Presentation on theme: "2013 Energy Conference, October 29, 2013"— Presentation transcript:
1 2013 Energy Conference, October 29, 2013 The Environmental Benefits and Challenges of Tight Oil and Gas DevelopmentHannah WisemanAssistant Professor, Florida State University College of Law2013 Energy Conference, October 29, 2013
2 The development of oil and natural gas resources from shales and tight sandstones— “tight” formations—has transformed domestic fossil fuel production, causing the United States to become a leading producer. What are the environmental benefits and challenges of this transformation, and what opportunities for improvement remain?
3 Road map of presentation National perspective on benefits and costs: simultaneous displacement of coal and renewables/energy efficiency.Wellhead perspective: smaller surface footprint due to horizontal drilling, but tens of thousands of new wells and associated impacts.The regulatory landscape, with a focus on the states, and improvements needed.
4 National benefits: displacement of coal in electricity generation
6 Methane leakage: the latest science “Magic number” for climate is 3.2% leakage or lower (Environmental Defense Fund estimate).Allen et al. (2013): methane leakage during flowback is low—0.42% of gross gas production.Measured actual leakage from 489 hydraulically fractured wells (27 flowbacks). Although controlled for potential bias, might have measured best practices.Alvarez et al. (2012): converting fleets to CNG “increases radiative forcing for 80 yr. before any net climate benefits are achieved.”For gas to provide climate advantage over coal
7 National costs: displacement of other innovative efforts, renewable technologies Henry Jacoby et al. (MIT), The Influence of Shale Gas on U.S. Energy and Environmental Policy (2012):“The gas ‘revolution’ has important implications for the direction and intensity of national efforts to develop and deploy low-emission technologies, like CCS [carbon capture and storage or sequestration] for coal and gas.” It will slow and in some cases stop these efforts.Cheaper gas “serves to reduce the rate of market penetration of renewable generation.”
8 Energy Information Administration: Estimated levelized cost of new generation resources, 2018, in 2011 dollars per megawatt hour, excluding tax creditsPlant typeLevelized capital costFixed O&MVariable O&M (including fuel)Transmission investmentTotal system levelized costConventional coal126.96.36.199.2100.1Conventional combined-cycle gas15.81.748.467.1Advanced nuclear83.411.612.31.1108.4Wind onshore70.313.10.03.286.6Geothermal76.212.01.489.6Solar PV130.49.94.0144.3Solar thermal188.8.131.5261.5Hydro78.16.12.090.3Do not include tax credits. Geothermal almost as cheap as wind.Offshore 221.5In 2012, wind energy became the number one source of new U.S. electricity generation capacity for the first time – representing 43 percent of all new electric additions and accounting for $25 billion in U.S. investment.
9 Wellhead perspective: environmental risks Potential risks in this presentation identified from the following materials:Violations of state environmental and oil and gas laws at wellheads.Other incidents collected and reported by state or regional agencies and courts.Peer-reviewed papers.
10 Most important risks (it appears) Cumulative impactsTraditional risks (long known in oil and gas industry), magnified due to number of wells: landscape impacts, habitat fragmentation, air emissions, other risksSpills and leaks from pits and tanks: contamination of soil, surface water, groundwaterBird deaths in pits (but lowas compared to deaths causedby house cats and automobiles)
11 Inadequate casing and plugging of wells Impacts on streams when water withdrawn simultaneously within one regionInadequate casing and plugging of wellsA lack of good options for disposal: large quantities of liquids; solids that settle out of brine and flowbackRoad damage and other local challenges
12 Other risks: not as prevalent (perhaps), but single incidents can have large impacts Leaking underground injection control (UIC) disposal wells Induced seismicity from UIC wells
13 Cumulative impactsThe EPA estimates that 11,400 new wells are fractured or refractured annually in the United States.In New York State, 56,508 horizontal gas wells and 6,723 vertical gas wells could be drilled and fractured in thirty years (NY Dept. of Envtl. Conservation).Approximately 28,000 wells will have been drilled in Texas’s Barnett Shale by (Currently at 16,000 wells.)
