisincidentoccurredduringthepost

fracflowbackperiod.Theincident

occurredinarural,relatively

unpopulated area.

PAregulatorstemporarily

suspendedEOG's

drilling

and

fracingactivitiesstatewide untilit

investigatedthecauseandhave

alloweddrillingtoresume.EOG

saiditspreliminary assessment

wasthatthesealintegrity

betweenthepiperamsofablow

outpreventerandtubingwas

compromised.

YESCONTROL

OFFLOWBACK

WASTE

YES


26/65

P a g e |25

IncidentsthatHaveFueledtheFireWhere When IncidentandCompanyInvolved As ses smentofIncident

IsUnderground

Hydraulic

Fracturinga

DirectCause?

AreOther

Drilling

Practicesat

Issue?

WellIntegrity

GarfieldCounty,

CO

2001and

2004

ENCANA.Aresident, LauraAmos,alleged

herwaterwellwascontaminatedbyfrac

fluidsfromwellsnearherhouseandthat

thefluidscausedanadrenaltumor.Her

casehasbeenextensivelypublicizedand

shehasappearedinanumberof

environmentalgroups'reports.fracing

operationsnearherhomeoccurred2,000

feetundergroundandherwellis225

feetdeep.(Thisdepthisconsiderably

shallowerthanshalewellsinPA,LA,TX

andAK.)

COregulatorstestedherwater

repeatedly anddidnotfind

contaminants associatedwithfrac

fluids,includingbenzene.Encana

deniedfracingcontaminatedher

water,butColoradoregulators

founditinviolationofstaterules

preventingfreshwater

contaminationbygas. Amoshas

settledwithEncana. Astudyhas

foundcorrelationofoil andgas

drillingwiththecountry'swater

characteristics.

NO UNCLEAR

Pavillion,WY Past

10

years

ENCANA.EPAtestedwellsinanareawhereresidentshavecomplainedovera

decadeabouteffectsofgasdrillingon

theirwater. In2009,EPAsaidithad

foundchemicalsthatenvironmental

groupsallegeareusedinthehydraulic

fracturingprocess.EPAsaysthe

chemicals"mightnotbeattributableto

wellcomponents"andalsonoted

agriculturalactivitynearby.

EPAcautions

it

doesn't

yet

know

if

thereisanoilandgaslinkandthat

itwillreleasefurtherstudyresults

inAugust2010.Encanatoldusthe

chemicalsatissuearenotusedin

fracinganditneedstosee

additionalresultsbefore

commentingfurther.

ALLEGED,NOT

PROVENUNCLEAR

Surface

Handling

CaddoParish,

near

Shreveport,LA

2009 CHESAPEAKEENERGY.SeventeencattlewerefounddeadnearaChesapeake

Energydrillingsite.Chesapeakesaid

Schlumbergerwastheservicecompany

onthejob.Bothcompaniesdenied

wrongdoing.Theincidentattracted

extensivecoverage;onecompanynot

involvedtoldusthatwhenithappened,

nobodywantedtotalkaboutanything

else"whenitcalledonstateandlocal

officials.Witnessesreportedhearing

cowsbellowbeforetheyfelloverdead.

LAregulatorsconcludedfluid

leakedfromawellpadandran

intoanadjacentpasture.Itfined

eachcompany$22,000.

Chesapeakesaysaftertestingthat

thecauseofdeathtocattlewas

inconclusive. Chesapeakeand

Schlumbergersaytheyhavetaken

aleadingrolein"enhancingthe

standard"forwellsite

constructionandliquidshandling.

NO,BUT

HANDLINGOF

FLUIDABOVE

GROUNDAT

ISSUE

YES

DunkardCreek,

southwestPA

2009 COMPANYLINKUNCLEAR.Afishkillalonga43milespanofthecreekdueto

aninvasivesaltwaterspeciesofgolden

algaewastiedbyanumberof

organizationstohydraulicfracturing.The

algaethrives

in

salty

water,

and

dischargeofshalewell"flowbackwater"

wassuspectedbecauseithashighsalt

content.Agasdrillingorganization

argueddrillingactivityhadn'ttakenplace

neartherelevantportionofthestream.

Thefishkillcontinuestobeaheated

topicamongflyfishingandoutdoor

enthusiasts.

AninterimEPAreport blaming

goldenalgaeforthekillcitedcoal

minedischargesofbrinywateras

potentialcontributingcausesbut

saidthealgaecanalsobespread

bymigratory

birds,

fishermen

and

industrialequipment.PA

regulatorssaytheystillhaven't

ruledoutfracingfluidasa

potentialcontributorbutmine

drainage,agriculturerunoffand

otherindustrialdischargesare

alsoapotentialcause.

