Marcellus Shale Fracking Rulemaking Unlocks its Potential


Conflicts over the environmental and public safety impacts from hydraulic fracturing and horizontal drilling in the Marcellus shale in New York and Pennsylvania have been growing. New York imposed a moratorium on all shale gas drilling to protect its watershed as did cities in Pennsylvania including Pittsburgh where the City council on November 16 2010 voted to ban drilling within municipal limits. State environmental regulators in both states have been working to identify the problems and find a solution.

The concerns stem from fears of groundwater contamination from the use of the fracking chemicals and from natural gas migration or ‘stray gas’ creating pockets of gas that create explosive hazards.  Getting these issues resolved and putting those solutions into action has been a high priority because both New York and Pennsylvania need and want the jobs, energy supply and money they create.

Marcellus Shale Potential is Huge!

In 2002 the United States Geological Survey in its Assessment of Undiscovered Oil and Gas Resources of the Appalachian Basin Province, said the Marcellus Shale contained an estimated undiscovered resource of about 1.9 trillion cubic feet of gas.  While that is a lot of gas its wide dispersal over a big geography meant much of it was not commercially practicable with traditional vertical drilling technology. But horizontal drilling changed all of that when it was introduced in the Marcellus for gas production in 2005. By 2008 more than 375 gas wells were in service.

In 2008 the Marcellus Shale world turned upside down when geologists from Penn State and SUNY Fredonia applied some of the same horizontal drilling and hydraulic fracturing methods that had worked in the Barnett Shale of Texas to estimate that the Marcellus might contain more than 500 trillion cubic feet of natural gas of which 10% of that gas (50 trillion cubic feet) might be recoverable. That is enough natural gas to supply the entire United States for about two years and had a wellhead value of about one trillion dollars at the time.

Pennsylvania Adopts New Rules on Fracking and Drilling

On November 18, 2010 Pennsylvania’s Independent Regulatory Review Commission approved a rulemaking resulting from months of negotiation among the industry, cities and environmental agencies and interveners.  In May 2010, the Pennsylvania Environmental Council brought together experts from 22 states to consider the problems from the drilling and recommend best practices that could be adopted as mandatory rules to address them. The proposals resulting  were submitted to the Pennsylvania Department of Environmental Protection (DEP), which has oversight authority over drilling and the Independent Regulatory Review Commission (IRRC), the Pennsylvania clearinghouse for changes in all state rules. The DEP issued new, stricter water safety standards in August 2010. November 18th IRRC finalized approval of new rules covering Pennsylvania’s well-drilling safeguards to be effective in January 2011.

What the new rules do:

  • The new Pennsylvania rules lower the maximum allowable well pressure, raise standards for well cement and pipes, and strengthen the industry’s requirements to investigate and report incidents of gas migrating out of well bores into residential water wells.
  • Drillers are now required to send electronic reports about the chemicals used at each well, with DEP setting up a publicly available map showing the chemicals used at each drilling site.  The rules settled the concerns by some companies over making public their trade secrets about the formulation of the fracking solution used. The new rules require the companies to disclose their fracking chemicals used to state agencies but protect their formulas from public release as trade secrets.

In its order approving the new rules the Pennsylvania IRRC said:

“Properly constructed and operated oil and gas wells are critical to protecting water supplies and public safety. If a well is not properly cased and cemented, natural gas in subsurface formations may potentially migrate from the wellbore through bedrock and soil. This stray gas may adversely affect water supplies, as well as accumulate in or adjacent to structures such as residences and water wells. Under certain conditions, stray gas has the potential to cause a fire or explosion. These situations present a serious threat to public health and safety as well as the environment. The purpose of this final rulemaking is to improve drilling, casing, cement, testing, monitoring and plugging requirements for oil and gas wells to minimize gas migration and protect water supplies.

The final form rulemaking differs from the proposed rulemaking in several important respects. The differences reflect the concerns raised by the regulated community and the public, resulting in an improved rule. The changes to the final form rulemaking strengthen well design requirements to prevent gas migration incidents.

The significant revisions to the final form rulemaking include: the addition of a provision that requires operators to have a pressure barriers plan to minimize well control events; the addition of a provision that requires operators to keep a list of emergency contact phone numbers at the well site; amended provisions that clarify how and when blow-out prevention equipment is to be installed and operated; the addition of a provision that requires operators to condition the wellbore to ensure an adequate bond between the cement, casing and the formation; the addition of provisions that require the use of centralizers to ensure that casings are properly positioned in the wellbore; the addition of a provision that improves the quality of the cement placed in the casing that protects fresh groundwater; the addition of provisions that specify the actions an operator must take in the event of a gas migration incident; and revisions to the reporting requirements for chemicals used to hydraulically fracture a well.”

So what?

The new Pennsylvania rules set strict requirements on sources of water that can be used in drilling, requires anti-siphon protection to prevent the water coming back up the pipe, specify where flowback water can be discharged or retained to address the potential environmental hazards.

The prospects of final rules adoption resulting from this consensus building process set off a land rush in the Marcellus Shale as developers rush to acquire tracks and position their companies to take advantage of the opportunities it presents.  Chevron announced recently that it will purchase Atlas Energy, a company with extensive holdings in the Marcellus Shale gas play of Pennsylvania for $4.3 billion and the Developing Unconventional Gas East Conference, held last week in Pittsburgh, attracted over 2500 attendees.

More importantly the agreement on new rules removes the uncertainty in the market and provides consistency across the industry to raise public confidence and allow the focus to return to business opportunities, revenue and jobs it can create without anxiety over potential safety and water quality issues in the future.

America’s strategic technology advantage in developing horizontal drilling and hydraulic fracturing to unlock the potential of oil and natural gas for domestic production is revolutionizing our energy future and assuring our energy security.  The actions in Pennsylvania to get the industry, regulators and environmental advocates together to agree on a consistent set of rules that allow the industry to develop this vast energy potential while protecting our water and environmental quality is the way forward.