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Debate runs deep

Depending on whom you ask, drilling for natural gas in New York using a method known as hydraulic fracturing is either the answer to the state’s financial woes-or the end of life on Earth as we know it.
 
An estimated 7.5 trillion to 9.5 trillion cubic feet of gas is contained underground in an 18,700-square-mile portion of the state known as the Marcellus Shale. Proponents of drilling for the gas say it could translate into nearly 40,000 new jobs and an additional $600 million in local, state and federal taxes in New York. One report estimates the value of potential activity at $1.89 billion in 2015.
 
Critics charge that drilling for the gas and transporting wastewater are threats to the environment that will be felt for generations. The procedures will poison drinking water, cause noise and air pollution and fill rivers, lakes and streams with chemicals, harming fish and wildlife, they claim.
 
This is the first of an ongoing series of articles on the natural gas industry in New York and its interests in the Marcellus Shale.
 
"The anti-drilling folks (say) the drillers are going to be drilling in the New York City watershed and it’s going to pollute all the water for 15 million people," said Robert Poreda, a professor of earth and environmental sciences at the University of Rochester and an oil, gas and hydrologic consultant.
 
"On the other hand, the drillers and the oil companies point to exploration in the Williston Basin in North Dakota and West Texas, where there are more cows than people and the geology is very simple and 99.9 percent of the time there’s not going to be a problem."
 
And somewhere in the vast in-between: a gray area of risk versus reward.
 
"It’s much like a polarized political debate," Poreda said. "It’s not black and white."
 
Hydraulic fracturing, commonly known as hydrofracking or simply fracking, has been in commercial use since the late 1940s. An American innovation, the practice involves pumping millions of gallons of water, sand and chemicals into underground rock formations to extract natural gas. When it is used with horizontal drilling, the well shaft is drilled vertically but turned horizontally when it reaches the shale rock level, as far as 10,000 feet below the surface. The pressure in the well fractures the surrounding shale, and natural gas flows from fissures in the rock into the well.
 
After the gas flows out of the well, it is stored in tanks and piped to market. The water and chemicals used to release it come back up, too. While methods of handling wastewater vary, generally it is stored in open pits and then trucked to a treatment plant.
 
Portions of the Southern Tier and Finger Lakes regions lie in the Marcellus Shale formation, which extends into parts of Pennsylvania, Ohio, New Jersey, Maryland, West Virginia and Virginia. Rochester lies just north of the shale; the city’s water supply in Hemlock and Canadice lakes is atop the Marcellus and Utica shales.
 
"Everybody is talking about hydrofracturing. The issue isn’t about hydrofracturing. It’s about supporting indigenous supplies of gas in New York State or not," said Brad Gill, executive director of the Independent Oil & Gas Association of New York.
 
"This is nothing new. It’s really bigger than hydrofracturing. It’s should we be drilling for natural gas or not, because hydrofracturing is just one component of it. Without (it), there is no exploring for natural gas. … It’s the one complaint about our drilling process that has been most misunderstood and feared by the public."
 
Shale rock is tight and highly stratified, and hydrofracking is used increasingly in drilling as the oil industry turns to natural gas. Compared with other shale formations, or plays, in the country, Marcellus’ natural gas reserves are largely untapped-and vast. At approximately 95,000 square miles, it also is the largest play in the country. The standard for shale gas development is the Barnett Shale Basin, a 5,000-square-mile play in Texas. It had a production growth rate of 3,000 percent from 1998 to 2007, according to a 2008 study of unconventional natural gas development commissioned by the American Clean Skies Foundation.
 
While Ohio and Pennsylvania have embraced hydrofracking for natural gas production in the Marcellus and Utica shales, the debate over its environmental safety and ultimate economic payoff is raging in New York.
 
On one side of the debate are oil- and gas-related companies-along with cash-strapped municipalities, support businesses and landowners-that see an economic boon from the state’s immense gas supply. They point to job growth and rising tax revenues in states that allow hydrofracking.
 
On the other side are environmentalists and some lawmakers who say the operation jeopardizes the quality of air and water. They point to environmental setbacks in other regions as reason for caution.

If not now, when?
The Marcellus Shale gets its name from the northern Finger Lakes town near Syracuse where the rock layer meets the surface. It is roughly 7,000 feet below ground near the Pennsylvania border in the Delaware River Valley. Drilling activity would occur in areas deeper than 2,000 feet, the state Department of Environmental Conservation says.
 