NO,BUT

HANDLINGOF

FLOWBACK

WATERFROM

FRACTURINGAT

ISSUE

UNCLEAR


27/65

P a g e |26


IsUnderground

Hydraulic

Fracturinga

DirectCause?

AreOther

Drilling

Practicesat

Issue?

SurfaceHandling

Lower

Monongahala

River,

southwestPA

2008 COMPANYLINKUNCLEAR.TheU.S.ArmyCorpsofEngineerssoundedalarmswhen

thesaltlevel(or"totaldissolvedsolids"

level)spiked"dramatically"ontheriver

inOctober2008,accordingtoa letter

fromtheCorpstoEPA.Althoughlow

rain,acidminedrainageandindustrial

dischargecanalsoincreasesalinityof

water,itcited"increasedgasdrillingin

theMarcellusShale"asanaggravating

factor.EarlierthisyeariturgedPAto

stiffenwatertreatmentstandards,saying

"conditionsarereversingon

Pennsylvania'srivers"

and

it

was

becomingapparentthattheabilityof

someriverstoreceivemoresaltcontent

wasnearitslimits"andsimplycannot

sustain"additionallevelsasaresultof

gasdrilling.

PAenvironmental regulatorscited

theCorps'riverresultsandthe

DunkardCreekfishkillinAprilto

callformorestringentruleson

treatmentofdischargewater.The

new,tougherstandardsare

incentivizingmorecompaniesto

recycleflowbackwaterrather

thantreatanddisposeofitinPA

riversandstreams.

NO,BUT

HANDLINGOF

FLOWBACK

WATERFROM

FRACTURINGAT

ISSUE

YES

Hopewell

Township,

southwestPA

2009 RANGERESOURCES.AspillofdilutedfracfluidfromaRangeResourcesdrilling

operationintoasmalltributarykilled

smallfish,salamandersandfrogs.A

relativelysmallamountoffishwere

affected,thecompanysaid.

PAregulatorsfinedRange

$141,175inMay2010forthespill.

Thecausewasabrokenjointina

transmissionlinetransportingthe

fluid.

NO,BUT

HANDLINGOF

FLUIDABOVE

GROUNDAT

ISSUE

YES

Dimock,PA,

northcentral

PA

2009 CABOTOIL&GAS.CabotOil& Gashadthree

spills

of

fracing

water

and

gel

totaling8,000gallonswithinaweek.The

spillsenteredacreekand nearby

wetland,accordingtoregulatory

documents.

PAregulatorsfinedCabot$56,650

andurged

the

company

to

"do

a

betterjobinthefutureof

overseeingitscontractors."

Cabotsaidthespillswere99.5%

waterandthematerialwasnot

hazardous.Itsaiditspolicyiszero

spills.

NO,BUT

HANDLINGOF

FLUIDABOVE

GROUNDAT

ISSUE

NO


28/65

P a g e |27


IsUnderground

Hydraulic

Fracturinga

DirectCause?

AreOther

Drilling

Practicesat

Issue?

WaterUse

NorthcentralPA 2008

through

2010

VARIOUS.SeveralcompanieswithdrewwaterfromPAriversandstreams

withoutpermitsfromaregionalwater

authority,accordingtotheSusquehanna

RiverBasinCommission.

TheSRBCnotifiedgasoperatorsin

mid2008thattheymusthave

approvalfromthecommissionto

withdrawwatertodevelopshale

gaswellsandhascontinuedto

issueorderstocompaniestostop

waterrelatedworkatdrilling

siteswhenitdiscovers

withdrawalswithoutpermits.The

SRBChasstreamlined procedures

forobtainingwaterpermitsand

saidlastyearthatthegasindustry

asawholehasoperatedin

compliancewith

water

regulations.

NO NO,BUTCASES

HIGHLIGHT

STILL

EVOLVING

WATERUSE

REGULATIONS

HEREANDIN

OTHERSTATES

AirQuality

DISH,TXnear

ForthWorth

2009 VARIOUSCOMPRESSORSTATIONS. DISH,TXishometoseveral gascompressor

stationsthatconnecttopipelines;Mayor

CalvinTillmanassertsthatresidentshave

beenexposedtotoxicairemissionsfrom

Barnettshalegasactivities.

EARTHWORKS,ahighprofile

environmental opponentofhydraulic

fracturing,publishedabriefreportin

Decemberclaimingalinkbetween

healthproblemsofDISHresidentsand

exposureto

chemicals

that

aprivate

environmental consultingfirmfoundin

DISH'sair.Tillmanhaslatelysoughtto

cultivateanationalprofileasan

advocate foroilandgasaccountability,

goingonseveralspeakingtoursinthe

Northeast.Hisallegations gained

credencewhentheTexasCommissionon

EnvironmentalQualitysaidinJanuaryit

foundelevatedlevelsofbenzeneand

otherchemicalsatwellsites,openair

pitsandgasprocessingstationsinthe

BarnettincludinginDish.

