Natural Gas Leasing, Exploration, and Extraction in Marcellus Shale

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1 Natural Gas Leasing, Exploration, and Extraction in Marcellus Shale

2 West Virginia has a long history. Burning Springs, WV Oil Field Sistersville, WV Petroleum, WV Oil Field

3 Geology What is the Marcellus Shale? (Answer: Mud!)

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5 Marcellus Shale 34 million acres in size, multi-state Several million acres leased Multiple companies drilling in region, more planned Cost per well $3 Million+/Horizontal well Yields vary between horizontally or vertically drilled wells

6 Where is the Marcellus in WV? It is present below the surface, at varying depths throughout much, but not all of WV. It is not present in extreme eastern or western WV. It crops out at the surface in parts of the Valley and Ridge province in eastern WV (shale barrens). It varies in thickness across WV.

7 Eastern WV Marcellus Outcrops

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10 Barnett Shale? Why should I be interested? Geologically formed in similar fashion to Marcellus Shale Barnett Shale is the largest natural gas field developed to date in the continental U.S. New technologies in horizontal drilling and hydraulic fracturing Close spacing of wells.

11 Why the Interest in WV?

12 Marcellus Black Shale in northern Appalachia could conservatively boost proven U.S. reserves by trillions of cubic feet.. estimated potential could reach 50 trillion cubic feet of recoverable gas. (30 trillion produced in US)

13 Leasing

14 Types of Ownership Fee Simple - Absolute ownership of everything on the surface of the land (up to 200 into the airspace) and under the ground to the center of the earth. Fee Simple Defeasible Ownership of property for a certain period of time. The period of time can be a set number of days, months or years, or it could end when a certain event occurs, i.e., the wells currently on the property stop producing oil or gas in paying quantities. Surface Rights Only - Ownership rights of what is on the surface of the land. For example, the oil, gas, and/or minerals below the surface were severed and sold off in the past. It is important to note that the mineral rights, whether for coal, oil, gas or some other mineral, can all be severed separately.

15 Steps in the Leasing Process --Confirmation of clear title(s) --Gas drilling company secures permit from DEP public notice, on the internet --Notifies landowners in and around drilling unit, 1000 distance --Water tested for quantity and quality --Other conditions around site documented for use during reconstruction, ie., roads. --Current and proposed WV regulations

16 Signing a Lease -You do not have to sign a lease if you do not want to. Forced pooling is illegal in WV for shallow wells (Marcellus=shallow well) -A lease is a binding contract Consult an attorney before signing any lease -Make sure you understand what is in the lease and what the outcome will be

17 Pre-drilling

18 Seismic Testing Seismic cables and geophones 2-D Seismic Test Helicopters for transporting cables Drilling shallow holes for charges Mowing machines to brush out trails Thumper trucks

19 Exploration and the Drilling Process

20 Exploration Process What happens to my land? Trees removed Roads cut Site surveyed, cleared and leveled Pits dug WV Department of Environmental Protection Inspections Environmental & Safety controls installed Best Management Practices (BMP s) put in place

21 The Well Site (Pad)

22 Typical Well Site 2+ acres in size Depends on the well type (vertical vs.horizontal) Ponds for drill cuttings, fresh water storage (also trailers to hold water) Heavy equipment Noisy Operates 24/7 while drilling occurs Lots of truck traffic Hauling equipment, water, pipe, etc. Visible at night Lights from drilling rig

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24 Drilling Pad

25 Picture courtesy Fortuna Energy

26 Chief Oil and Gas

27 The Drilling Process Show Drilling Video Can be viewed at:

28 Fracing Fracturing or fracing The pumping of fluids into a reservoir with such force that the reservoir rock is cracked and results in greater flow of oil or gas from the reservoir. (Source: Chesapeake Energy 2 to 6 million gallons of water are needed for each frac Major sources: surface water, municipalities, and recycled frac water Frac return water is ~10 to 20% of the amount injected.

