SEC Steps Into Fracking Debate

On Thursday, August 25, 2011 0 comments

WASHINGTON—The Securities and Exchange Commission is asking oil and gas companies to provide it with detailed information—including chemicals used and efforts to minimize environmental impact—about their use of a controversial drilling process used to crack open natural gas trapped in rocks.

The federal government's investor-and-markets watchdog is stepping into the heated environmental debate surrounding hydraulic fracturing, or "fracking," according to government and industry officials, even as state and federal environmental officials have begun to bring greater pressure on the industry. The process, which involves pumping water, chemicals and sand underground to free difficult-to-reach natural gas in shale basins, has come under criticism from environmental groups ad some lawmakers over concerns toxins in the mix may contaminate air and water.

The SEC move shows the broad interest among Washington regulators in taking a closer look at fracking and suggests companies that are betting billions of dollars on the technology will increasingly need to weigh disclosing techniques they often consider proprietary. Battles over disclosure have already broken out at the state level, including in states such as New York and Pennsylvania that sit on the giant Marcellus Shale, an underground formation that has become a fracking hotbed because of the large quantities of natural gas there. Just last week, Noble Energy Inc. paid $3.4 billion for a stake in developing 663,350 acres there.

Regulators in several states have identified cases in which drilling—although not necessarily the fracturing process in particular—has allowed natural gas to seep into residential water wells, and at least one scientific study has linked drilling and gas contamination more broadly. But there have been few if any documented cases of contamination by the chemicals used in hydraulic fracturing. The industry acknowledges that improperly constructed wells can allow gas to escape, but says such cases are rare and aren't directly tied to fracturing itself.

In the past, the SEC has trained its attention on other areas of concern, such as subprime mortgages and credit-default swaps, and has asked companies to provide additional information to investors. Government officials said the SEC's interest in fracking is in ensuring investors are being told about risks a company may face related to its operations, such as lawsuits, compliance costs or other uncertainties. Other federal agencies like the Environmental Protection Agency are collecting information about fracking, but those efforts are separate from the SEC.

For the moment, the SEC isn't requiring broad, standardized disclosure of fracking information to the public. Instead, oil and gas companies are being asked by the agency's office that oversees corporate disclosure to supply information confidentially to the SEC, and the agency, in turn, will likely require them to publicly disclose some of that information, according to government officials.

"If there's something in [a company's] field of operation that creates uncertainty, that's something they may want to talk about" with investors, said a government official.

The SEC's requests drew criticism from some in the industry about potential regulatory overkill.

"While our industry absolutely supports common sense disclosure and transparency measures, such duplicative inquires that may fall outside of an agency's core mission, are troubling and counter to what our nation needs at this time," said Kathryn Klaber, president of Marcellus Shale Coalition, an industry group.

An SEC spokesman said "in the course of our filing reviews staff will ask questions related to the areas disclosed in the company's filings." The EPA didn't respond to requests for comment.

The SEC's foray into the issue comes as the Obama administration is trying to find a middle ground between environmental concerns over fracking and an industry that is creating jobs and increasing domestic supplies of an alternative energy source to coal. Natural gas currently provides about 25% of total U.S. energy and is projected to increase to 45% by 2035, according to the U.S. Energy Information Administration. In addition to a fracking study being conducted by the EPA, the Department of Energy and the Interior Department have also been examining the practice. Some states have fined drilling companies for environmental problems.

For securities regulators, two recent energy-related disasters are fresh in their minds: the crippling of Tokyo Electric Power Co.'s Fukushima Daiichi nuclear-power plant in March and last year's BP PLC oil spill in the Gulf of Mexico. In both cases, some investors were surprised at the risk to which the companies were exposed, and their share prices fell sharply.

The SEC's questions in recent letters include which chemicals are being injected into the ground, what companies are doing to minimize water usage and what steps they are taking to minimize environmental impact, according to copies reviewed by The Wall Street Journal.

The questions are already prompting some companies to disclose more. SandRidge Energy, a small, Oklahoma company, beefed up disclosure related to fracking operations after the SEC asked a series of questions in connection with a public offering of a trust SandRidge completed last week. For instance, the company said in a recent financial filing that its fracking fluid contains 99% fresh water, and the remainder includes the food additive guar, enzymes and other chemicals, which it didn't name.

Fracking fluids include some toxic chemicals, based on company disclosures of chemicals such as benzene and formaldehyde for congressional reports and at voluntary disclosure sites.

Kevin White, senior vice president of SandRidge, said "responding to those comments would be easier than what other companies might face" because the firm doesn't use many chemicals in its fracking fluid.

Industry representatives said much depends on how specific the SEC wants companies to be and cautioned they would resist revealing proprietary information.

