Posts Tagged ‘gas drilling activities’

PSU report touts job growth, increased taxes; planned severance tax a concern. Others say study inflates benefits.

STEVE MOCARSKY smocarsky@timesleader.com

Development of the Marcellus Shale has the potential to create more than 200,000 jobs in Pennsylvania during the next 10 years, according to an update to a Penn State University study released on Monday.

The report warned, however, that imposing a state severance tax on the natural gas industry, as Gov. Ed Rendell has proposed, could induce energy companies to redirect their investments to other shale “plays” in the United States. Plays refers to natural gas development in other shale developments.

If that happened, any revenues gained from a severance tax could be offset by losses in sales taxes and income taxes resulting from lower drilling activity and natural gas production as producers shift their capital spending to other shale plays.

Some, however, have expressed doubt about the impact of a severance tax and claims and assumptions about economic benefits and job growth in the report.

The update, commissioned by the Marcellus Shale Coalition, was conducted by professors with the university’s Department of Energy and Mineral Engineering. It supplements a study the department released last July.

The updated study also states that during just the next 18 months, gas drilling activities are expected to create more than $1.8 billion in state and local tax revenues.

“At a time when more than half-a-million people in Pennsylvania are currently out of work, the release of this updated report from Penn State … confirms the critical role that responsible energy development in the commonwealth can play in substantially, perhaps even permanently, reversing that trend,” Kathryn Klaber, president and executive director of the Marcellus Shale Coalition, said in a press release.

“Last year alone, Marcellus producers paid more than $1.7 billion to landowners across the state, and spent more than $4.5 billion total to make these resources available. By the end of this year, that number is expected to double, and millions of Pennsylvanians will find themselves the direct beneficiaries of that growth,” Klaber said.

The updated study finds that Marcellus development will create more than 111,000 new jobs by 2011, a result of an increase in the number of wells developed from the roughly 1,400 in operation today to 2,200 expected during the next 18 months.

All told, by 2011, this work is expected to deliver nearly $1 billion in annual tax revenue to state and local governments.

In addition to generating tax revenue, natural gas development stimulates the economy in two major ways: business-to-business spending and payments to land owners, the study states.

Exploring, drilling, processing and transporting natural gas requires goods and services from many sectors of the economy, such as construction, trucking, steelmaking and engineering services. Gas companies also pay lease and royalty payments to land owners, who also spend and pay taxes on this income.

In 2009, Marcellus gas producers spent a total of $4.5 billion to develop Marcellus Shale gas resources, drilling 710 wells that year. The writers estimate that this spending added $3.9 billion in value to the economy and generated $389 million in state and local tax revenues, and more than 44,000 jobs.

Based on energy company plans to drill 1,743 wells this year, value-added dollars, tax revenue and jobs creation are expected to approximately double for 2010, according to the report. And by 2015, the numbers are expected to nearly double from this year.

Some question PSU report

While the report paints a rosy economic picture for the state, assuming that no severance tax is imposed, some are leery of assumptions and claims made in the report.

Dick Martin, coordinator of the Pennsylvania Forest Coalition, an alliance of outdoor enthusiasts, landowners, churches and conservation groups, first notes a disclaimer in the study, that Penn State does not guarantee the accuracy or usefulness of the information.

Martin said the study contains some flaws.

While the study states that development costs are higher in the Marcellus Shale than in other shale plays, “the industry itself tells its shareholders that the Marcellus is a low-cost gas deposit,” he said.

“Chesapeake Energy has told its shareholders that it can make a 10 percent return when gas prices are at only $2.59 per thousand cubic feet. Gas price today is $4.08,” Martin said.

Martin also said the study relies on data and assumptions supplied by the gas industry and that it looks only at benefits and not at costs to communities, infrastructure, environment and regulators.

He said the study does not look at data from other states that either imposed or raised severance taxes. He said there is no evidence that severance taxes affect either production or investment in states that impose or raise severance taxes.

Martin pointed to a review by the state Budget and Policy Center of the study Penn State released in July, saying the review is still valid because the update is based on the 2009 report and used the same methodology.

The review claims that the 2009 Penn State report “overplays the positive impacts of increased natural gas production, while minimizing the negative.”

