Posts Tagged ‘Pennsylvania’

PennEnvironment group wants to ensure water, land isn’t damaged by natural gas exploration.

CBy Rory Sweeneyrsweeney@timesleader.com
Staff Writer

According to a state environmental advocacy group, Pennsylvania needs to do more to ensure that gas drilling creating profits today won’t end up like the coal mining of yesterday that left a costly environmental legacy for the next generation.

In a recent report, PennEnvironment outlined various changes it recommends to the state’s approach to the drilling industry.

They include: strengthening clean-water laws and regulatory tools; making sensitive public lands off limits to drilling and instituting a severance tax on the extracted gas.

“I think we’ve leased out too much state forest land,” said state Rep. Greg Vitali, D-Delaware County, who attended a teleconference last week.

He added that it’s “irresponsible” to lease more until the production is taxed.

“It’s only political influence … that’s kept the Marcellus Shale from being taxed,” he said.

He hoped to get such a tax in the next state budget cycle.

At issue is how to best oversee the increased drilling in the gas-laden shale, which is about a mile underground throughout much of northern and western Pennsylvania. While the state Department of Environmental Protection has promised increased oversight, a rash of issues at various drilling sites has residents concerned that companies will strip out the gas and leave pollution in their wake.

The report lists various regulatory changes PennEnvironment believes would minimize the potential realization of those fears.

“We disagree with the idea that dilution is the solution,” said Brady Russell of the Clean Water Action organization.

He suggested that drilling companies should foot the estimated $300 bill for landowners to get baseline water testing before drilling begins because it can be difficult for landowners to find that money.

The report also calls for better right-to-know laws to force drillers to release the kinds and amounts of chemicals they use and account for the water they consume, while providing for public input that includes allowing health officials opportunities to review proposed permits.

The report also suggests rewriting the municipal code to give local officials primacy over state law for siting wells, which would overrule a recent state Supreme Court decision.

Regarding regulations, the report suggests expanding buffer zones around streams where drilling is prohibited and account for cumulative impacts of drilling when considering additional well permits.

The report calls for banning wastewater discharge to publicly owned treatment works and requiring recycling and reuse of all flow-back wastewater, while setting zero-discharge limits at treatment facilities.

While the report doesn’t address the threat of concentrating naturally radioactive refuse from the drilling process – an issue of concern in New York as the state considers regulations for drilling – Erika Staaf of PennEnvironment said the issue hasn’t come up in Pennsylvania because it doesn’t seem that anyone has tested for it yet.

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

Copyright: Times Leader

State wastewater regulations for natural gas drilling may change to reduce pollution threat.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

Anyone concerned with pollution threats from increased natural gas drilling in Pennsylvania has likely encountered the phrase, “total dissolved solids” and recognizes its potential to be a problem.

However, fewer no doubt know how it can become a problem or that – because of issues emerging from the increased drilling – the state Department of Environmental Protection is considering changes to wastewater discharge standards for TDS that would become effective Jan. 1, 2011.

DEP is seeking public comment on the proposals, and citizens have until Feb. 5 to make them. Earlier this month, Penn State University released a document to help people understand the issues and participate in the process.

Rather than a specific chemical, TDS is a measurement of all dissolved matter – such as minerals, salts and metals – in a given water sample and can be naturally occurring. The federal safe drinking-water standard has a recommended level of 500 milligrams per liter for TDS, but no specific regulation. However, concentrations above that can damage treatment equipment and be toxic to aquatic life and people who drink it.

DEP is proposing the changes, which would limit the TDS levels in wastewater discharges, because it determined that some state waterways, including the West Branch of the Susquehanna River, don’t have the ability to absorb increased levels of TDS.

According to the Penn State report, most of the water used to prepare gas wells – often called “frack water” – is between 800 milligrams per liter and 300,000 milligrams per liter.

The industry estimates the amount of such high-TDS wastewater needing disposal in Pennsylvania will increase from about 9 million gallons per day in 2009 to nearly 20 million gallons per day by 2011, the report said.

DEP’s proposal would change two parts of state code.

First, it would require high-TDS discharges to be diluted to at least 500 milligrams per liter, plus lower thresholds for sulfates and chlorides and, for the oil and gas industry, limits of 10 milligrams per liter for strontium and barium.

Second, it would change water-quality standards for the actual waterway, which would, in turn, affect what could be discharged into it. That regulation change hasn’t yet been officially proposed.

To comment on the proposed rules, the Penn State report recommends several approaches: be specific in citing documents or the target of the comment, stick to comments on the proposed rule rather than water-quality in general, include personal experiences and note where the proposed rules are written unclearly.

