Nick Snow
Washington Editor
An official from an independent producer and one from a leading environmental organization are working together to address some of the most contentious questions surrounding shale gas development. Mark K. Boling of Southwestern Energy Co. (SWE) and Scott Anderson of the Environmental Defense Fund (EDF) have asked other producers and groups to join them, they told OGJ in an Oct. 26 phone interview.
Boling, who is executive vice-president, general counsel, and secretary at the Houston independent, which also provides midstream services, said he approached EDF, where Anderson is a policy advisor in its Texas office, in January. "We felt the debate on hydraulic fracturing wasn't addressing the real question, which was what the obstacles were, and how we could overcome them," he explained. "We felt that the first step was to get more than one perspective."
SWE wanted to see if it and EDF could agree on a set of well-construction standards that state regulators would adopt and the general public would accept as effective, Boling said. "Shale gas is too important a resource to not be developed because of all the environmental and economic benefits it provides," he maintained.
Anderson said the goal is to address all the well construction and operation issues that are relevant to fracing. "When [SWE] reached out to us earlier this year and suggested working together, we agreed that the goal would be to write a model regulatory framework that would protect the environment as much as reasonably possible," he said.
After reviewing comments filed by various producers and environmental groups as well as rulemakings in New York and Pennsylvania, "we're in the process of coming up with a draft of possible regulations that we hope will be the strongest well construction regulations around," he continued. "We want to build a broad-based, multiple stakeholder effort with environmental groups and companies in the industry to develop additional drafts of these documents and work together to make state rules as close to the model framework we are developing."
Framework focus
They are concentrating initially on downhole issues, Anderson said. "The scope of our effort is limited now to well construction, well operation, and hydraulic fracturing," he told OGJ. "The downhole issues are fairly susceptible to a technical solution, so bringing in parties who might oppose each other is usually easier than tackling above-ground issues such as pits, roads, and water. Those will be very tough to address. We hope that by building a coalition to tackle downhole questions, it will be easier to take a collaborative approach to solving above-ground issues."
He said the model that has evolved addresses proper casing, cementing, and pressure management, as well as the presence or absence of a geologic confining area that can be counted on to prevent artificially induced fractures coming into freshwater zones. The model also addresses frac fluid ingredient disclosure, which, Anderson and Boling recognize, could be the most difficult issue to resolve. Nevertheless, they call for making frac fluid ingredient disclosure mandatory, with the information held by state regulators.
"The common thread we found on the gas migration issues in Dimick and other areas of Pennsylvania, in Ohio, and in Colorado is that the annulus problem comes from a bad cement job which isn't isolating zones and making sure that fluids don't make their way into the annulus and overpressure it," Boling said. "If that happens, gas coming into the annulus will find the path of least resistance, which usually is at the surface shoe, and creates the migration problems. We supported EDF's proposal to require pressure gauges and pop-off valves because we thought it made a lot of sense."
Boling noted that as he and Anderson were putting together the first draft of the model framework, they looked at many different states and how they handle—and in some cases, don't handle—such issues. "We also looked at [the American Petroleum Institute's] documents on hydraulic fracturing, then followed up with what's required in [underground injection control] programs, comments in New York hearings, and what's required in Pennsylvania," said Boling. "As the model framework continues to evolve, we see a lot of due diligence by states looking at various approaches and how they can improve what they're doing."
Anderson said, "The industry likes to talk a lot about voluntary disclosure, and we applaud people who do this, but voluntary disclosure is simply not responsive to the issue of the day, which is how we get in front of the public and policymakers the identity of these chemicals and what's being used where. We need actual—not voluntary—disclosure. The industry is shooting itself in the foot by hiding this information. It's in the industry's interest to resolve this issue and provide it."
Public trust basis
Disclosure of frac fluid ingredients is essential to building public trust, said the EDF official. "Without that knowledge, there's no way for people to rationally discuss what the risks are. Unless people know what the chemicals are, they don't know what the consequences could be," he said. "Having the information is essential to guide the use of limited research dollars. People who study toxicology say there's more we don't know than what we do know. This will help determine what needs to be studied first, and what needs to be studied most."
