Betting on the Marcellus Play:
Gas Royalties in Your Future?
How ‘Bout Clean Water?
Choose Wisely
Landowners and communities are raising questions about the problem and the opportunity of drilling the gas-rich Marcellus Shale.
The Marcellus Shale is generally described as a geological formation about 8,500 feet below the surface of the earth that runs through Pennsylvania, New York, West Virginia and Ohio. Technology such as horizontal drilling and hydraulic fracturing now make it profitable to extract gas from this formation; and experts say there is a lot of gas there.
But while a multi-million dollar national advertising campaign by the energy industry touts natural gas as the clean burning fuel, the process for getting natural gas out of the ground is far from clean.
So folks are looking for advice: To drill or not to drill … to lease or not to lease? What can I expect from potential drilling activities on my property, if I decide to lease?
As one property owner said, a lot of people want to bet on the “Marcellus Powerball” and hope they win the lottery in the form of lucrative royalty payments from a gas lease.
But hope isn’t a strategy, and daydreams aren’t reality. So landowners and public officials must educate themselves and choose wisely; because whatever decision you make, you will own the consequences - good or bad.
The Marcellus Shale with its hydraulic fracturing and chemical stew is a high-stakes game. Never bet what you can’t afford to lose. Like clean water, property value, health.
Educate Yourself & Talk to Your Neighbors
There are lots of information resources out there, but where do you look among industry, government and academic sources to name three. Consider all of these but always ask yourself, “What is in this organization’s self interest?”
And listen to the voice of landowners who have been through the experience.
Here’s a quick look at two resources - academic and landowners who have been there, done that.
First, check out a report published this year on “the impact of Marcellus Shale gas extraction.” It is an illustrated, easy-to-read tutorial on what to expect.
Titled, Hancock & The Marcellus Shale, the 40-page booklet was produced by a graduate seminar at Columbia University’s Urban Design Program in the Spring of 2009. It is available as a downloadable pdf file: <http://www.osiny.org/custom/HancockAndTheMarcellusShale.pdf>
The title refers to Hancock, NY, a village near the northeast corner of the Pennsylvania border.
The report acknowledges that the opportunity to sign natural gas leases and receive royalty payments looks good to many property owners. That money “would allow for mortgages to be paid off, children to go to college and lifelong dreams to be realized,” the document notes. ["You Decide" - p. 34 of print document; p. 38 of pdf file]
It begins with a sobering assessment: “Today, extracting natural gas from the Marcellus Shale … does not even receive the same level of review required by [the village of] Hancock [NY] for a single residential dwelling plan where local, State and Federal criteria must be met regarding well, septic and adjacent wetland.” ["Preface" - p. 1 of print document; p. 5 of pdf file]
Among the issues, according to the report:
1) How much water do you have - A single, typical horizontal well in the Marcellus Shale will require from 1.5 million to 9 million gallons of water during the 4-6 weeks of hydraulic fracturing that takes place. ["Water Withdrawal," p. 10 of print document; p. 14 of pdf file]
2) One-third or more of that water becomes contaminated waste water - “Typically, 30 to 40% of the water used for drilling and fracturing returns to the surface highly contaminated.” The contamination includes toxic fracking chemicals, metals, suspended solids, oil and grease. ["Waste Water & Disposal," p. 10 of print document; p. 14 of pdf file]
According to the report - as some landowners already know - “gas companies will likely pump waste water into on-site pits to evaporate in the open air. These pits are constructed with plastic liners, susceptible to punctures and often overflow during heavy rainfall.” ["Waste Water & Disposal," p. 10 of print document; p. 14 of pdf file]
Dimock, PA - Landowners’ Nightmare
Coincidently, the report also devotes several pages to Dimock, PA, which is across the Delaware river and about 35 miles from Hancock, NY. Dimock is a textbook example of what you don’t want to happen on your property or in your community.