TheTexasDepartmentofState

HealthServicesreportedMay12

thatbiologicaltestresultsofDISH

residentsshowedtheirexposure

tocontaminantswasnotgreater

thanthegeneralU.S.population.

Theonlyfourresidentswith

elevatedbenzenelevelsintheir

bloodweresmokerswhowere

expectedtohavehigherreadings.

Theotherchemicalsfound"ina

fewpeople"

at

higher

levels

are

commonlyfoundinpeople

drinkingfromchlorinatedwater

systemsandusingcommon

householdproducts.Thefindings

"didnotindicatethatcommunity

wideexposuresfromgaswellsor

compressorstations"were

occurring. Sincethen,TexasCEQ

hasfoundsomeairsamples

aroundFt.Worthwithbenzene

levelsthatitsaidwarrantfurther

review.

NO NO


29/65


30/65

P a g e |29

drinkingwaterhasbeenattributedtohydraulicfracturingofdeepgasformations.AIl

investigatedcasesthathavefoundpollution,whicharelessthan80inover15yearsof

records,havebeenprimarilyrelatedtophysicaldrillingthroughtheaquifers,improper

designorsettingofupperandmiddlewellcasings,oroperatornegligence.

JosephJ.Lee,Jr.,P.G.,chief,SourceProtectionSection,DivisionofWaterUsePlanning,

PennsylvaniaDepartment

of

Environmental

Protection,

letter

to

Ground

Water

Protection

Council,June1,2009

Whilewedocurrentlylistapproximately421groundwatercontaminationcasescausedby

pitsandapproximatelyanequalnumbercausedbyothercontaminationmechanisms,we

havefoundnoexampleofcontaminationofusablewaterwherethecausewasclaimedtobe

hydraulicfracturing.

MarkE.Fesmire,PE,Director,NewMexicoOilConservationDivision,NewMexicoEnergy,

MineralsandNaturalResourcesDepartment,lettertoGroundWaterProtectionCouncil,

May29,2009

Icanstatewithauthoritythattherehavebeennodocumentedcasesofdrinkingwater

contaminationcausedbysuchhydraulicfracturingoperationsinourState.

DavidE.Bolin,DeputyDirector,StateOilandGasBoardofAlabama,lettertoGround

WaterProtectionCouncil,May27,2009

TheRailroadCommissionofTexasisthechiefregulatoryagencyoveroilandgasactivities

inthisstate.Thoughhydraulicfracturinghasbeenusedforover50yearsinTexas,our

recordsdonotindicateasingledocumentedcontaminationcaseassociatedwithhydraulic

fracturing.

VictorG.Carrillo,Chairman,RailroadCommissionofTexas,lettertoGroundWater

ProtectionCouncil,May29,2009.

EnvironmentalProtection

Agency,

Evaluation

of

Impacts

to

Underground

SourcesofDrinkingWaterbyHydraulicFracturingofCoalbedMethane

Reservoirs,June2004.22

Theagencyinitiatedthisstudyin2000inresponsetocourtlitigationoverfracturinginAlabama.The

studyfoundthathydraulicfracturingincoalbedmethanewherethegasissubstantiallycloserto

watertablesthantheshalegasatissueinthisreportposeslittleornothreattodrinkingwater

suppliesanddoesnotjustifyadditionalstudyatthistime.Thisreporthasbeenattackedby

environmentalistsbothforallegedresearchgapsandrelianceoninputfromindustry. EPA

Administrator

Lisa

Jackson

(not

in

charge

when

the

2004

study

was

released)

told

the

House

Energy

and

CommercesubcommitteeinApril:"Thatstudyiswidelycitedassaying,'see,thatprovesit'ssafe,'andI

don'tthinkthat'safairoraccuratesummationofthatstudy.Ithinkthat'sanoverbroadreading.We

needsomedata."

22 http://www.epa.gov/safewater/uic/wells_coalbedmethanestudy.html


31/65

P a g e |30

(Wewouldaddthatwithoutdatafromindustry,studieswillbesignificantlylimited.Itisextremely

expensiveandpotentiallyimpracticaltodrillwellswhollytoobtaincontroldataandsamples;

meanwhile,decadesofindustrydataisavailabletotesthypotheses.)

Amongitskeypoints:

EPAfrownedmainlyononepractice: injectingfracfluidwithdieselintocoalbedmethane

reservoirs.

