Monday, December 16, 2013

Pa. regulators seek public comment on shale development Seven years into the play, hearings intended to shape regs

We will soon know how passion and reason of stakeholders and the general public might shape regulations of shale gas development in Pennsylvania.

The state Department of Environmental Protection is holding a series of public meetings on provisions of Act 13, a bill intended to upgrade the state’s Oil & Gas law to accommodate unconventional gas extraction. The DEP is charged with taking into account public sentiment as it draws up specifics to implement the bill, which Governor Tom Corbett signed into law last year. Issues range from impacts on parks and wildlife areas to managing waste disposal and spills. The draft rulemaking also includes standards affecting the construction of pits, gathering lines, and temporary pipelines, provisions for identifying and monitoring abandoned wells (and related hazards of drilling through them) and the industry practice of spreading brine, which can include radio-active material and other well waste, on roads.

These and other highlights are summarized on the DEP website. But the overview does not mention key elements of Act 13 that have spawned controversy and law suits, and which are bound to also come up at the hearings. One is a provision regulating physicians who treat patients suffering from exposure to drilling and fracking chemicals. Commonly known as “the gag rule,” the regulation prohibits doctors’ access to information about chemicals in exposure cases. To get this information, physicians must sign a legal contract that prevents them from sharing it with anybody, including other health care providers.  In October, a U.S. District Court threw out a doctor's claim that the rule violates First Amendment rights. The ruling was made only because the doctor, Alfonso Rodriguez, brought the case before the court as a hypothetical situation, and therefore did not have standing. It did, however, leave the door open for claims based on actual events. (More on that here.)

Another touchy provision of Act 13 limits the power of municipalities to influence or ban development within their borders, while allowing drill rigs, waste pits, and pipelines in residential districts. The matter is now before Pennsylvania’s high court after municipalities -- including South Fayette in Allegheny County; and Peters, Cecil, Mt. Pleasant and Robinson in Washington County – successfully argued before the Commonwealth Court that the law was unconstitutional.

UPDATE: On Dec. 19th, the Pennsylvania Supreme Court ruled that part of Act 13 restricting local jurisdiction over gas wells was unconstitutional.

The Oil and Gas industry is exempt from both local and national regulations that apply to other business, ranging from zoning to the handling and disposal of hazardous waste. The justification for this (as I discuss in previous posts): cheap fossil fuel cannot be pulled from the earth with an overabundance of nit–picking inspectors and onerous regulatory burdens.

The degree to which shale gas operations should be regulated, and under which jurisdiction, is one thing. Banning them altogether is something different. The Environmental Quality Board, chaired by the Secretary of DEP, is responsible for adopting regulations and considering petitions to change them, and it will be interesting to see how much of a platform the hearings will become for stakeholders who want no regulation, some regulation, or an outright ban.

A 60-day comment period on the rule-making process began Sunday. The first of seven public hearings across the state is scheduled for Jan. 7 in Wyoming County. Officials have also scheduled informational webinars on Dec. 19, from 2:30 p.m. to 3:30 p.m., and Friday, Jan. 3, from 9:30 to 10:30 a.m. For information about schedules and how to submit testimony, click here.

Since the Marcellus drilling boom began in 2006, more than 6,500 shale wells have been drilled in Pennsylvania – making the Marcellus the number one natural gas play in the country. With the encouragement of pro-drilling governors, first Ed Rendell and now Tom Corbett, the DEP approach has been regulate-as-you-go. That’s a striking contrast to New York state, where officials suspended permitting for high volume hydraulic fracturing in 2008 pending an environmental review and policy overhaul, now in its sixth year and still absent resolution to questions about health impacts. As I have written in Under the Surface, contrasting political cultures and histories in New York and Pennsylvania have shaped the states’ respective approaches to shale gas development. The delay in New York has encouraged anti-fracking activists – bolstered by governor Andrew Cuomo’s liberal base advocating renewable energy - to organize campaigns against the industry, and use public meetings to showcase their opposition.

Will the forthcoming hearings in Pennsylvania also become a showcase for anti-frackers? Perhaps, but it is unlikely they will follow the pattern in New York. The organizational challenge to tip the balance away from the status quo is daunting, especially in this late stage of the game. For anti-frackers to simply show up is part of it, but influencing the process requires comments that are on point and informed. This is a strong suit for industry professionals, who make a living out of mastering policy and related practical, legal, economic, and regulatory intricacies.  And there are thousands of these details with far-reaching consequences encompassing a spectrum of issues, ranging from exemptions to burden of proof to liability to enforcement to bonding to well construction standards to impact fees and taxes… Etc, etc.

Doug Shields, an outspoken industry critic who was instrumental in passing a fracking ban when he was a Pittsburgh councilman in 2010, was later featured in Josh Fox’s Gasland II as a person on the front line of the anti-fracking movement in Pennsylvania. He told me that he expects activists to attend the DEP hearings to exert political pressure, but it will take more than that to significantly alter the course of fracking in Pennsylvania. “A big turnout sends a message to the elected,” he said. “But the meat and potatoes on regulations will be on the technical points.”  He added that he also expected some of the large environmental NGOs to take the lead in assessing and critiquing chapter and verse of the state’s proposal. ‘We will need to get some technical expertise to look at the proposed regulations and determine where the weaknesses are.”

In New York, the anti-fracking movement was able to draw on active chapters of groups such as the Sierra Club and the National Resources Defense Council, combined with  decisive technical help from figures such as Sandra Steingraber and Walter Hang, who each led sophisticated and ultimately effective critiques of New York’s draft guidelines and regulations. Advancing grass roots opposition early in the process on technical rather than ideological grounds, Hang marshaled letter writing campaigns and list serves to educate followers on the nuts and bolts of proposed permitting guidelines – called the Supplemental Generic Environmental Impact Statement -- and to guide responses that favored the movement. Steingraber adopted a similar approach – an online guide called the 30-Days of Fracking Regs – to encourage technically relevant comments first on fracking regulations and later on infrastructure projects. The efforts of both Hang and Steingraber have encouraged a flood comments that stalled the process.

Hang and Steingraber are among activists intent on blocking, rather than regulating the industry. Compared to Pennsylvania, the political ethos and history of New York has favored land preservation more than mineral extraction. Geology is also undoubtedly a factor. Pennsylvania’s extemporaneous approach to establishing rules for the shale gas industry (more than five years into the play) reflects a political tolerance tied to a storied history of extraction, including coal, oil and natural gas, in the state for better and worse. The forthcoming hearings and public comment period on Act 13 will be a grass roots test of how moved the electorate is to change the status quo of carbon dependency. A small response will reflect a willingness to defer to regulators and the state, while the opposite will provide critics with potentially potent raw material for change.

Saturday, December 7, 2013

10% or 90% - How much fracking waste is recycled? Loose definitions give industry lots of leeway

Shale wastewater released from a treatment plant in Josephine, Pa.
Bloomberg reporters David Wethe and Peter Ward recently shed a little light on a critical aspect of the shale gas boom – wastewater disposal. Their article last week explains how recycling – once pitched as a market-based panacea for dealing with 21-billion barrels of brine, solvents, metals, and radioactive elements produced annually from domestic oil and gas production – is less of a hit with investors than anticipated. The reason: technological limits.

The article, Fracking Bonanza Eludes Wastewater Recycling Investors, frames the issue in a quote by Mark Kidder, head of an oilfield unit for Schlumberger: “We’ve spent millions and millions of dollars evaluating virtually every available and reasonable-looking technology out there, always hoping we’d find the silver bullet … At this point, we found nothing.”