29 What is in frac fluid? Frac fluid is mostly water and sand. About 2% is chemicals. Component Acrylamidecopolymer* Ammonium sulfate Amphoteric alkyl amine Boric acid Calcium chloride Ca Mg, Na phosphate Dimethylsiloxanes and silicones Guar gum Hemicellulase enzyme Magnesium chloride Noncrystalline silica Potassium chloride Propan-2-ol* Sodium chloride Sodium hydroxide Sodium sulfate Urea Notes Normally safe nitrogen fertilizer detergent weak acid road salt, dust control mineral supplement sealant, contact lenses plant derived gum enzyme, breaks down cellulose deicer, mineral supplement sand Potash, fertilizer Irritant: inhalation, skin absorption table salt base, ph control sulfate salt nitrogen fertilizer Most of the components that make up frac fluid are safe, commonly used chemicals. *Should be handled with care. Potential toxic effects.

30 WV Water Research Institute Frac Water Study Conclusions Chemistry Generally neutral to alkaline (ph of 7.0 or greater) Primarily sodium, calcium, chloride (about 95% of Total Dissolved Solids) Magnesium, strontium and barium in lesser amounts Volatile/non-volatile organic compounds in varying concentrations Environmental/health and safety Primary environmental issue: salinity Primary human health issue: organics You don t want to drink fracing fluid Aubrey McClendon, CEO Chesapeake Energy. 60 Minutes, 14 Nov 10 Management Water managers must keep it out of streams and drinking water supplies Treatment-Sewage Treatment Plants, Evaporation, deep well injection Recycling *Source: Dr. Paul Ziemkiewicz, WV Water Research Institute

31 Large scale hydrofracing

32 Flaring a well to evaluate production

33 Post Drilling

34 Multiple wells from one pad XTO Energy

35 Restoration Drilling companies must follow WV code for reclamation requirements What does your lease say? Special considerations Native grasses, shrubs, and/or trees replanted, access roads seeded, small pond construction, etc. Amount of time after equipment leaves until restoration complete What will it look like?

36 Restored Well Site Picture courtesy Fortuna Energy

37 Natural Gas Development Process: Activities and Timeframes Leasing: 4 6 months Exploration/Seismic: 4 months Site Preparation & Drilling: 4 8 weeks Site Reclamation: 2 weeks Extraction & Transport: 5 40 years (!) Maintenance: Life of the well Closure

38 Environmental Concerns Transportation Dust Diesel Fumes Air Quality

39 Environmental Concerns Public Safety Noise Pollution Pipeline Construction Stream Crossings

40 Environmental Concerns Steep Slopes Use of Ineffective Hay Bales Inadequate Silt Fence Impacts to Sensitive Areas

41 Environmental Concerns Other: Fresh water sources for fracking Freshwater impoundments Flowback water impoundments Onsite pit solidification and burial Wastewater treatment Naturally occurring radioactive materials Groundwater contamination around annulus Greenhouse emissions (Methane, CH 4 )

42 What else can they use my land for?

43 Development of Infrastructure

44 Compressor station used to increase gas pressure into pipeline Picture courtesy Fortuna Energy

45 Gas Drying and Metering Facilities Picture courtesy Fortuna Energy

46 Pros and Cons of Natural Gas Development Pros Source of energy for 100+ years Affordable for consumer Reduces dependency on foreign sources of energy Money for mineral owner Money into local economy through fuel, food, hospitality sales, etc. Severance taxes for counties Smaller carbon footprint/fewer impacts to the environment than other sources of energy (?) Cons Impacts to infrastructure (roads, bridges) Increased demand for emergency services Increased traffic Environmental concerns (air, water, land) Aesthetic concerns Inconvenience for surface owners Impacts to property values (?)

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48 Credits Photos courtesy Range Resources, Chesapeake Gas LLC, Fortuna Energy Inc., Chief Oil and Gas, Ultra Resources, XTO Energy, and Jackie Root, Mike McDavid, Mark Madden, Earle Robbins, and Tom Murphy Penn State University Marcellus Shale Exploration Why Here, Why Now? Tom Murphy, Penn State Cooperative Extension Natural Gas Education Team WV Department of Environmental Protection, Office of Environmental Advocate

49 Additional information: WVU Extension Service, Natural Gas Team Website Penn State University, Natural Gas Website WVDEP Office of Oil and Gas Contact Information: Georgette Plaugher WVU Extension Service