EPAsconclusionsarebasedprimarilyonexistingliterature.

EPAfoundnoconfirmedwaterwellcontaminationcaseslinkedtoinjectingfracfluidinto

coalbedmethanewells.

Thedilutionoffracingchemicalswithwater,theremovalofmuchofthefluidafterfracing,

andthepotentialbiodegradationofremainingfluidundergroundcanmitigatepotentially

adverseeffects.

Thelowpermeabilityofshalerockmayactasabarriertofractureheightgrowthandfluid

movement.

ActiontakenbyEPAafterstudy: Initiallynoaction.Then,thisyear,itannouncedastudytoreexamine

theseresults.Itiscurrentlyholdingpublicmeetingsonstudydesign.

NewYorkStateDepartmentofEnvironmentalConservation,DRAFT

SupplementalGenericEnvironmentalImpactStatementOnTheOil,Gasand

SolutionMiningRegulatoryProgram,WellPermitIssuanceforHorizontalDrilling

AndHighVolumeHydraulicFracturingtoDeveloptheMarcellusShaleandOther

LowPermeabilityGasReservoirs,September200923

This804pagetomerepresentsoneofthemorerecent,exhaustivereviewsofhydraulicfracturing.After

receivingrequeststoissuedrillingpermitsforwellsintheMarcellusShale,thestatelaunchedareview

ofwhetheritsregulationsadequatelycoveredhydraulicfracturing.Itdisappointedenvironmentalists

withitspreliminaryconclusionthatitdidntseesignificantriskstogroundwaterfromfracturing.The

statehaspledgedtoreviewandaddressamassivenumberofnewcommentsandsubmissionsbeforeit

makesthefinaldecisiononwhetherandhowtoissuehighvolumefracingpermits.Justonerebuttal,

fromtheNaturalResourcesDefenseCouncil,is283pagesandallegesthatitwouldbeillegalforNew

Yorktoproceedwithdrillingbasedonthedraftfindings,inpartduetothefailuretoassesscumulative

impactsevenwhenanindividualwellmaynothavesignificantimpact.Mostparties,including

environmentalists,expect

the

state

to

reaffirm

its

prior

conclusions

by

the

end

of

this

year

or

early

next

yearbutrequiremorerestrictionsondrillingunderNewYorkwatersheds.

23http://www.dec.ny.gov/energy/58440.html


32/65

P a g e |31

Keypoints:

Adequatewelldesignpreventscontactbetweenfracturingfluidsandfreshground

watersources.

Groundwatercontaminationbymigrationoffracturingfluidisnotareasonably

foreseeableimpact.

Avarietyofsafeguards,setbacksandcontrolsprotectsurfacewaters.

Fulldisclosureofchemicalsshouldberequiredforanyopenpitstodeterminethebest

controls.

ActionstakenbyNYDEC:Whileitdevelopsitsfinalregulatoryassessment,ithasannouncedastricter,

separatereviewforshalesdirectlyunderunfilteredwatersupplies.Butitswebsitedefendsfracing,

sayingithasbeenusedinNewYorksafelyinverticalwellssinceatleastthe1950s.

ICFInternational,AnalysisofSubsurfaceMobilityofFracturingFluids,report

preparedfor

NYDEC

for

its

draft

impact

statement

(above),

2009.

24

Thisstudy,commissionedbyNewYorkState,foundthatfracingofshaledoesnotpresentareasonably

foreseeableriskofsignificantadverseenvironmentalimpactstopotentialfreshwateraquifers.Among

thepoints:

Shalesareseparatedbyaquifersbyatleast1,000feetofrock(usuallymanythousands

offeet)

Fracturingpressuresareappliedforshortperiodsoftime,typicallylessthanaday,

whereasthetimerequiredforfluidtomoveintoaquifersunderthosepressureswould

takeyears.

Somechemicalsleftbehindwouldbeadsorbedbyandboundtoorganicrichshales,

transformingthem.

Experiencewithtensofthousandsofwellsisconsistentwiththeanalyticalconclusion.

Therearenoknownincidentsofgroundwatercontaminationduetohydraulic

fracturing.

24Appendix11of http://www.dec.ny.gov/energy/58440.html


33/65

P a g e |32

MITEnergyInitiative,TheFutureofNaturalGas:AnInterdisciplinaryMITStudy,

InterimReport,June201025

ThiswellrespectedMassachusettsInstituteofTechnologyinitiativehaspreviouslypublishedstudieson

coalandnuclearpower.AuthorsareMITscientistsandprofessors,butthegroupisalsoadvisedby

environmentalorganizations(NaturalResourcesDefenseCouncil,SierraClub)andindustry(Hess).

