NY shale prospects dim six years after leasing frenzy Industry faces mounting legal, economic hurdles

New York’s Marcellus Shale gas reserves, once thought to be world class, continue to lose their luster along with the gumption to develop them.

Shale gas proponents, once giddy with anticipation during the leasing boom of 2008, know now what they didn’t know then: legal hurdles to overcome state and local roadblocks look more formidable if not insurmountable with each passing court case and hearing, and the resource looks less and less worth the effort under today’s economics.

Given the inherent uncertainty in mineral exploration, much of the impetus behind it boils down to a mindset. While even some of the most ambitious extraction endeavors go bust, it’s a given that resources buried 5,000 feet deep will not be found where nobody chooses to look. And nobody is going to look if they are not allowed to, or if the effort of looking is deemed greater than the rewards anticipated under any scenario.

Two recent indicators of future prospects in New York have, for the most part, slipped under the radar of the mainstream press, but it’s a reasonable bet they have not escaped notice of prospectors and the people who finance them. The first indicator is the status of a lawsuit by industry and a group of landowners to legally force open the Marcellus frontier in New York. I’ll get to that in a minute. The other indicator is the latest assessment of economically recoverable reserves under current market conditions, if the moratorium were lifted or bypassed.

First the economics. Although it may be a fading memory for many, stakeholders will remember a time when New York was expected to join Pennsylvania as a global energy producer with gas from the Marcellus Shale. Many will recall the summer of 2008, when the leasing frenzy – whipped up by a $110 million deal between XTO Energy and landowners in Deposit, New York – sent lease prices soaring along the relatively unexplored fringes of the Marcellus in the Southern Tier of New York.

Since then, the price of natural gas has fallen by more than two thirds. Moreover, New York state’s moratorium on shale gas development, pending a review originally expected to last a year, is about to begin year seven, with no end in sight. In the meantime prospectors have moved on to other ventures, leaving many to wonder when and if they will return to the Empire State. The answer is simple: They will return when and if a) it’s allowed and b) it’s profitable.

The League of Women voters became interested in the profitability issue when the state released its 2014 Energy Plan, which includes vague references to shale gas development within New York’s borders. To help bring things into focus, the league  commissioned petroleum geologist Arthur Berman and petroleum engineer Lyndon Pittinger to assess the potential of the shale gas under New York state in the context of market viability.

The result, a report titled Resource Assessment of Potentially Producible Natural Gas Volumes from the Marcellus Shale, State of New York, was released last month. It begins with varying projections of the Marcellus Shale potential from credible sources that show, if anything, just how uncertain the starting point of that calculation is and always has been. Estimates of the recoverable reserve range from those posed by Penn State geologist Terry Engelder in 2008 -- 489 trillion cubic feet (tcf), with about 71 tcf under New York stat – to those offered by The United States Geological Society in 2011: 84.2 tcf for the entire Marcellus play extending through Pennsylvania and four other states.

To clear up a point of common confusion, these numbers represent “technically recoverable” gas. As Berman and Pittinger point out, the “economically recoverable” figure, which is more relevant, is bound to be lower. Both figures are moving targets. That which is technically recoverable changes with technological advances; economically recoverable resources change with economy, and specifically with the value of the resource. The  value, in turn, is influenced by supply, demand, and infrastructure to get it to market. All of these things are influenced by regulation, which in New York remains unknown.

In a nut, the League of Women Voters report found that the business of fracking in New York, moratorium aside, would not be viable at today’s price -- between $4 and $4.50 per MMBtu, or Million British Thermal Units. The price would have to rise to $6 per MMBtu to encourage exploration and even then production would be modest -- between the 0.8 and 2.5 Tfc. A price of $8 MMBtu would encourage production between 2 to 9.1 tcf -- more than marginal but hardly the bonanza that people were expecting in 2008. For gas to reach $6 MMBtu, Berman notes, “Substantial unforeseen changes in the natural gas supply/demand balance would need to occur.”

(You can hear Berman discuss his report with Capitol Press Room Host Susan Arbetter here.)

It’s fair to note that Berman has long been a critic of shale gas development, and his projections tend to reflect a broader notion that its economic sustainability falls well short of expectations promoted within the field. But he is respected, and even shale gas proponents such as Engelder, given the chance, show no eagerness to flatly dismiss his assessment of New York. “Art may not be that far off the mark although he is usually low relative to other analyses,” Engelder said in a recent email, asking his take on Berman’s work.  “Maybe some of Broome County works at $4 gas,” Engelder added.

It’s also worth noting that Berman’s analysis draws on and expands the same school of thought developed last year by a team comprised of a cross-section of professionals, led by investor Chip Northrup, who happen to be upstate New York residents and who have been conspicuous in the battle to keep fracking out of their state. The team also includes Lou Allstadt, a retired Mobil vice president, Brian Brock, a geologist, and Jerry Acton, a retired systems engineer for Lockheed Martin. (Here's link to Northrup's blog, No Fracking Way.)

Within days of the release of the report by the League of Women Voters, shale gas proponents suffered another discouragement on the legal front. First, some background: Undaunted by a string of defeats in state court that have consistently ruled in favor of municipalities’ rights to ban drilling, a legal team representing landowners and industry filed a suit against New York that claims the indefinite moratorium on shale gas development violates the state’s own policy under the State Environmental Quality Review Act. The state filed a motion for dismissal on the grounds that the plaintiffs had suffered no damages and the moratorium fell well within the state’s right in establishing policy on shale gas, regardless of how long it took to review all the factors.

