Drilling for natural gas may not be the gold mine everyone thinks it is. Some industry officials are warning this could be another dot com bubble or giant Ponzi scheme.
The Columbus Dispatch, in its editorial of June 27, calls for caution in proceeding with natural gas drilling in the state. Now I am calling for us to follow New Jersey’s lead in banning fracking. In an effort to preserve the state’s waterways and safe drinking water, New Jersey passed legislation yesterday, June 29, banning hydraulic fracturing or fracking used in horizontal drilling of natural gas. They chose the environment over bags of money. (See link at bottom of previous article)
Bravo for them!
In their editorial, Due diligence—Drilling regulators should make sure ‘fracking’ in Ohio is done safely, the Dispatch warns that the state should proceed with caution, making sure it understands the process and its risks well enough to protect the environment and the public’s enjoyment of the parks. They warn that the “gold-rush mentality” is troubling and this potential wealth does not come without risk. The editorial warns that we should proceed slowly and learn from the mistakes made by other states involved in harvesting shale gas. Water and air quality are key concerns as well as spills and blowouts at the surface causing ground contamination.
Water purity is a major concern in Pennsylvania where the state has banned the waste water from the fracking process used in drilling horizontal wells from entering their wastewater treatment plants due to major pollution from the known and unknown chemicals used in the process. The water treatment plants can’t handle the influx of chemicals and the water discharged from the plants is polluting the state’s rivers and streams. The Ohio Environmental Protection Agency announced that it also will not allow the waste water to be treated in our water treatment plants leaving the waste from both Pennsylvania and Ohio to be disposed of in underground injection wells. This causes some experts to question whether our state has the capacity to handle all this. In an attempt to slow the influx of waste, the state raised the brine-disposal fee from 5 cents to 20 cents a barrel.
One bright spot is that last year the state did a major revamping of the mining laws giving regulators more authority to insist on safer well construction.
Included in the editorial is a call for regulators to require full disclosure of all chemicals used saying public safety and the environment are at stake. The editorial closes by saying:
Ohio has the benefit of learning from mistakes made in Pennsylvania and elsewhere, but officials still should exercise the caution necessary to avoid making new ones.
Many are eager to reap the financial benefits projected to come from natural gas drilling citing the $128 million Pennsylvania received and $178 million collected by Michigan. However, in a political blog on the Dispatch’s website titled Officials plan to go slow on oil, gas drilling on public lands, Laura Jones, spokeswoman for the Ohio Department of Natural Resources, said, “This will be a very deliberate, very measured process. There will be nothing happening fast.” It is projected that drilling in state parks and public lands won’t begin for at least a year while procedures and approvals are being put in place.
One step will be the creation of a five member Oil and Gas Drilling Commission to oversee drilling on state-owned land and grant leases. This commission may sound good on paper but I predict it will be nothing more than a rubber stamp for state and oil company officials since it is composed of four gubernatorial appointees and only one Natural Resources official. The Ohio Environmental Council, among others, has expressed concern that the bill would give the commission, rather than state agencies that own the land, too much authority to grant drilling leases.
While the commission is being created and rules written, Natural Resources officials are busy researching titles on land parcels to determine whether there are restrictions. House Bill 133, sponsored by Rep. John Adams, R-Sidney, which established the Commission, is designed to allow the process to move as quickly as possible as the rules are promulgated according to Rep. Adams.
Although the drilling companies will eventually nominate the parcels for drilling it is expected the state will do the nominating for the first year.
Sen. Teresa Fedor, D-Toledo, said drilling on public lands “remains unnecessary, unwanted and unsafe,” echoing concerns about how drilling could impact the natural beauty of parks and about the use of a hydraulic fracturing technique on deep shale that could harm groundwater supplies.
But, are we being too eager to capture the golden goose? Are we pursuing only fool’s gold? Some oil and gas company executives and experts are beginning to question the financial feasibility of pursuing the gas buried deep beneath shale deposits.
In an article titled Natural-gas industry: Companies over-hyping wells, some experts say Investors banking on controversial drilling, that appeared in the Dispatch Sunday, June 26, and reprinted from The New York Times, experts express grave doubts. Energy executives, industry lawyers, state geologists and market analysts are skeptical about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of the wells and the size of their reserves. Some are even comparing the frenzy to the dot com bust and fall of the housing bubble.
“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February email. “Reminds you of dot-coms.”
“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy-research company, wrote in an email on Aug. 28, 2009. Company data for more than 10,000 wells in three major shale-gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted.
