Exclusive: Investors press U.S. shale oil drillers to control flaring

Reuters) - Investors representing $500 billion in assets are pushing energy companies in the shale oil rush in North Dakota and other states to disclose the amount of natural gas they burn - a practice they see as a wasteful financial risk.

"We want to encourage companies to articulate plans for resolving this issue while shale oil production is still in its relative infancy," said Karina Litvack, the head of governance and sustainable investment at F&C Asset Management.

Litvack is one of 36 investors who sent a letter to 21 oil drillers including Continental Resources Inc (CLR.N), Exxon Mobil (XOM.N), and Chesapeake Energy Corp (CHK.N) asking them to disclose the amount of natural gas they are burning off, or flaring, at shale oil operations in North Dakota, Texas, Colorado and Ohio.

While shale oil drilling has helped reverse a decades old decline in U.S. crude output, the lightening pace of new development may also have an environmental dark side. The investors and others say emissions from flaring and venting natural gas cause air problems and increase global warming.

The investors want the companies to disclose by May 1 how much flaring they are doing and to meet with them to plan ways to tackle the problem.

The practice "poses significant risks for the companies involved, and for the industry at large, ultimately threatening the industry's license to operate," they wrote in a letter to the companies.

Energy companies flare natural gas they are unable to capture and sell as they produce shale oil which is much more valuable. The practice, which had been in decline in the traditional oil business, is now soaring at shale oil formations in North Dakota and Texas where the infrastructure is not keeping up with the boom.

Techniques including hydraulic fracturing, or fracking, have given drillers in those states access to vast new deposits of shale oil. But some states, many of which are new to drilling, do not have strong regulatory systems in place.

One third of the gas North Dakota produces is flared. The amount flared per day by last July had increased 1,200 percent since 2004, when development of the Bakken shale formation began, according to the state's government.

The investors estimate flared gas in North Dakota produced 2 million tons of carbon dioxide last year, equal to 384,000 extra cars on the road. And even with low natural gas prices, the state lost about $110 million in revenue last year from the flaring, they say.

Continental, whose CEO Harold Hamm is Republican presidential hopeful Mitt Romney's top energy advisor, Exxon, and Chesapeake would not comment on the letter.

As the shale gas fracking boom in Pennsylvania and Texas helps sink natural gas prices to 10-year lows, drillers are hesitant to invest in pipelines that would capture the gas.

"Such a short sited approach raises significant concerns," said Steven Heim, a managing director at Boston Common Asset Management and one of the investors who sent the letter.

Persuading companies to build natural gas pipelines at the Bakken formation in North Dakota is no easy task as oil output there outpaces the building of even crude pipelines and much of the petroleum has to be shipped in trucks.

But some companies have been responsible, he said. EOG Resources Inc, (EOG.N), for example, put in some pipelines before they started fracking for shale oil.

(Reporting By Timothy Gardner; Editing by Sugita Katyal)

http://www.reuters.com/article/2012/03/29/us-usa-fracking-investors-idUSBRE82S03120120329

Gas drilling raises concern over water supply

Drillers hoping to retrieve gas through Utica shale wells in eastern Ohio are drawing water for their operations from ponds and streams or purchasing it from public reservoirs, worrying environmentalists who say it might endanger water supplies for the public and wildlife if there’s not enough water for everyone.

The drilling process known as hydraulic fracturing, or fracking, injects millions of gallons of chemical-laced water into the earth at high pressure to free gas. The geology of eastern Ohio makes it rich in resources such as propane, butane and ethane but short on groundwater for that drilling, The Columbus Dispatch reported.

So drilling operations are finding water where they can. Chesapeake Energy signed an agreement with the city of Steubenville last month to take up to 700,000 gallons of water a day from a city reservoir of water from the Ohio River, at a cost of $5 for every 1,000 gallons.

That brought in about $30,000 for the city after the company took about 6 million gallons during a two-week period in late February and early March.

“It’s a great deal,” city Law Director Gary Repella said. “We’re not spending any money to treat the water, and it’s not going to disrupt our system. We can draw as much as we want.”