Relevantfindings:

Naturalgaswillassumeanincreasinglyimportantpartoftheenergymixoverthenext

severaldecades,particularlytomeetgreenhousegasreductiongoals.

Theenvironmentalrecordonshalegasdevelopmentisforthemostpartagoodone,

butonemustrecognizetheinherentrisksandthedamagethatcanbecausedbyjust

onepooroperation.Recommendsgovernmentresearchonallsubsurfaceaspectsof

U.S.shaledrillingandonwaystoreducewateruse.

Moretransparency

and

disclosure

should

be

required

of

fracturing

operations,

including

contentsoffracfluids,andwatermanagementofgasdrilling.Transparencyiskey.

Goodoilfieldpracticeandexistinglegislationshouldbesufficienttomanagetherisks

ofundergroundfracturing.[emphasisadded]

Wastedisposalisabiggerchallengeandregionalcoordinationcanhelpcreate

integratedwateruseanddisposalplans.

U.S.DepartmentofEnergyandtheGroundWaterProtectionCouncil,StateOil

andGasRegulationsDesignedtoProtectWaterResources,May200926

TheGWPC(anonprofitorganizationofstategroundwaterregulatoryagencies)helpedDOEevaluate

whetherstateoilandgasregulationsprotectwater.

Studylookedatpermitting,wellconstruction,hydraulicfracturing,temporary

abandonment,wellplugging,tanks,pitsandwastehandlingandspills.

Regulationsareadequatelydesignedbutcouldbereviewedformorespecificity.

(Severalrecommendationsmadeonbestpractices.)

Claimsthatoilandgasindustryisunregulatedarenotsupportedbythefindings.

Enactmentofnationalregulationswouldbeduplicativeandcostly.

25http://web.mit.edu/newsoffice/2010/gasreport0625

26http://www.gwpc.org/e

library/documents/general/State%20Oil%20and%20Gas%20Regulations%20Designed%20to%20Protect%20Water

%20Resources.pdf


34/65

P a g e |33

U.S.DepartmentofEnergy,GroundWaterProtectionCouncilandALLConsulting,

ModernShaleGasDevelopmentintheUnitedStates:APrimer,April200927

Thisisabroadoverviewofshaledrillingandtheissuesassociatedwithit;notascientificstudy.Itis

positivetowardindustryandcompiledwiththehelpofindustry.

Theuseofhorizontaldrillinghasnotintroducednewenvironmentalconcerns.Onthe

contrary,thereducednumberofhorizontalwellsneeded,coupledwithmultiplewells

drilledfromasinglepad,hassignificantlyreducedsurfacedisturbances.

Hydraulicfracturinghasproventobeasafeandeffectivestimulationtechnique.

Groundwaterisprotectedbycasingandcementwherethewellisdrilledandthe

thousandsoffeetofrockbetweenfracturezoneandaquifers.

Solutionsareemergingtomanyoftheconcerns.

InterstateOilandGasCommission,StatesExperiencewithHydraulic

Fracturing,2002

survey28

Ashortonepagechart;noscience;mainlyreflectsexperiencewithverticalwells,nothorizontalwells.

TheIOGCCatthetimerepresentedthegovernorsof37statesthatproducedvirtuallyallthecountrys

oilandgas.

AllstatesansweredNOtowhetherfracinghadcausedharmtogroundwater.

ThesurveyshowsthatfracingwasdoneinPennsylvaniaasearlyasthe1950searlier

thanthefirstwellinArkansas(1980s)andLouisiana(1960s)andthesameasTexas

(1950s.)

Aone

page

document

with

the

chart

contends

that

80%

of

injected

fluid

returns

to

the

surfaceandanadditional1520%isrecoveredthroughproduction(Thisisnottruewith

horizontalwells;morestaysunderground.)

27http://www.fossil.energy.gov/programs/oilgas/publications/naturalgas_general/Shale_Gas_Primer_2009.pdf

28http://s3.amazonaws.com/propublica/assets/natural_gas/iogcc_survey_july2002.pdf


35/65

P a g e |34

StudiesUsedtoOpposeHydraulicFracturing

Oil&GasAccountabilityProjectofEARTHWORKS,OurDrinkingWateratRisk:

WhatEPAandtheOilandGasIndustryDontWantUstoKnowaboutHydraulic

Fracturing,April

2005.

29

Thisisalengthy,blowbyblowrebuttaltotheEPAs2004conclusionthatfracingposeslittleorno

threat.ThereportraisessomegoodpointsaboutthelimitationsoftheEPAstudy,anditisthese

argumentsthathavehelpedpushtheEPAtodoanewstudy.Worthnotingisthat,whenthisreport

cameout,CongresshadnotyetpassedtheenergybillthatexemptedfracingfromtheSafeWater

DrinkingAct.Putanotherway,lawmakerswouldhaveseenthisEarthworksreportbeforetheyaffirmed

thathydraulicfracturingwouldberegulatedstateside.Itskeypoints:

TheEPAfoundanumberofworrisomecasesbutinexplicablyclearedfracingof

suspicion.