The complaint was filed by the Joint Landowners Coalition of New York, represented by Scott Kurkowski and funded by the Mountain States Legal Foundation, a group founded by the Koch brothers to fund conservative legal causes. A companion suit was filed by industry lawyer Tom West on behalf of Mark Wallach, a trustee of Norse Energy, a bankrupt drilling company with interests in upstate New York. Morgan Costello of the attorney general’s office provided council for the state.

On April 24, both sides appeared in a hearing before state Supreme Court Judge Roger McDonough. It’s often tough to tell the outcome of a case based on a hearing and prior to a ruling, but by all counts, the judge seemed to lack sympathy for the landowners, and pressed them on the merits of their complaint against the state. Here’s an excerpt from an account posted April 26 on the Joint Landowners website:

Judge McDonough asked if the executive branch can delay forever. Ms. Costello’s answer was that it can take extended time. Judge McDonough seemed to agree with Ms. Costello on the executives role, calling it “separation of powers 101.”

Attorney Tom West for Norse spoke next. The Judge focused on time limits in SEQRA. There are none. He suggested that this should be remedied in the legislature or in the executive branch. As Attorney West kept hammering at the history of delay and the ongoing wrong, the Judge said that he can only take the executive on its word at this stage of the process. (Editor’s note: Motive will emerge in discovery, but we have to get past the motion to dismiss in order to get to discovery.) The Judge sympathized with the frustration but kept returning to time limits in the law.

The blog concluded optimistically that the “judge reserved decision” and though he did not recognize the fracking moratorium as an “illegal delay” under the state’s SEQR policy, there may be an opening for an argument of “unreasonable delay.”

That optimism was not shared by West. In a recent email in response to my query about the status of the case, West was blunt:  “We are not expecting a positive decision based upon the way that oral argument went.” The West Law firm took down the links to the complaints once posted on its website.

While the jury is still out, so to speak, there is little good news based on these recent events for those counting on a near-term future in shale exploration and development in New York, and plenty of good news for those hoping to see New York lay the groundwork to establish itself as an alternative energy trend-setter.

But the story is not that simple, of course, with plot lines extending well beyond New York, and woven deeply into the national and global circumstances that will determine the future of fracking. Those plots are quickly evolving.

One example: The U.S. Energy Information Administration has just cut its estimates of recoverable reserves in the Monterey Shale in California by 96 percent. California, like New York, is politically influential, and it’s hard to ignore other similarities regarding their roles in the fracking saga. In California, the notion that the geology cannot support the hype has enlivened the argument that the fracking bonanza was a bust from start, and has encouraged legislation for a moratorium similar to New York’s.

But while shale gas prospects are dimming in New York and California, they are getting a big push from places inbetween as well as other parts of the world. Global forces are encouraging development of gas reserves in dozens of other U.S. states to capitalize on growing international demand for cheap and readily available fuel sources, with the economic and political equation favoring expediency over externalized costs. Those demands, already substantial and growing in Asia, have spiked in Europe. The age-old call for energy independence is again taking on a new urgency in the Free World, with the Ukraine crises vividly illustrating the danger of energy dependence on unpredictable and unfriendly governments – in this case, Russia.

Many think more gas from the U.S. and a global spread of the fracking gospel is the answer. Michael Lindenberger of the Dallas Morning News, recently reporting on the significance of a deal for Russia to strengthen it’s economic status with a $400 billion deal to export gas to China, cited Texas Senator John Cornyn as characterizing the broad political push for policy to encourage more U.S. exports. More exports, according to Cornyn, make economic sense but, moreover, are justified “because of the competition it would provide for Putin and the Russian monopoly.”

Of course, we are talking about shale gas and fracking, so it comes as no surprise that there is little consensus and much division on the topic. Seamus McGraw, author of End of County, Dispatches from the Frack Zone, has been following the fracking issue since he began writing his book as the shale gas boom first developed in Pennsylvania. He points out that the global economics of shale gas cannot be isolated from the economics of other energy sources, including coal. The political urgency provoked by international threats in areas involving key American interests must account for the practicalities of various solutions. And a primary practicality  of shale gas exports involves infrastructure in place to get energy where it needs to go today, not years from now. And here I will give McGraw the last word. In a recent discussion on my Facebook page, he posted:

You're not going to break Russia's stranglehold (on natural gas exports) because a) they've got pipelines which beat LNG (liquid natural gas) every time, and b) because they can set the price as low as they want to drive us out of market and then jack it back up at will. All this is going to do is drive up prices here to the point that gas may no longer be reliably competitive with coal, choke off any ancillary economic benefits to manufacturing, and concentrate what advantages there are entirely in the industry itself. And even that, as the Russia/China deal demonstrates, isn't going to be nearly as lucrative as the industry imagines. It's a bad deal all around.

Ultimately, global markets along with political considerations will shape the deal, good or bad, and determine whether the value of gas in places like New York ever justifies the costs of extracting it.

Paper trail for Pa. shale waste leads to ex-IBM site in NY Official dismisses DEP record of cuttings shipped upstate

A delivery arrives in the village of Endicott, NY last summer
Photo: NY Friends of Clean Air and Water

ENDICOTT, NY -- An issue over what – exactly -- is arriving in tanker trucks for disposal at a manufacturing plant in Endicott, New York is a recent and vivid example of the fear and uncertainty over the endpoint of waste produced by the shale gas industry, and the lack of regulatory wherewithal to track it.

