Posts Tagged ‘consultant’

Gas drilling incident in western Pennsylvania linked to firm’s corner-cutting tactics.

From staff and wire reports

HARRISBURG – Rig workers’ inexcusable failure to use a second set of pressure-control devices while preparing to connect a natural gas well to a pipeline led to the well’s blowout in western Pennsylvania last month, a consultant’s report said Tuesday.

State regulators, who hired the consultant, quickly ordered all drilling operators to adhere to a set of safety standards designed to prevent another such incident.

“I don’t know any company that would cut corners like this on this kind of well,” said consultant John Vittitow, a Texas-based petroleum engineer.

The company, Houston-based EOG Resources Inc., has used this same tactic on other wells in Pennsylvania, Vittitow said.

“I don’t think they’ll use it again,” he added.

Meanwhile, state Environmental Protection Secretary John Hanger warned that another such incident could mean the end of EOG’s business in Pennsylvania, and insisted state regulations don’t allow EOG’s tactics.

EOG and its contractor, C.C. Forbes Co. of Texas, were given maximum fines of more than $400,000 combined and ordered to take corrective actions, but were allowed to resume all activities in Pennsylvania on Tuesday after a 40-day suspension of well-finishing work.

EOG operates nearly 300 wells in Pennsylvania.

The blowout happened late June 3 on the grounds of a hunting club in Clearfield County where EOG is drilling a number of wells.

For 16 hours, explosive gas and briny wastewater shot into the air before specialists brought it under control.

Hanger insisted Tuesday that existing regulations do not allow EOG’s tactics because they require companies to obey accepted industry safety standards.

Most companies obey those, he said, but a letter sent Tuesday would lay out in detail what is expected of them.

Gary L. Smith, EOG’s vice president and general manager in Pittsburgh stated in an e-mailed that company officials “sincerely regret that the well-control issue took place.”

Since that time, Smith said, EOG has worked with the DEP to resolve all issues, will implement the new operational procedures outlined in the letter to gas well operators and looks forward to resuming activities.

Marcellus Shale Coalition president and executive director Kathryn Klaber said the new regulations DEP put forth “have already been incorporated by many of our members as part of their regular wellsite operations.”

State Rep. Phyllis Mundy, who is leading the charge for a moratorium on gas drilling in the state, said the $400,000 in fines and 40-day suspension “seems like a pittance … for what was clearly an inexcusable lack of proper procedure to care for the environment and their workers.”

Mundy, D-Kingston, said the incident “reinforces the need to hit the pause button with a moratorium. With this kind of activity, there will always be accidents.

“But with proper laws, regulations, best practice guidelines and inspections in place, we could prevent many of them and be much better prepared to deal with them when they do occur. Those things are not in place at this time, yet we continue to issue new permits. We are simply not prepared to either prevent or react to these incidents.”

Hanger said his agency would redouble its inspection activity with more emphasis on well-finishing work.

Copyright: Times Leader

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

The yearlong wait was worth it for Wyoming County landowners who didn’t get a chance to sign a gas lease last year.

In a deal with Chesapeake Energy announced on Tuesday, they’ll receive almost double the bonus offered previously and an additional bump in the royalties they keep. The five-year deal offers $5,750 per acre immediately as a sign-up bonus, 20 percent royalties and a multiyear extension option.

The Wyoming County landowners group represents about 37,000 acres that haven’t been leased yet, and if all property owners sign up, the deal, in bonus money alone, is worth about $212.75 million.

Chesapeake officials were hoping to have a lease signing this week, but the landowners don’t think that will be possible logistically, group secretary Chip Lines-Burgess said. “The one question that comes up is, ‘What happens if we’re on vacation next week when this comes about?’ ”

After months of relative silence on leasing in the Marcellus Shale, a layer of gas-laden rock about mile underground that centers on northern Pennsylvania, interest is again heating up.

The agreement is somewhat bittersweet for members of the group who leased last year before the financial crash with Colorado-based Citrus Energy.

Lines-Burgess’s 42 acres in Meshoppen were among those roughly 35,000 acres. They received a $2,850-per-acre bonus, minus consultant payments, for a five-year lease with 17-percent royalties. If the lands aren’t drilled within five years, there are two one-year extensions each for $1,000 per acre.