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

Copyright: Times Leader

EnCana Corp. will work with WhitMar Exploration Co. in seeking gas in the Marcellus Shale in the region.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

EnCana Corp., perhaps the largest natural-gas producer in North America, has chosen Luzerne County as its entry point into the Marcellus Shale, thanks to an exploratory agreement with WhitMar Exploration Co.

WhitMar, a Denver-based exploratory company, has already leased about 25,000 acres in Columbia and Luzerne counties, including in Fairmount, Ross, Lake, Dallas, Lehman, Jackson, Huntington, Union, Hunlock and the northwest corner of Plymouth townships.

However, it doesn’t have the resources to develop the entire leasehold, so it went looking for a partner. It found EnCana, a Calgary-based company with U.S. headquarters in Denver that produced 1.4 trillion cubic feet of natural gas in 2008, according to its Web site. For comparison, Chesapeake Energy, another industry leader with a local presence, produced 839.5 billion cubic feet that year, according to its 2008 annual report.

Spokesman Doug Hock said EnCana has no other interest in the Marcellus Shale, a ribbon of gas-laden rock about a mile underground that stretches from upstate New York into Virginia but centers on Pennsylvania.

The agreement, however, only commits EnCana to the two exploratory wells WhitMar has agreed in its leases to create, Hock said. “Further activity will really depend on the results of the first two wells,” he said. “The first couple wells that we’re drilling are really to prove it up and ensure that we have viable program there.”

Both wells, while exploratory, will also be put into production, he said, though it’s unclear where pipelines will be installed to connect the wells to regional gas lines.

The deal gives EnCana 75 percent interest in the leasehold and control as the operator, according to WhitMar spokesman Brad Shepard. “Being an exploration company, we’re a small company,” he said. “At least in the Marcellus, we get a partner to develop it with.”

He said there were several companies interested, but that EnCana was “the best fit” thanks to similar interests in testing, drilling and size of the project.

Both companies are also interested in increasing the acreage in the leasehold, he said. Within the area the current lease encompasses, there are perhaps 25,000 to 30,000 acres that aren’t leased, Shepard said. “What we’re trying to do now is basically trying to infill all the land that we have now,” he said.

According to Hock, EnCana, whose business is currently 80 percent gas production, is in the process of splitting the company into two “pure plays” to “enhance the value” of each: EnCana, which would focus entirely on gas, and Cenovus Energy Inc. to oversee its oil-sands operations in Canada.

“We’re in that process right now,” Hock said. “The deal is expected to close at the end of the month.”

EnCana slid on the New York Stock Exchange this week, from $59.40 per share on Monday to $56.11 on Friday.

Both companies are also interested in increasing the acreage in the leasehold.

Copyright: Times Leader

Chesapeake Energy explains protections it practices during drilling for natural gas.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

PLAINS TWP. – As negative issues arise related to natural-gas drilling in the Marcellus Shale, at least one company is being careful to keep residents informed about the industry’s benefits and distance itself from concerns.

Speaking on Thursday at the “Executive Management Breakfast Series” put on by Penn State Wilkes-Barre, a spokesman for Chesapeake Energy detailed the environmental protections his company uses when drilling and outlined the positive economic effect the industry has had in Pennsylvania.

Chesapeake has paid out $700 million to landowners since 2008, along with $100 million to contractors in the state and $500,000 to community projects in 2009, according to Brian Grove, the director of corporate development for the company’s eastern division.

But the growth – a plan for 200 more wells in 2010 – isn’t at the expense of precautions, he said. Wells receive five layers of protection from ground water, he said, and “all of the chemicals (used in the hydraulic fracturing process) are stuff you will find in your home.”

The statement comes weeks after driller Cabot Oil and Gas was fined by the state Department of Environmental Protection for spilling fluids that contaminated a nearby wetland and a day after the department announced another fine against Cabot and ordered that alternative water supplies be provided to Susquehanna County residents whose water wells have been contaminated with methane.

“Certainly, when an operation isn’t meeting the regulations laid out by the state, it doesn’t reflect well on the industry,” Grove acknowledged, adding that Chesapeake is striving to remain free of such image-tarnishing incidents.

At least one of Chesapeake’s operating practices impressed Mary Felley, the executive director at Countryside Conservancy in La Plume, for its environmental protection beyond state regulations. Drillers must collect water contaminated by drilling activities, but they’re only required to store it in open-air pits. When Grove noted that Chesapeake stores all of it in closed containers, Felley complimented the company on its additional protections.