News outlets looking for accessible material are not likely to find much, either, in the way of simplicity in the fracking waste story. It’s an area clouded by confusion, noise, and lack of baseline reporting standards and enforcement. There is no easy measure to gauge the problem’s impact -- a hallmark of good journalism and one of the first calculations reporters tend to make in considering a subject. But there are still ways to get at this story, and the financially oriented Bloomberg uses an approach that carries the most weight with its readers – economic analysis. Wethe and Ward cite these benchmarks:

Of the $31 billion spent each year on managing water resources in U.S. and Canadian oilfields, $2.8 billion, or less than 10 percent, is spent on recycling, according to PacWest Consulting Partners LLC... 
In Pennsylvania last year, operators cleaned and reused 85 percent of fracking and produced water because state rules, as well as geology, makes water disposal more expensive there. In most other regions, where disposal wells are more plentiful, recycling amounts to 10 percent or less, according to PacWest estimates.

Interesting, to be sure. But the article does not explain the vast discrepancies in other reports attempting to quantify the extent of frack water recycling in the oil patch, or why the PacWest estimates are any truer than other numbers cited by experts, media, and interested parties. Several notable examples come to mind:

The Wall Street Journal, citing figures from the Susquehanna River Basin Commission, reported that 14 percent of frack water in central Pennsylvania was recycled as of November, 2012.

A report in October of this year by San Jose State University and Earthworks, an environmental group, found that about one third of Pennsylvania fracking waste is “reused” and about half is discharged into rivers and streams either through brine/industrial waste treatment plants or municipal sewage treatment plants. The report also found that only about 8 percent of injected fracking solution water is reclaimed from wells in Pennsylvania to begin with, which suggests that many production wells become long-term repositories for unrecovered waste.

Energy In Depth, the industry public relations arm, claims that the industry “reused” or “recycled” 90 percent of flowback water in the last half of 2013.

Adding to this confusion is the problem of definition. “Recycled,” much like “all natural,” is one of those marketing idioms that invites abuse by those seeking to paint something green. Colleen Connolly, a spokeswoman for the Pennsylvania Department of Environmental Protection, explained to me this week that the agency in fact does not make a distinction between “reuse” and “recycling” and that “recycling” generally applies to fracking waste that undergoes some sort of treatment. The “recycled” label therefore applies to flowback from shale gas production wells that has been treated and discharged into a river, even if it contains unscreened or unrecovered hazards, such as total dissolved solids, solvents, metals, and radionuclides. Lacking a good-faith statutory definition, the “recycled” label suggests a certain environmental stewardship while in fact allowing the industry convenient options for waste disposal – whether actually reusing it, discharging it, or injecting it in the ground.

As with much of the industry (which is exempt from both federal Safe Drinking Water Act and hazardous waste disposal laws) the fracking-waste reporting “system,” varying in form and rigor from state to state, offers the illusion of transparency while obscuring actual practices. Operators in Pennsylvania and other states are required to report their waste production and disposal on a database that is available on the Internet. But there is little or no oversight, let alone enforcement. Perhaps the biggest telltale sign of a problem is a disclaimer on the DEP website that visitors must agree to before viewing the agency’s files. The DEP notes that the data is self-reported, unchecked, unverified, and possibly incomplete.

DEP makes no claims, promises or guarantees regarding the accuracy, completeness or timeliness of the operators’ data that DEP is required to post. 
DEP expressly disclaims any liability for errors or omissions related to the production data contained within these reports. No warranty of any kind is given by DEP with respect to the production data contained within these reports posted on its website.

Are we expected to trust this data, even when the DEP clearly doesn’t?

The shale gas boom is taking shape in an age where free market interests are strong and the will to regulate is relatively weak. Rather than looking to government reporting data that is inconsistent, unreliable, or non-existent, the Bloomberg report tackles the recycling analysis in a way that hits home with investors – by gauging economic feasibility rather than regulatory compliance. That’s fair and good, yet there are additional ways to get at this story, and many of them are taking shape in the Ivory Tower rather than the newsroom.

A research team led by Sheila Olmstead of the University of Texas measured water quality changes at thousands of points downstream from waste treatment plants and drilling sites for more than a decade. In a paper published in the National Academy of Sciences early this year, the team found a trend of elevated chlorine concentrations – a marker of fracking pollution -- downstream of waste water treatment facilities, but not downstream of drilling sites. As New York Times blogger Andrew Revkin notes in Dot Earth, the findings suggest that spills and leaks at specific sites are not statistically visible, but impacts of poorly processed wastewater are. In other words, we should be aware of the “cumulative impacts,” or the toll taken in water quality over time as shale gas development becomes more commonplace, even in areas previously untouched by mineral extraction.

Salts are a telltale marker of waste -- known as “flowback” – that is regurgitated from natural gas wells after they are stimulated with hydraulic fracturing fluids. Studies, including one by the USGS in 2011, show that radioactive levels tend to correspond with total dissolved solids (TDS). TDS is a measure of concentration of salts and other impurities dissolved in water that tends to fluctuate depending on operators' production and disposal schedules. They are not visible to the naked eye, and they are flags for water problems, including radioactivity.

SU grad student Sunshyne Hummel works on groundwater study
The Olmstead team is one example of a burgeoning field of study focused on fracking and water quality. (There are many others, including one featured in this report I wrote for Syracuse University Magazine.) Yet the subject could use much more reporting than it gets in the mainstream press. The problem is, it requires a level of commitment and investigative wherewithal beyond the reach of many beat reporters working in an age where resources are scarce, staffs are small and growing smaller, and deadlines are more pressing as ever due to Internet immediacy. Instances that do make it to mainstream media outlets often originate with press-releases from NGOs, universities, or government agencies regarding events that are too conspicuous to ignore, including the following examples from Pennsylvania:

Waste Treatment Corp., a plant on the Allegheny River in Warren County, Pa. has been operating under a state permit that sets no limit on the amount of total dissolved solids and chlorides it can send to the river from oil and gas and other waste streams. Late last month, the DEP negotiated an order with the company that allows the plant to send a monthly average of 176,000 pounds per day of total dissolved solids into the river on an interim basis for two more years. The company has until January 2016 to trim the salt discharge to a monthly average of 888 pounds per day of total dissolved solids. As part of the proposed agreement with the state, the company agreed to a $25,000 fine.  Waste Treatment Corp. still faces a law suit filed by Clean Water Action, an environmental group, in U.S. District Court. The group claims that the plant is illegally discharging fracking wastewater containing high levels of salts, heavy metals and radioactive compounds into the Allegheny River.

Samples collected in Blacklick Creek downstream from discharges from the Josephine Brine Treatment Facility, in Indiana County, found radium levels 200 times greater than samples upstream and background sediments. The levels exceed thresholds for radioactive waste disposal and pose “potential environmental risks of radium bioaccumulation in localized areas of shale gas wastewater disposal,” according to a peer reviewed study by Duke University scholars studying the impact for shale waste.

Last summer, the DEP revoked the permit of Aquatic Synthesis Unlimited after numerous spills and violations at the plant, built on an old rodeo site about 40 miles northeast of Pittsburgh. The plant had problems from the beginning, when it started construction in December 2011 without first getting a permit from the DEP. As the demand for wastewater treatment grew, the DEP issued a conditional permit in April 2012 that allowed the plant to accept flowback, but soon the facility was inundated. It treated some of the wastewater it had on site in July and August last year, but in September it was cited by the DEP for moving wastewater off-site for injection into deep wells, in violation of its permit.