Among other flaws, the report “exaggerates the impact a severance tax would have on development of the Marcellus Shale and overstates what taxes the industry now pays, going so far as to count fishing and hunting license fees paid by those who benefit from the industry as a tax due to industry activity,” the review states.

Also according to the review, the report acknowledges that many drillers will avoid corporate taxes, paying the much lower personal income tax or avoiding taxes altogether through deductions.

The report also “inflates the economic impact of expanded gas production in Pennsylvania to puff up the industry’s economic promise,” the review states.

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

Copyright: Times Leader

April 5, 2010

EILEEN GODIN Times Leader Correspondent

Well-water testing in advance of natural gas drilling operations in parts of Luzerne County could give homeowners with wells knowledge, a baseline for future testing and a legal leg to stand on if their water becomes tainted, some experts say.

Marcellus Shale gas drilling is coming into Luzerne County this summer. EnCana Oil and Gas USA Inc., based in Denver, Colo., will be starting a site in Lake Township off Zosh Road in June or July.

Drilling could also be coming to other mostly Back Mountain area communities. Some area groups have voiced strong opposition to the drilling, and some landowners in counties where drilling is already taking place have said their water wells have been inversely affected by gas drilling activities.

EnCana Community Relations Adviser Wendy Wiedenbeck said her company has drilled 8,700 gas wells and has not had “any instance of well water becoming contaminated.” She said EnCana takes great pains not to damage water wells.

“It is in our best interests not to impact water supplies,” she said. Wiedenbeck said that besides using the standard cement casing at the gas-drilling site to protect underground water sources, a second cement casing will be used for added protection.

She said the casings are inspected regularly throughout the life of the well.

Encana’s zero tolerance of spills means its employees are specially trained for operating valves at drilling operations or transporting liquids, she said.

All spills are reportable, and the federal Environmental Protection Agency has a toll-free line to report them at (877) 919-4372.

“We are very proud of our environmental record,” she said.

To be prepared, residents within a mile radius of the drilling sites are advised to have their well water tested, Wiedenbeck said.

The trick is knowing what kind of testing is needed and the proper way to take a sample.

Aqua-Tech Laboratory Director Joseph F. Calabro, Mountain Top, said well water owners should have a state Department of Environmental Protection-certified lab do the testing. Someone who is certified with the lab should draw the water and a chain of custody for the water sample should be followed, he said.

A chain of custody for the sample is a log that is signed and dated by the person taking the water sample and given to the lab, where it is signed and dated upon receipt. Calabro said this log will stand up in court.

A listing of state-certified labs, by county, can be found at http://water.cas.psu.edu. Click on “information” on water issues related to Marcellus drilling. Then, on the right side of the screen, click on “find a lab.”

Calabro said homeowners should know what is normally in their well water. He said small amounts of minerals such as barium, sodium, manganese and iron, are already in well water, along with many other minerals.

He said that once this baseline for what’s in the water is established, then testing for industry-specific indicators can be performed.

He advised that if homeowners notice a change in taste, clarity or smell of their water, they should have it tested right away.

Concerned that nervous residents could be charged for more testing that what is really needed, he said he is willing to attend municipal meetings to discuss minerals and industry-specific indicators to watch for.

Wilkes University geologist Brain Ora said he is hoping homeowners will be willing to share their testing results to compile a database, by zip code, to show water quality history. He said that over time the database will track changes of water quality.

Copyright: The Times Leader

EILEEN GODIN Times Leader Correspondent

Well-water testing in advance of natural gas drilling operations in parts of Luzerne County could give homeowners with wells knowledge, a baseline for future testing and a legal leg to stand on if their water becomes tainted, some experts say.

Marcellus Shale gas drilling is coming into Luzerne County this summer. EnCana Oil and Gas USA Inc., based in Denver, Colo., will be starting a site in Lake Township off Zosh Road in June or July.

Drilling could also be coming to other mostly Back Mountain area communities. Some area groups have voiced strong opposition to the drilling, and some landowners in counties where drilling is already taking place have said their water wells have been inversely affected by gas drilling activities.