14 City of Fort Worth, Texas: 1,856 producing wells
16 ColoradoGabrielle Petron et al., Hydrocarbon Emissions Characterization in the Colorado Front Range: A Pilot Study, J. Geophysical Research (2012)Analysis of daily air samples “since 2007 shows highly correlated alkane enhancements caused by a regionally distributed mix of sources in the Denver-Julesburg Basin.” Attributed to “a mix of venting emissions (leaks) of raw natural gas and flashing emissions from condensate storage tanks.”Flash – pressure of a liquid decreased or temperature increased
17 SpillsPennsylvania Marcellus: Two fuel tank trucks collided at the pad entrance The fuel tank was damaged and leaked approximately 15 gallons of diesel fuel” onto road. Contaminated material excavated. PermitSelf-reported 20-gallon diesel spill from delivery truck. PermitNew Mexico tight sands: “A fuel pump split, allowing 1,000 gallons of diesel to be released gallons recovered.” API
18 Louisiana Haynesville: “Oil based mud discharged in vicinity of well and allowed to migrate to natural drainage.” PermitPennsylvania Marcellus: “1,500 gallon spill of drilling mud observed on the surface of the ground outside of the containment area.” Permit
19 New Mexico tight sands: “During fracking a valve was left open due to human error causing a release of 245 gallons of frac water, all recovered.” APIPennsylvania Marcellus: “Blowout, frac fluid release” in Tioga County. Permit
21 Louisiana Haynesville: Frac tanks used for temporary storage of produced saltwater. Gauging error caused overflow, and water flowed into ditch and swampy area. PermitTexas Barnett shale: Driveway, pasture, pond polluted with low chloride drilling fluids diluted with rain water. PermitColorado tight sands: “Excessive oil accumulation at tank battery. Berm not sufficient at tank battery. Excessive oil on ground at wellhead, oil is migrating down grade (from wellhead) toward upper pit. Wildlife accessing both pits.” API
22 U.S. v. Brigham Oil and Gas (D.N.D. 2012)—Bakken Shale reserve pits “On May 6, 2011, Special Agent Grosz and [Fish and Wildlife] Service Contaminants Specialist inspected the site. Grosz inspected the pit and noted it was not netted or flagged at the time of inspection. He noticed an oil sheen “on the fluid of the reserve pit.” During the inspection, Grosz observed and collected “two dead and oiled mallards.” Dead pintails and ring-tailed ducks also found.
23 Simultaneous water withdrawals Susquehanna River Basin Commission, July 16, 2012, 64 Water Withdrawals for Natural Gas Drilling and Other Uses Suspended to Protect Streams“Under SRBC’s passby flow restrictions, when streams drop to predetermined protected low flow levels, operators who are required to meet the agency’s passby requirement must stop taking water.” Most states and regions do not have this type of regulation.
24 Inadequate casing and plugging of wells Pennsylvania Marcellus: “Methane migrated to surface through cement in 9 5/8” annulus.” Permit(Post-drilling – well shut in): “Cellar is filled with water Well head is leaking from somewhere below the surface of the water. Gas is bubbling up through the water all around the wellhead.” Permit
26 “March 30, 2011 order: “Catalyst Energy’s unpermitted discharge of iron, manganese, dissolved methane, dissolved ethane, and combustible free gas from its drilling activities into groundwater violates the Clean Streams Law [and] constitutes unlawful conduct and a public nuisance.”
27 Mar. 10, 2009 letter from DEP, Bradford, PA: Lab analysis of spring water “indicated levels of Chlorides, Total Dissolved Solids, Calcium, Sodium and Specific Conductivity that were in excess of EPA’s drinking water standards. Elevated levels of these parameters are indicative of a dilute brine solution and suggest an infiltration of frac water into the shallow ground water that supplies your spring.”
29 Disposal challengesLara A. Haluszczak et al., Geochemical Evaluation of Flowback Brine from Marcellus Gas Wells in Pennsylvania, Appl. Geochem. at 6 (2012) noted levels of radium in flowback water “ times that maximum contamination level for drinking water standards.” Difficult to treat at a wastewater treatment plant.
30 Underground injection control wells Oklahoma Geological Survey (2011) “Cases of clear anthropogenically-triggered seismicity from fluid injection are well documented with correlations between the number of earthquakes in an area and injection.” See also Katie M. Keranen et al., Potentially Induced Earthquakes in Oklahoma, USA: Links Between Wastewater Injection and the 2011 Mw 5.7 Earthquake Sequence, Geology (2013).
31 Midland, Texas: an improperly constructed injection well—maintained by a company now in bankruptcy—leaked into the city’s drinking water aquifer, creating a “‘plume’ of chloride infested water that is (and has been for some time) migrating through the Aquifer” and progressively polluting more fresh water. Approximately 6.2 billion gallons had been contaminated by 2010.
32 Road damage and other local challenges National Park Service estimates average well requires 320 to 1,365 truck trips, depending on whether water is trucked in or piped in.
34 The regulatory landscape STATEStates have independent authority over many development activities.LOCALStates determine nature and extent of local jurisdiction.REGIONALStates, with federal approval, participate in compacts.FEDERALStates implement certain federal environmental regulations.PUBLIC-PRIVATEStates work with nonprofits and industry groups to write guidelines, review regulations.
35 State regulationsFor cumulative impacts, not much regulation, although Colorado leads in controlling air emissions, and Maryland has proposed a comprehensive gas drilling plan.Spills; leaks from pits and tanks: well and well site setbacks, minimum pit liner thickness, minimum “freeboard” in pits. Pits must be dewatered and filled in.