One of the most mysterious and troubling frack-water-treatment messes involves one of the highest-profile and promising plants. Minuteman, a service company in Milton Pa. that handles fracking waste, was heralded by Governor Tom Corbett as “an American success story.” Corbett made a personal visit to showcase the plant as part of a pitch to promote job-creation incentives in February, 2012. Owner Brian Bolus (who happened to be a $10,000 contributor to Corbett’s campaign) began the company in 1991 and built it into a $5 million operation with 200 trucks and 158 employees. In what remains an unexplained turn of events, the FBI, accompanied by agents from the DEP, the IRS, and various local agencies including the Milton Sewer Authority raided the plant in May. Federal agents bound some Minuteman workers in plastic cuffs, also handcuffed Bolus' wife Karen in front of their son, interviewed incoming waste truckers and left with a huge haul of boxes of documents.

Minuteman issued a statement that characterized the probe as "baseless," and a result of unfounded complaints from "disgruntled" employees speaking to the AG's office. There have been no follow-up reports since the event late last spring. Dennis Fisher, a spokesman for the Attorney General’s Office, refused to comment on the status of the investigation or address any of my questions about it.

Of course, there are hundreds of treatment plants profitably treating or “recycling” frack wastewater throughout the Commonwealth without undue attention or incident. (You can view a video of one here by Kirsi Jansa, a Finnish journalist, who takes viewers on a tour of Reserved Environmental Services.)  Many, undoubtedly, follow “best practices” – a term that refers to standards set and policed by industry rather than government. But in the absence of clearly defined federal standards, enforcement, or even a more precise definition of “recycling,” it’s hard to know where the bar is set and who is actually meeting it.

Friday, November 22, 2013

Cabot buys second polluted residential property in Dimock 12-acre parcel on Carter Road flanked by faulty gas wells

The former Mike Ely propety, now owned by Cabot
Cabot Oil & Gas has closed a deal for a second residential property affected by chronic methane pollution in the heart of its prolific gas operations in Susquehanna County, Pennsylvania.

The Texas-based company paid Michael Ely $140,000 for the 12-acre property that includes a doublewide modular home, according to records filed in Susquehanna County Courthouse Wednesday.  The property – now vacant -- borders the intersection of the south end of Carter Road with State Route 3023 in Dimock Township.

The state Department of Environmental Protection has identified at least two malfunctioning gas wells operated by Cabot bordering the property, including the Gesford 3 well, several hundred yards to the north off Carter Road, and the Costello 1 well, just to the south off Route 3023.

Cabot demolished the former Sautner in September 
The agency has forbidden Cabot to drill more wells in a nine-square mile area around the intersection until the company resolves problems with these and other shale gas wells that – according to the DEP inspectors – are causing methane pollution.

The former Ely property sits less than a mile south from another polluted residential property on Carter Road that Cabot bought for $140,000 from Craig and Julie Sautner last year. Cabot demolished the three-bedroom ranch in September and sold the empty lot to a neighbor for $4,000. The new deed includes a clause – called a land covenant -- that forbids residential dwellings on the property.

Cabot bought both the Sautner and Ely properties through a subsidiary called Susquehanna Real Estate 1 Corp.

Ely ancestral home across from Cabot's newly acquired lot
The former property of Mike Ely is part of a larger swath owned by generations of the Ely family since 1858. Bill Ely, Mike’s father, lives in the family’s large ancestral colonial home near the banks of Burdick Creek, which runs under a bridge connecting Carter Road with Route 3023. Bill Ely and his wife, Sheila, are among families in the area that depend on bottled water. Bill told me he has no intention of selling his 19th century house to the company, even though his water is not drinkable.

“I’m not leaving” Ely said Thursday. “My family’s been in this home for generations.”

Susquehanna County and operations centered in Dimock have been the source of both boon and bane for Cabot, which in 2013 was the second largest natural gas producer in Pennsylvania behind Chesapeake Energy. In the first half of the year, Cabot had 15 of the top producing wells in the state concentrated in its leasehold in Susquehanna County – an area experts call a “sweet spot” for Marcellus Shale production. But production has been beset by problems. Both Mike and Bill Ely were among more than 30 families in the area that settled a law suit with Cabot for damages related to water pollution for an undisclosed amount in 2012. The controversy continues, as Cabot, under the watch of the DEP, attempts to fix problems that have prevented it from drilling any new wells in a 9-square-mile region around the Carter Road area. Some of the gas wells have been plugged or shut down, so residents living over them have seen royalty payments dwindle.

Hazards found in some residential water wells include methane, arsenic, bacteria, and various heavy metals that occur naturally. Methane can make water flammable and pose risks of explosion in wellheads and enclosed spaces. Arsenic, heavy metals, and bacteria can cause illness. Drilling can open pathways that allow contaminants to move through the ground, but the extent to which this happens is open to scientific and legal interpretation. Cabot continues to challenge the DEP findings publically with claims the contaminates are a result of naturally-occurring phenomenon.

The DEP began investigating problems in the region after a residential water well on the north end of Carter Road exploded at the home of Norma Fiorentino on January 1, 2009, shortly after Cabot began ramping up operations to produce gas from the Marcellus Shale with the controversial practice of horizontal drilling and high volume hydraulic fracturing. Since then, the area has been the focus of a national controversy over the impacts of shale gas development on residential communities.

During my visit to the area this week, I noticed that a service rig at the Costello gas well had been removed. George Stark, a spokesman for Cabot, was not immediately available for comment about recent developments. Stark told me in September that the rig, which has been at the site for months, allowed crews to “monitor” the casing of the gas well, which appeared sound.

DEP officials explained it differently. They had not pinpointed a source for the problems affecting three homes near the well, including the Ely properties. But they had determined that the suspect Costello gas well was "unviable" and would have to be plugged. In an email response to my query earlier this fall, DEP spokeswoman Colleen Connolly reported that Cabot was ”continuing remedial efforts” at the Costello gas well and “evaluating the effectiveness” of the work.  Methane levels were fluctuating, she said. Additionally, tests had shown levels of iron and manganese that were elevated but within standards in some water samples. Elevated levels of these elements are “not uncommon during gas migration,” she reported.

Update 5:25 p.m. EST. In response to my request for an update this week, Connolly said in an email this afternoon that “remediation work” is continuing on the Costello 1 well.  But the department’s characterization of the status of the well remains vague. In Connolly’s words, the well is "essentially unviable," but DEP officials are "not aware of the gas well having been officially plugged.”

Friday, November 15, 2013

Fracking critics gain leverage with social media mastery Why PR matters in the war over shale gas

Richard Levick, an influential public relations advisor, wrote a piece for Forbes last week about how the Oil and Gas industry’s PR machine is losing the battle for hearts and minds of mainstream America “despite industry advertising budgets that dwarf the activist war chest.” Why? In Levick’s view, it’s all about anti-fracking activists’ mastery of social media to galvanize and amplify grass roots movements. Or in his words:

Social media outreach, online content development, and Search Engine Optimization (SEO) and Marketing (SEM) are all dominated by activist voices. As a result, they are not only rallying significant grassroots opposition; they are doing it in ways that neutralize any advantage that industry money once provided.

Anti-fracking campaigns, both at institutional levels and from the ground up, were quick to catch the crest of the social media wave that has largely displaced community newspapers and town halls as popular incubators and catalysts for free speech, political action, and self-governance. Levick uses an empirical analysis, including a count of tweets about fracking over a given period, to illustrate how “the most influential conversation around this topic is highly negative.” He laments that the industry supporters do little or nothing to engage this on-line discussion, and urges them to get in the program.