The Muskingum Watershed Conservancy District is considering requests from a dozen companies seeking to draw water from six eastern Ohio reservoirs it controls.

Some environmentalists, fearful of the repercussions of the growing water demand, aren’t sure the conservancy district should allow that.

“There isn’t enough water to go around,” said Lea Harper, a member of the Southeast Ohio Alliance to Save Our Water.

The Muskingum Watershed’s conservation chief said the district would ask the U.S. Geological Survey to help determine how much extra water is in the area but might approve requests for reservoir water in the meantime if there’s no clear threat to wildlife.

Energy companies say they try to make sure they don’t take too much water, and state officials say they believe Ohio has enough water for everyone.

Businesses aren’t required to register with the state if they draw less than 100,000 gallons from water sources, but officials plan to change rules to better track drillers’ water sources, said Bethany McCorkle, spokeswoman for the Ohio Department of Natural Resources.

http://www.cantonrep.com/fracking/x586824940/Gas-drilling-raises-concern-over-water-supply

Fracking: Pennsylvania Gags Physicians

The law, known as Act 13 of 2012, an amendment to Title 58 (Oil and Gas) of the Pennsylvania Consolidated Statutes, requires that companies provide to a state-maintained registry the names of chemicals and gases used in fracking. Physicians and others who work with citizen health issues may request specific information, but the company doesn’t have to provide that information if it claims it is a trade secret or proprietary information, nor does it have to reveal how the chemicals and gases used in fracking interact with natural compounds. If a company does release information about what is used, health care professionals are bound by a non-disclosure agreement that not only forbids them from warning the community of water and air pollution that may be caused by fracking, but which also forbids them from telling their own patients what the physician believes may have led to their health problems. A strict interpretation of the law would also forbid general practitioners and family practice physicians who sign the non-disclosure agreement and learn the contents of the “trade secrets” from notifying a specialist about the chemicals or compounds, thus delaying medical treatment.

The clauses are buried on pages 98 and 99 of the 174-page bill, which was initiated and passed by the Republican-controlled General Assembly and signed into law in February by Republican Gov.Tom Corbett.

“I have never seen anything like this in my 37 years of practice,” says Dr. Helen Podgainy, a pediatrician from Coraopolis, Pa. She says it’s common for physicians, epidemiologists, and others in the health care field to discuss and consult with each other about the possible problems that can affect various populations. Her first priority, she says, “is to diagnose and treat, and to be proactive in preventing harm to others.” The new law, she says, not only “hinders preventative measures for our patients, it slows the treatment process by gagging free discussion.”

Psychologists are also concerned about the effects of fracking and the law’s gag order. “We won’t know the extent of patients becoming anxious or depressed because of a lack of information about the fracking process and the chemicals used,” says Kathryn Vennie of Hawley, Pa., a clinical psychologist for 30 years. She says she is already seeing patients “who are seeking support because of the disruption to their environment.” Anxiety in the absence of information, she says, “can produce both mental and physical problems.”

The law is not only “unprecedented,” but will “complicate the ability of health department to collect information that would reveal trends that could help us to protect the public health,” says Dr. Jerome Paulson, director of the Mid-Atlantic Center for Children’s Health and the Environment at the Children’s National Medical Center in Washington, D.C. Dr. Paulson, also professor of pediatrics atGeorge Washington University, calls the law “detrimental to the delivery of personal health care and contradictory to the ethical principles of medicine and public health.” Physicians, he says, “have a moral and ethical responsibility to protect the health of the public, and this law precludes us from doing all we can to protect the public.” He has called for a moratorium on all drilling until the health effects can be analyzed.

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Fracking debate gets federal attention in Erie

ERIE, Colo. — The controversial natural gas drilling practice of hydraulic fracturing in Colorado is getting some attention at the federal level.

Congressman Jared Polis visited with some Erie residents about their concerns over the safety of fracking.

Last week, Erie enacted an immediate six-month moratorium on new gas drill permits.

A National Oceanic and Atmospheric Administration study said the propane levels in the air in Erie are worse than in Los Angeles and Houston.

It’s the air and a host of other issues that brought out Congressman Jared Polis to talk to residents.