“Yes, sure, it’s a tough pill to swallow … but who knew?” she said. “If it goes a year down the road, it might go to God only knows what, or it may not. … You just have to make a decision that when you sign on the dotted line, (you’re) happy.”

She said her family was able to pay off their farm. She remained on as secretary, as did other members of the group’s core committee, because “we just felt it was our … duty to make sure this happened.”

“Our county consists of a lot of people in their golden years. … We have a lot of people who have a lot of acreage and needed something. If this wonderful lease brings those people more comfort in their golden years … that’s the ultimate,” she said. “Their grandchildren, with this, won’t have to worry about what’s in this lease.”

The deal comes as groups in Susquehanna County are signing similar leases and about a month after the Northern Wayne Property Owners Alliance signed perhaps the first lease in the state with 20-percent royalties.

The South West Ross Township Property Group held a members-only meeting on Tuesday night, and member Ken Long acknowledged that the group is “in negotiations with a major gas company” and that “the monetary offers are in the ballpark of what” the Wyoming County landowners received.

He declined to confirm or deny that the company is Chesapeake.

It’s unclear what caused offers to rise so much so fast, but there are theories. “There’s been a lot of discussion about that,” said Lines-Burgess, who speculated that it might be a reaction to potential legislation that would affect leasing rights.

“We just don’t know what they (gas companies) are seeing. … Obviously, they have a plan, and we’re part of it,” she said.

Long said he believed the education efforts of land groups helped. “I would say that a lot of the efforts of the groups that have formed … are kind of paying dividends now. I think we’ve raised the standards of the leases, and we’re starting to see the increases in the bonus payment and royalties,” he said, adding that companies might be scrambling to get a foothold in the shale as more and more of the land is leased.

Copyright: Times Leader

Jurisdiction over drilling for natural gas in the Marcellus Shale is subject of hearing.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

HARRISBURG – The chairman of the state Public Utility Commission is confident that Marcellus Shale development will stabilize prices not only of natural gas, but electricity prices as well, and is thrilled the natural gas industry supports the PUC’s oversight of pipeline safety in Pennsylvania.

Commission members on Thursday heard testimony from representatives of the natural gas industry, a federal pipeline safety official, the state consumer advocate and the director of the Pennsylvania Association of Township Supervisors on the commission’s jurisdiction as related to Marcellus Shale development.

“I think everybody is in agreement that this increased gas supply, whether the gas is sold in Pennsylvania or not, is going to have a depressing effect on the wholesale price of gas,” PUC Chairman James H. Cawley said after the hearing.

Irwin “Sonny” Popowsky, of the state Office of Consumer Advocate, testified that the retail and wholesale price level of natural gas “has been on a roller coaster ride for years.”

He said an abundance of natural gas should stabilize and ultimately lower the price of gas and electricity so that it is affected by supply and demand rather than politics in the Middle East.

Commissioner Wayne Gardner said he’s heard that many roads were severely damaged under Chesapeake Energy traffic.
David J. Spigelmyer, vice president of government relations for Chesapeake, said a harsh freeze-thaw season and the fact that many roads were never constructed with proper foundations resulted in the need significant road repairs. But the company is bonded to repair those roads and has hired 23 road contractors in Bradford County to repair them.

David M. Sanko, executive director of the Pennsylvania Association of Township Supervisors, said his concern is that state law requires bonds for roadwork in the amount of $12,500, but it could cost up to $100,000.

Commissioner Robert Powelson asked how the commission can be confident that the “self-policing system (of the gas industry) will work and that safety will be maintained?”

Spigelmyer said the industry has worked closely with the state Department of Environmental Protection to ensure the industry meets state requirements and noted that permit fees that fund inspections climbed from $100 to about $4,000.

Alex Dankanich, general engineer with the U.S. Department of Transportation’s Office of Pipeline Safety, testified that of the 31 states that produce natural gas, only Pennsylvania and Alaska lack the statutory authority to regulate gas gathering pipelines.