36 Well setback requirements Pennsylvania Act 13, effective Apr. 16, 2012 – under reviewRegulatory provisionBefore Apr. 16, 2012As of Apr. 16, 2012Distance between gas well and water well200 ft.58 Pa. C.S. §500 ft.58 Pa. C.S. § 3215Distance between well site or well and stream100 ft.300 ft.Distance between well pad and public water supplyno regulation identified1,000 ft.58 Pa. C.S. § 3215Rebuttable presumption that oil and gas operations caused water contamination1,000 ft. for contamination within 6 months of operations58 Pa. C.S. §2,500 ft. for contamination within 1 year of operations58 Pa. C.S. § 3218
37 West Virginia Natural Gas Horizontal Well Control Act, HB 401, effective December 14, 2011 Regulatory provisionBefore December 14, 2011As of December 14, 2011Distance between gas well and water well200 ft.W. Va. Code §250 ft.W.Va. Code § 22-6A-12Distance between well pad or well and streamno regulation identified100 ft.W. Va. Code § 22-6A-12Distance between well pad or well and trout stream300 ft.Distance between well pad and public water supply1,000 ft.Rebuttable presumption that oil and gas operations caused water contaminationw/in 1,000 ft. of siteW. Va. Code §w/in 1,500 ft. of siteW. Va. Code § 22-6A-18Public water supply: surface or groundwater intake.Naturally reproducing trout stream.
39 Few direct regulations to protect against bird deaths, although some states require netting or pit covers.Stream impacts from cumulative water withdrawals: states like West Virginia and Pennsylvania require operators to show that water withdrawal will not harm aquatic life.Federal listing of diamond darter as endangered will likely affect water use in Marcellus.WV: For surface water withdrawals, must demonstrate “that sufficient in-stream flow will be available immediately downstream of the point of withdrawal” and methods to “minimize adverse impact to aquatic life.” W. Va. Code § 22-6A-7
40 Casing and well plugging: few states have updated well bonding requirements, but many mandate pressure tests of wells prior to fracturing. Some have increased required casing depths, and some limit the installation of used casing. Most states provide minimum times for which cement must set before being disturbed, and many specify the type of cement that must be used.
42 Casing requirements example – Ohio SB 165, effective June 30, 2010 Before June 30, 2010As of June 30, 2010“[G]ood and sufficient wrought iron or steel casing so as to exclude all surface, fresh, or salt water from any part of such well.”Method of placing casing approved by Chief of Division of Mineral Resources Management.In lieu of casing, Chief could accept “adequate mudding methods.”Oh. St. §“[S]ufficient steel or conductor casing” that protects unconsolidated sediments and water.Materials must “comply with industry standards for the type and depth of the well and the anticipated fluid pressures that are associated with the well.”Sour gas and gas bearing zones must be isolated.Well shall not be perforated in zones of water protection.Well owner shall notify mineral resources inspector each time the owner or representative notifies someone to perform casing.Oh. St § 17
43 Tracking water quality Baseline testing: not uniform, but states increasingly require it: incentivized to 1,500 feet in West Virginia, 2,500 feet in Pennsylvania; required to 1,500 feet in Ohio. See also Colorado and Michigan.
44 State approaches to disposal Limit the available methods of disposal.Ohio S.B. 165 (codified at Ohio Rev. Code § (10)): “flowback from the stimulation of a well, and other fluids used to treat a well shall not be spread on a road.”Require treatment prior to disposal.By 2014, Clean Water Act Treatment Standards for Wastewater from Shale Gas Extraction25 Pa. Code § 95.10: operators must reduce total dissolved solids to a certain concentration prior to disposal.Modify existing wastewater treatment permits.
45 Recycling of flowback and produced water Very common in the Marcellus Shale region because of 25 Pa. Code § 95.10: wastewater source reduction strategy must “identify procedures” the operator will follow to maximize recycling and reuse.Not much treatment of water necessary prior to reuse.Less common in other shales.
46 Changing governance to address community impacts Pennsylvania Act 13 (2012): impact fee that is redistributed for environmental remediation, conservation, roads and bridges, low-income housing.Pennsylvania Supreme Court still attempting to determine constitutionality of Act 2013 after a Commonwealth court struck down the Act.Road use agreements and other community benefits agreements.Zoning to limit areas in which well development may occur (where not preempted); cap decibel levels; require sound barriers and fences.Gina Banai, Rice Energy
47 Also note the importance of private standards Lenders and lessors increasingly require environmental protections within contracts and leases, such as lining of the entire well pad, no drilling in areas with too much surface water.Companies increasingly voluntarily disclose chemicals added to fracturing water on FracFocus, but we still do not know the composition of much of the flowback water, which contains naturally occurring substances.API standards, standards from Center for Sustainable Shale Development impact certain operators’ behavior.
