Bill sets off war of words with Pennsylvania, where moratoriums also are being considered

BY ERIC LIDJI FOR GREENING OF OIL 

The Marcellus Shale extends into at least six states, each with its own authority to regulate. That creates the possibility for differing approaches to oversight. So far the greatest differences have been between New York and Pennsylvania. Those differences grew August 4 when the New York Senate approved a moratorium on shale drilling.

The bill is short, only two paragraphs, but potentially broad. Industry groups worried that the bill, aimed at the hydraulic fracturing process used to produce natural gas from the Marcellus Shale, would in effect shut down all oil and gas drilling until next May.

The bill suspends “the issuance of new permits for the drilling of a well which utilizes the practice of hydraulic fracturing for the purpose of stimulating natural gas or oil in low permeability natural gas reservoirs, such as the Marcellus and Utica shale formations.”

State Sen. Antoine Thompson, who sponsored the bill, said the moratorium would give the state time to explore the potential environmental impacts of hydraulic fracturing.

For the purposes of the bill, hydraulic fracturing refers to “the fracturing of rock by fluid for the purpose of stimulating natural gas or oil for any purpose.” That clause prompted groups like the Independent Oil and Gas Association of New York to claim the bill would have unintended consequences on other forms of oil and gas development in the state.

The New York Assembly won’t get a look at the bill until September.

New York and Pennsylvania taking different paths

Although the southern tier of New York is believed to be prime territory for Marcellus Shale drilling, the state hasn’t seen as much activity as neighboring Pennsylvania.

The New York Department of Environmental Conservation is in the middle of studying the potential impacts of shale development. The state got around 14,000 comments on a draft version of a Generic Environmental Impact Statement on gas drilling last year.

That years-long process has held up drilling in New York. Meanwhile, Pennsylvania issued more than 1,700 Marcellus Shale permits between January and July 2010.

Those different attitudes have caused consternation across the border.

Some New Yorkers see Pennsylvania as a testing ground, where the kinks in shale development can be worked out before the industry comes to New York. Meanwhile, some Pennsylvanians believe the hesitancy in New York eliminates a competitor for economic growth. And vice versa, some Pennsylvanians believe New York is being more prudent, while some New Yorkers see jobs going to their neighbors across the border.

The New York Senate bill set off a war of words between officials in the two states.

Incidents like Dimock, Pa., where the state believes Cabot Oil and Gas allowed methane from a natural gas well to contaminate drinking water supplies, New York State Sen. Tom Libous was quoted in the Wilkes-Barre Citizens Voice as saying “Shame on the state of Pennsylvania. Shame on their Department of Environmental Protection, because they screwed up badly. They didn’t keep an eye on those who were drilling. They didn't keep an eye on environmental factors on behalf of the citizens of that state.”

In response, John Hanger, secretary of the Pennsylvania Department of Environmental Protection, noted the integrated nature of natural gas production, saying, “If they are so ashamed of what's gone on here perhaps they should stop buying Pennsylvania gas.”

Moratorium bills waiting hearings in Pennsylvania General Assembly

But the Pennsylvania General Assembly also is considering moratoriums.

Several bills are under consideration. Some would suspend drilling in state forests — one of the few lands owned by the state and therefore a potential source of royalty revenues — for three years, while others would suspend all Marcellus Shale drilling for one year.

Unlike the New York Senate bill, though, many of the bills proposing moratoriums in Pennsylvania also mandate environmental reviews, setting out specific issues for the state to research during the suspension and specific timelines for those studies to be completed.

Alberta preparing regulations for widespread shale development

Meanwhile, across a national border, Alberta is preparing for shale gas development, Gary Park writes in Petroleum News, a sister publication to Greening of Oil.

The Canadian province is the center of oil sands activity in Canada, but hasn’t seen as much shale development as neighboring British Columbia, home of the Horn River basin.

That’s not for lack of prospective shale gas formations in the province, though. The Alberta Geological Survey has indentified about 15 in the Western Canada Sedimentary basin, with the possibility of more than 1,000 trillion cubic feet in reserves.

The Alberta government is reluctant to discuss those big numbers until it irons out a regulatory structure to oversee large-scale commercial development of shale gas.

Alberta Environment Minister Rob Renner believes that the province’s “significant” experience from conventional gas development gives it an edge over jurisdictions new to resource extraction, but at a recent unconventional oil and gas forum in Calgary, he said “we have to keep an eye on the issue, we have to ensure that we’ve got the appropriate technology in place and that we protect our precious resource that is ground water.”

“We will continue to keep an eye very clearly focused on technology (related to the protection of ground water) as it progresses and moves into Alberta,” he added.

The issues at play in Alberta are familiar to shale regions in the United States and include surface water use for drilling, hydraulic fracturing and underground water sources.

Renner said he hoped Alberta could avoid the contentious debates arising around the U.S.

Alberta could get some advice from industry. Companies like Encana and Talisman Energy have extensive operations in Alberta as well as in shale plays in the Lower 48.

Read the full story here.

Shale news in brief

The natural gas industry wants Pennsylvania to allow the practice of “forced pooling,” where gas is extracted from beneath certain properties without leases, but with compensation, when one land owner among many objects to drilling. Proponents see it as a way to reduce surface disturbance, while opponents call it a form of eminent domain.

Dry weather in Pennsylvania is causing one producer to consider slowing Marcellus Shale drilling, because regulators are increasingly limiting water withdrawals.

Geologist Art Berman throws a wet blanket on shale gas in an interview with the Association for the Study of Peak Oil and Gas, saying reserves are overstated and many wells aren’t commercial. “No one talks about dry holes in shale plays, but there are bona fide dry holes-maybe 5 or 6 or 7 percent that are operational failures for some reason.”

Following several emergency incidents at natural gas wells, the Pennsylvania Department of Environmental Protection is arranging response services from CUDD Well Control.

Contact Eric Lidji at ericlidji@mac.com