Shale rock’s tightness and relative depth have long made it a challenging source of gas. Advancing technology used to extract natural gas-including recent enhancements to horizontal drilling and hydraulic fracturing-now makes it a more attractive option. The Marcellus play’s proximity to high-demand markets of the Northeast is another plus for producers.
 
There are dozens of shale regions around the country, and shale gas has been produced for years from Texas to North Dakota.
 
"It’s a lot of sort of ingenuity and trial-and-error approach and some very good technical expertise that allowed them to advance," Poreda said. "In places like the Middle East, it’s a piece of cake to get out the oil, so you don’t have to try very hard."
 
The U.S. Geological Survey estimates the resource base, or the amount, of U.S. natural gas to be 827 trillion cubic feet. Geologists believe the Marcellus play in its entirety may contain as much as 489 trillion cubic feet, making it a potentially dominant player in the natural gas industry. How much is commercially recoverable within New York’s boundaries is not known.
 
Some 13,000 oil and gas wells in New York are active sites, the DEC reports. While horizontal drilling already is in use throughout the state, drilling on the scale being proposed in the Marcellus Shale is uncharted.
 
Shale gas has been a game changer in the United States, and the pattern for its production is huge growth, said Phyllis Martin, senior energy analyst with the U.S. Energy Information Administration.
 
As a resource base, the Marcellus is huge, she said. But production lags other shale areas.
 
"You’ve got growing production in the Marcellus, but it’s certainly not the largest by any means. Some of that may be regulations, holding drilling back and all," she said. "Although it’s huge, they’ve just sort of started to touch it."
 
In tracking trends, the Energy Information Administration makes no assumptions about environmental regulations that might affect production, she said.
 
While U.S. natural gas production has increased, prices have fallen considerably, Martin added, likely for a variety of reasons, including lower consumption during the economic downturn.
 
As of last October, the amount of land leased for drilling in the Marcellus was far outpaced by other U.S. plays.

Measured steps
To say New York is weighing how to proceed compared with its neighbors to the west and south would be an understatement, says Gill, whose trade group represents oil and gas producers with interests in the state.
 
Pennsylvania’s drilling boom started in 2008; Ohio’s in 2010.
 
"Pennsylvania has viewed the oil and gas industry as an asset. Ohio absolutely views it as an asset. New York doesn’t," he said. "It’s political. … You’ve got a disproportionate number of voters and legislators (in New York) who don’t understand and fear industry activities, and they’re driving the policy."
 
Gill also is president and owner of Earth Energy Consultants LLC and vice president of Chautauqua Energy Drilling Inc., which drills wells in Pennsylvania. He and other IOGANY members are anxious to get going in New York, where the DEC has been reviewing the issue since 2009.
 
High-volume hydrofracking is on hold in New York until the DEC wraps up an extended review this year. New York’s State Environmental Quality Review Act requires further review before well permits can be issued because the process requires large volumes of water.
 
Anthony Ingraffea, an engineering professor at Cornell University, said the state’s measured steps are intentional and important.
 
"New York State has different laws on the books relevant to new industry, (such as) the SEQR law. If industry is new and coming here, and if the state judges there are environmental issues with sufficient impact, a SEQR review is done. Pennsylvania didn’t have to do it," he said.
 
Last September, the DEC released a revised draft Supplemental Generic Environmental Impact Statement, accompanied by a socio-economic impact analysis report, after a first draft SGEIS in 2009 prompted more than 13,000 public comments. The comment period for the revised draft SGEIS ended Jan. 11. More than 18,000 comments had been received by press time.
 
The SGEIS allows the state to review large-volume water withdrawals and the potential impact on streams, public water supplies, and fish and wildlife. It also looks at the elements of hydrofracking itself: well site facilities and fracking fluid composition, storage and transportation, reuse potential and treatment options.
 
State officials want to know what impact, if any, hydrofracking will have on ground and surface water, road use, the environment, communities, noise, and visual and air quality. At stake are environmental and health concerns, tax revenues and job creation.
 