It’s a matter of record with the New York State Department of Environmental Conservation that the tanker trucks in question are importing more than 80,000 gallons of waste a day to the plant in the heart of the village. That sum includes 30,000 gallons of leachate from the Seneca Meadow’s landfill, and 50,000 gallons from the Broome County landfill. But there is much that is not on the record, and I will get to that in a moment. First, some background.

Leachate is the soluable and suspended matter that percolates through landfills with (in this area) 30 inches of rain each year, plus whatever moisture is in the landfill itself. This drainage includes essentially anything that goes into the landfill that can be flushed out with water. Put another way, Leachate consists of landfill dregs.

Municipal sewage treatment plants are generally not equipped to handle landfill leachate, so it’s shipped to commercial plants designed to treat industrial waste. The sprawling manufacturing campus in Endicott, in the middle of a heavily populated retail and residential area of the village, was once home to IBM Corp’s micro electronic division .The industrial park, now owned by Huron Real Estate, includes a plant that has been treating waste produced from onsite operations for decades.

The most recent imports are a new source of income for the current operators, i3 Electronics. They began arriving conspicuously last year from Seneca Meadows landfill in 18-wheel tanker trucks rolling through the village. At that time, the business was owned by EIT, which eventually fell to bankruptcy. Along with the tanker trucks came suspicion and fear that former and current operators of the business are trying to offset steady manufacturing losses and job declines over the years with revenue from waste imports.

The suspicion is not without justification. As far as state regulators are concerned, the plant is processing this new source of landfill waste, without a permit, as part of a pilot study. But no time frame has been allocated, and no public comment period or public notification has been declared. According to Mary Jane Peachey, a regulator with the state Department of Environmental Conservation, the DEC has not monitored the input or output of the plant in at least five years.

And here is another critical piece of background: The i3 Electronics site and the surrounding residential and retail district is a Class 2 state Super Fund site, meaning existing pollution there poses a “significant threat to public health or the environment.” Since 1979, IBM Corp. has been pumping toxic solvents from the ground that have seeped from the micro-electronics plant into the community, affecting more than 470 homes. There have been multiple spills since.

It is no surprise that Endicott residents are generally concerned about becoming a waste destination, and specifically concerned about waste from shale gas development, which have been banned in New York pending a health review.

Much of the controversy over fracking waste involves the chemical solution that goes into shale gas wells to stimulate production, and the liquid mix of brine, chemicals and metals that comes out. But liquid waste – called flowback – is just one part of a broader metric. Shale gas development also involves a viscous solution called drilling mud, and solid waste, including drill cuttings tinged with varying degrees of metals, solvents, and naturally occurring radio active material (NORM) from deep in the ground. It’s a matter for record that drilling cuttings from the Marcellus Shale tend to be radioactive, and the New York State Department of Health has advised officials from the DEC to devise a testing protocol to ensure hot drilling waste is handled and disposed of properly .

Drill cuttings, like flowback, are also exempt from federal hazardous waste handling laws, and they often end up in landfills, like Seneca Meadows.

And that’s how shale gas dregs can end up Endicott, or countless other places where landfill leachate is treated. The shipping of leachate to private plants is not, in itself, sinister, or even especially newsworthy. It’s the exemptions, loopholes, and lack of disclosure about its contents that makes it a problem and rightly invites the attention of activists and media watchdogs.

According to records filed with the state Department of Environmental Protection, the Seneca Lake Meadows landfill was the final destination for Marcellus Shale drill cuttings from 196 wells drilled in Pennsylvania during 2010 and 2011. After tracking this bit of information down on their own, some Endicott residents and area activists wanted to know if this potentially radio active drilling waste stream ended in Endicott via the importation of Seneca Meadows leachaete. If so, were state regulators aware of it?

And that brings us to the part of the story where the record gets muddy.

A citizens group called the Western Broome Environmental Stakeholders Coalition met with the DEC’s Peachey in February to get to the heart of the matter. (A video of the meeting, filmed by activist Bill Huston, is available here.) Early in the meeting, the question came up as to whether the Seneca Meadows leachate arriving in Endicott was tested for radioactivity – a simple question that apparently invited a very confusing answer.

Peachey said that step is unnecessary, unless agency personal “are aware” that the waste comes from a suspected radioactive source. “When we are aware that someone is taking a waste stream that would have those elements we would require them to do appropriate sampling and monitoring for that,” she explained.

When a resident pointed out that Seneca Meadows takes Marcellus drill cuttings, Peachey challenged the source of that information. “If they were taking fracking waste now I think we would know it,” she said. When told that the information came directly from the Pennsylvania DEP database, Peachy replied: “I would question that ... I would like to substantiate that more with what’s currently going on there.”

DEP records show that Peachey is technically correct. Seneca Meadows is not currently taking waste from shale gas wells. But she failed to tell the group – in a meeting that was purportedly intended to inform the public and set the record straight – that the Pennsylvania record also shows the landfill did accept cuttings from nearly 200 wells over a two-year period. In bureaucratic form, Peachey fixated on timing and semantics while ignoring the essence of the matter.

While Peachey’s response could be explained as an attempt to disarm a source of PR headaches for the agency, it did nothing to address the issue at hand: drill cuttings in the Seneca Meadows landfill and their influence on the leachate. And it circumvented the original question – is the leachate from that landfill being checked for radioactivity as it rolls into Endicott?

