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Stephanie Catarino Wissman

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1 Stephanie Catarino Wissman
The Path and Safety Challenge Associated With the Marcellus Shale in Pennsylvania Pennsylvania Governor’s Occupational Safety & Health Conference February 19, 2013 Stephanie Catarino Wissman Executive Director

2 Associated Petroleum Industries of Pennsylvania
A Division of the American Petroleum Institute Who We Are The American Petroleum Institute (API) is the only national trade association that represents all aspects of America’s oil and natural gas industry. Our more than 500 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry. Although our focus is primarily domestic, in recent years our work has expanded to include a growing international dimension, and today API is recognized around the world for its broad range of programs. 300 North Second Street | Suite 902 | Harrisburg, PA |

3 Associated Petroleum Industries of Pennsylvania
A Division of the American Petroleum Institute What We Do Advocacy We speak for the oil and natural gas industry to the public, Congress and the Executive Branch, state governments and the media. We negotiate with regulatory agencies, represent the industry in legal proceedings, participate in coalitions and work in partnership with other associations to achieve our members’ public policy goals. 300 North Second Street | Suite 902 | Harrisburg, PA |

4 Associated Petroleum Industries of Pennsylvania
A Division of the American Petroleum Institute What We Do Standards For more than 85 years, API has led the development of petroleum and petrochemical equipment and operating standards. These represent the industry’s collective wisdom on everything from drill bits to environmental protection and embrace proven, sound, engineering and operating practices and safe, interchangeable equipment and materials. API maintains more than 600 standards and recommended practices. Many have been incorporated into state and federal regulations; and increasingly, they’re also being adopted by the International Organization for Standardization. 300 North Second Street | Suite 902 | Harrisburg, PA |

5 Associated Petroleum Industries of Pennsylvania
A Division of the American Petroleum Institute What We Do Research and Statistics API conducts or sponsors research ranging from economic analyses to toxicological testing. We collect, maintain and publish statistics and data on all aspects of U.S. industry operations, including supply and demand for various products, imports and exports, drilling activities and costs, and well completions. This data provides timely indicators of industry trends. API’s Weekly Statistical Bulletin is the most recognized publication, widely reported by the media. 300 North Second Street | Suite 902 | Harrisburg, PA |

6 Associated Petroleum Industries of Pennsylvania
A Division of the American Petroleum Institute What We Do Certification Each day, the oil and natural gas industry depends on equipment to produce, refine and distribute its products. The equipment used is some of the most technologically advanced available in the search for oil and gas and allows the industry to operate in an environmentally safe manner. Designed for manufacturers of production, drilling, and refinery equipment, the API Monogram Program verifies that manufacturers are operating in compliance with industry standards. API also provides quality, environmental, and occupational health and safety management systems certification through APIQR. 300 North Second Street | Suite 902 | Harrisburg, PA |

7 Associated Petroleum Industries of Pennsylvania
A Division of the American Petroleum Institute What We Do Education API organizes seminars, workshops, conferences, and symposia on public policy issues. Through API University, we provide training materials to help people in the oil and natural gas business meet regulatory requirements and industry standards. To prepare the next generation of Americans to make informed decisions or pursue careers in our industry, we work with the National Science Teachers Association and other educational groups to impart scientific literacy and develop critical thinking skills in the classroom. Resources developed specifically for teachers and students include Energy & Society, and informative and interactive educational resources in one easy-to-use location. 300 North Second Street | Suite 902 | Harrisburg, PA |

8 500 corporate members include large corporations, smaller independents, service and supply companies throughout the US and the world Largest, oldest, and most diverse association of oil and gas businesses with over 900 members in PA 300 North Second Street | Suite 902 | Harrisburg, PA |

9 REACH OUT, INFORM, EDUCATE
The Keystone Energy Forum was formed through a partnership of two major oil and gas trade associations in Pennsylvania. The American Petroleum Institute and the Pennsylvania Independent Oil & Gas Association represent over 95% of operators in the Commonwealth. REACH OUT, INFORM, EDUCATE 300 North Second Street | Suite 902 | Harrisburg, PA |

10 A New - Yet Old- PA Industry
1859: Drake Oil Well 1878: Haymaker Well in Murrysville. First commercial natural gas well in U.S. 150 YEARS of drilling history, 60 years of hydro fracturing. 350,000 vertical wells 60,000 still in production 300 North Second Street | Suite 902 | Harrisburg, PA |