Activists understand that the marketplace of ideas has evolved – and they are evolving – and leading — right along with it. If fracking is to become an accepted practice in the U.S., the energy industry must do so as well.

I found Levick’s points relevant enough to merit posting on my own Facebook Page, with this comment: “PR & the fracking war. Big Oil & Gas $ versus anti-fracking organization. Media expert Richard Levick explains natgas industry’s failure in Forbes.”

A reader, perhaps interpreting my post as an endorsement of Levick’s industry coaching, responded that the article was misguided, as the anti-fracking battle transcends a PR contest. She left this query. “He thinks it just comes down to a pr battle. What do you think?” Fair question, and one that – given it was posted on facebook and I am now responding on Blogger -- illustrates the influence of the new media that Levick writes about.

So here’s my answer: As a journalist, I’m always interested in how a message is conveyed, the degree to which it piques public interest, people’s perceptions, and what influences them. I welcome analysis from informed observers, and in this regard I think Levick’s piece rings true… mostly. The industry has done a lousy job from the start explaining itself with a patronizing “Trust-Us-It’s-Safe” message. This assessment is not just from Levkick, but is shared by notable industry supporters as well as skeptics, and it applies to both the industry’s traditional advertising campaigns in print and broadcast, as well as its social media efforts. Tom Ridge, former Pennsylvania-governor-turned-public-relations-figurehead for the industry, told an Associated Press reporter that the industry had to do a better job conveying a positive public image and “they know they have some work to do.” That was in 2010.

Last week, Sarah Murphy wrote an article for Motley Fool, the popular investor guide, titled “Fracking is Losing the PR battle.” She cited a recent report called Disclosing the Facts: Transparency and Risk in Hydraulic Fracturing Operations,  released last week. The report assesses investors’ needs for risk disclosure and mitigation against company practices and found “a systematic, industry-wide failure to adequately disclose fracking-related information that is material to investors.” Murphy explains what this means in her view:

The thing is, fracking may really not be as awful as the campaigns make it appear, but the industry is going to have to rethink its strategy or risk condemnation in the court of public opinion… 
Seriously, these guys have got to step up their game if they want to survive. At last week's SRI Conference on Sustainable, Responsible, Impact Investing, I talked with countless fund managers, investors, financial advisors, and academics, all of whom agreed that while fracking is controversial from a sustainability perspective, the industry's ham-fisted approach to public engagement has been so feeble as to be pathetic.

In this day and age, much of that engagement is on line. And, as Levick points out, it’s a place where the industry is out of its element of old-fashioned Madison Avenue advertising strategies aimed at conventional media.

While industry money went into advertising and traditional “outreach” campaigns that net diminishing returns in the digital age of public affairs…  activists stretched every dollar with online efforts that prove far more effective.

The trend is also important in politics. Levick links to another assessment that recaps the advantage Obama had over Romney by understanding and applying the power of Social Media in an “era where familiarity, credibility, and the ability to forge personal connections trump traditional advertising at every turn.”

The accounts of Levick, Murphy, and Ridge are but a few assessments of how the industry has failed with the traditional media with patronizing and heavy handed messaging, and failed with the new media with its inability to engage savvy and influential audiences on line. But there is a critical third frontier that they don’t address: Big-money politics.

Popular opinion is only one gauge of a campaign’s success. The other is special interest – the megaphone through which public opinion is conveyed to Washington. The size of the megaphone is related to lobbying wherewithal of a given interest, and the lobbying wherewithal is largely a function of the money behind it. Here the industry is winning, at least in Washington. The Obama administration has identified shale gas development as a “priority” in meeting the nation’s future energy needs. That may be related to lobbying, or not. But certainly lobbying has everything to do with the policy framework that heavily favors the industry over others.  Specifically, Obama’s administration and Congress have preserved drilling and fracking industry exemptions from the Safe Drinking Water Act and hazardous waste disposal laws – passes that allow industry to operate with one foot in the pre-regulatory era. Without these exemptions, the industry would have to reveal what hazardous substances that it puts into the ground, and characterize the waste that comes out – revelations that would open the door to a host of other laws, and cast fracking in an altogether different public light.

The lobbying battle at regional and local levels is not going as well for the industry, or conversely, is going much better for the activists. New York state remains off limits to the industry pending a moratorium now in its sixth year. And this month local municipalities in California and Colorado have advanced the Home Rule movement -- which settles drilling issues with local town boards and referendums -- that is gaining traction in New York and Pennsylvania. As Levick notes about the recent vote in Colorado: Boulder, Fort Collins and Lafayette overwhelmingly voted for drilling bans. The industry had only one victory in Broomfield, an area that traditionally trends Republican, where voters rejected the environmentalist agenda by the slimmest of margins.

In the long run, operators and investors continue to push forward with shale gas development that has flooded the market with cheap natural gas. The industry’s success or failure over the longer term hinges on its ability to address issues of sustainability -- not just ecologically, but economically and politically -- in the Market Place of Ideas, where voters and investors judge the good from the bad.

Tuesday, November 5, 2013

What are the prospects for New York’s shale reserves? Sociology, ideology weigh heavy in debate over geology

The value of a given shale gas reserve depends on the physical characteristics of the rock. How deep? How thick? How much wet gas? How much dry gas? But as with many aspects of the shale gas debate, there’s more to it. Community attitudes, politics, special interests, markets, and ideological conviction all influence the social and monetary push to get things moving.

Things are not moving in New York, where for years shale gas has been pitched as an economic gift – a windfall for the taking -- by industry public relations campaigns, lobbiest, and landowners seeking lucrative contracts with drillers. Now, fracking critics are drawing on industry’s own data to build a case that the New York’s shale prospects amount to a stillborn promise.

Chip Northrup, a former oil and gas investor from Texas, led a team of professionals who made this case Wednesday night at Cornell University. Presenters also included Lou Allstadt, a retired Mobil vice president, Brian Brock, a geologist, and Jerry Acton, a retired systems engineer for Lockheed Martin. The team, moderated by Cornell engineering professor Tony Ingraffea, spoke at a 200-seat lecture hall brimming   with a supportive anti-fracking crowd that laughed and applauded in response to occasional quips and deadpans by Northrup. (Example: “In Texas, they know better than to spread radio-active flowback on roads…. They use it to induce earthquakes by injecting underground.”)

In a presentation that lasted close to two and a half hours, Northrup and his colleagues drew on data from a handful of exploratory wells in New York and extrapolations from thousands of production wells in Pennsylvania, along with prevailing social factors. Their conclusion: Viable shale reserves in New York are too limited and social resistance too great to produce major development at current prices. Rather than blossoming into the mega-billion dollar industry, as promised, the play is more likely to attract highly speculative exploration around the fringes by wildcatters, storage facilities and pipelines to get Pennsylvania gas to market, and geology that is uniquely suited for the injection of fracking waste from out-of-state operations – factors that Northup likens to “a hangover without the benefit of the night on the town.”

For years, the anti-frackers have waged their war against shale gas development predominantly on environmental grounds with arguments that it’s unsustainable and acutely and chronically damaging to the ecosystem. Wednesday’s presentation shifted the fight to economic grounds, at a time when the industry is sensitive to talk that can discourage investors. Natural gas prices are expected to remain at historic lows for the foreseeable future, cooling enthusiasm to sink capital into exploration and production efforts in new and unproven areas.  (In many ways, the industry is victim to it’s own prolific success in Pennsylvania. Landowners are anticipating the market glut will soon exceed storage capacity, portending even further suppression of prices or a scale back in production. For a recent assessment of the market glut from the view of landowner's forum, click here.)