Grove also assured members of the Wyoming County Landowners Group whose land rights are confirmed will be receiving the full up-front payments the group negotiated, which was a particular concern for Marisa Litwinsky, a financial advisor with Merrill Lynch. Group members and others who have recently signed with Chesapeake have worried that the driller might back out on paying the balance of those deals.

“We’re committed to” the land group, Grove assured. “Anyone who’s got a good title, they’re going to have a lease.”

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

Copyright: Times Leader

The Associated Press

DIMOCK — State regulators are fining a Houston-based company because its natural-gas drilling operations polluted residents’ water wells in northeastern Pennsylvania.

Department of Environmental Protection officials said Wednesday that Cabot Oil & Gas Corp. is paying $120,000 in connection with its finding that gas seeped underground into 13 water wells in Susquehanna County.

Cabot has drilled numerous gas wells into the Marcellus Shale rock formation in the rural county, about 15 miles south of the New York State border.

On Jan. 1, a water well exploded at a home nearby Cabot’s operations, prompting an investigation.

The department says its approval of Cabot’s well casing and cementing plans is now required before Cabot can drill.

It also says Cabot must develop a plan to permanently restore or replace the affected water supplies.

Copyright: Times Leader

Economist from M&T Bank predicts gas drilling will give area “a huge shot in the arm” in next decade.

By Ron Bartizekrbartizek@timesleader.com
Business & Consumer / City Editor

WILKES-BARRE – The Marcellus Shale gas play will be “a game changer” for Northeastern Pennsylvania, bringing a “huge economic injection” and making life here very different a decade from now, an economist said Wednesday.

James E. Thorne, Ph.D., chief investment officer of equities for M&T Bank, told members of the Greater Wilkes-Barre Chamber of Business and Industry during a luncheon talk at the Westmoreland Club that the region will get “a huge shot in the arm” from natural gas drilling. “The economic forecast is very bright.”

Gas drilling has boomed in the Northern Tier of Pennsylvania since horizontal drilling technologies using pressurized liquids have made it financially feasible for companies to drill into the Marcellus Shale, a layer of gas-laden rock that runs about a mile underground from New York into Virginia.

Many landowners in Luzerne County have entered into leases with drillers, but no wells are yet operating in the county.

Thorne said the future direction of the national economy is less clear while emphasizing that the United States has a history of adapting to changing times. He cited the push into science and technology in the late 1950s after the Soviet Union launched the Sputnik satellite as an example.

As at that time, “there’s got to be a new industry created” that the U.S. can lead the world in, Thorne said, suggesting “green” technology may be the logical successor to space exploration and the Internet. The current economic problems, he said, were made worse by a diversion of resources to consumption and housing, which do not increase productivity.

Export-led, resources and infrastructure industries need to be the immediate focus, Thorne said, adding that additional government spending to rebuild and repair aging domestic

The present weakness of the dollar is necessary, Thorne said, to give American exporters the opportunity to expand their markets. But in the long run “the solution is to create inflation.

“The dollar is a reflection of economic growth; we benefit from a weak dollar.”

“We’re going to enter an adjustment period,” Thorne said, that could be several years long. But he said there’s reason to be optimistic about the outcome.

“We’ve done this before. I’m hugely bullish on the American economy,” he said.

Copyright: Times Leader

MARC LEVY Associated Press Writer

HARRISBURG— Citing three recent chemical spills at one well site, Pennsylvania regulators said Friday they had ordered Cabot Oil and Gas Corp. to halt its use of a drilling technique that uses liquids to fracture rock and release natural gas.

The state Department of Environmental Protection’s order applies to eight of Cabot’s drilling sites, all in Susquehanna County in northeastern Pennsylvania.

The company, which received the order Thursday, voluntarily shut down its use of the drilling technique — called hydraulic fracturing, or “fracking” — at the spill-plagued site there earlier this week. It has seven other drilling sites that eventually will require fracking to complete.

“The department took this action because of our concern about Cabot’s current fracking process and to ensure that the environment in Susquehanna County is properly protected,” the DEP’s northcentral regional director, Robert Yowell, said in a statement.

Under the state’s order, Cabot must complete a number of engineering and safety tasks before it can resume its fracking process as it drills into the potentially lucrative Marcellus Shale formation.

Cabot spokesman Ken Komoroski said Friday that the company disagrees with some of the agency’s allegations in the order, but it is committed to completing the tasks required by the order.

Copyright: Times Leader

After ’08 deal dies, Wyoming County Landowners expect Chesapeake Energy deal.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

A year after the financial meltdown sank a lucrative gas-lease offer, the Wyoming County Landowners group has come to terms with another company, Chesapeake Energy, for what is expected to be a record deal.

Neither side has released details yet, but Chip Lines-Burgess, secretary of the landowners’ group, expected an announcement late Tuesday evening.

