Houston driller begins New York shale gas exploration Marcellus test well sunk in Tioga County woods

Wetterling Well in Tioga County, NY

PHOTO JAMES PITARRESI PitarresiPhoto@gmail.com    

A Houston company has begun confidentially exploring the potential of the Marcellus Shale pay zone in New York in a remote area less than 10 miles north of the Pennsylvania border.

Carrizo Oil and Gas began drilling the Wetterling Well this week in the town of Owego. Following tips from local residents, area journalist Sue Heavenrich was the first to report the endeavor on her blog, The Marcellus Effect. Heavenrich consulted permitting records and found that on May 17 Carrizo applied for a vertical Marcellus well on a 43-acre unit off McHenry Road, several miles northeast of the village of Owego. The company received approval from the state Department of Environmental Conservation on August 9. Conspicuous signs of drilling, including truck traffic and the glow of stadium lights in the woods were reported by locals several days ago.

Carrizo is a publically traded energy company that specializes in horizontal drilling to produce oil and gas in shale plays, with stakes in the Eagle Ford Shale in South Texas, the Barnett Shale in North Texas, the Niobrara Formation in Colorado, and the Utica Shale in Eastern Ohio in addition to the Marcellus in New York and Pennsylvania. It’s also developing oil from the Huntington Field in the United Kingdom North Sea.

I followed up this week with a call to Carrizo, and was connected to Richard Hunter, vice president of investor relations. He confirmed that the well was an exploratory venture to test the viability of Marcellus in that part of New York. But he would not elaborate. “This really is a tight hole,” Hunter told me, using the industry vernacular for the status of an exploratory well kept under wraps for competitive reasons. “It’s a look-and-see well. Once we see what’s there, that will affect our thinking about what we will be doing in the future.”

While New York state officials are not issuing permits for horizontal shale gas wells pending a review of environmental and health consequences, there is no policy that prevents vertical wells into shale pay zones. Vertical wells are not an economically efficient means to exploit shale gas because they can't draw from a large enough area in the thin but vast shale mantels. But they are effective tools for exploration, and later they can be turned into horizontal wells, thereby giving drillers a head start on development in a given area.

Keeping Marcellus exploration secret in New York – even in a remote wooded area -- is like trying to hide a rhinoceros in a petting zoo. Truck traffic, stadium lights, and permitting records aside, the operation defies stealth for many reasons.

Timing: The well comes as awareness intensifies with a debate over the fate of shale gas exploration in New York. The Empire State is the strategic center of a national anti-fracking movement fueled by unanswered questions about health and environmental ramifications of high volume hydraulic fracturing and shale gas development in general. Permitting of horizontal wells and high volume hydraulic fracturing has been on hold for four and a half years while officials try to get their regulatory house in order to manage environmental consequences, ranging from water and air emissions to expected demographic changes related to the boom-bust cycle historically accompanying mineral extraction. The state’s review – spelled out in a document called the Supplemental Generic Environmental Impact Statement (SGEIS)– has undergone multiple drafts since 2008 amid widespread public criticism. Last month, Governor Andrew Cuomo’s administration – under the threat of lawsuits from environmental groups -- ordered an additional review by the Department of Health. Agency officials have not said whether they will begin issuing permits before that review is complete.

Geography: The Wetterling well is not far from the border of Bradford and Susquehanna counties in Pennsylvania, where the Marcellus so far has been a prolific producer. It’s also close to the Millennium Pipeline -- a natural gas transmission artery bisecting lower upstate New York State to the lucrative New York City metropolitan market. The well is intended to begin addressing the question that has been a matter of informed speculation: How viable is New York’s portion of the Marcellus? While many prospectors see evidence in the geologic record strongly suggesting the value of the Marcellus does not stop short of the Pennsylvania’s border, Casio intends to be among the first to prove it. The Wetterling is roughly between a region in western New York where conventional wells and infrastructure to tap the Trenton Black River formation were developed near the turn of the 21st Century, and unexplored areas to the east thought to hold vast unconventional reserves that have since become extractable through the development of high volume fracking and horizontal drilling. (The people, politics, geology, and geography in this area provide a primary story line in my book, Under the Surface.) As the Marcellus play was proven throughout Pennsylvania, multinational companies negotiated lease deals with landowner coalitions worth hundreds of millions of dollars for acreage straddling both sides of the New York’s border with Pennsylvania just east of the Wetterling well.

Geology: Much of what is known about the geology under the Wetterling well is related to its geography. The well is positioned near the center of a much larger region overlying both the Marcellus and the Utica shales – in the northern end of a shale gas drilling fairway that begins in West Virginia, and cuts northeast through Pennsylvania into southern New York. Although New York’s part of the fairway is largely unexplored and undeveloped, geologists have—based on preliminary data including seismic data, core samples, and information from conventional wells -- identified a sweet spot running just north of the Pennsylvania border through Tioga, Broome, Chenango, and Delaware counties.

There are other circumstances to be taken into account while gauging the significance of the Wetterling well. Gas prices have fallen with a glut of production from Marcellus wells in Pennsylvania, making the prospects of aggressive exploration and expansion into new regions – at least for the near term and possibly longer -- far less certain than during the land rush of 2008 when international companies bid up the leasing price for unexplored New York acreage to between $2,500 and $5,000 an acre. The Wetterling well – if successful – may spark renewed interest in prospecting in New York, especially if the state begins permitting shale gas wells. That would be a welcome sign for land-owner cooperatives controlling large tracts that held out in the 2008 rush expecting to ink deals that would bring more money and tighter safeguards for property owners. The opposite may be true if the Wetterling results are lackluster. Although industry is unlikely to chart its future based on the outcome of a single well, sometimes test wells become bellwethers.

Regardless of the outcome, the industry’s advancement into New York is likely to grab attention from the anti-fracking movement, which continues to gather force among a grass roots base lead by some high-profile activists who have pledged to be jailed for acts of civil disobedience rather than yield to gas development. While gas proponents see shale gas as a cleaner alternative to coal and a bridge to renewable energy forms, opponents see it as no better than other fossil fuels – a threat to the health and quality of life of local communities where it is extracted and a distraction from commitment and resources necessary to develop renewables.