"While we support disclosing our ingredients, it is critical to our business that we protect our proprietary information, including the recipes of our products," said spokeswoman Tara Mullee Agard of Halliburton Co., one of the largest providers of hydraulic-fracturing services to the energy industry.

Already some companies have said they will voluntarily publicize their chemicals online at, and several states, including Wyoming, Texas and Arkansas, have recently passed mandatory disclosure rules. The companies will make the information public through state registries.

Fracking is primarily regulated by states and is largely exempt from some federal statutes, such as the Safe Water Drinking Act. The EPA's study on whether fracking affects drinking water is to be released at the end of 2012. For the study, nine companies provided information on the chemicals they use after an agency request last year.

The SEC has also been investigating whether companies are overstating the long-term productivity of their natural-gas wells and has issued subpoenas to at least two firms, according to company financial disclosures earlier this month. The agency subpoenaed Quicksilver Resources Inc. and ExCo Resources Inc. The New York attorney general's office, meanwhile, has also issued subpoenas this month to various companies, including Range Resources Corp., Goodrich Petroleum Corp. and Cabot Oil & Gas Corp., over their estimates.

Jim Smith, a partner at Houston law firm Porter Hedges LLP specializing in environmental law, questioned whether the type of fracking information the SEC is requesting is material to a company. "I have not heard of companies in relatively recent times having significant environmental liabilities associated with hydraulic fracturing that in any way affected their reported worth," he said.

Investors, including the $129.4 billion New York State Common Retirement Fund, have begun agitating for enhanced disclosure of fracking operations over the past few years and have successfully included shareholder proposals at 16 companies. Though none have passed, proponents at Chevron Corp. got 41% support, backers at Exxon Mobil Corp. got 28% and Williams Cos. holders got 42%. Some companies, such as Williams and Cabot, have increased disclosure of their fracking operations as a result of the proposals.

New York State Comptroller Thomas P. DiNapoli , who runs the New York State Common Retirement Fund, said some companies drilling in the Marcellus Shale in Pennsylvania have had to pay large fines and suffered reputational damage over fracking problems. Chesapeake Energy and Cabot have paid fines there. "Only through appropriate disclosure do you get the information you need to make informed and sound investment decisions," he said.

—Daniel Gilbert and Russell Gold contributed to this article.

US Slashes Marcellus Shale Estimate by 80 Percent!

On Wednesday, August 24, 2011 0 comments

The U.S. will slash Marcellus Shale reserves from 84 trillion cubic feet of natural gas from the earlier estimates of 410 trillion, according to Bloomberg.

Geologists from the U.S. Geological Survey provided the new number, which supersedes estimates from the Energy Information Administration.

The EIA does not contest the new number: "They’re geologists, we’re not. We’re going to be taking this number and using it in our model,” an EIA analyst told Bloomberg.

The Marcellus Formation, which spans from New York to Kentucky, was America's greatest hope for natural gas.

An April estimate from the EIA increased Marcellus reserves by a multiple of 42 based on new technology and information. As part of this estimate, the EIA said America had enough recoverable natural gas to heat homes and run power stations for 110 years

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New Marcellus Shale Study Says Marcellus Shale is Better Than Coal

On Thursday, August 18, 2011 0 comments

Marcellus gas has less impact on global warming than coal, according to a recent study by scientists at Carnegie Mellon University.
The peer-reviewed study published Aug. 5 in “Environmental Research Letters” appears to be a direct refutation of an April study from researchers Robert Howarth and Anthony Ingraffea at Cornell University that indicated that shale gas was worse for global warming than coal.

The Cornell study had a number of faults — acknowledged by its authors — including sketchy data that did not directly apply to Marcellus drilling operations.

The Carnegie Mellon study looks specifically at Marcellus and the “life cycle greenhouse gas emmissions” associated with its production and consumption.

Marcellus gas is essentially no different than conventional natural gas, the study found, and 20-50 percent cleaner than coal for producing electricity.

“Marcellus shale gas emits 50 percent fewer greenhouse gas emissions than any U.S. coal-fired plant,” said study co-author Chris Hendrickson. “We favor extraction of Marcellus shale natural gas as long as the extraction is managed to minimize adverse economic, environmental and social impacts.”
Former DEP Secretary John Hanger lauded the new study on his blog, saying it “debunks and decimates professor Howarth’s hit piece study that the NYT gas reporter and other media gave so much attention.”

“By contrast,” Hanger said, “the CMU study has received very little press attention so the result remains that many people think Howarth is the final word on this important matter.”
The new study does support “green completions” — in which gas is captured during the earliest stages of production rather than being vented or flared into the atmosphere. Proposed shale gas rules from the EPA would require green completions.