The answer (as eventually revealed – sort of) is no, and perhaps there is a good reason that it is not. (Addressing a later question from the audience, Peachey explained that it is up to landfill operators to check for radio-activity.) But Peachey’s failure to acknowledge, much less explain, the record of shipments of cuttings from Pennsylvania gas wells to Seneca Meadows does not inspire trust. The error of omission could be a misguided attempt for damage control. Or it might be evidence that the department is out of the loop in what she pointed out was a “transaction between one private company to another private company.”

Another possibility, no more reassuring, is that the Pennsylvania records are untrustworthy. Before gaining access to the DEP website, visitors must agree to this disclaimer that 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.

All of this uncertainty points to an overarching problem: the industry’s exemption from federal laws that mandate a clear tracking and specific kind of handling of hazardous waste. States are left with that job, and more often than not, state officials – citing a lack of resources -- defer to the industry to get the job done.

The issue of where the waste goes, which I have written about in several posts, is especially pressing these days, as tens of thousands of shale gas wells come on line in Pennsylvania and Ohio, and tens of thousands more elsewhere in the country.In the absence of federal hazardous waste laws and lack of regional planning, placing the waste becomes a process of default as various states consider legislation to ban it. (New Jersey legislators are crafting a second attempt at a ban after the first was vetoed by Gov. Chris Christie, and the issue is also being considered in New York and Connecticut.) Hence, rather than guided by a master plan, the waste is following the path of least social and political resistance. Much of what comes from the Marcellus, as far as we can tell from industry’s self policing records, goes to injection wells in Ohio, and various landfills and private treatment plants in Pennsylvania and New York.

In addition to Seneca Meadows, DEP records show that New York destinations for waste from the Marcellus Shale include Hyland in Angelica, the 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.

Communities like Niagara Falls (and notably Love Canal) tied to a history of toxic waste disposal are especially sensitive to the possibility of a future tied to more of the same. Even though the Buffalo area does not sit over a viable shale reserve, I have found during book signings there that community members are keenly attuned to the issues of shale gas development and, specifically, the lack of assurances about its waste stream.

Endicott is also one of those places. People in the village are angry that they were not notified about waste imports to the i3 Electronics plant. Matters were made worse last year when a corroded tank holding the contents of a Seneca Meadows shipment failed and at least 6,000 gallons of leachate spilled out, much if it soaking into the ground. Residents were not informed of the shipments or the spill. They were left piecing together information until a year later, when John Okesson, Peachey’s colleague at the DEC, explained details at the February meeting after sustained community pressure for the agency to account for it.

Rick White, a community member and labor advocate, summed up feelings at the end of the meeting. He referred to decades of spills, a pattern of secrecy, and a resulting legacy of environmental problems that, in his words, “stack up.” He continued:

This whole community is very sensitive to the idea that if there is additional toxic fluid, whether it is fracking waste or landfill waste or whatever it might be, and it’s coming into the village of Endicott for whatever the reason, whether it’s to make money or to enrich somebody’s pockets or it its simply to do a good service to the community, the negatives outweigh the positives. And this is why we are asking these questions.

His comments were met with applause from the 50 or so people in attendance.

Ruling allows Scroggins back on Cabot-leased land Fracking activist will fight buffer zone in May trial

Update, April 30 2104: Scroggins V. Cabot trial, set for May 1 in Montrose, Pa., postpomed until July 2.

***

A ruling Friday by a Pennsylvania judge to allow activist Vera Scroggins back on land leased by Cabot Oil & Gas is a “big win” according to her legal team, but the fight will continue in a trial scheduled for May 1.

An order, drafted by Cabot attorneys and handed down by Judge Kenneth Seamans in October, barred Scroggins from setting foot on land owned or leased by Cabot, “including but not limited to” well sites, well pads, and access roads. That language kept Scroggins from approximately 200,000 acres -- nearly 40 percent -- of Susquehanna County where Scroggins lives, including property of friends, neighbors, stores, parks, schools and health care providers.

After a hearing Monday, Judge Seamans modified the injunction to restrict Scroggins only from work areas designated by no-trespassing signs and a 100-foot buffer zone. The new order, issued on Friday, allows Vera to enter other land leased by Cabot, including markets, public spaces, physicians offices, and hospitals. It also allows her to use public roads that go by work sites, but the ruling stipulates that she cannot stop or linger at the entrances to access roads.

In an interview Friday with Associated Press reporter Michael Rubinkam, Scroggins’ attorney Scott Michelman characterized the revised order as “a big win,” but he added that the 100-foot buffer could pose unjustified restrictions. Scroggins said the revised order was “a step in the right direction. ” She told me today that she and her legal team will fight the buffer zone at a trial scheduled for May 1.

Scroggins’ vantage point was mostly from public roads by drilling sites, although Cabot claims that she also trespassed onto private land under lease by the Texas drilling company, posing a safety risk to herself and others. In a statement Friday, Cabot officials said they were "satisfied” with the ruling to maintain an injunction against Scroggins that “protects Cabot and its employees, contractors and others” and “keeps landowners from being exposed to liability that could arise from Scroggins' actions."

One of the main questions to be resolved: Is a buffer zone, which does not apply to other citizens, necessary to protect the health and safety of Scroggins and others, as Cabot claims, or is it being used by Cabot to discourage anti-fracking activists from filming or viewing Cabot operations from legitimate vantage points, as Scroggins claims.