“This oil and gas has been under the ground for millions of years. They need to take a time out and show me scientific proof this is safe,” says Boulder County resident Rod Brueske.

He and his family moved to the country from Denver a year ago, for the fresh air, a slower pace and better quality of life for his kids.

It’s bad. You breathe like fumes and stuff,” says his 5-year-old son.

But Brueske fears fracking will ruin all of it.

Fracking pumps water and chemicals underground at high pressure to crack rock and release oil and natural gas.

“It’s a threat to my family’s dream. Ooh,” he says as he staves off tears. “It’s a threat to our health and safety. And you can’t put a price on somebody’s dream. You can’t put a price tag on health,” he says.

It’s those fracking fears bringing Polis to visit Brueske and others whose homes are about 100 feet from a completed mining site.

Thick, blackish smoke poured out of it last summer.

It’s clearer now. But some say it is still potentially dangerous.

“Those hydrocarbon vapors are poisonous fumes, that as you can tell, the wind is blowing toward us and blowing toward homes only 100 feet away,” says Shane Davis of the Rocky Mountain chapter of the Sierra Club.

Mothers are worried.

“So they breathe this here at home. Then they go to school. There’s no escape for these kids; there’s no escape,” says April Beach, a mother of three boys. She says one of them developed asthma after the well was finished.

Polis is sympathetic to families who say they didn’t move here for city-like problems.

“You shouldn’t have to have fracking in your backyard. Colorado is wide open. The country is wide open. There are huge tracks of land where it’s not 300 feet from a daycare center or backyard,” says Polis.

The Democratic Congressman from Boulder has introduced two fracking bills–both would require oil and gas companies to abide by the federal Clean Air and Safe Water Act.

And he’s still drafting another requiring fracking be a certain distance from daycares and schools.

The oil and gas industry insists fracking is safe. It claims it follows numerous state and federal regulations.

http://kdvr.com/2012/03/14/fracking-debate-gets-federal-attention-in-erie/

Faulty Wells, Not Fracking, Blamed for Water Pollution

Some energy companies, state regulators, academics and environmentalists are reaching consensus that natural-gas drilling has led to several incidents of water pollution—but not because of fracking.

The energy officials and some environmentalists agree that poorly built wells are to blame for some cases of water contamination. In those cases, they say, wells weren't properly sealed with subterranean cement, which allowed contaminants to travel up the well bore from deep underground into shallow aquifers that provide drinking water.

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Judge's ruling limits shale developer's drilling rights

Nunner said while Chesapeake can vertically extract gas and oil from underneath the hunt club's 187 acres of woods and fields, the energy company can't use the land to drill sideways to get at reserves from adjacent land.

He ordered Chesapeake, a dominant player in Ohio's shale production, to stop horizontal drilling that extends beyond Jewett's property line unless it gets the club's permission to go ahead.

Extracting natural gas and oil from shale formations depends on lateral drilling to carry millions of gallons of water under intense pressure to fracture surrounding rock. Horizontal bores can extend up to 10,000 feet, or almost two miles, from the drill hole. Chesapeake already had poured a 12-acre concrete pad for rigs but has sunk no wells.

"They don't have a right to come in and destroy our surface without fair compensation," said Jewett club president John Harris.

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Ohio prepares shale regulatory proposals

Ohio governor John Kasich is preparing to roll out a comprehensive new regulatory plan for oil and gas production in the state that will include an increase in severance taxes on operators.

Ohio is home to the largest swath of the red-hot Utica shale play, an area rich with the oil and gas liquids operators are increasingly chasing amid low North American natural gas prices.

Kasich, a Republican, said his plan, which his administration has been working on “for 16 or 17 months”, will “help the industry be successful but at the same time protect the interests of Ohio and protect the interests of the environment”.

“We’re getting ourselves in a position where we don’t have to choose between good environmental policy and job creation,” he told reporters at the IHS CeraWeek conference on Wednesday in Houston.

He said his proposals, set to be unveiled next week, will require companies to disclose the chemicals used during hydraulic fracturing and impose tighter rules on gathering lines and high-pressure pipelines.

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