Cawley noted that the administration had been pushing for the PUC to obtain inspection authority because the administration doesn’t have the manpower.

Dankanich said the PUC would be reimbursed 80 percent of the cost for inspecting non-Class I pipelines – those surrounded by 10 or fewer homes within 220 yards of a pipeline in a 1-mile stretch. Those lines are exempt from federal inspection.

PUC Vice Chairman Tyrone Christy asked if Pennsylvania should also exempt Class I pipelines from inspection.

Lindsay Sander, a consultant for the Marcellus Shale Coalition, said she was comfortable with the exemption given the low number of Class I problems.

Cawley said the natural gas industry “seems to be bending over backwards to be responsible. But you’ve got to have the rules in place for everybody, including the potential bad apples who are going to try and take shortcuts.”

He said the commission is not trying to economically regulate the gas production industry.

“We’re not going to try and set the rates. We just want safety jurisdiction, whether they’re a public utility or not. And … the industry coalition, which has 170 members, support us adopting the federal standards. … They’ve said that’s fine and they’ve said they’re willing to help pay for it on a per-mile basis,” he said.

Cawley said the commission has submitted proposed statutory language to House and Senate oversight committees related to PUC safety regulation.

“One part of it has already been passed by the House almost unanimously. It would increase fines for violations to the federal level. It would go from $10,000 per day to $100,000 per day and up to $1 million overall. House Bill 1128, that could be the vehicle for getting it done. The Senate could amend it and send it back over or the House could give us this additional legislation, but this is our top legislative priority – pipeline safety,” Cawley said.

He said he also asked the industry for a commitment to use PUC’s certificated trucks for hauling equipment and supplies, “and they’ve committed to that, which is good. We’ve increased carrier enforcement in that area because we discovered that in their haste to get supplies in, they weren’t using PUC certificated carriers.”

“We’ve increased our enforcement, … and now that they know we’re watching, they’ll be more careful about the carriers they use,” Cawley said.

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

The board is still considering building a second plant.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

HANOVER TWP. – The Wyoming Valley Sanitary Authority board has decided not to treat wastewater from the Marcellus Shale gas-drilling process at its current plant, but is still considering building a second plant for that purpose.

Fred DeSanto, executive director of the authority, informed the state Department of Environmental Protection last week that the board wanted to withdraw an application to revise its current permit to allow treatment of wastewater high in total dissolved solids from gas and oil drilling operations.

After meeting with DEP officials, who explained the requirements the authority would have to meet for a revision, authority officials decided it would be too risky to contract with an energy company to accept 150,000 gallons of wastewater per day and possibly exceed the limits of dissolved solids imposed by DEP, said Robert J. Krehley, the authority’s director of administration and planning.

“We just knew that a good majority of the time, we’d be over the limits,” Krehley said.

DeSanto said the board is waiting to hear from a consultant it hired to look into the feasibility of constructing a stand-alone plant.

John Minora, president of Pennsylvania Northeast Aqua Resources, said his staff is still researching some technical issues, but he expects to make a recommendation to the board at the next meeting on April 20.

Minora said he’ll likely recommend constructing a second plant because it would benefit the authority and ratepayers as well as energy companies; it’s just a matter of working out details based on data he is still waiting to receive.

Disposing of wastewater in Hanover Township would save energy companies in transportation costs, given that the closest treatment plant that can process drilling wastewater is in Williamsport, and the next closest is in Somerset County. The Williamsport plant doesn’t have the capacity for wastewater from all nearby drilling sites, he said.

Minora said a “closed-loop” treatment plant would remove solids from the water; the solids would be disposed of in landfills. The treated drilling water would be high in chloride and diluted with treated water from the authority’s current treatment plant; that blended water could be sold back to drilling companies to re-use in drilling operations.

Given that the current plant would be discharging less treated water into the Susquehanna River because it would be added to the treated drilling water, the authority would in turn discharge less nitrates and phosphates into the river. The authority could then sell credits to other treatment plants that discharge nitrates and phosphates in excess of state limits, Minora said.

The additional revenue could be used to stave off rate increases to customers.