Scroggins has taped and posted hundreds of video files on You Tube showing drilling operations in Susquehanna County since 2009, including spills, clean-ups, and discharges. The videos cast operations in a way that runs counter to the industry’s portrayal as clean and safe. Scroggins has also lead tours for political action groups, academics, journalists, and other interested parties visiting the area to learn more about drilling and the controversial practice of high volume hydraulic fracturing to stimulate the gas wells.

Cabot Oil and Gas v. Vera Scroggins

Cabot v Scroggins = heat over land rights, speech, fracking Pa. court considers injunction to limit activist’s actions

Vera Scroggins and her lawyers (left) at the Montrose courthouse Monday

A confrontation over free speech and land rights that began inside a courthouse in Montrose, Pennsylvania this morning grew more contentious outside, as lawyers and demonstrators took their arguments to the courthouse steps and parking lot.

The hearing, in the Court of Common Pleas before Judge Kenneth Seamans, involved what degree Cabot Oil & Gas can limit activist Vera Scroggins in her attempts to videotape drilling operations and related activity. The company has faced public relations and environmental problems in Dimock township after the state Department of Environmental Protection held Cabot's operations responsible for polluting an aquifer that supplies dozens of homes in Dimock Township.

Scroggins has taped and posted hundreds of video files on You Tube showing drilling operations in Susquehanna County since 2009, including spills, clean-ups, and discharges. The videos cast operations in a way that runs counter to the industry’s portrayal as clean and safe. Scroggins has also lead tours for political action groups, academics, journalists, and other interested parties visiting the area to learn more about drilling and the controversial practice of high volume hydraulic fracturing to stimulate the gas wells.

Scroggins’ vantage point was mostly from public roads by drilling sites, although Cabot claims that she also trespassed onto private land under lease by the Texas drilling company, posing a safety risk to herself and others.

One basic question before the court was whether Scroggins willfully and habitually trespassed. Her lawyers said that drilling zones were not always clearly marked with no trespassing signs, that Scroggins' ventures into drilling territory in each case were in good faith to openly ask questions and seek information, and that she always complied if asked to leave.

Two other questions, however, make the case a potential landmark test of a company’s control over property it leases but does not own. The first question is whether Cabot can legally keep Vera away from leased land, including access roads, with a buffer zone that extends into adjoining public roads and right-of-ways. The second question is whether a party that owns sub-surface rights but not surface rights can legally act as “gatekeepers” for who can and cannot come onto the land. Can a mineral rights lessee forbid a person who has been invited onto the land by the property owner to view operations?

Seamans granted the injunction in October, after Vera appeared in court without an attorney to answer the trespass charge.  Since then, the case has generated interest and outrage among activists who say Cabot is restricting limits on Scroggins’s constitutional right to report what is happening in her community, and its actions have a chilling effect on others. Attorneys Scott Michelman, of the Public Citizen Litigation Group in Washington, D.C. and Gerald Kinchey, in private practice in Sayre, Pa., have taken up Scroggins’ case pro bono.

Ostensibly, the injunction was designed to keep Scroggins away from work areas for safety reasons. But technically, the language forbids Scroggins from setting foot on land owned or leased by Cabot, “including but not limited to” well sites, well pads, and access roads. That phrasing is what makes the case a possible watershed. The Texas drilling company has leases on more than 200,000 acres -- nearly 40 percent -- of Susquehanna County where Scroggins lives, including rights to property of friends, neighbors, stores, parks, schools and health care providers. Obeying the injunction has required both active research to find out what land is leased, and also avoidance of places that she would normally go without thought.

At today’s hearing, Cabot proposed an alternative plan that would ban Scroggins from 150-foot setbacks from access roads and 500-foot buffer zones from work sites. Cabot attorney Amy Barrette, of Norton Rose Fulbright, argued the setbacks were necessary because “given Ms. Scroggins’ past conduct, if you give her an inch, she will take many, many miles, and she will be up on the well pads.”

Michelman argued that the order went well beyond addressing safety concerns and posed “a chilling effect” on the speech and actions of activists who wanted to call attention to fracking operations. An injunction that prevented Vera from entering designated work sites would be reasonable, he said, but not a buffer zone. He pointed out that such a zone could keep Scroggins from certain parts of public roads as well as areas that property owners are allowed on, even if they invited her to go with them.

The broad scope of the injunction is not about safety, but a ploy to intimidate activists, Michelman said in an interview after the hearing. “It tells them you will pay for exposing what is going on at these sites. You will pay for speaking out against the big oil and gas companies.”

During the hearing, Kinchy argued that, unless it is specifically written in a lease, the lessor of sub-surface rights does not have the right to dictate who can and cannot come onto leased property. That principal will be relevant if the case goes to trial. Jeremy Mercer, a lawyer for Cabott, rebutted that Pennsylvania case law does in fact give mineral rights holders such rights.

Seamans adjourned the hearing after attorneys from each side agreed to send the court versions of the order that they could live with. Judging by the arguments, that would be in Scroggins’ case an injunction that keeps her from well pads, work areas, and access roads, and in Cabot’s case an injunction that keeps Scroggins from both these areas and specified setbacks from these areas. The case is scheduled to be tried May 1 unless the parties can come to terms.

A small group demonstrated support for Cabot 

More than 120 people attended the hearing, many of them activists from outside the area who were there to support Scroggins. A contingent of a half dozen or so drilling proponents, including some local landowners, demonstrated support for Cabot’s position.