Companies that have long drilled in Western and Southern oil and gas regions find unfamiliar terrain in the Northeast. Their drilling experience lies in mostly flat geology, not the folds and faults of Appalachia, critics charge. In Pennsylvania, the geology leads to enhanced migration of both brines and natural gas, said UR’s Poreda, who has consulted as an engineer for some of the firms.
 
"(The Western and Southern firms) know very little. They have no internal expertise on the Marcellus Shale," Poreda said. "So they need to evaluate it.
 
"This is what we’re trying to impress upon these folks, that we have local expertise," he said.
 
IOGANY’s Gill, a Western New York native, said the drilling and hydrofracking have been proven to be safe and effective, even in Appalachia’s rolling terrain.
 
"In Western New York, some wells are 800 or 900 feet deep. Groundwater may be at 100 feet. We’re using chemicals and we’re using hydrofracturing with 800 feet separation, and we’ve never had a problem," he said.
 
"We are now at 5,000 and 6,000 feet down, so the separation between the zone we’re treating and the groundwater is much, much greater. And microseismic (study) shows that extension of our fractures doesn’t typically extend more than several hundred to 800 feet. There are plenty of scientific reasons why it’s impossible for fluid in the subsurface to migrate vertically to freshwater zones.
 
"Methane in water happens naturally far, far, far more often than what could be caused by a drilling operation. Has it ever happened? Yeah, it has. But it’s remediated quickly," Gill said. "That is well-documented."
 
Cornell’s Ingraffea, who has given presentations on the dangers of natural gas production at community gatherings around the state, agrees-to a point.
 
"It is perfectly true, in my opinion," Ingraffea said, "that a very high percentage of water wells in New York and Pennsylvania are overlying shale formations that have naturally occurring methane in them. But how much?"
 
Dozens of landowners in New York have received letters from the DEC informing them that their private water wells have been contaminated by methane or other hydrocarbons from a nearby gas well, Ingraffea said.
 
What to do with wastewater is another chief concern for the DEC. In a widely published 2008 editorial, Pete Grannis, then DEC commissioner, addressed the environmental concerns around wastewater.
 
"Before any permits are issued for horizontal wells in the Marcellus formation, we will know what is going into and coming out of the ground," he wrote. "We will know how the large quantities of water needed for these operations will be managed and stored in order to protect our critical water resources. And we will know how any wastewater will be properly treated and disposed of."
 
The current draft SGEIS would require regulation of wastewater disposal. The water, sand and chemicals left over from the process must be treated and disposed of in an environmentally safe manner.
 
However, the majority of industrial waste treatment plants in New York are not equipped with the technology required to treat wastewater chemicals.
 
A growing number of oil and gas producers are reusing the wastewater through closed-loop systems that separate solids from liquid, but the solid residue still has to be disposed of, Ingraffea said.
 
"Recycling is good, it’s better, but it doesn’t solve the problem," he said. "The DEC doesn’t propose a solution. It’s not the DEC’s job to propose a solution. It’s the industry’s job to propose a solution to be reviewed by the DEC.
 
"It’s their waste. That shouldn’t be a burden on the taxpayers of New York. You produce it, you solve it."
 
Lawmakers opposed to hydrofracking want to forestall it further. Democratic Assemblyman Robert Sweeney of Long Island, chairman of his chamber’s Environmental Conservation Committee, indicated last week that he would seek an extended moratorium on hydrofracking for natural gas until June 1, 2013. Republican Sen. Greg Ball of Putnam County, an outspoken opponent of drilling, is sponsoring a companion bill in the Senate.
 
A previous moratorium passed by both houses of the Legislature in 2010 was vetoed by Gov. David Paterson, who instead issued an executive order banning drilling permits to give the DEC more time to study the issue. Last September, the DEC issued its revised draft SGEIS.
 
Proposed legislation comes out of districts that do not and will not have wells, Gill said. Legislators from districts that lie above the Marcellus Shale, on the other hand, typically speak in favor of drilling, touting the economic benefits.
 
"If you look at the moratoriums, those in favor are those who have thousands of wells in their district," he said.
 
Gov. Andrew Cuomo did not mention hydrofracking in his recent State of the State address, but in previous comments health and environmental safety issues have been a concern.
 
"I can’t tell you how many people tell me they support natural gas drilling but are opposed to hydrofracturing. Well, you can’t have one without the other," Gill said.

1/13/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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