Industry officials are also expressing environmental concerns. Referring to the fracking process which can require more than a million gallons of water per well, they are saying that if shale gas wells fade faster than expected, energy companies will have to drill more wells or hydrofrack them more often, resulting in more toxic waste.
The information was provided in emails obtained through open-records requests or provided to The New York Times by industry consultants and analysts who say they think the public perception of shale gas does not match reality. Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas, remembers saying, “I think we have a big problem” when she first studied well data from shale companies in October 2009 after attending a speech by the chief executive of Chesapeake.
Her research showed that the math wasn’t adding up and the wells were petering out faster than expected. “These wells are depleting so quickly that the operators are in an expensive game of ‘catch-up,'” Rogers wrote in an email on Nov. 17, 2009, to a petroleum geologist in Houston, who wrote back that he agreed.
When the boom began in 2008 oil and gas companies were offering Fort Worth residents as much as $27,500 per acre for signing leases. By late 2008 the recession began and natural gas prices plunged by nearly two-thirds, throwing the drilling companies’ business models into a tailspin. Some company engineers were projecting a well life span to be 20 to 30 years but some federal energy analysts were doubtful based on the wells’ performances.
Given the many hazards and uncertainties surrounding retrieval of natural gas, I once again plead for caution. The fact that many industry insiders and experts are questioning the financial feasibility should make us question the road we are on—it is not too late for a course correction. We do not want to rape, pillage, and plunder our state when there is so much to lose.
- New Jersey Senate Passes Fracking Ban (desmogblog.com)
The battle over natural gas is heating up. This weekend I received emails from opposite camps concerning the natural gas issue. I received a notice from T. Boone
Pickens to his army asking me to urge my representatives in Congress to support
the Natural Gas Act (NAT GAS Act—HR 1380) and the next day I received a notice from a political action committee urging me to ask my representatives to
sponsor the FRAC (Fracturing Responsibility and Awareness of Chemicals) Act.
I originally joined Pickens Army because he was preaching less dependence on foreign oil. His arguments were very convincing because OPEC is holding us hostage with the exorbitant price of oil. He was urging use of domestic resources including solar energy
and windmills. He proposed massive windmill farms which sounded good to me. Both
windmills and solar energy are a way of harvesting free natural resources to
meet our energy needs. I guess that solution was too simple and since it is a
free resource few people will make big money. Now his emphasis is on natural
gas. What else could I expect coming from an oil man? Below is his message:
I’ll keep this short, because it’s pretty obvious what the problem is and
there’s a very obvious solution.
According to the Federal Reserve Economic Database, the U.S. imported 62% of its oil – or 362 million barrels – last month alone. That’s $41.7 billion that was sent to
foreign countries for oil.
Our oil import numbers continue to be astronomical and our country continues to suffer as a result. In a time of economic turmoil, our crippling dependence on OPEC oil represents the height of fiscal irresponsibility – particularly when we have the ability to
use our own vast domestic natural gas resources.
We simply cannot afford to let this opportunity go to waste.
The message also included a link to my representatives which
I have deleted since I no longer support his efforts to promote natural gas.
The next day I received a notice seeking my support for the
FRAC Act. As I have previously written, there are many dangers involved with
the controversial method of reaping natural gas from shale formations known as
hydraulic fracturing of fracking. Below is their information:
As an Ohioan, you’ve probably been hearing a lot lately about fracking.
High Pressure Hydraulic Fracturing (or fracking) is a method of drilling for natural gas by pumping a mixture of water and chemicals, including known toxics and carcinogens, deep underground, and it’s already responsible for more than 1000 documented cases of poisoning water in states across the country.1
Fracking wells are spreading at an alarming rate. But even more alarming, thanks to the work of Dick Cheney and his infamous energy policy, frackers don’t have to disclose the chemicals used in their fluid to the EPA, and the process is
The FRAC Act, a bill that has been in the Senate since 2009, would correct both these problems. As public concern over fracking has grown, the bill has gained some momentum, but we still need more Senators actively working to pass it. Will you urge Sens. Brown and Portman to support the bill?
While state leaders in Ohio welcome new gas drilling, fracking in other states is polluting Ohio’s water as well. Ohio has been storing, treating and dumping waste water from fracking projects in other states into Ohio rivers. 2
Fracking is currently underway in 36 states. While some state regulations do exist, they vary widely. But water contamination isn’t constrained by state boundaries, and we need a strong baseline national standard to make sure fracking chemicals are publicly disclosed everywhere fracking is taking place, and that this practice isn’t putting our nation’s drinking water at risk.
