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Marcellus Shale in Pennsylvania Marcellus Shale in Pennsylvania Impacts, Regulation and Legislation Environmentally Sound Development of Pennsylvania’s Newest Energy Resource May 17, 2012

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Marcellus Shale in PennsylvaniaMarcellus Shale in PennsylvaniaImpacts, Regulation and Legislation

Environmentally Sound Development of y pPennsylvania’s Newest Energy Resource

May 17, 2012

PIOGA/Independent Oil and Gas Producers

• PIOGA: largest and most diverse association of oil and gas businesses association of oil and gas businesses, over 900 members

• Represent conventional and Marcellus Represent conventional and Marcellus Shale producers

• Pennsylvania activity:y y

Conventional natural gas/coal-bed methane well Shallow oil wells Marcellus Shale wells Marcellus Shale wells

Pennsylvania Oil and Natural Gas History

• Fueling Pennsylvania for more than 150 yearsfor more than 150 years

• 1859: Drake Oil Well near Titusville, “The ,start-up that changed the world”

• 1878: Haymaker Well in Murrysville, First commercial natural gas well in U.S.

Marcellus Shale Formation

• Geological formation created about 380 million years ago in about 380 million years ago in Middle Devonian age

• As formation aged and decayed, t l t d i th h lnatural gas trapped in the shale

• Formation rests a mile or more below surface, thickness ,between 50-200 feet

• Approximately 95,000 square milessquare miles

Marcellus Shale Formation

• Estimated recoverable reserves: 500 trillion cubic feet (tcf)( )

– Current U.S. natural gas demand is 23 tcf per year

M ll h t ti l t – Marcellus has potential to serve not only Pennsylvania, but can meet 25 percent of total U.S. natural gas demandnatural gas demand

– Natural gas prices would increase without current Marcellus Shale productionproduction

The Competition

U.S. Department of Energy, U.S. Shale Basins

How the Marcellus compares…

…to the largest oil and gas fields in the world Marcellus reserves could exceed those of the largest oil field in the world (Saudia Arabia) and be the 2nd largest natural gas field (largest in Qatar/Iran)

(Bubble size approximates reserves)

Natural Gas Facts and Usage

• Cleanest-Burning Fossil Fuel

t l CO th il– 30 percent less CO2 than oil

– 45 percent less CO2 than coal

– Virtually no SO2, Mercury or y , yParticulates

Residential Use: 22 percent

Heat hot water ovens/stovesHeat, hot water, ovens/stoves

Industrial/Commercial Use: 43 percent

Electrical Generation Use: 32 percent

Transportation Use: 3 percent

Potential Permits Required for Gas Well• Well drilling permit (w/ well location plat,

casing and cementing plan, PNDI for threatened or endangered species, landowner/water well owner notifications, coal owner or operator notification and gas storage field owner notification)

• Roadspreading plan approval• Transfer of well permit or registration• Orphan well classification• Off-site solids disposal• Residual waste transfer stations and

Ohio River basin)• GP-3 for bank rehabilitation, bank

protection, and gravel bar removal • GP-4 for intake and outfall structures • GP-5 for utility line stream crossings g )

• Water management plan for Marcellus Shale wells

• Proposed alternate method of casing, plugging, venting or equipping a well

• Bond for Oil and Gas Well(s) (individual or blanket, various bond types allowed)

processing facilities• Transportation of residual waste• Road use permit – construction of access to

state roadway• Road use bond (PennDOT or municipality)• Surface use permit (if in the Allegheny

• GP-7 for minor road crossings • GP-8 for temporary road crossings• GP-11 Maintenance, Testing, Repair,

Rehabilitation or Replacement of Water Obstructions and Encroachments

blanket, various bond types allowed)• Waiver of distance requirements from

spring, stream, body of water, or wetland (to put the well closer than 200 feet)

• Variance from distance restriction from existing building or water supply (to put the well closer than 100 feet)

Surface use permit (if in the Allegheny National Forest)

• PASPGP-3 or PASPGP-4 for pipelines crossing streams (if < 1 acre)

• Water Obstruction – Encroachment – US Army Corps of Engineers Section 404 Joint well closer than 100 feet)

• Proposed alternate method or material for casing, plugging, venting or equipping a well

• Approval for alternative waste management practices

• Approval of a pit for control handling or

Army Corps of Engineers Section 404 Joint Permit

• Dam permit for a centralized impoundment dam for Marcellus Shale gas wells

• GP-11 for non-road engine air emissions• GP-05 for natural gas compression facilities

emissions• Approval of a pit for control, handling or storage of production fluids

• Use of alternate pit liner• NPDES GP-1 for discharges from stripper

oil wells• Water Quality Management Permit for

t t t f iliti

emissions• Erosion & Sedimentation Plan

(5,000 square feet-Five acres)• Erosion and Sedimentation Control

General Permit for Oil and Gas Activities (< than five acres)NPDES t t f t ti treatment facilities