After the adjournment, the crowd swarmed outside the courthouse where both pro-drilling and anti-fracking groups held press conferences. In a rally on the courthouse steps, drilling supporters held signs that said “Drill Baby Drill” and “Vera Get Off Our Land.” At the same time, a mix of Scroggins supporters and adversaries gathered in the corridor that lead to the back parking lot. Vera had sat quietly during the hearing and let council do the talking. Now, flanked by her lawyers, she used the platform to criticize the industry’s safety record and to call for more scrutiny.

“It sends a message that if you speak out, you will pay. This is an outrage,” she said, citing violations that the state has issued the company. “Why are they allowed to operate?”

Barrette (right) argues with Michelman over intention of Scroggins injuncttion

After about 10 minutes, a sheriff’s deputy told the crowd to go outside because the congestion in the hallway was posing a hazard. About this time, Barrette, Cabot’s attorney, shouldered her way through the crowd to Michelman, who was standing next to Scroggins. After an exchange, they exited to the parking lot. Some of the conversation was lost in the noise, but it had to do with the merits of the injunction and the way it was written.

“Did you draft that order?” Michelman said as the two faced each other in the parking lot.

“Yes, and the order was not sought to keep her from the hospital or any of those other places,” Barrette replied.

“Its language was categorical,” Michelman said. “If you wanted something different, you should have drafted it more carefully, and if you didn't like what the court entered you should have moved to modify it. You could have done that in the last five months.”

“We gave you a very narrow proposal that you rejected many times,” Barrette said, as a cluster of reporters and spectators caught up with them. “We'll let the court decide.” Barrette referred questions from reporters to George Stark (a company spokesman who has not returned my calls) and she walked away to rejoin the pro-drilling group in the front of the courthouse.

Shale Shock Media captured some of the events following adjournment, including the confrontation in the parking lot, in the video below:

Coming soon: Audit to grade DEP’s oversight of drillers Water testing protocol remains center of transparency flap

Is the Pennsylvania Department of Environmental Protection a lion or a lamb when it comes to regulating and policing shale gas operations?

One qualified and independent source will soon provide an answer. Im May, the office of Auditor General Eugene DePasquale is due to release a detailed investigation into the practice and protocol of the state's regulation of the drilling industry, a source from his office told me this week.

DePasquale announced the review in January, 2013, in the wake of a controversy over whether state investigators obscure or alter the outcome of investigations into drilling’s impact on water supplies by disclosing an incomplete suite of chemical tests. The intention of the probe, according to a letter from DePasquale, is to determine the "adequacy and effectiveness of DEP's monitoring of water quality as potentially impacted by shale gas development activities, including but not limited to systems and procedures for testing, screening, reporting and response to adverse impact such as contamination."

In other words, the probe will get to a question at the crux of the fracking debate: whether and to what degree the DEP is safeguarding water supplies from drilling.

The DEP’s testing protocol for wells potentially affected by drilling operations entered the public spotlight with a case by Loren Kiskadden seeking damages for pollution against the agency and Range Resources. The case, now pending in the Court of Common Pleas, claims that the department withheld full results of tests of Kiskadden’s water in June 2011 and January 2012. The ensuing “suite code” controversy came to light in September 2012 with the deposition of Taru Upadhyay, the DEP Bureau of Laboratories technical director, at a Environmental Board Hearing. Upadhyay testified that results for some metals, including copper, nickel, zinc and titanium, were not included in Kiskadden’s final report. This was not unusual, she said, because the lab only verifies concentrations of compounds ordered by the investigator from the oil and gas division, even if the samples were tested for a broader range.

DEP officials have since confirmed that the testing protocol for markers of contamination from Marcellus Shale production – including what and how many chemicals  are included in the final analysis -- falls to the discretion of individual investigators because they are best able to judge what chemicals are relevant to the investigation.

Watchdog agencies have characterized the DEP’s approach as random, incomplete, and a violation of public trust. Steve Hvozdovich, Marcellus Shale Policy Associate for Clean Water Action, said residents and watchdog agencies took it on faith that the department was following accepted protocol outlined by the federal Environmental Protection Agency in Method 200.7 – which requires testing for at least 24 different chemicals.

“This comes down to a lack of trust and a lack of transparency,” he said. “Nobody outside of the DEP offices knew this – that they were not quality controlling and quality assuring for the full 24 chemicals. It took a law-suit to bring that out … We need to have comprehensive testing, especially in a case where it originates from a residential complaint.”

Clean Water Action was one of a dozen agencies that signed a letter to the DEP on January 25, 2013 with concerns that the agency's testing methods “lack transparency; result in the withholding of vital data from affected households and the public; force residents to potentially undergo prolonged exposure to contaminants that impact health; and delay action necessary to correct pollution of drinking water supplies.”

But concerns of environmental activists are not shared by all. The DEP’s approach to regulation and enforcement under drilling supporter Governor Tom Corbett has a lot to do with the boss’s political values of how much government should be overseeing private business. The oil and gas industry – provider of cheap abundant energy that we all demand – has been the long-time beneficiary of regulatory passes. For starters, the entire problem of determining what, how, and if chemicals affect water is prodigiously complicated by the fact that the industry is exempt from federal laws that require disclosure and regulations of chemicals injected into the ground, and also laws governing hazardous waste coming out. Corbett, who won election in 2010 partially on a platform to limit state regulations on the industry, has been praised by industry supporters who defend the DEP oversight as sufficient and responsible.