11 Shale Formations in Pennsylvania
300 North Second Street | Suite 902 | Harrisburg, PA |

12 Marcellus Shale Formation
Geological formation created about 380 million years ago in Middle Devonian age As formation aged and decayed, natural gas trapped in the shale Formation rests a mile or more below surface, thickness between feet Approximately size of 95,000 square miles 300 North Second Street | Suite 902 | Harrisburg, PA |

13 Marcellus Shale Formation
Estimated recoverable reserves: 500 trillion cubic feet (tcf) Current U.S. natural gas demand is 23 tcf per year Marcellus has potential to serve not only Pennsylvania, but can meet 25 percent of total U.S. natural gas demand Natural gas prices would increase without current Marcellus Shale production Economically feasible as a result of: Horizontal drilling Proximity to northeastern population centers 300 North Second Street | Suite 902 | Harrisburg, PA |

14 The Competition U.S. Department of Energy, U.S. Shale Basins
300 North Second Street | Suite 902 | Harrisburg, PA |

15 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) 300 North Second Street | Suite 902 | Harrisburg, PA |

16 Utica Shale Formation The Utica Shale formation lies a few thousand feet below the Marcellus shale and covers most of Pennsylvania. The Utica Shale is thicker than the Marcellus, it is more geographically extensive, and it has already proven its ability to support commercial production. The potential source rock portion of the Utica Shale is extensive. In the United States it underlies portions of Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia and Virginia. If the Utica Shale is commercial throughout this extent it will be geographically larger than any natural gas field known today. 300 North Second Street | Suite 902 | Harrisburg, PA |

17 Utica Shale Formation The United States Geological Survey (USGS) recently released its first estimates of undiscovered, recoverable natural gas and natural gas liquids, like ethane and propane, in the Utica Shale formation. The USGS estimate covered parts of Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia. Natural Gas – 38 trillion cubic feet Oil – 940 million barrels Natural Gas Liquids – 208 million barrels The Utica Shale formation is in its earliest stages of development in northwestern Pennsylvania with exploratory wells being drilled in Crawford County. The pace is a little higher in Ohio, where 19 rigs are currently operating. 300 North Second Street | Suite 902 | Harrisburg, PA |

18 Marcellus Shale Development
300 North Second Street | Suite 902 | Harrisburg, PA |

19 Phases in Marcellus Shale Development
Pre-Drilling Exploration Leasing Drilling Construction Horizontal Drilling Casing and Groundwater Protection Completion Hydraulic Fracturing/Well Stimulation Flow-Back Production Post-Production Site Reclamation 300 North Second Street | Suite 902 | Harrisburg, PA |

20 Marcellus Shale Development
Exploration Extensive review of geologic conditions completed prior to drilling Wealth of state and federal geological data available Two- and three-dimensional seismic testing completed to better identify formation details 300 North Second Street | Suite 902 | Harrisburg, PA |

21 Marcellus Shale Development
Exploration Two and Three-dimensional seismic Seismic trucks send shock waves into the ground - waves bounce off the rock and reflect back to the surface Geophones record vibrations Computer processes vibrations and develops geologic picture Small charges placed ft below surface in grid pattern, fired in succession Geophones record vibrations from charges Computer displays images of rock below Improves probability of successful well development Seismic activity has no impact on property/environment 300 North Second Street | Suite 902 | Harrisburg, PA |

22 Marcellus Shale Development
Leasing Producers conduct title search for mineral rights holders Land professionals work with property owners to establish lease agreements Leases give developers approval to explore for natural gas Leases reflect current market values and geologic conditions Property owners urged to contact attorney prior to entering lease 300 North Second Street | Suite 902 | Harrisburg, PA |

23 Marcellus Shale Development
Groundwater Protection First focus is protection of groundwater Compressed air is circulated down drill pipe to lift rock cuttings past deepest groundwater zone Steel casing cemented in place along vertical wellbore Cemented casing isolates wellbore from groundwater Casing process continues vertically with smaller-diameter steel pipes Increased regulations to protect groundwater 300 North Second Street | Suite 902 | Harrisburg, PA |