Anderson said he does not consider Colorado's regulations to be a true disclosure requirement because it requires operators to get the information from their fracing fluid supplies and keep it on hand until the state requests it. "Wyoming's recently adopted rules are very good, and Arkansas has some proposals out for public comment which we also think are good," he said.
SWE is experiencing first-hand the challenge of addressing legal questions about its shale gas operations. SWE's Southwestern Energy Production Co. (Sepco) subsidiary asked a federal district court in Pennsylvania on Oct. 12 to dismiss a lawsuit alleging that its Lenox Township, Pa., drilling operations contaminated 13 families' nearby water wells with barium, manganese, and strontium.
Neither the drilling nor fracturing fluids that were used at its Price No. 1 well contained any of these substances, Sepco said in a statement. "Barium is one of the most common elements in the earth's crust and occurs naturally in many water supplies, which has been noted by both federal and state agencies," it said. "An August 2007 report by the US Department of Health and Human Services specifically identified Pennsylvania as a state with many communities that 'have drinking water where barium content is up to 10 times higher than the US Environmental Protection Agency's recommended maximum concentration level.' Further, water samples from the area taken prior to the commencement of Sepco's drilling operations indicated barium readings in excess of federal and state limits."
Boling told OGJ, "We went through the testing protocol and couldn't see any problems. Even though we don't think there's any merit to this lawsuit, you have to be cognizant about why these things are happening. It's because of fear, and some environmental groups are using it in their campaigns. On the other side, there are some companies and industry groups who say if regulations are increased, development will be stifled. We think it's time to dial down the rhetoric."
Essential steps
Anderson suggested, "The companies and associations need to start listening to people, acknowledging there are problems, and following through on solving then. Environmental advocates need to do a better job of giving credit where credit is due. Several of them are trying to scare people with horror stories instead. They need to take the time to understand what the true problems are and what the reasonable solutions are. There are companies that are upgrading their practices and trying to work with the public. And there are state agencies that are improving their regulations."
He said that EDF was "deeply involved" when Pennsylvania enacted new well cementing requirements, and that he considers the regulations "a big step forward" but hardly the country's strongest, as some state officials have said. One shortcoming is that they put too much responsibility on operators to lead investigations of complaints—a role that Anderson said should be taken by the state. It also doesn't define freshwater, a definition he said is missing from some other states' regulations as well and that he said producers need to determine how deep their casing needs to go and regulators require to find whether there has been a violation.
Anderson said that Pennsylvania also should collect and retain wells' cementing records for future remedial work, investigations, and other reasons instead of simply requiring the operator to keep the information for 5 years. "We understand that the state has a budget problem and think it might feel it doesn't have the resources to archive it properly," he said. "If that's the case, they should require the operators to maintain the information until the state does have the resources to act as a custodian."
Finally, he said, Pennsylvania's regulations do not adequately manage well pressure, especially in the northeastern part of the state where producers can encounter over-pressured formations. He said that EDF proposed that wells be required to have permanent pressure gauges and valves that would pop off if the annulus pressure gets too high and release pressure which otherwise could threaten public safety and the environment. "Our understanding is that pressure gauges and pop-off valves can be installed for $250-700/well. It puzzled us that the agency didn't see fit to adopt that recommendation."
Anderson and Boling said they have approached other producers and environmental groups about joining them. "We are engaged in substantive discussions with several other companies and environmental groups," said Anderson. "Although they are not necessarily involved in our discussions, there are several other companies which I want to recognize as already being constructive in several ways, including helping to advance the cause of disclosing the chemicals in frac fluids in some cases." These producers include Anadarko Petroleum Corp., Chesapeake Energy Corp., EnCana Oil & Gas USA Inc., Range Resources Corp., Petrohawk Energy Corp., Talisman Energy USA Inc., and XTO Energy Inc., he said.
The pair also is in touch with state regulators. Anderson said he addressed the Interstate Oil & Gas Compact Commission's shale gas committee when it met in Lexington, Ky., this past spring. "We don't expect the language we're working on to be adopted, word for word, anywhere," he told OGJ. "We envision that this could become a resource for state regulators as well as local stakeholders to go about the business of strengthening their rules. We recognize that all of this needs to be tailored to local conditions. At the end of the day, the agencies will have the most to say about what the rules are. That's the way it should be."
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