A 23-page consent order filed November 4, 2009 by the Pennsylvania Department of Environmental Protection (DEP) cites Cabot Oil and Gas Corporation for “unlawful conduct” that includes:
- Exploding water wells
- Polluting fresh ground water and drinking water
- Improper and/or insufficient cement well casings which allow natural gas to migrate where it should not go (into homes and water wells)
- Discharge of drilling mud, an “industrial waste,” onto the ground or into the water
Among other actions, Cabot was ordered to:
- Provide the affected residents with “water in amounts sufficient to continually satisfy water usage needs until … [the DEP] has determined that the … Water Supply has been restored ….”
- Correct the improper well casings and cement in order to stop gas migration
- Civil penalty of $120,000 with the possibility of additional fines
Details and a copy of the DEP consent order can be found on the website of the Damascus Citizens for Sustainability (DCS), a grassroots group in Damascus, PA. Link: http://www.damascuscitizens.org/aquifer-contaminated.html
Energy Companies & Marcellus
Energy companies are also betting on the Marcellus Powerball.
For example, Spectra Energy recently announced a “binding agreement” between its Texas Eastern pipeline division and Range Resources (”the leading Marcellus Shale producer”) to move Appalachian natural gas “to premium markets in the Northeast.”
Press Release Link: http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-newsArticle&ID=1355645&highlight=
You can bet these companies act only in their own self interest - never mind the community relations platitudes gas companies love to use with landowners and public officials.
Test your water before they bring a single piece of equipment on your property. Invest in an evaluation of your water that includes testing for any byproducts related to gas operations. You’ll want proof of the baseline quality of your water, if it changes later.
One property owner told me that such a test cost him $900. This is an important investment in your property and your health. Any property with contaminated water is a nightmare scenario. And don’t let the gas company do the testing for you.
Never Confuse a Business Acquaintance with a Friend
At the end of the day, if you decide to sign a drilling lease, remember this is a business transaction. It is not about making a new friend who is going to give you money and leave your property in pristine condition.
Do not behave like white meat on the turkey because the gas companies and their landmen will pick you and your property clean. Be as tough minded as they are (even behind their buttery smiles).
After all, they are not doing you any favors. You own the key asset they covet. Make them earn it; and do everything you can to protect your property and your health.
Ask about (and investigate) the company’s track record, because they are going to be “living” on your property. You want more information than what is in their glossy brochures. Tell them to identify in writing their top three environmental and safety penalties in your state and nationally (including any that are under investigation where penalties have not yet been decided).
If they say they have none — make them put that in writing too. Full disclosure is what you are after.
Make sure your lease is very specific about the protection of your property; about what the gas company can do on your property and what it cannot do; where it can operate equipment and where it cannot operate equipment.
Contact landowner groups through their websites (see “Links & Resources” below). Download and read the report from Columbia University, Hancock & the Marcellus Shale.
Arm yourself with information so you are in a position to make the best decision on behalf of yourself, your family and your property. Once you sign the lease, the time for any amendments or changes is over.
Links & Resources
Worth reading: Hancock & The Marcellus Shale, 40-page booklet from Columbia University’s Urban Design Program, published in the Spring of 2009. Easy-to-read, illustrated report on what to expect. Available as a downloadable pdf file: <http://www.osiny.org/custom/HancockAndTheMarcellusShale.pdf>
Damascus Citizens for Sustainability (DCS): The home page of an active and well organized grass roots group working to protect the upper Delaware Basin Watershed: http://www.damascuscitizens.org/index.html
Four steps to consider before signing a gas lease - based on a 1st person radio interview on WHRW-FM, Binghamton University:http://www.spectraenergywatch.com/blog/?p=455
Industry Lobbying, Public Relations & Advertising: IRS Disclosures Show Extent of Oil & Coal Groups’ Outreach (November 18, 2009). The industry is telling its story, that’s why it’s important to listen to the voice of landowners.http://www.eenews.net/public/Greenwire/2009/11/18/1