49 Actual inspections and enforcement State and yearApproximate number of active oil and gas wellsNumber of inspectorsInspections conductedViolations notedEnforcement actions takenPennsylvania 201292,3267626,9133,378949Texas 2009280,00087128,00080,000550
50 Regulatory improvements needed Comprehensive analysis of variability among state regulations should be a top priority.In some cases, geology, climate, and other factors may justify differences.In other cases, there might be one, accepted practice for adequately protecting against risk, yet this practice is not consistently required.
51 States should consider regulations with “total harm thresholds” – those that address cumulative impacts.Susquehanna River Basin Commission regulations require water withdrawals to cease if streams drop below a protected low flow level.
52 Bond amounts should be updated Indiana: $2,500 per oil and gas well, plus annual fee, Ind. CodeOhio: $5,000 per well, Ind. CodeArlington, Texas $50,000 per well, City of Arlington, Tex. Ordinance No § 6.01(B)(1)(c)
53 More insurance requirements possibly needed Ohio Substitute Senate Bill No. 315 requires liability insurance “of not less than five million dollars bodily injury coverage and property damage coverage,” and a “reasonable level of coverage available for an environmental endorsement.” Codified at Ohio Rev. Code §Few states require environmental liability insurance. But see Maryland S.B. 854 (approved May 16, 2013).Maryland S.B. 854, approved by the Governor May 16, 2013, (requiring coverage of “not less than $1 million per loss,” which is to cover natural resource damage in addition to bodily injury). Only three other states appear to require any insurance for oil and gas operators, and the requirements do not include environmental liability insurance. See 2 Co. Admin. Code 404-1:708 (Westlaw 2013) (“All operators shall maintain general liability insurance coverage for property damage and bodily injury to third parties in the minimum amount of one million dollars ($1,000,000) per occurrence.”); Colo. Oil & Gas Conservation Commn., Amended Rules Redline at 129 (2008) (changing the requirement from $500,000 in coverage to $1 million per occurrence); N.J.S.A. 13:1M-2 (Westlaw 2013) (requiring oil and gas well operators to have “liability insurance coverage in an amount not less than $10,000, for bodily injury and $10,000, for property damage”); Ohio R.C. § (Westlaw 2013) requiring operators to have “one million dollars bodily injury coverage and property damage coverage,” and three million in coverage in urbanized areas). Idaho requires “public liability, property damage, and products liability insurance in the sum of four hundred thousand dollars ($400,000) for injury or death for each occurrence” and, more generally, “insurance against explosion, blow out, collapse, fire, oil spill and underground hazards” for oil and gas operators leasing state lands. ID ADC (Westlaw 2013). Oregon similarly requires coverage of a minimum of one million dollars per occurrence for “personal injury, property damage to third persons” for oil and gas operations on state lands. OR ADC (Westlaw 2013).Municipalities: City of Arlington, Tex. Ordinance No § 6.01(C)(4) (2007), (requiring energy companies to carry environmental pollution liability insurance that will cover $5 million per incident); City of Fort Worth, Tex., Ordinance No § 15-41(C)(4), (same); Farmington, New Mexico Code of Ordinances § , (follow “Chapter 19 – Oil and Gas Wells” hyperlink, then “Article 2 -- Administration and Enforcement,” then “Division 4 – Bond and Insurance) (same).
54 Better enforcement needed States likely need to raise well permitting fees to fund more inspection staff.Through training, states should alert industry to new rules to enhance compliance.States should establish enforcement priorities. (Pennsylvania—incidents that “result in an actual release of gas or pollutants and endanger human life or public health and safety”).
56 Governments should reassess who has what authority and why States are not in all cases the best entities to regulate oil and gas development.Municipalities still need some control if high drilling and fracturing rates are to continue—minimal zoning and nuisance-prevention authority needed.Federal government should, at minimum, more closely investigate inconsistencies among state regulations and consider filling gaps if states do not.
57 Substantive gaps to prioritize Pit and tank management, including pits that hold flowback for reuse, and secondary containment requirementsWastewater reuse and disposalBaseline and post-drill water testingCasing requirements, including well pressure tests--must ensure that casing can withstand pressure of fracturing, and not all states doWater withdrawal regulationsCommunity impacts
58 Summary of pointsUpstream oil and gas, like many other industries, poses a number of risks. We can limit many of these risks; others are more difficult to address.Governments are rapidly updating certain regulations, but gaps remain.Enforcement should be the first gap filled: states should raise fees so that they can hire more staff, set and implement priorities. Consider electronic monitoring at sites?
59 Thank you. I welcome questions and comments: email@example.com.