Steve Mocarsky, a Times leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

Cabot Oil & Gas Corp. denies the allegation and said it has evidence to back its position.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

DIMOCK TWP. – The state is alleging an energy company is responsible for contamination of a water well, a spring and wetlands after a black fluid was discovered recently near a Marcellus Shale drilling site in Susquehanna County.

The company denies responsibility.

The state Department of Environmental Protection on Thursday sent a notice informing Cabot Oil & Gas Corp. that violations of the state Clean Streams Law, the Oil & Gas Act and the Solid Waste Management Act were documented on site visits near the A&M Hibbard well pad on March 22-24.

The visits were the result of a phone report from Cabot of the presence of a black fluid in a ditch near the site on March 21.

“The investigation revealed that black fluid originating on the … drill pad was not properly contained in a pit or tank (and that the fluid) entered a hand dug well and a spring near the location, as well as a wetland downgradient of the spring,” the notice states.

“We believe it was waste from their drill pit,” DEP spokesman Dan Spadoni said Thursday.

He said he doesn’t think anyone was using the spring for drinking water, and the well was used only as “a back-up” water supply by the property owner.

Cabot has 10 days to provide the cause(s) of the incident, when the violations were or will be corrected, the steps taken to prevent their recurrence and documentation of clean-up activities.

DEP also asked Cabot to investigate the condition of the drill pit and liner and “strongly recommends that the liner and (drill) cuttings be removed from the pit and properly disposed of prior to restoration of the site.” The department also requested notification after all cuttings and fluid are removed from the pit so DEP can inspect the liner.

Cabot spokesman Ken Komoroski said the company has not confirmed the source of the fluid, but has confirmed that “Cabot activities are not the source.”

Komoroski said Cabot checked with its “independent third-party consultant,” which concluded that “the observance of black water in the well did not and could not have occurred as a result of Cabot activities” based on “observation and extensive analytical testing.” He said the well and spring contained “total and fecal coliform, which is indicative of human or animal waste” and that “the materials that exist in the well in high concentrations don’t exist on Cabot locations.”

Asked if any of the materials Cabot uses were found in the well, Komoroski said the company does not yet have all analytical results from lab tests and a final report is still in draft form. DEP continues to investigate the incident and Cabot will continue to cooperate and support the department’s efforts, he said.

The Clean Streams Law and Solid Waste Management Act provide for civil penalties and criminal fines ranging from a maximum of $10,000 per day to a maximum of $25,000 per day for each violation. Each day of continued violation constitutes a separate offense.

Copyright: Times Leader

DEP probes Cabot Oil & Gas query about “discharge of black water” in Dimock Twp.

By Steve Mocarskysmocarsky@timesleader.com
Staff Writer

DIMOCK TWP. – The state Department of Environmental Protection is investigating a possible leak or spill at a natural gas drilling site in Susquehanna County.

Mark Carmon, DEP spokesman at the Wilkes-Barre office, said the department received a call to its emergency response line from Cabot Oil & Gas Co. on Sunday afternoon informing the department that employees found “a discharge of black water” at the site.

The call was referred to the department’s Gas & Oil Program team, which operates from DEP’s Williamsport office.

Dan Spadoni, DEP spokesman at that office, said the team is investigating “the possibility of a spill or leak at Cabot’s Hibbard drill pad” since Monday, but has not yet determined if there was a spill or leak at the site.

Spadoni said there are two wells on one pad at the site, and no drilling activity is currently taking place. He said the team took samples from a private drinking water well that is currently not being used, from two nearby springs and from the site pit.

The samples are being analyzed at DEP’s lab in Harrisburg.

“We need to see those results to see what our future course of action will be,” Spadoni said.

He expected lab results back in a week or two.

Spadoni said Cabot’s consultant also collected samples and the drill cuttings in the pit for analysis. Site pits, which are lined, are where the residue from the drilling and hydraulic fracturing processes ends up, he said.

There was discussion on an online Susquehanna County gas forum about the possibility of a nearby pond being drained, but Spadoni said he had no information about the pond and no samples were collected from it.

He confirmed Cabot had a vacuum truck on-site “in response to where this dark fluid was observed. It was a voluntary measure on their part,” he said.