EnCana Community Relations Adviser Wendy Wiedenbeck said her company has drilled 8,700 gas wells and has not had “any instance of well water becoming contaminated.” She said EnCana takes great pains not to damage water wells.

“It is in our best interests not to impact water supplies,” she said. Wiedenbeck said that besides using the standard cement casing at the gas-drilling site to protect underground water sources, a second cement casing will be used for added protection.

She said the casings are inspected regularly throughout the life of the well.

Encana’s zero tolerance of spills means its employees are specially trained for operating valves at drilling operations or transporting liquids, she said.

All spills are reportable, and the federal Environmental Protection Agency has a toll-free line to report them at (877) 919-4372.

“We are very proud of our environmental record,” she said.

To be prepared, residents within a mile radius of the drilling sites are advised to have their well water tested, Wiedenbeck said.

The trick is knowing what kind of testing is needed and the proper way to take a sample.

Aqua-Tech Laboratory Director Joseph F. Calabro, Mountain Top, said well water owners should have a state Department of Environmental Protection-certified lab do the testing. Someone who is certified with the lab should draw the water and a chain of custody for the water sample should be followed, he said.

A chain of custody for the sample is a log that is signed and dated by the person taking the water sample and given to the lab, where it is signed and dated upon receipt. Calabro said this log will stand up in court.

A listing of state-certified labs, by county, can be found at http://water.cas.psu.edu. Click on “information” on water issues related to Marcellus drilling. Then, on the right side of the screen, click on “find a lab.”

Calabro said homeowners should know what is normally in their well water. He said small amounts of minerals such as barium, sodium, manganese and iron, are already in well water, along with many other minerals.

He said that once this baseline for what’s in the water is established, then testing for industry-specific indicators can be performed.

He advised that if homeowners notice a change in taste, clarity or smell of their water, they should have it tested right away.

Concerned that nervous residents could be charged for more testing that what is really needed, he said he is willing to attend municipal meetings to discuss minerals and industry-specific indicators to watch for.

Wilkes University geologist Brain Ora said he is hoping homeowners will be willing to share their testing results to compile a database, by zip code, to show water quality history. He said that over time the database will track changes of water quality.

Copyright: Times Leader

On WVIA show, members of industry admit not telling public about methods.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

PITTSTON TWP. – Members of the gas-drilling industry acknowledged on Thursday evening a failure to inform the public about their procedures, and the audience at the WVIA call-in show reminded them of that often.

Viewers of the “State of Pennsylvania” program repeatedly questioned – through the Internet, phone calls and in person – potentials for polluting, environmental justice issues and the industry’s willingness to abide by regulations.

There were even sporadic bursts of applause when in-house questions touched on contentious issues. “I don’t want it (Marcellus Shale drilling) in Luzerne County,” said Audrey Simpson of Shavertown “Take a trip up to Dimock (Township in Susquehanna County) and see what the hell is happening to those people up there.”

There, methane contamination in 13 wells is being attributed to gas-drilling activities. Those affected have brought a lawsuit against the local driller, Cabot Oil and Gas.

A Cabot representative was not among the panel.

In fact, the only driller there was Chesapeake Energy, represented by David Spigelmyer, the vice president of government relations for Chesapeake’s Eastern Division. The company has defended the industry by itself at several similar public-input meetings.

Early on during the hour-long program, the vehemence was foreshadowed by Gary Byron, a former state Department of Environmental Protection official and the president of Dux Head Environmental Services, a consulting firm for the drilling industry.

“The industry and the DEP don’t agree on a lot, but the one thing they do agree on,” he said, is that information has lagged behind drilling activity so much that “there are a lot of misconceptions about the industry.”

He added that many of the companies need to be educated about regulatory methods in Pennsylvania. “They want to comply,” he said.

Bruce Bonnice, who has worked for several resource-conservation groups but also leased his land to Carrizo Oil and Gas and now consults for them, likened the risks to everyday transportation. “I’m not sure I’m going to have a car accident every time I get in my car, but I still travel,” he said.

Spigelmyer noted plans for taxing the industry are premature because the Marcellus hasn’t yet shown it’s worth refocusing capital from other gas shales in southern states. He added that regulatory overhead would further stunt that process.

Copyright: Times Leader