• Alternative pit liners• Inactive status

• NPDES storm water for construction activities

• Water allocation (SRBC, DRBC or DEP for

Marcellus Shale Development

Water Supply, Storage and Flow Back• Well stimulation of Marcellus

wells require between 0.5 to 4.0 million gallons

• State and federal agencies permit, monitor water withdrawals from local streams, rivers and lakes

W t ft h d f • Water often purchased from municipal sources

• 10-30 percent of water used in fracture process returns promptly to fracture process returns promptly to surface as “flow-back” water

• All fresh/flow-back water stored in lined impoundments or tanks at lined impoundments or tanks at location

Marcellus Shale Development

Flow-back Water Management

• Many companies approaching/achieving 100 percent recycling of flow-back water

• Recycled water stored in secure impoundments, piped or trucked to next hydraulic fracture location

• Permitted water treatment capacity in state adequate to support industry

• Range of future treatment options in • Range of future treatment options in development

• New TDS Rule: Meet drinking water standards at end of discharge pipestandards at end of discharge pipe

Marcellus Shale Development

Consumptive Water Usage

6 0005,930

6,000

5,000

r Day

4,000

3,000Gal

lons

pe

3,000

2,000 1,6801,550

Milli

ons

of

1,000

0Power Industrial Public Water Other Mining Marcellus

268 182 30

Power generation

Industrial Public Water systems

Other Mining Marcellus Shale Drilling

General approximation for illustrative purposes

Susquehanna River Basin total water demandAccording to the Gas Technology Institute

Marcellus Shale Development

Infrastructure Improvements

• Significant short-term transportation challenges

• Roadways used for drill rig, support y g, ppequipment, water truck and tank, and worker access to site

• Producers work with municipalities pto maintain, improve roads, investing millions annually

• Local construction companies preceiving most road maintenance contracts, estimated $200 million in 2010

Marcellus Shale Development

Restoration

• Multi-well Pad: Before and After

Economic Impact in Pennsylvania*

2011 2015 20200 0 5 0 0

Value Added: $10.1 Billion $14.4 Billion $18.8 BillionValue Added: $10.1 Billion $14.4 Billion $18.8 Billion

State/Local Taxes $987 Million $1.4 Billion $1.87 Billion

Total Jobs: 111,413 160,205 211,909

Source: The Economic Impacts of the Marcellus Shale: Implications for NY, PA, WV (API Report 2010)*Assumes favorable growth scenario

MARCELLUS SHALE ADVISORY COMMISSION

The Participants on the Commission

Regulatory Agencies

Commission

Natural Gas Industry RepresentativesState and Local Government State and Local Government RepresentativesEnvironmental Group Environmental Group Representatives

PURPOSE OF THE COMMISSION

The Purpose of the Advisory Commission was to examine the impact of Marcellus Drilling Activity in Pennsylvania determine what legislative and in Pennsylvania, determine what legislative and regulatory changes need be made to assure safe and environmentally sound development, and and environmentally sound development, and advise the Governor and General Assembly on fees needed to offset the financial impacts on state and local governments.

ENVIRONMENTAL ISSUES ADDRESSED

• Minimum setbacks from streams, wetlands and environmentally sensitive areasand environmentally sensitive areas.

• Casing and cementing standards.

• Regulation of impoundments.

• Chemical disclosure

• Bonding of wells

Marcellus Shale Commission Recommendations

• A Comprehensive, Strategic Plan.

• 96 Recommendations outlining a comprehensive, strategic plan for the responsible development of natural gas drilling in the Commonwealth.

• Unanimously approved by the commission on y pp yFriday, July 15, 2011.

• Outlines first major update of Oil and Gas Act in nearly three decades.nearly three decades.

• Culmination of four months of work by commission

Recommendations (continued)• Stronger Regulations for Drilling.

• Increase bonding amounts from $2,500 to $10,000 and more for deeper wells.

• Up to $250,000 for blanket bonds.• Triple well setback distance from streams, ponds, and other bodies

of water from 100 to 300 feetof water from 100 to 300 feet.• Increase setback distance from private water wells from 200 to 500

feet and to 1,000 feet for public water systems.• Expand operator’s presumed liability for impairing water quality

from 1,000 ft to 2,500 feet from a well, and extends the duration of presumed liability from 6 months to 12months.

• Require minimum 24‐hour notification before commencing certain well site activities.

• Post critical information online, including violations, penalties and remedial actions.

• Expand public disclosure and information through enhanced well d ti d l ti tiproduction and completion reporting.

Recommendations (continued)

• Tougher Penalties for Violators.

• Double penalties for civil violations from $25,000 to $50,000.to $50,000.