Economic prospects in New York, meanwhile, are further weakened by regulatory uncertainty. After more than five years of an environmental review, state officials are yet to finalize permitting policy pending questions about public health, and Governor Andrew Cuomo’s lack of commitment is grounded in coordinated opposition from both grass roots and institutional campaigns that represent a significant part of his political base.  (Significantly, Northup and Allstadt are among leaders of their own political action campaign to ban fracking near their homes in Cooperstown. Their fight to put shale gas development in the hands of local town leaders rather than state officials boils down to the outcome of a landmark case now before the Court of Appeals.)

Just as gas proponents were using the promise of wealth to urge state government to begin permitting gas wells when prices were high and interest was booming, critics are now presenting evidence of a flat-out bust as all the more reason to hold back.
Acton's analysis shows colored dots representing viable shale zones 

At Wednesday’s presentation, Brock provided a geological assessment that explained what is widely known about the Marcellus: Production is most viable in the thickest, richest sections at a certain depth, which tapper exponentially from an area just south of New York’s border with Pennsylvania. Acton supported Brock’s characterization with a separate analysis, now circulating on the Internet. Acton used production figures from Pennsylvania wells to assess yields corresponding with certain physical parameters of Marcellus geology, including depth, thickness, and thermal maturity, and then extrapolated the Pennsylvania data to model New York’s production. His conclusion: Reserves under the Empire State remain mostly unviable, with the exception of an area extending slightly into the Southern Tier, just north of the most lucrative part of the reserve in Susquehanna County Pennsylvania.

As with many arguments over shale gas, this one is not so much about the data, but how the data is framed in a broader campaign for or against development. Much of Thursday’s presentation amounted to casting old information in the context of current market conditions. Acton’s map, in fact, was similar to a map created by Terry Engelder, a Penn State geologist and shale authority who has prominently argued in favor of the economic benefits of drilling. Allstadt later used Engelder’s map to support the theme of the Cornell presentation: The New York shale gas cup is far more empty than full.

A map by Engelder used by Allstadt shows conflicting interpretations
Northrup pointed out that while the shale gas footprint in New York is vast, it’s functionally limited by geology, market restrictions, myriad moving parts of corporate portfolios and lease holds, complications and uncertainties posed by unresolved state policy, no drill zones proposed by the state, and bans by municipalities. I’ve heard both shale gas critics and proponents refer to this set of factors as strangulation by regulation. It’s a point that industry lawyer and lobbiest Tom West frequently makes at public talks: given the social resistance it faces in New York, the shale gas industry will simply move on to less restrictive and more productive territory.

Allstadt presented evidence that major companies have tested both the Utica and Marcellus shales in New York and found them unworthy. He cited a handful of test wells with underwhelming results drilled by companies such as Chevron, Gulf, Anschutz, Chesapeake and others prior to the shale gas boom. His point is worth noting, but also in need of context. These test wells were small in number and scattered over a large area. They were vertical wells that used low volumes of fracking solutions, prior to refinements and breakthroughs to adapt the process to Devonian shale. And they don’t correspond with leasing trends that took shape with a better geological understanding of the play that came after 2008. (XTO Energy, later bought by Exxon Mobil, paid $110 million dollars for leases on 50,000 acres spanning parts of Broome and Delaware County in the spring of 2008 after wells were proven in northeastern Pennsylvania.)

By the account presented by Northrup and his group, New York is missing or has already missed the shale gas party. As for what Northrup characterizes as the hangover: New York remains an attractive disposal option for Pennsylvania producers because New York regulations, which haven’t been updated since the late 20th century, allow flow-back to be spread on roads and drill cuttings to be disposed of as conventional waste. Additionally, conventional wells in New York that were drilled and depleted decades ago make, by industry standards, suitable repositories for shale gas waste. From a geographical standpoint, New York is a strategic spot for infrastructure projects to store and transport gas to major northeast markets, and some of these projects are already well underway, including various pipelines and a controversial project to convert old salt mines on the shores of Seneca Lake to natural gas and propane vaults.

Given all these factors, what does New York’s future look like? Allstadt, who has both ample industry experience and a stake in development as an Upsate resident, said a drilling boom is unlikely, but expect some intensive drilling by maverick   companies in communities bordering Pennsylvania.  “There’s always somebody who has to take a shot somewhere, and instead of going to a casino they will drill,” he said. “These are the least reliable outfits. They will drill the wells as cheaply as possible.”

Predictably, the presentation drew admiration from anti-fracking activists and criticism from industry supporters. And while it was an academic exercise that will not alter the geology and arguably has little baring on markets or regulations, it represents a piece to a much larger rhetorical tug-of-war for the hearts and minds of policy makers and politicians. Science can be found on both ends of the rope. Bruce Selleck is a geologist at Colgate University who has identified the prospective area for shale gas development – or “fairway” -- in New York to extend well into upstate New York, west to Chemung County, east to Sullivan County and north to Oneida County. The Marcellus shale alone is capable of producing 5 trillion to 10 trillion cubic feet of gas in New York, by Selleck’s estimate. His take on the presentation at Cornell? “All the blah-blah-blah rhetoric in this 'finding' makes it clear that the folks involved don't want to see gas development in New York - not surprising given the 'experts' involved.” He offered his assessment in a recent email, along with this elaboration:

That companies are dropping leases simply means they are not planning to drill the properties anytime soon, indicating their estimation of the value of the recoverable gas at current prices makes development in these frontier areas non-economic, in the near term.  The dry gas market is flush right now, and will likely remain that way for 3-5 years. The lack of permitting of HVHF in NY is of course an additional factor.

Even if the Marcellus reserve is in the 5 TCF range in NY, development could prove attractively economic down the road when gas prices are higher.  Five TCF of gas would require 2500-4000 wells to ultimately recover that resource. That scale of development would still bring significant royalties to landowners, along with other economic benefits, and all the negative impacts, as well. 
The Utica is even more of an unknown in NY, so any statements made about its potential are based on very little data.  I expect a few of the companies in NE PA will try the Utica at some point soon. 

Policy is made at the crossroads of science and politics. The argument that Upstate New York’s celebrated shale reserves have already been passed over by major players challenges proponents painting the industry as economic salvation for upstate New York, and their corresponding push for legislators and the governor to create a policy infrastructure that enables it. But it’s hard to know exactly where it will lead. The assessment by critics that reserves are economically viable only in a small part of the Southern Tier may give Cuomo political cover to proceed with a plan he has already proposed: Begin issuing permits for wells in areas along the Southern Tier where local officials feel their communities stand to benefit, and see what happens.

Friday, October 25, 2013

Will Utica, Marcellus remain non-starters in Empire State? New theory holds geology, not politics, thwarts NY fracking

Cabot Oil & Gas Map showing thickness of Marcellus shale, one measure
of it's viability. Other factors include depth, organic content,
thermal maturity, and myriad political and market factors    
A collection of factors stalled the Pennsylvania shale gas rush at the New York state border, including grass roots opposition, a market glut, the threat of local bans and --  above all -- the state’s reluctance to complete permitting guidelines without more information about health impacts. That, at least, is the familiar version of the story recounted through the popular press. But a group of activists – some uniquely qualified – are building an argument that something more profound and fundamental is at work: A lack of gas.