No matter what it says, DePasquale’s report, coming in May, will likely be controversial due to the political volatility of the subject matter. In addition to the water-testing issue, the probe will “determine the adequacy and effectiveness of DEP’s monitoring of the handling, treatment and disposal of waste connected with shale gas development activity, including but not limited to systems and procedures for testing, tracking, treating, disposal, data collection and analysis, reuse and recycling, reporting, and response to adverse impact such as contamination.”

It’s sure to add a new wrinkle to the shale gas debate as the election year heats up, beginning with primaries among gubernatorial candidates who will likely have something to say about it. Those include John Hanger, a Democrat, who served as DEP Secretary under the Ed Rendell administration. Hanger is a gas supporter, but he is also in the pro-regulatory camp. As DEP chief he has been critical of – and sometimes at odds with -- certain companies he characterized as rogues. He has called on the DEP to reform its protocol to ensure a comprehensive data set of water test results gets to people who are potentially affected by drilling. The degree Hanger's message resonates with primary voters will be one of many tests of how much weight regulatory reform carries in the larger political equation.

NY nat' gas projection exemplifies doublespeak on fracking Cuomo plan bases outlook on conflicting scenarios

Will Fracking be part of New York’s energy picture for the next 20 years, or not? The state’s draft 2014 Energy Plan is supposed to answer this kind of question, and the fact that it appears to but doesn’t represents the politically unwieldy position Governor Andrew Cuomo finds himself in with the fracking debate.

In a recent post, I wrote that the plan “makes no mention of developing New York’s shale reserves through fracking, a discussion that remains the elephant in the room. But the plan gives a nod to the role of natural gas and more infrastructure as part and parcel to some very ambitious, of very broad, goals.”

An astute reader, Keith Schue, flagged this. He pointed out Cuomo's plan does in fact mention fracking, albeit in a convoluted and (in my view) meaningless way. Schue directed me to “Volume 2 – Sources,” and a subsection on p. 88 titled "New York Production Forecast." (Embedded below)

My own review of this section found several things worth noting.  First, the forecast, accompanied by a chart, extends through 2035. During that time, the state’s natural gas production is “expected to decrease significantly,” according to the text, due to a “decline in existing formations” and “lack of new wells being drilled.”

Yet, oddly, the line plotted in the accompanying “figure 32” gas production climbs impressively through that period.

The text attempts to explain this, ignoring the inconsistency in the original analysis that gas production was expected to decline. The graph illustrates “a conservative Marcellus Shale natural gas production level.” This “conservative” level accounts for “potential (my emphasis) permitting and production difficulties related to horizontal drilling and hydraulic fracturing.” It offers this elaboration. “If these difficulties are minimized, Marcellus production levels could potentially be higher.”

Finally, it explains that the graph “would show a forecasted overall decline in production continuing through 2035 if the current prohibition on shale development continues.” It concludes that “Regardless of actions within New York boundaries,” ample supplies of gas exist elsewhere “as long as the interstate pipeline capacity exists.”

In a nut, the plan says that Marcellus gas will make production go up, contingent on unknowable factors if it happens, and go down if it doesn’t; and New York can get gas elsewhere anyway, if their are enough pipelines.

To my eye, the analysis appears at first blush to be vague to the point of meaninglessness. But I will grant that it provides a baseline for discussion and many will find that the very dance around the Marcellus question along with the excruciating qualifications and parsing of language are emblematic of the ambiguous state of our energy future.

Shue, who is working with various environmental and anti-frcking groups, explained in an email that he and others were in the process of “writing an exhaustive critique of the energy plan and will be shining a spotlight on this sly mention of fracking at the hearings too.” I am happy that others are looking carefully at this, and I welcome their assessments.

2014 Draft Nysep Vol2 Sources (Page88) 1

Moratorium or not, NY begins to feel fracking’s impact Outcome rests with future of consumption, production

While New York’s governor Andrew Cuomo has officially tabled a decision over the politically explosive issue of fracking until sometime after elections, his state’s energy dilemma continues to simmer.

For worse or better, the Empire State will continue to feel impacts of the fracking boom for the next decade or more. The question is how big those impacts will be. The answer, to a large degree, rests with the governor, who can direct policy encouraging or discouraging both production and consumption of natural gas, and/or alternatives.

Even with no decision to allow shale gas wells to be permitted within the state, fracked natural gas and oil are flowing into or passing through New York at an accelerated rate as the on-shore drilling boom continues to ramp up nationwide. Crude oil from the Bakken shale in North Dakota has begun passing through New York at an annual rate of 2 billion gallons, traveling by rail to Albany and then down the Hudson River on tankers and on to refineries in New Brunswick Canada. (The oil carries unusual risks. With relatively high concentrations of gas, it has caused explosions after four separate rail mishaps in North America, including one that killed 47 people in Lac Megantic, Canada.)

Numerous infrastructure plans to store and transport natural gas within New York are also well underway. Liberty Natural Gas has proposed a terminal to import gas to communities in New York and New Jersey. The Port Ambrose facility, proposed 19 miles off Long Island, would take in liquefied natural gas (LNG) from ships, convert it back into gas, and pipe it to markets in New York and New Jersey now dependent on heating oil. Anti-fracking activists fear the port will be converted to an export facility. In addition to various pipelines on the drawing board and underway throughout upstate and downstate, there are plans to increase storage capacity. In the Finger Lakes community of Seneca Lake, Inergy Midstream is seeking final approval from the Department of Environmental Conservation to store propane in depleted salt mines, which would serve as a distribution hub through the region. The project faces intense opposition from grass roots and institutional environmental causes.