Yet somehow, the EPA has been handcuffed from regulating fracking since 2005, in what has become known as “the Halliburton loophole.” Halliburton, where Dick Cheney was CEO before becoming Vice President, patented fracking in the 1940’s and remains the third largest producer of fracking fluids. And in trademark Bush administration style, Halliburton staff were actively involved in a 2004 EPA report on fracking safety.
The “Halliburton loophole” remains a dangerous legacy of the Bush Administration and if we’re going to protect our nation’s water, we need to close it.
If you’re not familiar with the dangers of fracking, here’s a little more background: Fracking a single gas well uses as much as millions of gallons of water, and hundreds of tons of chemicals. While the exact contents of the fluid remains largely undisclosed, scientific examination reveals that it can contain diesel fuel, which includes benzene, as well as methanol, formaldehyde and hydrochloric acid and many others.3
The fluid is injected thousands of feet underground at extremely high pressure, literally cracking the earth to release trapped gas. Unfortunately, it must pass through our water table, where the fluids, along with natural gas, can leak through well casings into our drinking water.
If you’ve ever seen the picture of the man lighting his tap water on fire from the recent documentary Gasland, that was
Fracking also poses serious risks to our rivers and streams from insufficiently treated, and often radioactive waste water, and from above ground spills of fracking fluid. An important investigative series by the New York Times recently concluded that “the dangers to the environment and health are greater than previously understood.”5
Yet, the oil and gas industry is the only industry in America that is allowed by EPA to inject known hazardous materials — unchecked — directly into or adjacent to underground drinking water supplies.
That’s got to change, and the FRAC Act is an important step in providing a strong national standard to protect our nation’s water from the dangers of fracking.
Thanks for fighting the unchecked oil and gas influence threatening our water.
1. Fracking,” Food and Water Watch.
As in most controversial issues you will find “experts”
representing both sides of the issue. Many scientists, engineers, and PhDs will
say hydraulic fracturing is perfectly safe. But if it is so safe why did the
industry take steps to exempt the process from the EPA regulations and pass
legislation to keep secret the chemicals used? In addition, accidents do happen and we all
remember the disastrous mess of the Gulf oil spill last year. We don’t want the
same thing to happen in our own backyard.
Our country, and in particular our own state of Ohio, are on
the precipice of a dangerous and slippery slope. The discovery of huge gas
deposits beneath the previously unapproachable shale could be the answer to our
financial and oil crisis—if it is harvested in a safe manner. This could mean
no more dependence on foreign oil and could bring in large revenues for
personal and state bank accounts.
Everyone could profit from this discovery but it must be
done in a way that won’t destroy our clean air and water. Currently, the
fracking process is just too dangerous with too many unknowns—including what
chemicals are used and their affect on the environment—to blindly fall for this
gold rush. What benefits can we possibly reap if we are dead or too sick to
enjoy them? Please contact your state representative to halt the explosive
growth of the natural gas industry in our state until safer methods are set in
place. Hurry before it is too late.
- Fracking, the Music Video (fool.com)
Gold Mine at Our Feet
Ohio could be sitting atop a gold mine! Ohio sits on top of both Marcellus and Utica shale deposits which harbor enough natural gas to last us for many years to come. It is literally a gold mine at our feet. It is estimated that perhaps trillions of cubic feet of gas and billions of barrels of oil are buried under Ohio’s
Many stand to gain a lot of money from mining Ohio’s natural gas deposits. Energy companies are reportedly paying landowners $1500 per acre plus royalties for the rights to drill on their property. The state of Ohio also hopes to make up huge deficits from the money they stand to gain from leasing drilling rights to
energy companies to drill on state-owned lands in the state parks. Governor
Kasich has said this is a huge windfall for the state.
Several Ohio cities were hoping for a financial windfall for treating the brine from natural
gas wells but the Ohio Environmental Protection Agency announced Tuesday, May
17, that cities won’t be able to treat the brine which is then dumped into
streams after treatment. The agency says it is concerned that the brine will
pose a pollution risk. The Ohio EPA’s recommended form of disposal is the use
of injection wells thousands of feet underground.
Steubenville, East Liverpool, and Warren, Ohio hoped to make money from the energy companies by treating the brine; but Warren is the only city currently treating brine for a
Lisbon-based company. The treated brine is then dumped into the Mahoning River;
however, the city’s treatment process does not remove salt from the wastewater.
The Ohio EPA announced it will not renew Warren’s permit to treat such brine
which expires in January.
Robert Disch, East Liverpool’s utility director, estimates his city could make at least
$168,000 a year. Chuck Murphy, Steubenville’s wastewater superintendent, said
his city could make as much as $300,000 a year. Tom Angelo, director of
Warren’s water-pollution-control plant, had hoped to charge as much as $150,000
a year to take the brine.