24 Marcellus Shale Development
Horizontal Drilling Representation of horizontal drilling unit Marcellus wells can be drilled vertically and horizontally Horizontal drilling yields more natural gas Multiple wells drilled from a single pad “Laterals” drilled horizontally up to 5,000 feet, following natural fractures in shale Multi-well pad: Requires 6 acres 24 vertical wells: Requires 100 acres Line = 1,000 feet 300 North Second Street | Suite 902 | Harrisburg, PA |

25 Marcellus Shale Development
Horizontal Drilling Well typically drilled vertically to 500 above Marcellus Shale Curve from vertical to horizontal approximately 1,200 linear feet Continues horizontally for several thousand feet Final casing string cemented in place at end of well bore Approximately 15 to 30 days required to drill a horizontal Marcellus well 300 North Second Street | Suite 902 | Harrisburg, PA |

26 Marcellus Shale Development
Infrastructure Improvements Pipelines required to transport gas to market Gathering lines link wells to processing facilities/ transmission lines ROW for lines is negotiated with property owners ROW re-vegetated, restored, and maintained to ensure safety of delivery system 300 North Second Street | Suite 902 | Harrisburg, PA |

27 Marcellus Shale Development
Hydraulic Fracturing/Well Stimulation Vital to producing minerals from all geologic formations Proven technology, advanced over 60 years High-volume fracturing used for horizontal well development Process begins by perforating casing, cement and shale with perforating gun Charge from gun opens fissures in shale to release natural gas, sand necessary to expand and prop open fissures Water, small amount additives injected under high pressure to carry sand into fractures 300 North Second Street | Suite 902 | Harrisburg, PA |

28 Marcellus Shale Development
Well Stimulation Fluids Water and sand make up 99.95% of the well stimulation Water 90% Sand 9.95% Chemicals 0.05% 300 North Second Street | Suite 902 | Harrisburg, PA |

29 Flowback Water Management
20-30% FLOWS BACK FROM WELL Most drillers have achieved or are approaching 90% recycling 98% stored in tanks, no longer open pits. Open pits are now mostly all fresh water. Final disposal only in permitted facilities Must meet drinking water standards for Total Dissolved Solids (TDS) 300 North Second Street | Suite 902 | Harrisburg, PA |

30 Marcellus Shale Development
Water Usage        Peak water use will be 60 million gallons/day At peak, water use will remain less than ONE PERCENT of state’s daily water consumption            Less than half the water used to irrigate Pennsylvania golf courses 300 North Second Street | Suite 902 | Harrisburg, PA |

31 Marcellus Shale Development
Infrastructure Improvements Significant short-term transportation challenges Roadways used for drill rig, support equipment, water truck and tank, and worker access to site Producers work with municipalities to maintain, improve roads, investing millions annually Local construction companies receiving most road maintenance contracts, estimated $200 million in 2010 300 North Second Street | Suite 902 | Harrisburg, PA |

32 During Drilling Process
Marcellus Shale Development Restoration Once well is complete and producing, restoration begins Only a small wellhead on a constructed pad, less than one acre, remains Property restored to meet owner’s needs Similar to home construction During Drilling Process Initial Reclamation 300 North Second Street | Suite 902 | Harrisburg, PA |

33 Marcellus Shale Development
Restoration Multi-well Pad: Before and After 300 North Second Street | Suite 902 | Harrisburg, PA |

34 Financial Impact of the
Oil and Gas Industry 300 North Second Street | Suite 902 | Harrisburg, PA |

35 Financial Impacts of Oil and Gas Development
Nationwide The U.S. oil and natural gas industry supports more than 9 million jobs nationwide. The industry supports over 7% of GDP, and contributes more than $86 million to the Federal Treasury every day. Pennsylvania (Currently) 275,563 total statewide jobs provided or supported by our industry. $66,251 average salary for non-gas station oil & natural gas employees. $43,325 average annual salary in Pennsylvania across all industries and sectors. $15 billion contribution to Pennsylvania labor income. $28.4 billion contribution to Pennsylvania economy. 300 North Second Street | Suite 902 | Harrisburg, PA |

