Cabot Oil & Gas Corporation

Transcription

1 Information you need to know regarding Cabot Oil & Gas Corporation s natural gas production activities and hydraulic fracturing About Cabot Cabot Oil & Gas Corporation (Cabot) is a leading independent natural gas producer, with its entire resource base located in the continental United States. Cabot is headquartered in Houston, Texas. Cabot s Interest in shale formation oil and gas Scientists have known for many years that the shale rock formations which underlie a large portion of the continental United States contain a tremendous supply of natural gas and oil in place. In the past 20 years, advances in technology, including horizontal drilling and hydraulic fracturing, have made these previously inaccessible reserves available. Thanks to the discovery of shale gas reserves, our country s supply of natural gas is growing at a rapid pace. In fact, according to the Energy Information Agency ( EIA ), natural gas reserves have increased 39% over the past two years. Currently, it is estimated that we have a growing 100- year supply of natural gas at our current rate of consumption, and that supply continues to expand with new discoveries and technology advancements. Cabot is developing natural gas and oil supply in various shale formations, primarily in Pennsylvania and Texas. The Marcellus shale in Pennsylvania is the closest significant natural gas resource base to the northeast states region. Furthermore, the northeast states region is the single largest market for natural gas in the nation. Cabot is also developing oil and gas shales in Texas, including the Haynesville shale in East Texas and the Eagle Ford Shale in South Texas. Cabot s shale exploration and production operations depend on the use of hydraulic fracturing to enhance production from oil and gas wells. This technology involves the injection of fluids consisting mostly of water but typically including small amounts (about 1-4%) of several chemical additives as well as sand into a well under high pressure in order to create fractures in the rock that allow oil or gas to flow more freely to the wellbore. Many of our wells would not be economical without the use of hydraulic fracturing to stimulate production from the well. Enhanced Use of Natural Gas Benefits Our Nation Currently, much of the energy used in the United States is imported from overseas. Of particular concern is the fact that some 63 percent of the petroleum used in the U.S. - most of which is used in the transportation sector - comes from often-unstable and unfriendly governments. On the other hand, plentiful supplies of domestic clean-burning natural gas are available. Indeed, 99 percent of the natural gas we use today comes from production fields located in North America, the vast majority right here in the U.S. Additionally, our nation s 2 million-mile underground natural gas delivery system is safe, reliable and in-place, making delivery of domestically-produced natural gas easy and efficient. Natural gas is also environment-friendly and increased use of the fuel can help reduce smog, acid rain and greenhouse gas emissions. 1

2 Clean, Abundant Energy for Homes, Commercial Business and Industrial Facilities Who could benefit from enhanced use of domestically produced natural gas? American homeowners, small businesses and manufacturers will all benefit from increased use of domesticallyproduced natural gas. The residential and commercial sectors comprise more than 110 million homes and nearly 5 million places of business, respectively. In homes, space heating and cooling, water heating and cooking are the most prominent end-use applications using natural gas. In commercial buildings, lighting, space heating and cooling, and water heating top the list. Natural gas provides a clean, flexible, cost-efficient fuel to serve homeowners and to support small businesses, which are the engine of our nation s economic growth. Natural gas can also be used as a vehicle fuel. Proven natural gas vehicle technologies are available today that could allow the U.S. to reduce reliance on foreign oil imports by several million barrels a day. In the U.S. industrial sector, expanded use of domestically-produced natural gas in such applications as blast furnaces, power generation or process heat can reduce emissions, and reduce costs, making our nation s manufacturers more competitive in the world market. Cabot s Commitment to Environmental Stewardship and Compliance Cabot has been an active member of the exploration and production community for over 120 years and throughout that time has been committed to conducting compliant, safe operations. The Company operates its facilities in full compliance with environmental and oil and gas drilling regulations. Cabot continues to implement measures to achieve our goal of zero incidents, has installed an environmental management system and is committed to performing a root cause analysis of any incident that occurs. The Company takes every issue involving people and the environment very seriously. Cabot is committed to furthering its working partnership with state and local regulators. The Company requests regular meetings with regulators to keep the lines of communication open. Cabot is committed to providing regulators and the public additional information regarding Company operations, and to address issues as they arise. Cabot s use of hydraulic fracture and horizontal drilling technologies Hydraulic fracturing operations have historically been overseen by state regulators as part of their oil and gas regulatory programs. We are committed to partnering with federal, state and local regulators to ensure the best regulations are in place to fully oversee our industry. However, bills have recently been introduced in Congress that would subject hydraulic fracturing to federal regulation under the Safe Drinking Water Act. In addition to these federal legislative proposals, some states and local governments have considered imposing various conditions and restrictions on hydraulic fracturing operations, including but not limited to requirements regarding chemical disclosure, the standards for casing and cementing of wells, withdrawal of water for use in hydraulic fracturing of horizontal wells, baseline testing of nearby water wells, and restrictions on the type of additives that may be used in hydraulic fracturing operations. We are working with our national trade associations to ensure more transparency into our practices and procedures and are focused on improved outreach and education to the various public stakeholders. 2