EPAruledoutfurtherstudyevenasitsawgapsinscientificdata.

EPAsresultswereskewedbydataselectivelyculledfromoilandgasfriendlysources.

EPAomittedinformationfromearlierdrafts.

EPAfailedtoassesssomehazardsthatopponentsbelievehelpprovetheharmfulnessof

fracingoratleastraisedoubts.Forexample,theEPAcitedastudyconductedinsixU.S.

states,whichfoundthat,in50%ofcoalbedmethanehydraulicfracturingstimulations,

thefracturingfluidsmovedoutofthecoalsandintoadjacentformations.Thisisone

reasontheOil&GasAccountabilityProjectallegestheEPAshouldnthaveconcluded

thatfracingfluidscantcontaminateundergrounddrinkingwatersources.

The

understanding

of

fluid

recovery

from

hydraulic

fracturing

is

immature.

EPAhadmajorgapsinitsstudyoffracturingfluidtoxicity,fracturebehavior,quantities

offracturingfluidleftstrandedintheformation,chemicalfateandtransportof

fracturingfluidstrappedunderground,andgroundwaterqualityfollowingfracturing

events.Giventhedearthofinformation,itisirresponsibletoconcludethathydraulic

fracturingofcoalbedsoranyothergeologicalformationsdoesnotposeariskto

drinkingwaterandhumanhealth.YetthisisexactlywhatEPAdoes.

FeaturedextensivelyinthereportaretheargumentsofanEPAwhistleblowernamed

WestonWilson,aveteranEPAengineerinColorado,whoaccusedtheEPAofreleasinga

scientificallyunsoundstudyandbecamesomethingofanenvironmentalcelebrity.

Mr.Wilson

has

since

become

akey

voice

in

anti

drilling

documentaries.

29http://www.earthworksaction.org/pubs/DrinkingWaterAtRisk.pdf


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P a g e |35

NewYorkCityDepartmentofEnvironmentalProtectionandHazenandSawyer,

FINALIMPACTASSESSMENTREPORT,ImpactAssessmentofNaturalGas

ProductionintheNewYorkCityWaterSupplyWatershed,December2009.30

Completed

with

assistance

from

Hazen

and

Sawyer,

P.C.,

an

environmental

engineering

firm,

and

sometimesreferredtoastheHazenandSawyerreport.NewYorkCityseeshydraulicfracturingasa

negativeallaround.NYCdoesnthavetheincomeproducingwells.Itjustdrinksthewaterthatflows

abovetheMarcellus,soitseesitselfasbearingalltherisks.TheCitysconcerns:

1,076squaremilesoftheNYCwatershedcontainMarcellusShaleandthislandisnot

protectedfromgasdrilling.

Flowbackwatercontainstotaldissolvedsolids(salts),hydrocarbons,heavymetalsand

radionuclidesthatarentamenabletotraditionalwastewatertreatmentandmustbe

disposedofusingundergroundinjectionwellsorindustrialtreatmentfacilities.The

regionhastoofewsuchfacilitiestohandletheexpectedwastewatervolumesfromgas

drilling.

Impacttocommunitiesfromtruckhaulingandindustrialactivitywouldoccurnotjust

for13yearsofdrilling,butitwouldhappenagainandagain.Companiesrefracturethe

wellsmultipletimes.

NewYorkCitycurrentlydoesnthavetofilteritswaterbecausethesourcesareso

pristine.Theindustrialactivityandheightenedriskofwatercontaminationis

inconsistentwiththeexpectationsforunfilteredwatersupplysystems.

SubsurfacecontaminationcouldsubjectwatershedresidentsandpotentiallyNYC

residentstochroniclowlevelsoftoxicchemicals.

The

difficulty

of

addressing

contamination

once

it

has

occurred

call

for

a

conservative

approachtowardsnaturalgasdrillingintheNYCwatershed. Apointwithparticular

poignancywhenviewedthroughthelensoftheGulfOilspill.

HarveyConsultingLLC,ReviewofDSGEISandIdentificationofBestTechnology

andBestPracticeRecommendations,December28,200931

ThisstudywasdonefortheNaturalResourcesDefenseCouncilandwassubmittedtoNYDEC.

ItcritiquestheshortcomingsoftheNewYorkStatedraftimpactstatement,sayingit

lackssufficientdatatoconcludefracingisunlikelytoimpactgroundwater.