36 Regulation of the Oil and Gas Industry
300 North Second Street | Suite 902 | Harrisburg, PA |

37 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) Dam permit for a centralized impoundment dam for Marcellus Shale gas wells Use of alternate pit liner NPDES GP-1 for discharges from stripper oil wells GP-11 for non-road engine air emissions Water Quality Management Permit for treatment facilities GP-05 for natural gas compression facilities emissions Alternative pit liners Earth disturbance permit (if ˃ 5 acres) Inactive status Water management plan for Marcellus Shale wells Roadspreading plan approval Erosion and sedimentation control permit (if ˃ 25 acres) Proposed alternate method of casing, plugging, venting or equipping a well Transfer of well permit or registration NPDES storm water for construction activities Orphan well classification Off-site solids disposal Water allocation (SRBC, DRBC or DEP for Ohio River basin) Bond for Oil and Gas Well(s) (individual or blanket, various bond types allowed) Residual waste transfer stations and processing facilities GP-3 for bank rehabilitation, bank protection, and gravel bar removal Transportation of residual waste Waiver of distance requirements from spring, stream, body of water, or wetland (to put the well closer than 200 feet) Road use permit – construction of access to state roadway GP-4 for intake and outfall structures GP-5 for utility line stream crossings Road use bond (PennDOT or municipality) GP-7 for minor road crossings Variance from distance restriction from existing building or water supply (to put the well closer than 100 feet) GP-8 for temporary road crossings Surface use permit (if in the Allegheny National Forest) GP-11 Maintenance, Testing, Repair, Rehabilitation or Replacement of Water Obstructions and Encroachments PASPGP-3 or PASPGP-4 for pipelines crossing streams (if < 1 acre) Proposed alternate method or material for casing, plugging, venting or equipping a well Water Obstruction – Encroachment – US Army Corps of Engineers Section 404 Joint Permit Approval for alternative waste management practices Approval of a pit for control, handling or storage of production fluids 300 North Second Street | Suite 902 | Harrisburg, PA |

38 Marcellus Shale Development
Well Stimulation Additives 300 North Second Street | Suite 902 | Harrisburg, PA |

39 State Law Now Requires Posting on www.FracFocus.com
300 North Second Street | Suite 902 | Harrisburg, PA |

40 Governor’s Occupational Safety and Health Conference
Unsafe Acts are the major cause of Accidents! Robin Grouette Production Operations Manager – Shell Appalachia

41 What do we mean by Safety?
HSE, HSSE, Personal Safety, PSM, AI,LOTO, HAZCOM, Environment, BBSM, Security, STOP, MIE, OCA, OIA, ERP, PTW, MOC… Management of Change

42 Is Safety a Priority or a Value?
Safety Philosophy Is Safety a Priority or a Value? Why be Safe? It is humane (The Right Thing to do!) Legal Obligation Best for the Business Why do Unsafe Acts/Condition Occur Don’t Know! Not Able Don’t Care!

43 Appalachia TRIR YTD – It is a Journey!
Copyright of Shell Exploration & Production Upstream Americas - Appalachia CONFIDENTIAL

44 Trips/Slips/Falls – work surface issues (weather) Hands
Worker Safety Issues Worker safety issues at a drilling and extraction sites. Discuss the problems that were encountered and how the industry responded. Trips/Slips/Falls – work surface issues (weather) Hands Falling Objectives Equipment Movements Driving People Competencies/Skills Language – Seismic High Pressure/Fire Chemicals Response Education/Train, PPE, Investigations, Modify trucking Contracts to change behaviors, Modify Designs Learn, learn , learn

45 Cultural Differences, long way from home Driving Orientation
Site Challenges Reaching remote well sites, transient work, changing workplaces, transportation, challenges for training, and training program specifics. Tight roads Landowners Cultural Differences, long way from home Driving Orientation Competencies Response Open Houses/communications, road work, Education/Train, Incident Investigations, Modify trucking routes, logistic systems Communicate, communicate, communicate and learn, learn , learn

46 Other Successes Other successes we have had with industry, counties, improving emergency response activities, interactions with OSHA, formation of the Pennsylvania Service, Transmission, Exploration, Production Safety (STEPS) work. Opportunity to provide education about the Industry Participate in Local Emergency Planning Commissions (LEPC) Work w/ local Emergency Management Services Road Transportation Safety Groups Contractor & Industry Forums Sharing Best Practices with Others

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