3 In fact, Cabot is a member of the America s Natural Gas Alliance ( ANGA ), the American Exploration & Production Council ( AXPC ) and the Independent Petroleum Association of America ( IPAA ). These three trade associations have announced support for the efforts of the Ground Water Protection Council ( GWPC ) and the Interstate Oil and Gas Compact Commission ( IOGCC ) to create a state-based system for disclosing the contents of hydraulic fracturing fluids on a public registry. Cabot is participating in this program, which is expected to launch in March This public registry will allow all stakeholders the opportunity to review the ingredients used and the concentrations of these ingredients in the frac fluid at each well location drilled. Cabot utilizes horizontal drilling techniques in its production activities. Horizontal drilling is an innovative approach that turns the drill bit from a vertical path through an arc until it is moving horizontally across the shale formation. Once turned, the bore can access a much larger production zone than would traditionally be tapped by a single vertical well. The combination of horizontal drilling and hydraulic fracture allows companies like Cabot to extract needed supplies of clean burning natural gas from the shale formations in an efficient and cost effective manner. Additionally, from an environmental standpoint, this combination allows the production of the gas from under a much larger area with a minimal surface disruption. Also, with horizontal wells able to reach more of the shale reservoir, this practice limits the amount of well bores through the water bearing zone. Frequently asked questions The following information is provided to assist our investors, landowners and community groups in better understanding Cabot s operations in the shale formations, its use of the hydraulic fracture process, and to provide information on the types of materials and practices used in hydraulic fracture, or fracing. 1. Why is Cabot involved in producing shale gas? Unlocking shale gas could provide the U.S. more than 100 years of clean natural gas supplies for use in our nation s homes, schools and hospitals, businesses, power plants and factories. The Marcellus shale covers ten times the square miles of the next largest formation in the U.S., and is one of the largest natural gas fields ever discovered. 2. What is hydraulic fracturing? Originally developed in the 1940 s, hydraulic fracturing has helped produce over the past forty years some 600 trillion cubic feet (TFC) of gas and 7 billion barrels of oil. Hydraulic fracturing is a method of enhancing and increasing production in a target zone by opening new flow channels in the rock surrounding a wellbore with hydraulic force. Gas is present in the open pore spaces of rocks. Hydraulic fracturing creates paths between these pore spaces to let the gas flow out. 3

4 3. Why does Cabot frac? Much of our nation s natural gas supplies are located in shale fields. Without hydraulic fracturing, the U.S. would lose some 45% of its domestic natural gas production from shale and other tight formations within five years. Clean burning natural gas is critical to American manufacturing jobs, to farmers who use fertilizers, to households who need clean burning fuel for home heating and cooking, to large and small businesses who need electricity, and to the transportation sector seeking cleaner alternatives to gasoline and diesel fuel. 4. How does the hydraulic fracture process work? Hydraulic fracturing at Cabot production sites is the collaboration of numerous vendors and a wide range of equipment. Cabot hydraulic fracture well projects can include anywhere from 1 to 20+ separate stages from start to finish. On each stage a sand-laden slurry is pumped into the formation. The force of the water creates a network of tiny fissures in the low permeability rock. The water that is pumped acts as a delivery mechanism for the sand, which finds its way into those newly created cracks and holds them open. These small passageways allow the previously trapped natural gas to travel to the wellbore, and then up to the wellhead on the surface. 5. How does Cabot manage frac fluids? Generally, Cabot recycles and reuses 100% of returned frac fluid in Pennsylvania. When fresh frac fluids are required, Cabot mixes the fresh water, sand and additives onsite. Cabot uses this approach to limit the need to truck large quantities of treated fluids to production sites. Cabot does not store frac fluids or flowback fluids (the portion of the frac fluid that returns up the well to the surface from the shale formation) in open pits; all frac fluids and flowback fluids used by the Company are stored in closed containers. Cabot uses on site real-time monitoring of its frac operations to ensure every aspect of the frac process is performed in an environmentally appropriate and safe manner. 6. What s involved in completing a well for production? The process of bringing a well into production can be performed over a short period of time, normally between 70 to 100 days. Once this well is in production, it can produce for as many as years. Typically, a horizontal well needs some four-to-eight weeks to prepare the site for drilling, and an additional four to ten weeks for on-site drill rig work, casing the well, cementing and moving all associated auxiliary equipment off the site. Once all of this activity has been performed, fracturing operations can commence. Once the development phases are complete, the site is reduced to a fraction of the size of the drill site, or approximately ¼ acre in Pennsylvania and approximately ½ acre in Texas. The remainder of the site is restored in a manner to provide environmental benefits such as reduced air and greenhouse gas emissions. 4

