Deep reservoirs could prove useful, but fracturing may be a threat

BY ERIC LIDJI FOR GREENING OF OIL 

Conversations that focus on the value of what is coming out of the Marcellus Shale often miss the value of what can go into it, according to an executive with Consol Energy.

While Consol is focused on producing natural gas from its 250,000 acres in the Marcellus Shale, the company also sees the potential for making money from depleted reservoirs.

“I think pore space is going to become a very valuable commodity if we move into a carbon constrained world,” Steve Winberg, Consol’s vice president of research and development, said at the Aug. 17 Energy Inc. conference in Pittsburgh, hosted by the Pittsburgh Business Times. A player in both coal and gas, Consol holds around 4.5 billion tons on coal reserves and more than 1.4 trillion cubic feet of natural gas reserves.

Should Congress ultimately pass a cap-and-trade bill, or some other form of carbon regulation, a move Consol and other gas producers generally oppose, “this part of the country can benefit because we are blessed with a lot of pore space,” Winberg said.

Winberg was referring to various iterations of Carbon Capture and Sequestration, a process where carbon dioxide is removed from fossil fuels and stored in underground geologic formations. CCS is a way to reduce the carbon footprint of fossil fuels.

CCS technology continues to advance around the world, but generally is only economic in countries with carbon markets, or in situations where one company can sell its carbon dioxide to another company for some use, such as enhancing oil recovery at old fields.

Pennsylvania is prime for CCS

A major CCS operation could create natural synergies in Pennsylvania.

Pennsylvania and neighboring West Virginia form the premier coal-producing region in the country. Pennsylvania also is a major electricity producer, much of it coal-fired.

Pennsylvania began seriously looking into CCS in 2008, as part of the requirements of Act 129, a much broader regulatory effort to reduce energy consumption and demand.

A 2009 report by the Clinton Climate Initiative conducted for the Pennsylvania Department of Conservation and Natural Resources imagined an integrated CCS network in Pennsylvania, rather than many unaffiliated pilot projects. It estimated that the cost to capture and store carbon in Pennsylvania would be among the lowest in the world.

And physically, Pennsylvania has the right geology for a big CCS project. The bigger hurdle is logistical: how do you get all that storage space into the hands of a single entity.

A 500-megawatt plant capturing 90 percent of its carbon dioxide emissions over 40 years would need 100 square miles of pore space, according to the U.S. Department of Energy.

“Assembling storage rights on that scale is a fundamental and perhaps insurmountable barrier to the successful deployment of at-scale CCS on-shore in the United States in the absence of Federal carbon caps and enabling legislation,” the DCNR report concluded.

Fracturing could change reservoirs

The Marcellus Shale could change that dynamic for better or for worse.

The report notes that the Marcellus Shale, once depleted, could become a potential storage site, especially because companies have been acquiring land positions. Those positions could make it easier to arrange large CCS projects, although the leases that allow for mineral extraction don’t always automatically allow for injections as well.

However, another DCNR report found that continued exploration and development of the Marcellus Shale “could potentially compromise the integrity of this formation as a viable cap rock in areas of natural gas production.” This is because the Marcellus Shale is developed through hydraulic fracturing, which literally cracks open underground rocks.

Those cracks might make sections of the Marcellus Shale unsuitable for CCS, which requires formations to be completely sealed off to keep the carbon dioxide sequestered.

That fracturing could also jeopardize other potential CCS sites.

The Marcellus Shale, located between 5,000 and 8,000 feet underground, is the geologic “cap” that isolates an even deeper formation called the Oriskany Sandstone. Fractures in the Marcellus could threaten the isolation that makes the Oriskany a CCS candidate.

Conventional oil and gas drilling could cause similar problems, the report noted. For that reason, it suggested designating certain areas for carbon dioxide injections, which could prove extremely difficult at a time when gas is a tradable commodity but carbon isn’t.

Links of interest

The Pennsylvania Department of Conservation and Natural Resources’ collection of recent reports on the viability of Carbon Capture and Storage in the state.

Consol Energy

Shale news in brief

Opposition to Marcellus Shale drilling continues to grow in Pittsburgh.

Pittsburgh City Councilman Doug Shields introduced a bill to ban gas development anywhere in the city limits. The city may not have the legal authority to enforce that ban, but Shields believes opposition to drilling could eventually lead to a change in state law.

Because Pittsburgh is very densely populated, finding enough room to set up a drilling operation might prove difficult for gas companies. Recent public chatter, though, noted that various cemeteries around the city could be spacious enough. This week the Catholic Cemeteries Association in Pittsburgh acknowledged it signed a mineral lease back in 2008. “It’s a 200-acre property, but it’s filled with burials,” Annabelle McGannon, executive director of the association, told the Pittsburgh Tribune-Review about the one city cemetery. “I believe they need five acres minimum to drill. It’s not there.”

Meanwhile, debate continues about potential drilling on another large source of open land: state forests. The Pennsylvania Department of Conservation and Natural Resources is trying to figure out where it does and does not hold mineral rights on state forests, which were cobbled together in piecemeal land deals decades before the drilling boom.

But the DCNR also believes large-scale leasing in state forests in a thing of the past.

That said, drilling in state forests could be very lucrative for Pennsylvania. According to the DCNR, the state collected $680,877 in Marcellus Shale royalties in July 2010.

As New York lawmakers inch closer to a moratorium on Marcellus Shale development, Gov. David Paterson said he wouldn’t support drilling without “overwhelming evidence that nothing will happen.” The New York Senate recently passed a moratorium bill that industry groups say would unintentionally ban conventional gas drilling in the state.

Range Resources has published the first completion reports since announcing it would voluntarily disclose details about its hydraulically fractured wells in Pennsylvania.

The Department of Environmental Protection fined Atlas Resources $97,350 for letting hydraulic fracturing fluids contaminate a watershed in southwestern Pennsylvania.

Europe could be the next stop for shale gas development. Halliburton recently performed the first hydraulic fracture operation into shale in Poland, the company announced.

Contact Eric Lidji at ericlidji@mac.com.