22 September 2014

Sidley Shale Gas and Hydraulic Fracturing Report

Volume 3, No. 38

States

Illinois legislators seek extension to consider hydraulic fracturing rules. The Illinois Joint Committee on Administrative Rules (“JCAR”) exercised a 45-day extension to act on rules proposed by the state Department of Natural Resources (“IDNR”) to regulate the use of hydraulic fracturing in Illinois. IDNR received over 30,000 comments on its original draft of the rules prior to issuing the revised draft. The revised rules include additional disclosure provisions and strengthened public participation requirements. JCAR must choose to adopt the rules by November 15, 2014 or the drafting process will start over.

North Dakota: Companies developing strategies to better manage natural gas produced in Bakken. Over the past three years, companies extracting oil from the Bakken Shale have burned up to 300 million cubic feet per day of natural gas, nearly a third of all gas being produced there. According to some estimates, between 2,000 and 4,000 wells are currently flaring gas that could otherwise be collected for sale. North Dakota recently passed regulations that will require companies to submit gas transportation plans for every new oil well, and beginning in 2015, companies that continue flaring could be ordered to stop or slow production or face penalties. In response, companies are working to develop systems to provide uses for the gas and installing well-site capture units. As an example, Statoil USA, one of the largest oil producers in North Dakota, recently announced a plan to begin a pilot project to capture flare gas and use it to run drilling rigs and a fleet of trucks. Other efforts are underway, as North Dakota’s Department of Mineral Resources reports that flaring is down from 36 percent of natural gas produced in 2011 to 26 percent in July 2014.

Litigation

Pennsylvania shale developer pays record fine. Range Resources Corp., agreed to pay over $4 million in fines to settle environmental claims related to leaks, spills and other environmental violations at eight of its water impoundments in Pennsylvania. The fine is the largest ever paid by a shale driller. In addition to paying the fine, the company will close several of the impoundments and make improvements at others.

Studies

Stanford research evaluates drilling pros and cons. Stanford University researchers recently published a study after reviewing multiple government databases and a range of academic reports on hydraulic fracturing. The researchers considered water usage, potential groundwater impacts, emissions of air pollutants, seismicity and overall effects on greenhouse gas emissions. Among other findings, the study reports that while drilling operations can impact local air quality, natural gas produced with hydraulic fracturing can generate electricity which produces greenhouse gas emissions at a much lower rate than coal-fired power plants. The report also makes several recommendations, including calling for increased chemical disclosure, additional short-term and long-term studies and more pre-fracking baseline studies to help evaluate changes in environmental conditions.

Well integrity, not migration from injection process, linked to water impacts. A new study published by the Proceedings of the National Academy of Sciences concludes that leaking oil and gas wells are primarily responsible for groundwater impacts observed in Pennsylvania and Texas, not the hydraulic fracturing itself. The peer-reviewed study, prepared by researchers from five universities, found that there was no evidence that methane found in shallow groundwater was migrating upward through rock layers during the hydraulic fracturing process. Instead, a more likely source was through the wells’ steel casing. Additional research is necessary to determine whether the high volume of water and pressure used in hydraulic fracturing may have contributed to issues with well integrity.

USGS scientists link Colorado and New Mexico quakes to wastewater injection. Four scientists at the U.S. Geological Survey have linked deep underground wastewater injection to increased seismic activity in Colorado and New Mexico in a new report published on September 16. Since 2001, there have been more than a dozen earthquakes measuring 3.8 or greater in magnitude, and the increased activity has been limited to an area within a 3.1 mile radius of wastewater injection wells. Prior to the start of wastewater injection in 1999, the Raton Basin spanning the two states had very little seismic activity.

New technology improves well productivity. Improvements in technology in the last ten years have led to exponential growth in well productivity. In 2003, the country’s most productive gas well, operated by Four Sevens Oil in the Barnett Shale, produced 5.9 million cubic feet a day. In contrast, in 2013, the most productive well produced nearly 30.3 million cubic feet a day. Based on these improvements, the federal government currently estimates that crude output could continue to rise through 2040.

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