“Simply put, we now know that the Marcellus is likely only marginally productive in a few townships by the border - and may not be economic there until after 2020,” said Chip Northrup. “The Utica may not be here at all - or in a few pockets.”

Next week, Northrup, a former oil and gas investor from Texas, will publically make this case along with a select group of anti-fracking activists, some with industry resumes. The event is scheduled for 7 p.m. at Cornell University’s Hollister Hall Auditorium. In addition to Northup, presenters will include Lou Allstadt, a retired senior vice president for Mobil Oil, Jerry Acton, a systems analyst for Lockheed Martin, and Brian Brock, a retired geologist. The event will be moderated by Tony Ingraffea, a Cornell engineering professor specializing in fracturing mechanics that are integral to shale gas production.

The argument isn’t really about whether there is gas under New York – geologists agree that multiple gas-bearing formations, conventional and otherwise, lie beneath upstate’s countryside from the Catskills to the Allegany region. It’s a question of whether the broad mantels of Devonian shale, which hold prospects of drilling, fracking, and infrastructure development on an unprecedented scale, are economically viable under current or future market conditions.

Interest in New York’s unconventional reserves peaked in 2008, when the price of natural gas was three to four times higher than it is now. Since then, production of Marcellus wells coming on line in Pennsylvania and West Virginia has soared, contributing to a price collapse that is not forecast to change anytime soon. While this is a contributing factor, Northrup argues that the much-hyped future for shale gas as an economic engine for New York was a bust from the start. The team of presenters next week at Cornell will base this outlook both on analysis of available geological records and the status of leasing and development trends by major oil and gas companies. So far, only one major, Exxon Mobil, holds significant leases in New York – 50,000 acres in Broome and Delaware counties, near the Pennsylvania border. Moreover, Northrup said, analysis of well data filed with the DEC shows a range of major companies including Chevron, Gulf and others, tested upstate reserves prior to the “the fury” of the gas rush unfolded in 2008. “They kicked the tires and left well before the moratorium was in place,” he said.

Since the moratorium preventing high volume hydraulic fracturing began in the summer of 2008, midsize companies have faired poorly in their shale gas quest in New York. Norse Energy, a Norwegian company, was planning to tap Marcellus reserves in Oneida and Chenango counties. But officials recently announced they will close operations that remain insolvent after the company’s failure to sell pipeline rights of way and gas leases on 130,000 acres to pay debts. Chesapeake Energy, meanwhile, is letting its leases in New York expire after losing a legal battle to extend them indefinitely (through a process called force majeure) while waiting out the resolution to the state’s moratorium. Prior to that, Talisman, a Canadian company that was a big player in New York’s Trenton Black River boom, began shifting it’s operations from conventional resources in New York to Pennsylvania’s shale gas.

Interest from major oil companies is one of multiple measures of shale gas prospects, and it is not always a defining one. As Russell Gold recently reported for the Wall Street Journal, majors have not typically thrived in the natural gas business, and Shell Oil is selling off some assets in Texas after suffering from a market glut that has held prices down to below $4 per thousand cubic feet for several years. The industry moves in cycles, however, along with prices and demand, and independents play an important if not critical role in exploring resources that might otherwise go undiscovered as business cycles ebb and flow. Gold explains:

Smaller producers have tended to be more successful in shale than major oil companies, in part because they can move more quickly to lease up acreage before land prices rise and are more nimble at experimenting with different well designs to maximize output and drive down unit costs.

In short, smaller independents commonly venture where majors don’t. There is a lower barrier of entry to leasing, exploring, and experimenting in unproven areas, and rewards of discovery are greater. So are the risks.

This is a concern for Allstadt, who has led the push for a precedent-setting municipal ban (now being tested before the state’s high court) on drilling in Cooperstown. He has told me he does not generally fear the work of major oil companies, but he is wary of wildcatters – independents with limited capital who live or die in the world of speculative ventures. “They (Independents) play on the fringes,” Allstadt said. “They are the ones most likely to screw things up.” (Drillers have already left a legacy in upstate New York. Regulators estimate there are 57,000 abandoned and orphan oil and gas wells statewide, many of them left by firms that went broke or walked away from them.  Of these, the state has listed 4,722 as a priority due to health and safety risks, but lacks funding to plug them.  More on that here.)

In addition to a market evaluation, Northup said the presenters at Cornell will offer geological data that shows underwhelming results for shale gas samples collected from wells drilled in the 1990s and the early part of this century targeting conventional formations – mostly the Trenton Black River. Operators had to drill through the Utica and Marcellus to get to the Trenton Black River, which provided a small boom of its own when natural gas prices began rising several decades ago. The Marcellus is generally thought to be too thin and too close to the surface to be effectively developed in western New York, where most of the Trenton wells are drilled. But some geologists have argued that the prime drilling fairway of the Utica shale, which is providing productive wet gas and oil wells in eastern Ohio, may overlap the Trenton fields in western New York. Northup argues the opposite. “If those had shown Utica potential, all the majors would be here - and they never were,” he said. Take into account these factors, plus limitations imposed by natural barriers, topography, and regional no-drilling zones the state has imposed for ecological reasons, the much-touted drilling fairway for shale gas extending into New York’s Southern Tier “looks more like a putting green,” Northrup quipped on a recent appearance on Liz Benjamin’s Capital Tonight.

Terry Engelder is a geologist from Penn State whose career has been defined by his knowledge of Devonian shale. In a series of calculations in 2008 and 2009, he estimated that the Marcellus contained enough recoverable gas – nearly 500 trillion cubic feet -- to last decades, and his very public encouragement to investors and the media served as a catalyst to the gas rush in Pennsylvania. Now, with prices a fraction of what they were, Engelder is cautious about assessing the economic breakeven point of New York’s shale reserves, which, he said, “need careful evaluation.” In an email this week, he responded to my requests to assess the validity of claims by Northrup’s team that New York’s reserves are too small and problematic to be worthwhile.

Now it may turn out that shale gas in New York will not work for less than, say, $5.00/MMcf, BUT the the state should thoroughly evaluate this possibility and not have a bunch of born-again anti-frackers shout the industry down before sensible geologists and engineers really understand what the possibilities are.  

His dismissal with the anti-fracking movement aside, Engelder’s cautionary theme is a contrast to brimming enthusiasm he expressed along with lawyers, elected officials, landowners, and landmen that reflected a sense of giddiness over prospects of the shale gas boom in 2008. Interest in New York peaked in the summer of 2008, after a coalition of landowners near the Pennsylvania border landed a deal with XTO Energy (later bought by Exxon Mobil) to open 50,000 acres for development for $110 million plus royalties. Although that acreage remains undeveloped due to the moratorium, Engelder’s estimates were supported by production figures as the shale gas rush took shape in Pennsylvania over the next few years. By early 2009 drilling proponents in Pennsylvania and New York began looking for political leverage to encourage government support of the industry. As the economy sunk into recession, the case for jobs seemed to be the hot button. Stakeholder-funded studies purported to show economic potential that, in retrospect, stretch the limits of good sense in some cases.  An enthusiastic Broome County legislature paid University of North Texas scholars for a study that concluded Broome County was “fortunately located in the epicenter of the play” and shale gas development would produce 4,000 wells that would bring $15 billion to the economy, create 16,000 jobs, generate $792 million is salaries and $85 million in tax revenue.  The study encouraged county officials – before a single well was drilled or land leased -- to budget $5 million of expected lease payments on county-owned land near the landfill. Five years later, the county is yet to collect a dime from its shale gas assets, whatever they may be.