In eastern Ohio, energy companies are paying landowners for the right to drill into the
Marcellus and the thicker, more deeply buried Utica shale deposits. Companies
have so far drilled 59 Marcellus wells and an additional 10 into the Utica.
Hundreds more could be drilled, especially if Utica wells produce large amounts
of gas, and possibly oil.
Even though the State of Ohio hopes to lease land to energy companies, this process could
be bogged down for some time until it is determined who actually owns the
mineral rights to the land. The Ohio Department of Natural Resources wants to
open state parks for drilling. Officials say that proceeds from leases and
royalty payments would help reduce a $560 million maintenance backlog in state
Also, a bill was introduced in the House on Wednesday, May 18, by Rep. Dave Hall,
R-Killbuck, chairman of the House’s Agriculture and Natural Resources
Committee, which states that land owned by universities or that the state
bought with legal agreements that restrict how it can be used, would be
unavailable for drilling. “We wanted to show where you could drill and where
you could not,” said Hall, who sponsored the bill. The bill also creates a
five-member board to review all drilling applications and make a decision
within 15 days.
Tom Steward, vice president of the Ohio Oil and Gas Association, which represents drillers, said his group supports the bill. He stated, “It became obvious that there were
lands bought with federal encumbrances where the state couldn’t ‘lose control’
of the properties.”
Environmental advocates remain opposed to drilling in any form. Jack Shaner, a lobbyist with the Ohio Environmental Council, said drilling breaks an implied promise that
parks won’t be developed or polluted. “I don’t care how much lipstick you
put on this pig, it’s still a pig,” Shaner said. According to the bill, state university
officials would be able to OK drilling on their land.
The EPA’s Role
One would think that the EPA is keeping a close eye on the natural gas industry but they
were essentially excluded by the passage of the Energy Policy Act of 2005. The
act also includes a provision that the energy companies do not have to reveal
what chemicals are used in the fracking process. The Policy Act excludes HF
fluids, except for diesel fuel, related to energy production from regulation
under the UIC (underground injection control) program. However, states may
choose to regulate HF, if they wish.
I am not an expert in wastewater treatment, but during my years as editor for a quarterly
magazine for the Ohio Water Pollution Control Association (OWPCA), I learned
that before a treatment facility can treat incoming water it must first know
what chemicals are in the water. If, by law, companies don’t have to reveal the
makeup of the chemical mixture how can the wastewater be properly treated? If the
wastewater is not properly treated, then our streams and drinking water become
Along with the expansion of HF there has been increasing concerns about its potential
impact on drinking water resources, public health, and environmental impacts in
the vicinity of these facilities. Therefore, the EPA has begun a study to
understand the relationship between HF and drinking water resources.
This news should be encouraging but, in typical governmental fashion, the study will take
some time to complete. It was begun in 2010 and is not scheduled to be
completed until 2014. A series of community hearings were held last year and the
results of those hearings will be sent to the Science Advisory Board (SAB)
where the draft will then be revised in response to the SABs comments. Initial
results are expected by the end of 2012 with a goal of a full report in 2014.
In connection with the study, the EPA sent letters to 9 companies currently
involved in HF or fracking to gain information regarding the chemicals used in
the process and the impact of the chemicals on human health and the
environment, standard operating procedures at the HF sites, and the locations
of sites where fracturing has been conducted. The nine leading national and
regional HF service providers are: BJ Services, Complete Production Services, Halliburton, Key Energy Services, Patterson-UTI, RPC, Inc., Schlumberger, Superior Well Services, and Weatherford. All companies but Halliburton (who developed the fracking process and was previously run by Dick Cheney before he became vice-president) responded to the EPA request in a timely manner. Halliburton responded only after being
subpoenaed to do so.
Flowback is regulated not by the EPA but by the National Pollutant Discharge Elimination System program which requires flowback to be treated prior to discharge into surface
water or underground injection prior to discharge. Underground injection is
regulated by EPA or a state with primary UIC (underground injection control)
enforcement authority. However, again, if the chemicals used in the process are
unknown, then proper treatment of the water is impossible.
It is certainly discouraging to think the gas drilling companies are running the
show. What were our fine representatives in Washington thinking when they
passed the Energy Policy Act of 2005 or what is commonly known as the
Bush/Cheney Bill? The fact that two oil men were running the country tells us everything.
I hate to think what horrors are ahead of us with very few regulations placed
on the industry. Why don’t they want us to know what chemicals are being used? What
are they hiding?
We may have a gold mine at our feet but what will it cost us to tap into this mine? Are we
opening Pandora’s Box?