Spadoni said he believes there was no recent drilling activity at the site. The site had not been shut down because of the discovery of the liquid, he said.

Ken Komoroski, spokesman for Cabot Oil & Gas, said there was no indication of any environmental contamination or pollution.

“Discolored water was observed over the weekend and Cabot immediately responded to observing water in a ditch. We notified DEP and took the additional measure to have a vacuum truck remove water from ditch,” Komoroski said, adding that employees noticed the water while driving by the site on Route 29.

Cabot also drained the pit to check if it was possible the water was leaking from the drill pit, but the pit liner was “completely intact. All indications are that it was not a result of Cabot activities,” Komoroski said.

Komoroski said the drill site has been in existence “for quite some time, and there doesn’t seem to be any reason” for the discolored water to appear “since it hasn’t been active site. We were not able to identify any potential cause or relationship.”

He said the water was found “in the vicinity of the site, but close enough that we wanted to consider the possibility that it was related to our activities.”

Steve Mocarsky, a Times Leader staff writer, may be reached at 970-7311.

Copyright: Times Leader

Law will restrict gas wells to specific areas

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

There’s no natural-gas drilling in Dallas, but that’s not stopping the borough from deciding where it will allow drilling.

As part of the revision of its zoning ordinance, Dallas is adding provisions that would restrict sitting gas wells to areas zoned industrial, highway or business. It would also designate distance setbacks from residences, waterways, streets and wetlands.

The proactive stance is putting Dallas at the forefront of what could become a major issue as drilling in the Marcellus Shale increases.

“You’re talking about a very fundamental conflict between the municipal regulation of land use and the ability of landowner to access land rights,” said Stephen Rhoads, the president of the Pennsylvania Oil & Gas Association. “You could think of this in terms of taking.”

“Taking” is illegally blocking someone’s access to the point of essentially denying their rights. Eventually, it will find its way to court, Rhoads said, though he wouldn’t speculate on who would win.

At its meeting on Thursday, the borough’s planning commission recommended the borough council vote on the revisions.

“The main point is that we were already going through a revision … so we thought it would be proactive to include something that reflects what’s going on in the Back Mountain these days,” Borough Manager Tracey Carr said.

The ordinance would also require drillers to identify roads they plan to use, pay for an engineer to document the roads’ conditions and be responsible for maintenance and repair.

With a flurry of lease signings lately, gas drilling has become a hot topic in the county. Drillers are flocking to the area to tap the Marcellus Shale, a layer of gas-laden rock about a mile underground that stretches from New York to Virginia. Its huge size – and economic potential – has been known for years, but technology only recently caught up to access it.

Despite industry innovations such as horizontal drilling that allow wells to access gas pockets up to a mile away, Rhoads said having versatility in well sites makes “a difference because it depends how much surface area is put off limits. You can’t just put a well site on the edge of town and drill from one well site and get every possible molecule of gas.”

Carr said the provisions aren’t meant to keep drilling out of any areas, “just where would be most appropriate if it was to take place.”

Rhoads said such actions can harm landowners. “The geology will dictate where the well (should be) located – not zoning – and if there’s a conflict between zoning and geology, the geology loses,” he said. “You’re effectively telling me that my oil and gas property is worthless if you zone my surface property in such a way that I can’t gain access to it.”

On the scale of issues facing the industry – including access to water for gas extraction, disposal options for waste and a proposed state severance tax – Rhoads called zoning “a major issue.”

But for Carr and the borough she manages, it’s just being efficient and responsible. “This is actually a very small part of what we’re doing,” she said, noting that the borough’s consultant on the revision suggested adding the drilling provisions.

The proposed ordinance must go through a public hearing and likely won’t be addressed by the council until November or December, she said. There have been no complaints so far, she said, “but we haven’t had the public hearing yet, either.”

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

Offer extended to interested landowners in Ross and Fairmount townships.

ROSS TWP. – For a limited time, landowners looking for a natural-gas drilling lease have a commitment-free offer to get a low-cost lease negotiator.