Engelder’s predictions remain controversial. And while early production numbers in Pennsylvania have met and in some cases exceeded them, questions about production have given way to questions about sustainability. (Will Bunch, of the Philadelphia Daily news, explores unmet expectations in Pennsylvania’s gas rush here, and Kevin Begos, of the Associated Press, looks at the concern of pension fund managers over the long-term profitability of the industry here.)

Chris Denton, an attorney who represents landowner coalitions, has seen the rise and fall of gas prices and corresponding interest in shale gas leases in New York. He pointed out that geological assessments are unique, piecemeal, and often proprietary, so it’s hard to usefully extrapolate figures from conventional wells, many which are in western New York, to the parts of the Marcellus shale thought to have the greatest potential, which are more toward the east. “I don’t really pay much attention unless it’s hard data from wells,” said Denton, who added that there is no mystery to why shale gas has not taken off in New York while it’s flourishing just across the boarder in Pennsylvania. “We’ve spoken with a lot of interested parties, and as it stands, it’s really too easy for them to go someplace else. They tell us, ‘call us after the moratorium’s been lifted.’”

For every argument against shale gas, it’s easy to find a countervailing argument. Theories about the geology in New York bring a chicken-or-egg quality to the discussion. Denton says the geology has not been proven because of the moratorium. Northup says the lack of interest – based on available geological data -- makes it politically comfortable for Governor Andrew Cuomo to extend the moratorium indefinitely.

The argument for or against the geology aside, there are new signs that Northrup has correctly pegged the political atmosphere. In an interview earlier this week in the Syracuse Post Standard, DEC Commissioner Joe Martens told reporter David Figura the health review needed to complete the state’s permitting policy is “going to take some time… We really don’t feel that there is any great urgency. People really want to be satisfied that this can be done safely and that's what [Department of Health Commissioner] Dr. Shah is trying to get to the bottom of.”

Will the geology of New York support a full-scale gas development by major energy companies or even speculative exploration by wildcatters? For now, a number of influences – including markets, political pressures, and unproven geology -- have created a feedback loop that favors the status quo.

Tuesday, October 22, 2013

The razing of 1101 Carter Road: The rest of the story… Land “covenant” in deed forbids “human habitation”

The Sautner home became focus of the antifracking movement
When I last visited Carter Road, a contractor for Cabot Oil & Gas was demolishing the former home of Craig and Julie Sautner, the anti-fracking activists who had relinquished their three-bedroom ranch as part of a settlement with the Texas drilling company. This was part of a larger dilemma in their hometown of Dimock, Pennsylvania, where the Sautner’s water well was polluted by nearby Cabot drilling operations, according to records from the state Department of Environmental Protection. It’s a charge that Cabot has denied publically and settled privately – with the Sautners and dozens of other plaintiffs.

The Sautner property – adorned with anti-fracking posters and inhabited by some of the most vocal and visible of fracking critics -- had become a particular symbol of the tensions that divided the community. Julie and Craig were featured in various high-profile accounts of the conflict as either victims, heroes or phonies. The aquifer that provided water to their home on 1101 Carter Road, and to 64 other homes in
EPA tecs sample water at Sautner home in 2012
the area, was the focus of a controversial EPA investigation that found pollution at levels posing safety threats in 8 percent of the wells. Instead of making recommendations, the federal agency deferred to the industry’s solution, approved by the state, which was to deliver water in bottles and tanks to affected homes and provide filtrations systems. The Sautners and some other residents found those measures ineffective, and they unsuccessfully pursued a water line from the nearby village of Montrose – a measure that would have cost Cabot more than $11 million.  (A more full account of that story here.)

As part of an eventual settlement, the Sautners sold their property to a Cabot subsidiary for $167,500. Cabot demolished the vacant house, company spokesman George Stark told me after my visit last month, because the company was planning to sell the property, and it was more marketable without the
structure. Yet that answer doesn’t square with information on a deed that has since been filed in the Susquehanna County Court House in Montrose. After demolishing the house, Cabot sold the 3.3 acre parcel to Tim and Debbie Maye – owners of an adjoining property -- for $4,000. (Perhaps the absence of the house is an asset to Cabot, which retained the mineral rights on the Sautner acreage, although it’s worth noting that the DEP has forbid the company to drill in the area until it resolves the persistent problem of methane seeping into some water supplies in nine square miles around Carter Road. It's also worth noting that the Mayes have a history with Cabot that's antithetical to the Sautner's. The Mayes, who were once critical of the company, became shale gas supporters after they settled pollution claims of their own )

The most striking aspect of the sale, however, is this: The new owners of 1101 Carter Road are bound by certain conditions set forth in the deed, in parlance that may fairly be described as epic. It forbids a “residence or dwelling for human habitation” on the land. The time frame for this and other restrictions is “forever,” to be observed by future generations as “covenants running with the land.”

The sale, first reported this week by Laura Legere for State Impact, represents a kind of denouement to a story that I have been following for years while reporting for the Press & Sun Bulletin, in writing Under the Surface, and for this blog. The Sautners were initially enthusiastic and expectant supporters of shale gas development when the landman convinced them to lease their mineral rights in 2008. Their story, and the story of more than dozens others affected by Cabot’s operations, captures a complication that belies a common industry pitch:  Everyone’s a winner with shale gas development. Landowers get royalties, others get jobs, and there is cheap abundant energy for all. Claims of water contamination are exaggerated, fabricated, or trumped up by overreaching regulators.

In reality, there are economic winners and losers, as well as substantial environmental risks and trade-offs. The risks and trade-offs are hard to quantify because the industry is exempt from reporting requirements to disclose what it puts into the ground to stimulate wells, and what comes out. Whether you find this acceptable is likely to depend on whether you trust the industry more than government, your tolerance for mineral extraction in places you care about, and your belief in the wisdom of investing heavily in a fossil based energy system to meet 21st century challenges.

We know this: In some places gas is flowing, and with it, economic bounty to a mix of parties. But we also know this, like most things in life, is a circumstantial and transitory condition. The reality of the matter is that it often takes teams of bankers, lawyers, real estate agents, insurance actuaries, and regulators to sort it all out while being mindful of split estates, law suites, lease language, liabilities, and policy that can cut both ways depending on the proficiency and determination of various stakeholders. In the end, the example on 1101 Carter Road left a new land “covenant” forbidding “human habitation” at a place once called home by the Sautners.

Thursday, October 10, 2013

Western NY brine plant becomes emblem of fracking flap Town officials: negotiations between industry, DEC secret

Update Oct. 21 New York state officials will hold a forum in early November to address community concerns and questions about the status of the failed Akso salt mine and related pollution and treatment operations. Representatives from DEC and the State Attorney General’s Office will lead a discussion by technical experts at Geneseo University, Newton Lecture Building, on Nov. 6 from 6:30 p.m. – 7:30 p.m., followed by a public comments and questions. DEC spokesman Peter Constantakes said the forum is a result of concerns expressed by local officials about the future of brine treatment operations to protect water supplies in Livingston County.

* * *

Shortly after the Marcellus Shale gas boom began in 2009, a tanker truck delivered 3,000 gallons of fracking waste from a Pennsylvania drill site to a treatment plant in a rural community outside of Rochester, New York. The delivery – a drop in the bucket by shale gas standards  -- was an experiment. The plant was designed to treat waste leaching from an imploded salt mine in the Town of Leicester -- the product of a mandate from the New York DEC after the geological catastrophe in 1994.  The mine’s owner, AkzoNobel, ever vigilant of costs of the ongoing operation and ways to reduce or offset them, is now negotiating terms with the DEC to shut the plant down. Meanwhile, interested parties have considered the potential to repurpose the plant – which employs 15 people and is running far under capacity -- to receive fracking waste. In that regard, the 3,000-gallon test was a success, at least in the minds of those eager to see the plant remain in operation, or perhaps even dismantled and moved to Pennsylvania.