5 7. What are the benefits of Cabot s production approach? Cabot s approach creates a smaller footprint at each production site minimizing impacts. Where possible, Cabot drills multiple wells on each pad site, thereby reducing the environmental impacts. Once work is completed on a well pad, the site can be reclaimed and minimal space will be used for day to day well operations. Cabot believes that proper and efficient well construction provides the first line of defense in groundwater protection. 8. How does Cabot protect groundwater in Pennsylvania? Steel pipe, known as casing, is cemented into place at the uppermost portion of the well for the specific purpose of protecting groundwater. This steel pipe is called surface casing. The depth of the surface casing is generally determined by the location of aquifers in the area, among other factors. Multiple strings of casing are used to ensure groundwater protection. As the well is drilled deeper, additional casing and cement is installed to isolate natural gas producing formations from ground water. Casing and cementing are critical parts of the well construction that not only protect groundwater, but are also important to ensuring efficient production of natural gas from the well. Before fracturing begins, casing with cement surrounding the casing, is pressure-tested at pressures greater than those that will be used during fracturing operations. Additionally, a cement evaluation log using sound waves is conducted to determine if there are flaws in the integrity of the cement in the vertical portion of the well. 9. What is frac fluid? Hydraulic fracture water or frac fluid is made up primarily of water and sand. Indeed, sand and water make up approximately 99.5% of the total fluid in the Marcellus shale in Pennsylvania and approximately 95.8% of the total fluid in the Eagle Ford shale in Texas. The remaining percentage of the fluid is made up of a number of additives that aid in ensuring the frac process works effectively and efficiently. Typically, it takes 3 to 7 million gallons of water to fracture stimulate a Marcellus shale well and 4 to 8 million gallons of water to fracture stimulate a Haynesville or Eagle Ford shale well. 10. What are the additives found in frac fluid? Frac fluids are formulated for the specific reservoir found in a producing area so the composition will vary by location. See question 12 below. 5

6 11. Who regulates Cabot s operations in the Pennsylvania Marcellus shale? Cabot is regulated by elected and appointed officials at the federal, state and local level in Pennsylvania. The primary agency that Cabot interacts with is the Pennsylvania Department of Environmental Protection (PA-DEP). The PA-DEP has the power to regulate, permit and enforce all natural gas exploration and production activities performed by Cabot in Pennsylvania from the drilling of the well, its hydraulic fracture, the management and disposal of drilling-associated wastes, and the ultimate abandonment and plugging of the well. The PA-DEP regularly inspects Cabot facilities to ensure compliance with state law, and investigates any complaints or incidents that occur that could impact the environment of the Commonwealth. 12. Will Cabot publically disclose the contents of its hydraulic fracturing fluid by well drilled? Yes, Cabot will publically disclose the contents of its hydraulic fracturing fluid by well drilled. Cabot is a member of the America s Natural Gas Alliance ( ANGA ), the American Exploration & Production Council ( AXPC ) and the Independent Petroleum Association of America ( IPAA ). These three trade associations have announced support for the efforts of the Ground Water Protection Council ( GWPC ) and the Interstate Oil and Gas Compact Commission ( IOGCC ) to create a state-based system for disclosing the contents of hydraulic fracturing fluids on a public registry. Cabot is participating in this program, which is expected to launch in March Does Cabot encourage its hydraulic fracturing service providers to use least toxic fluids? Yes, Cabot encourages its fracing service providers to use lower impact chemistries for additives such as friction reducers and surfactants, while keeping in mind both functionality and cost effectiveness. 6