The Columbia County Landowners Coalition has a secured a consultant from Texas to negotiate a deal, but he’s starting soon and only doing it once.

The consultant, who has experience with fossil-fuel wells in the Midwest, is charging $1 per acre and expects to begin negotiations at $2,900 per acre for sign-on bonuses and extraction royalties of 18.75 percent, the executive committee of the Southwest Ross Township Property Group announced at a meeting on Tuesday evening.

Those figures exceed the usual for contracts inked in this region.

The Ross group, led by the committee of eight volunteers actively researching the situation, has been holding meetings to explain issues regarding gas leases and sign up landowners within its borders. It’s focusing on a roughly 10,000-acre region and hopes to amass a no-commitment membership of at least 4,000 acres within there.

The Columbia County offer is extended to interested landowners in the vicinity, including the Ross Township group and one in Fairmount Township. Landowners can sign up at the coalition’s Web site, but they must act soon.

According to the Ross group, the coalition expects to begin negotiating in a matter of weeks and hopes to have a contract to sign by the fall. And the consultant, who is doing a favor for a friend, plans to return to retirement after completing the deal.

If it sounds too good to be true, the suspicion might be warranted. The Ross committee acknowledged that the timetable is more rushed than they’d prefer, but they argue that there’s no commitment and people can opt out if they dislike the negotiated deal.

According to the committee, the Columbia County group is moving quickly because sign-on bonuses are considered regular income, and the group fears the changing political climate next year will mean tax increases for upper tax brackets.

What’s next?

The Southwest Ross Township Property Group is holding its next informational meeting at 7 p.m. July 29 at the Sweet Valley fire hall on Main Road.

Copyright: Times Leader

Experts say leases are in-depth and a lawyer’s assistance is recommended.

By Sheena Delazio sdelazio@timesleader.com
Staff Writer

LEHMAN TWP.— The Penn State Cooperative Extension of Luzerne County and the Luzerne Conservation District want landowners to know what they are getting into before they sign a natural gas lease for their property.

The two organizations will host “Understanding and Negotiating Natural Gas Leases,” as part of a two-day informational discussion. The first session, held on Monday, was attended by more than 70 local landowners.

“It’s a hot topic right now,” said Tanya Dierolf, a conservation coordinator for the conservation district. “The price per acre has increased at a phenomenal rate.”

Typically, leasing companies offer property owners one-eighth of the money made on gas or oil extracted from beneath their properties. Depending on the company, owners can receive hundreds of dollars up front.

“(On Monday) presenters talked about the impact it could have on the land (if someone signed a lease), and there is potential there to make money, but we’re trying to present the facts,” Dierolf said. “These (leases) are very technical, and we highly recommend (landowners) consult an attorney before they make a decision.”

For example, in June, the Pennsylvania Mineral Group based in Port Lavaca, Texas, made up to 700 offers in Luzerne County to purchase gas rights at $300 an acre. Offers were based on geological surveys that pinpoint locations that may contain natural gas or oil.

The Pennsylvania Mineral Group did not return phone calls.

“These lease agreements are so in depth that landowners don’t understand the legality,” said Donna Grey, a Penn State Cooperative Extension educator. “We’re trying to explain what the landowner can expect to occur on their property so they can have an understanding, both visual and written.”

For next week’s session, Penn State Extension educators will be on hand, as well as a geologist and attorney, to talk about understanding gas leases, negotiating a lease, the economic impact of signing a lease and development of the Marcellus shale within the Earth.

Grey said landowners who attend will be able to make better decisions regarding their land. “This could be a good thing or a bad thing (for the landowner),” she said.

“It’s really confusing, and landowners need to use a consultant or attorney to help them. They can negotiate (if they decide to sign). And if they aren’t comfortable, they don’t have to settle on one gas company,” Grey said. “There is more than one company. They are just like any other sales person, they are out there to sell their product.”

If you go…
What: Understanding and Negotiating Natural Gas Leases

When: 7 p.m. Monday

Where: Technology Center, Penn State Wilkes-Barre Campus, Lehman Township

To register: Call 570-825-1701 or 570-674-7991. There is a $15 registration fee per person.

Copyright: Times Leader