NewYorkStateshoulddoadditionalanalysis.

30http://www.nyc.gov/html/dep/pdf/natural_gas_drilling/12_23_2009_final_assessment_report.pdf

31http://www.riverkeeper.org/wpcontent/uploads/2010/01/HarveyFinalDSGEISReview.pdf


37/65

P a g e |36

NewYorkStateshouldupdateitsregulationsspecificallyforshalegasdevelopment,

includingtoaddressconcernsabouthandlingofdrillingfluidsandwastewaters,well

design,emissions,disruptiveseismicactivity,spills,surfacepitsandwellabandonment.

NaturalResourcesDefenseCouncil,DrillingDown:ProtectingWestern

Communitiesfrom

the

Health

and

Environmental

Effects

of

Oil

and

Gas

Production,October200732

SeveralenvironmentalgroupsmentionedthisNaturalResourcesDefenseCouncilreporttousasan

influentialone.Itisashortreport(48pages)thatconsistslargelyofpolicyanalysis,nothardscience.

Itcriticizesdecadesofdealmakingbytheoilandgasindustrytowinnumerous

exemptionsfromfederallegislation.

Itcitesanecdotalevidenceinnumerous,briefprofilesofWesternlandownerswhotied

healthsymptomstooilandgasextractiononorneartheirproperty.

Thevignettes

were

light

on

detail

about

what

local

authorities

investigations

actually

proved.

TheNRDCcallsforstifferregulationonavarietyoffronts,notjusthydraulicfracturing,

includingremovingexemptionsthatapplytotheoilandgasindustryforwastedisposal

andpollutionlaws.

AlArmendariz,Ph.D.,SouthernMethodistUniversity,EmissionsfromNatural

GasProductionintheBarnettShaleAreaandOpportunitiesforCostEffective

Improvements,January26,2009.33

ThisreportwasproducedfortheEnvironmentalDefenseFund.

BarnettShaleoilandgasproductionactivitiesaresignificantsourcesofairemissionsin

northcentralTexas.Summertimeemissionsfromthesesourcesareprojectedto

significantlyexceedemissionsfromtheregionsairportsandtoslightlyexceedonroad

mobileemissions.

Manycosteffectiveemissioncontrolmethodsareavailabletoreducetheseemissions,

includinguseofgreencompletionstocapturemethaneandvolatileorganic

compoundsduringwellcompletions,electricmotorstodrivegascompressors,vapor

recoveryunitsandimprovedvalvesandfittings.

32http://www.nrdc.org/land/use/down/down.pdf

33http://www.edf.org/documents/9235_Barnett_Shale_Report.pdf


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TexasCommissiononEnvironmentalQuality,InterofficeMemorandum,Health

EffectsReviewofBarnettShaleFormationAreaMonitoringProjects,January27,

201034

The

Texas

environmental

regulator

conducted

a

widely

discussed

study

of

air

emissions

in

and

around

producingregionsoftheBarnettShalenearFortWorth.

Thestudyfoundelevatedlevelsofbenzeneandotherchemicalsatwellsites,openair

pitsandgasprocessingstations.

Itrecommendsadditionallongtermmonitoringofemissionsintheareatobetterassess

theinfluenceofoilandgasactivityonthepresenceofvolatileorganiccompoundsover

alongperiodoftime.Aparticularconcernisbenzene,aknownhumancarcinogen.

Sincethen,someothertestsnearthatregionhaveregisterednormalexposures.Andbiologicaltests

conductedbytheTexasDepartmentofStateHealthServicesfoundthatresidentsofDISH,Texas,atown

whosemayor

is

avocal

national

opponent

of

hydraulic

fracturing,

did

not

indicate

exposure

to

certain

contaminantsthatwasgreaterthanthatofthegeneralU.S.population.Theonlyresidentswithhigher

benzenelevelsintheirbloodturnedouttobesmokers,whichisnotunusual.35

34http://www.tceq.state.tx.us/assets/public/implementation/barnett_shale/2010.01.27healthEffects

BarnettShale.pdf35

http://www.dshs.state.tx.us/news/releases/20100512.shtm


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TheConversationaboutFracingandWhosControllingItItisfairgameforenvironmentaliststoholdcompaniesaccountable,andforanalystsandjournaliststo

asktoughquestions.Butmuchoftherhetorictheindustryisbattlingisnotscientificallyrigorous.We

looked

at

tactics

and

perceptionsand

found

a

pretty

well

matched

PR

war.