Some of these facts, which I confirmed this week through an informed source speaking on the condition of anonymity, are just coming to light at town and county meetings as residents try to piece together something they feel has a lot to do with their well-being: the status and future of a treatment plant that was originally built to protect their aquifer from the threats of brine leaking from a failed salt mine, and now being considered for decommission or possibly as a source for fracking waste.

The mine collapse that started it all was a major event that ruined water supplies and swallowed significant portions of the landscape. In a recent overview of the dilemma, Gannett’s Steve Orr aptly describes lingering associations:

People can't help but remember the sinkholes, land subsidence, a creek that disappeared underground and basements suddenly filled with explosive methane, the closed roads and ruined bridge that marked 1994 and 1995 in western Livingston County.

Orr also summarizes the conclusions of conflicting geological reports -- one by a U.S. Geologic Survey researcher and the other by a consultant in Albany -- regarding the consequences of shutting down the treatment operation after more than 15 years. Without the treatment, the salt will drain into a deep aquifer not currently used as a fresh water source. There is a debate whether the current quality of the aquifer justifies saving it from the discharge, and whether it might in fact be a necessary source of freshwater in the future.

It’s about the aquifer, but the DEC’s handling of the situation behind closed doors represents a broader political issue: the degree local governments trust the state’s ability, willingness, and sincerity in openly overseeing environmental protection in the face of industry interests. Perhaps nowhere is this issue hotter than with shale gas development.

Town of Leicester supervisor Lisa Semmel was among a small party of local officials who met with staff from the DEC and the Attorney General’s office last month. It was here she first learned of Akzo’ negotiations with the state to close the treatment plant, she said, but she could get details. The state officials asked her to keep the meeting confidential, she added, a request that she finds unacceptable. “We’re not keeping it quiet any longer because they are not giving us any answers,” she told me this week. “We’re kept in the dark, like everybody else.” Semmel is especially concerned about the implications of the undisclosed delivery of fracking waste at the plant – which she learned through a report last month in the Genessee Sun.

The production of shale gas from a single well produces millions of gallons of flowback  -- liquid waste that contains additives and naturally occurring hazardous substances including metals, solvents, chemicals, radionuclides, and various dissolved constituents. But its most obvious ingredient is brine, which can foul fresh water systems if not removed before the effluent is discharged into rivers and streams. Because drilling waste is exempt from federal hazardous waste laws, operators can run flowback through conventional treatment and desalinization plants not equipped to remove hazardous waste.

New York currently has a moratorium on shale gas production due to unknowns about its impacts on health and environment. But a lack of a stated policy on waste imports from Pennsylvania, an air of secrecy regarding the health department’s current evaluation of health risks, and general difficulty local officials are experiencing in prying loose information have encouraged town boards to challenge the state’s qualifications to oversee the industry in the best interest of the public. For these reasons, and questions over the state’s handling of the Leicester treatment plant in particular, the Avon Town board passed a resolution last month to re-impose a 12-month moratorium on natural gas exploration and extraction.

Avon Town Supervisor David Lefeber, quoted by Genessee Sun reporter Josh Williams, explained it this way:  “Since we talked about this operation [hydrofracking], we thought the State was going to issue permits, the State was going to monitor things, the State was going to make sure that our resources are protected … Businesses come and go, but our ability to produce food and have fresh water is a huge thing and somebody’s got to protect that.”

Avon’s resolution is one of more than 170 bans imposed or considered by municipalities statewide, and the validity of many of them rest on the outcome of a landmark case now before the state’s Court of Appeals testing jurisdictional limits of shale gas regulation known as Home Rule. (More on that here.) After five years, the state is yet to finalize its own policy on permitting shale gas development. Although Gov. Andrew Cuomo’s administration is not allowing fracking until its review is complete, it has not prohibited the importation of fracking waste from other states.

In response to my email query this week, DEC spokesman Peter Constantakes said Akso and its insurance carrier, Zurich, want to discontinue operations to treat the discharges from the ruins of the salt mine in Leicester, which they characterize as “impractical and not cost-effective,” The DEC is considering a monetary settlement for the plant’s closure, but no decision has been made. Constantakes did not address whether the plant could be repurposed for fracking waste.

Robert Middaugh, a spokesman for New York State Attorney General’s Office, said Akso is planning to dismantle the plant, and he knew of no plans to process fracking waste there. The AG’s office has been in touch with county officials about the plant’s status, he added, and has asked that only matters dealing with litigation be kept private.

Those matters could be varied, numerous, and far reaching, of course, and it’s hard to reconcile this vague answer with the claim from local town officials telling reporters they are being kept in the dark, including this in the Genessee Sun from Jim Campbell, an attorney who represents the Towns of Avon, Leicester and York:

These towns are justifiably concerned that the State and the DEC are attempting to delay this information from being made available to the public … Our concern is that the ink might already be dry on a deal between the New York State Attorney General, the DEC, and Zurich. Such a deal could have profound impacts for Livingston County and should only be considered after adequate dissemination of the facts and an opportunity for public input.

“We need a public discussion of exactly what’s going on,” Livingston County Administrator Ian Coyle told me this week. He has asked DEC officials to hold a hearing on the matter in a school or auditorium. He is still waiting for a response.

While the politically explosive option of allowing the Leicester plant to process fracking fluid may be off the table (or not), it’s hard to know exactly what’s going on behind the scenes. If the state has allowed this kind of testing for one plant, what about others? The current draft of the Supplemental Generic Environmental Impact Statement – the state’s pending overview of permitting considerations for high volume hydraulic fracturing -- identifies 130 municipal waste treatment plants in appendix 21 that have equipment that makes them eligible for fracking waste permits.

Liquid waste from gas production is just one part of a much broader metric. Shale gas development also produces solid waste, including drill cuttings tinged with varying degrees of metals, solvents, and naturally occurring radio active material (NORM) from deep in the ground. Like flowback, this waste is also exempt from federal hazardous waste handling laws, and at least four New York landfills are accepting it under protocols designed for industrial waste: Hakes Landfill in Painted Post, the Chemung Landfill near Elmira, Seneca Meadows Landfill in Waterloo and the Allied/BFI Waste Systems landfill in Niagara Falls. According to figures compiled by Fractracker (which compliles industry reports filed with the state) operators in Pennsylvania imported 29,662 tons of solid waste and 6,000 gallons – a relatively small amount -- of fracking fluid to New York destinations in the first half of 2013.

There are incentives and rationale for accepting waste from shale gas operations: It has to go somewhere; it is an unpreventable byproduct of cheap energy that we all use; it is not perceived as dangerous; it is handled appropriately and sufficiently as industrial waste; and it can generate millions of dollars of revenues for municipalities and private companies as part of the larger economic incentive for shale gas development.  But given the tenacious and organized resistance that has stalled fracking in New York, it will be a hard political sell for most New York communities to knowingly allow the importation of Pennsylvania fracking waste under incomplete and seemingly discretionary state policy and it’s growing reputation for secrecy. Yet, as things stand, it remains a legally viable option, one that does not require public hearings, and one that is difficult to track.