“No one in the region has seen this amount of money,” she said. “We’re excited about the offer we have received, and it’s going to be a huge impact for our entire region financially. … Hopefully, it comes to fruition. … This is what we’ve been striving for the last year and a half.”

She added that lease signings could come as soon as a facility is secured that is large enough to hold the expected 600 to 800 landowners involved.

The group is composed of roughly 37,000 acres in Wyoming, Bradford, Susquehanna, Sullivan and Lackawanna counties. A minimal amount of Luzerne County acreage is also involved, Lines-Burgess said.

Only those who have recently re-signed are currently members, she said, though other members can re-join by filling out paperwork on the group’s Web site. New members also might be considered, though Lines-Burgess was unsure what the demarcations will be. She also noted that while current Lackawanna County members will remain in, it’s unclear if new landowners from that county will be accepted.

In August 2008, the group made headlines by signing a lease with Colorado-based Citrus Energy, but the worldwide financial crisis caused the deal to fall through quickly. Ironically, Citrus was chosen after it beat an original offer from Chesapeake.

The landowners regrouped quickly and began aggressively courting companies, creating a solicitous Web site and attending two industry expos. Most members chipped in $30 to cover various expenses, including creating their own roughly 40-page lease with items worked in that are usually left for individual landowners to add or subtract as addendums.

“We knew that we wanted a company that could afford to buy 37,000 acres … that could not only buy us, but drill us,” Lines-Burgess said. “In order to do that, we knew we had to go for the cream of the crop. … Within the last month, it has just heated up tremendously.”

Chesapeake is one of the largest natural-gas producers in the country and the largest leaseholder in the Marcellus Shale, a layer of gas-laden rock about a mile underground that’s centered on northern Pennsylvania.

Lines-Burgess said Marty L. Byrd, the vice president for land in Chesapeake’s Eastern Division, flew into the region Monday evening to meet with members of the landowners’ group Tuesday morning. He is expected to meet with the group’s core membership today, and leases could be signed by the end of the month, she said.

“There was a little give and take all the way around,” she said, citing the company’s requirement of an increased drilling-unit size. The group estimates about 100 well pads will be created throughout the entire acreage.

TO LEARN MORE

To join the landowners’ group, read its lease and find other information about the group, go to its Web site at: www.pamarcellusshale.com

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

Copyright: Times Leader

Court will hear landowners’ claims that gas companies took advantage of them.

MARC LEVY Associated Press Writer

HARRISBURG — Pennsylvania landowners who want to snatch a better deal from natural gas companies hoping to drill into their ground and the potentially lucrative Marcellus Shale formation beneath it will get the ear of the state’s highest court.

Wednesday’s oral arguments in front of the state Supreme Court are certain to be watched closely for its impact on one of Pennsylvania’s biggest economic opportunities and environmental challenges in decades.

For exploration companies with offices from Calgary to Canonsburg, the decision could either bring a huge sigh of relief or the havoc of renegotiating land leases across the state, possibly throwing the entire gas industry into chaos.

The fact that the court moved quickly to hear the case — and resolve a burgeoning number of complaints in state and federal courts — demonstrates the seriousness of the matter.

“By its actions, I think the court recognizes that this really is an extraordinary issue for Pennsylvania and it’s critically important that it is resolved,” said David Fine, a Harrisburg-based lawyer representing ElexCo Land Services Inc. and Southwestern Energy Production Co.

To some extent, justices will hear plaintiffs’ attorneys tell a story of big corporations taking advantage of unsuspecting landowners, paying them a fraction of the upfront per-acre leasing fee that they later paid to other landowners as competition in the land rush intensified.

“They didn’t know Marcellus Shale from a hole in the wall and they feel the gas companies came in and got them to sell away the rights to their property,” said attorney Laurence M. Kelly, who is representing Susquehanna County landowner Herbert Kilmer and his family.

The real legal question will be whether some tens of thousands of leases were never valid because they violate a state law that guarantees landowners a minimum one-eighth royalty from the production of oil and gas on their land.

The lawsuits are just the latest sign that Pennsylvania’s laws governing mineral rights and environmental protection are lagging behind the large, modern-day industry presence that has descended here.

Dozens of exploration companies and contractors have flocked here since early 2008 from as far away as Houston, Denver, and Calgary, Alberta, in a rush to lock up land rights over the thickest portions of the shale. That rush has eased somewhat since the recession drove down natural gas prices — but the legal disputes have not.

By Fine’s estimate, more than 70 lawsuits have been filed in federal and state courts by plaintiffs seeking a judgment that the leases they signed were never valid.