Over the long haul, the impact of regional and national shale gas development on New York rests with two primary factors: How much gas the state consumes, and how much it produces.

On the consumption side, natural gas is a primary fuel for heating and electricity generation. Based on a draft of the New York State 2014 Energy Plan, recently released by the governor’s office, that trend is destine to continue, like it or not. The plan calls for expansion of natural gas infrastructure to replace heating oil – which is both dirty and expensive -- in urban areas downstate and elsewhere.  Initiative 9 on p. 44 states it this way:

Reduce reliance on petroleum products for heating buildings by supporting the use of clean alternatives to heating oil and expanding access to natural gas in the near term while pursuing strategies to reduce natural gas leakage.

Simply put, natural gas consumption will continue to be a staple in the state’s energy diet with intended improvements to its leaky delivery system.

The plan talks much about consumption and infrastructure of natural gas, but little about production. It makes no mention of developing New York’s shale reserves through fracking, a discussion that remains the elephant in the room. But the plan gives a nod to the role of natural gas and more infrastructure as part and parcel to some very ambitious, if very broad, goals. An overriding goal (rooted in policy from Gov. David Paterson's administration) is to reduce the amount of greenhouse gasses emitted in the state by 80 percent by 2050. It’s important to note that the gauge for measuring this goal is predicated on carbon; and that fuel oil – like coal -- emits much more carbon than gas. Critics like Bob Howarth feel the plan falls well short of fully accounting for the impact of methane. Howarth, a Cornell University ecology professor, is one of several co-authors of a paper challenging the notion that methane is an environmentally sound alternative to coal or other fossil fuels for that matter. “Natural gas is a disastrous fuel,” he said.

There are other aspects to the 2014 Energy Plan, including a $1 billion “New York Green Bank” to invest in “clean energy projects”; an initiative that lists “increased transportation alternatives”; and independent “microgrids” that can offer alternative and backup sources to communities apart from primary  grids.

The plan is easy to look at, with an abundance of glossy and marginally relevant pictures of happy people in scenic landscapes, but difficult to read with bureaucratic jargon that is simultaneously dense and vague. Some critics called out the report for a lack of specifics and the preponderance of gloss. Andy Leahy, a drilling proponent and blogger who has been following developments in New York, wrote in Shale Gas Now that the Energy Plan was “governance of wishful perception” and he suggested it was “catering to the uninformed, wishful desires of everybody in New York who wants to feel vaguely good about the future, but to stay lit and warm throughout, burning what's extracted out of Pennsylvania.”

Others were enthusiastic about the plan. Pierre Bull, a policy analyst for the National Resources Defense Council, wrote on the agency’s blog, Switchboard:

The already-impressive NY-Sun Initiative is about to become one of the most ambitious solar programs in the nation, with the governor committing, through a filing with the state’s Public Service Commission, $1 billion to the program—that’s right, $1 billion—over the next 10 years. (Governor Cuomo’s text also announces a major new program to help K-12 schools throughout New York go solar. You can read more about that here.) The governor’s goal is to install 3,000 megawatts of solar across New York. That’s enough solar to power 465,000 New York homes, cut greenhouse gas emissions by 2.3 million tons annually—the equivalent of taking almost 435,000 cars off the road—and create more than 13,000 new solar jobs. 

If New York expects to become a national showcase for how to dramatically reduce greenhouse gasses, it has plenty to work with. But assessing how that measure is made – and the degree that it includes natural gas -- is critically important.

By design more a PR gloss and political showcase than a technical document, the daft energy plan still serves a critical role as a catalyst for public discourse and involvement on the politics and technicalities of energy delivery. To that end, public hearings will be held around the state in February and March. (Full schedule here.)

The primary question not mentioned in the energy plan is whether New York will allow exploration to begin for shale gas production. With a recent announcement from Department of Environmental Commissioner Joseph Martens that the state will not issue permits until at least 2015, the governor’s staff has put speculation to rest that we will see fracking in New York anytime soon.

But both landowners and industry interests are mounting legal challenges in an attempt to force the governor’s hand. Tom West, an industry lawyer, is a primary figure behind the challenges, which I wrote about here. (Note that a hearing for West’s case, Wallach v New York state, has been postponed until March 7. This is so the complaint can be filed with a parallel case by the Joint Landowners Coalition, represented by attorney Scott Kurkoski of Levene, Gouldin & Thompson and funded by the Rocky Mountain Legal Defense Fund, an NGO that supports conservative causes.

Regardless of how the challenges to Cuomo’s indefinite delay on fracking turn out, another group has brought up a nagging question about the extent of New York’s shale reserves, and whether development is even viable at current prices. Chip Northrup, a former industry investor, accompanied by a group of critics with backgrounds in geology and industry, have been making presentations, most recently to a state Senate committee. The thrust of their argument is that geological data suggest New York’s shale gas reserves are not worth the bother, but speculators who gamble on them may still cause significant environmental headaches for the greater public.

All the speculation, either supporting or undermining the size of the state’s fossil fuel assets, won’t change this underlying reality: Upstate and New York City need lots of energy now, and tend to consume it in its cheapest and most available form.