Theindustryhasapowerfulmessage:Itisdeliveringcleanerburningdomesticenergy,andmoreofit,

whiledrillingfewerholestogettoit.Butresidentsinnewshalecountryhaveacasetomaketoo:There

isnothingscarierforparentsthanchemicalthreatstheycantsee.Anditchangesacommunitywhen

tankersofresidualwastechugthroughtwolanemountainroads,occasionallyturningover.Particularly

inthetwistyvalesandhillsoftheMarcellusShale,churches,backyardsandschoolsarenotjustnext

doorneighborstoproducers.Theyaresometimesdownhillfromtheirwastepits.

Inshort,politicsthrivesinsuchanenvironmentlikegoldenalgaeinDunkardCreek!(SeeIncidentsThat

HaveFueledtheFire,page25.)

Afterlastyearssetbacksonclimatechangeinitiatives,antifracingcampaignsaregivinggreenenergy

groupsnewmomentumtopushrenewables.Sincewindandsolarcantcompeteonprice,renewable

advocatesneedtoshowthatfracedgasismoreharmfultopublichealththanexistingfossilfuel

extraction.

SoreportsarecirculatingliketheonefromaCornellprofessor,whoassertedinMarchthatgas

productionfromshaleplaysmaybeworseforglobalwarmingthancoalfrommountaintopremoval.

Althoughheconcedesthatgasismuchcleanerburning,heguesstimatesthatadditional,unintendedgas

leaksfromwellheads,pipelines,andprocessingstationscounteractthatbenefit.Infact,hesays,

emissionsfromhydrofracedgasare60%higherthanfordieselandgasoline.Farbetterwouldbeto

rapidlymovetowardsaneconomybasedonrenewablefuels.

Maybeonedayhewillbeprovenright.Buthisownpressreleaseonhispreliminaryassessment

warnsthatsuchcalculationsarehighlyuncertainandshouldbetreatedwithcautionbecausehehad

solittleinformationonwhichtoassessthisscientifically.36Inourinterviews,nonprofitsbroughtuphis

reportwithoutthosecaveats.

Fracopponentsprefertopublicizetheproblems,nottherealisticfixes,likebettercementstandards

orwasteprotocols.WethoughtChrisTucker,acrisisPRspecialistwhoismanagingtheenergy

industryspublicresponsetofracing,madeagoodpointinarecentrebuttaltoenvironmentalists.Even

thoughhuman

error

has

caused

several

of

the

recent

problems,

blaming

blue

collar

workers

doesnt

fit

withopponentspoliticsoragenda.Itknowsitcantattackthecarpenter.Soitsdecidedtoattackhis

toolsinstead,hesaid.

36http://www.eeb.cornell.edu/howarth/GHG%20emissions%20from%20Marcellus%20Shale%20

%20with%20figure%20%203.17.2010%20draft.doc.pdf


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P a g e |39

Itisnotalwaysinopponentsinteresttogettoodetailed. Manyinformationoutletsjustkeepthe

messagesimple:gasdrillingbad,renewablesgood.Thebestwaytodothatistocreatetheperception

thatnoamountofregulationcanmakefracingsafe.Thisiswhyyouseewellrespectedenvironmental

organizationsofferingtopublicizeincidentsbasedonhunches:

Here37,aNaturalResourcesDefenseCouncilpolicyanalystciteswelloveradozenincidentswhere

drinkingwaterhasbeencontaminatedandhydraulicfracturingisasuspectedcause.Ican'temphasize

enoughthattherearemanymorecasesofdrinkingwatercontaminationaroundthecountryrelatedto

oilandgasproduction;thoselistedbelowarecaseswhereahomeownerhadenoughdetailed

knowledgetoknowthatanearbywellwasrecentlyfractured.

37http://switchboard.nrdc.org/blogs/amall/incidents_where_hydraulic_frac.html


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Thelistthatfollowsmakesnoattempttodissectevidenceortoprovidearesponsefromthegasdrillerin

question.DocumentationamountedtolinkstoYouTube.HerearetheArkansasexamples:

Arkansas: In 2008, Charlene Parish of Bee Branch reported contamination of drinking water during hydraulicfracturing of a nearby natural gas well owned by Southwestern Energy Company. Her water smelled bad, turned yellow,and filled with silt.

Arkansas: In 2007, the Graetz family in Pangburn reported contamination of drinking water during hydraulicfracturing of a nearby natural gas well owned by Southwestern Energy Company. The water turned muddy and containedparticles that were very light and kind of slick and resembled pieces of leather.

Arkansas: In 2009, a family in Bee Branch, who wishes to remain anonymous, reported changes in water pressureand drinking water that turned gray a

Documents

RISKS, HYPE, AND FINANCIAL REALITY OF HYDRAULIC FRACTURING IN THE SHALE PLAYS July 8, 2010 A Special Report Jointly Presented By: Ann Davis