In general, the leases in question give the exploration company the right to subtract certain costs — such as taxes, assessments or transportation — before paying the 12.5 percent royalty. That violates the law, plaintiffs say.

The law, however, is silent on the meaning of “royalty” and whether it is determined before or after those expenses.

Fine and industry officials say it is standard language in leases to deduct those costs — a contention disputed by landowner advocates in Pennsylvania and elsewhere.

But judicial decisions in two of the cases raised the prospect of a myriad of different legal opinions.

In Susquehanna County, the judge in the Kilmer vs. ElexCo case handed the companies an initial victory, saying the law does not specifically prohibit the subtraction of costs. Kilmer has appealed to state Superior Court.

Separately, a federal judge in Scranton hearing a case against Cabot Oil & Gas Corp. denied a motion to dismiss the case, saying the law’s silence does not necessarily mean the costs can be legally deducted.

Fine decided to ask the state Supreme Court to take up Kilmer vs. Elexco immediately, and effectively settle the matter for everyone.

Still, the high court’s decision could create a new kind of chaos. Records of oil and gas leases dating back to the royalty law of 1979 are kept in county courthouses, often in arcane filing systems, making it nearly impossible to know how many landowners and leases are potentially affected.

“I’m sure that no one person knows,” Kelly said.

Copyright: Times Leader

Some landowners holding back, banking on economic improvement to bring better offers from drillers.

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

The offer is somewhat unconventional, but a natural gas company that’s leasing land in Luzerne County says its deal is a successful compromise for both parties, and leaseholders agree.

Denver-based WhitMar has locked up more than 22,000 acres in, among other places, Fairmount, Ross, Lake, Lehman, Union, Hunlock, Huntington and Dallas townships, according to company representative Brad Shepard.

The company is offering an unusual deal that has garnered both accolades from landowners for navigating the money squeeze caused by the recession and criticism for its lack of a long-term commitment. WhitMar, which Shepard said is involved in similarly complicated and expensive drilling operations in Oklahoma, Arkansas, Louisiana, Utah and the Dakotas, is offering a four-phase lease.

Landowners receive $12.50 per acre for the first year, after which the company decides whether it will continue the lease for a second year at the same payment rate. The lease also requires that within the first year the company begin the permit process for drilling at least one well and within the second year begin drilling at least one well.

For the third year, the company will offer a $2,500-per-acre, five-year lease on the properties it wants to keep, and landowners whose land gets drilled also will receive 19.5-percent royalties. Conservation Services, the company that amassed most of the territory, receives .5 percent of the royalties.

“As far as I know, that’s the highest royalty that’s been signed in Pennsylvania or New York,” Shepard said. “The reason we offered that royalty is literally because the landowners were willing to let us come in and test it up for $12.50” per acre.

The company then retains an option for a second five-year, $2,500-per-acre lease. “All together, it could be a 12-year lease,” Shepard said, but noted that the leases dissolve if the landowners aren’t paid. “So if they don’t receive a $2,500 payment or a $12.50 payment, the lease has expired because we didn’t pay them like we said we would.”

The offer has aroused reactions on both sides among affected landowners. Some urge restraint, predicting that better offers will crop up when the economy rebounds. “Right now, (gas companies) are picking all this low-hanging fruit,” said Ken Long, an executive committee member of the South West Ross Township Property Group that declined to recommend WhitMar’s offer to their group. “People are panicking to sign leases … because they want to get this monkey off their back.”

Landowners who signed leases note the generous royalties and the commitment to quickly begin exploration drilling. “I firmly believe that a sweeter, more lucrative deal can not be found in Luzerne County,” leaseholder Michael Giamber noted in an e-mail. “By comparison, the folks in Dimock (a truly proven area) can only get 18 percent. Over 30 years, a 2-percent difference in royalties can literally add millions of dollars in a landowner’s pocket.”

Shepard added that forced drilling likely means additional drilling will occur. “For the most part, once the drill rig’s brought in, it’s not brought in to drill one well,” he said. “As long as they hit, we have every intention of drilling as quickly as we can and our partner wants us.”

The company is still working out important specifics, though. First, it needs to find a larger partner to help drill, Shepard said, and it also must secure the rights to millions of gallons of water for the process that cracks the underground shale and releases gas.

In nearby counties, the company is working with Houston-based Carrizo Oil & Gas, Fort Worth-based XTO Energy, Inc., Louisiana-based Stone Energy Corp. and others, Shepard said.

He added that the company has received many offers from landowners to sell surface water on their properties, but said the company is not yet at the stage where it’s investigating water-acquisition options.

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

Copyright: Times Leader