• Double daily penalties from $1,000 to $2,000 a day.

• Make penalties for criminal violations consistent with other environmental statutes.

• Enhance DEP’s ability to suspend revoke or deny • Enhance DEP s ability to suspend, revoke or deny drilling permits for failure to comply.

• Enhance Pennsylvania’s Energy Independence.Independence.

• Develop “Green Corridors” in Pennsylvania for natural gas‐fueled vehicles with filling stations at least every 50 miles gas‐fueled vehicles with filling stations at least every 50 miles and within two miles of designated highways.

• Include natural gas vehicles in Pennsylvania Clean Vehicles Program.

• Provide incentives for the conversion of mass transit and school bus fleets to natural gas.

• Provide incentives for intra‐state natural gas pipelines to encourage in state use and help lower costs for encourage in‐state use and help lower costs for Pennsylvanians.

• Enhance air quality through increased use of natural gas for transportationp

• Create Jobs for Pennsylvanians.

• Build regional business parks in strategic locations to maximize job‐creation potential.

• Evaluate future rail needs to support industry and reduce need for truck traffic.

• Develop a comprehensive strategy to maximize p p gy“downstream” use of natural gas and its by‐products, such as in chemical manufacturing, plastics, etc.

• Develop a strategy to help Pennsylvania companies to Develop a strategy to help Pennsylvania companies to supply natural gas industry with the products they need.

• Train Pennsylvanians for Natural Gas Jobs.Jobs.

• Work with industry to develop a standard curriculum to provide proper trainingprovide proper training.

• Develop job‐training assistance and certification programs for jobs in the industry.De elop ed cational mate ial on nat al gas fo se in • Develop educational material on natural gas for use in grade and high schools.

• Partner with groups like Hiring Our Heroes and Troops to Roughnecksto Roughnecks.

• Develop a gas safety inspector training facility in PA. (There is currently only one in the nation located in Oklahoma.)Oklahoma.)

• Improve Infrastructure.C h f i li i i • Create a one‐stop shop for pipeline permitting process to better coordinate review and ensure thorough oversight.

• Evaluate rail freight facilities and capabilities to relieve burden on roads and bridges.

• Evaluate air service and infrastructure needs among gregional airports.

• Amend state law to allow location of energy and utility infrastructure within PENNDOT’s right‐of‐way.g y

• Expand PA Natural Resource Inventory on‐line tool to accommodate linear projects longer than 15,000 feet. (http://www naturalheritage state pa us/)(http://www.naturalheritage.state.pa.us/)

• Protect Public Health and Promote Public SafetySafety

• Create a population‐based health registry.Collect and evaluate clinical data from health care providers.pMonitor citizens living near drilling sites.

• Create a system for timely and thorough investigation of complaints.

• Establish education programs about potential impacts on health.

• Assign 911 addresses and GPS coordinates for well sites.D l t d di d l• Develop standardized emergency response plans.

• Provide comprehensive training for local responders.• Create regional safety task forces.• Establish a specialized team of emergency responders• Establish a specialized team of emergency responders.

• Protect Natural Resources.

• Establish an advisory committee within DCNR to discuss future development of state forest and discuss future development of state forest and park land.

• Document and monitor effects of industry on l f ildlif h bi il d plants, forests, wildlife, habitat, water, soil and

recreational resources.• Review and regularly update best management Review and regularly update best management

practices for well site construction and operation.• Prevent spread of invasive plant species.

• Help Communities Deal with Impact.

• Recommend enactment or authorization to impose a fee to mitigate to uncompensated impacts caused to communities by natural gas developmentnatural gas development.

• Any fee should recognize on‐going nature of certain impacts.• Attributable impacts identified by the advisory commission

include:include:Environmental remediation.Public health evaluation and emergency response.I d d d i l iIncreased demand on social services.Infrastructure improvements.Natural resource agency administration and oversight

Legislative Action

PA Governor Corbett i HB hi h signs HB 1950 which

becomes Act 13 of 2012.

Resulting legislation from the Marcellus Shale Commission Reco e datio sRecommendations.

A Significant Opportunity for PA

N l G D d I• Natural Gas Demand to Increase

• Importance of Indigenous Energy in U.S.

• Pennsylvania is Poised to Lead Development

• Significant Benefits to Entire Commonwealth

• Industry Commitment to Responsibility/Stewardship

Our Challenge

Tomorrow morning when we wake we must be prepared to b p pmeet the needs of 7 billion human beings – food, shelter, clean water, clean air ,

l thi d t t ti clothing and transportation. To meet those needs we must have energy – real technologically achievable g yenergy, not promises. We must utilize all energy sources, natural gas, coal, renewables and nuclear We renewables, and nuclear. We must make those energy sources environmentally sound for all humankind.