“Green completion... would significantly reduce the largest source of emissions specific to Marcellus gas preproduction,” the study says, but it adds that such emissions are a small portion of the life cycle estimates.

The study’s authors said greenhouse gas emissions are not the only challenge when it comes to extracting shale gas.

“We still need to study other environmental issues, including use of water and disruption of natural habitats,” said co-author Paulina Jaramillo.
Read Original Article - Here.

Proposed Drilling Under PA State Forests Could Bring In $60 Billion in Revenue

On Wednesday, August 17, 2011 0 comments

The head of Pennsylvania's Department of Community and Economic Development has said if Pennsylvania allows new Marcellus Shale gas well drilling throughout Pennsylvania's publicly owned forests, state government could receive revenues of $60 billion in the next 30 years and solve all of its economic problems.

Alan Walker, secretary of the DCED, made the remarks last week during an interview for Capitolcast. The remarks were reported by Capitolwire yesterday.

According to the article, Mr. Walker acknowledged that getting $60 billion in revenue would require leasing drilling rights under most of the state's forests, but he said he wasn't concerned about any environmental impacts.

Mr. Walker is quoted in the article as saying, "The way the drilling platforms are being set up today -- where you may only have to have one pad every so many square miles -- it's a minimum impact on the state forest property, and in a matter of a couple of years, it's going to be revegetated."

Environmental organizations and some Democratic state legislators condemned the idea. Paul King, president of the Pennsylvania Environmental Council, a mainstream statewide environmental organization, said in a letter to Gov. Tom Corbett that the proliferation of shale drilling rigs, pipelines and compressor stations "would be devastating to our state forests" and the impacts would last for generations.

"To use our state forests as an expedient means to generate new revenues, when there are a multitude of options including but not limited to a severance tax, is wholly inappropriate," Mr. King wrote, noting that the forests are already big economic assets for their timber production, tourism and recreation. "These lands belong to the people of Pennsylvania."

In response to reporters' questions, Kevin Harley, the governor's spokesman, issued a statement Tuesday afternoon saying Mr. Walker's remarks reflected his position and opinion.

"[Secretary Walker] was speaking as someone who is in charge of economic development," Mr. Harley said. "He wasn't speaking on behalf of the governor." He added that Mr. Corbett would take into consideration both economic and environmental factors before moving forward on any future lease sale, but no additional leasing of forest land is in the works.

Read entire article in Pittsburgh Post Gazette.

PA Shale Gas Production is UP

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HARRISBURG, Pa., Aug. 17 (UPI) -- Natural gas production from the Marcellus shale gas play in Pennsylvania increased substantially during the first six months of 2011, the government said.The Pennsylvania Department of Environmental Protection reported a 22 percent increase in shale gas production during the first half of 2011 compared with the second half of 2010, the Platts news service reports.

Shale gas production was reported at 1.87 billion cubic feet per day.

The U.S. Environmental Protection Agency in May called on energy companies to do more to monitor drinking water downstream from treatment plants taking wastewater from the Marcellus shale gas play.

Environmental advocates have expressed concern that chemicals used to coax natural gas out of shale formations could reach drinking water aquifers.

The New York State Department of Environmental Conservation in early July released recommendations surrounding shale gas operations in the state. Those recommendations could open about 85 percent of the Marcellus Shale play in New York to development but keep operators away from key watersheds and groundwater aquifers.

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Pittsburgh Mayor Won't Sign Bill Banning Marcellus Shale In City

On Tuesday, August 9, 2011 0 comments

Mayor Luke Ravenstahl has decided not to sign Pittsburgh City Council's bill banning Marcellus Shale gas drilling in the city.

Tuesday marks the deadline for getting the measure to the elections department to include it on the fall ballot.Ravenstahl's decision to withhold his name eliminates the possibility of any ballot referendum. Ravenstahl said in a statement that the "industry is in the region to stay."

National Fuel Joint Venture to Develop Marcellus Shale Is A No Go.

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Dow Jones Newswire -
National Fuel Gas Co. (NFG) said it likely won't pursue a joint venture with two companies that its subsidiary had been eyeing to develop assets in the Marcellus shale region.

The company's stock had rallied last September after its Seneca Resources Corp. subsidiary said it was seeking a partner for its assets in the prolific natural-gas production area in Pennsylvania.

Friday, shares were off 9.9% to $57.01 after setting off a single-stock circuit breaker. The stock had also declined after-hours Thursday, despite the company's better-than-expected fiscal third-quarter results.
As late as last month, Seneca said it was still considering offers from "several" different parties. Friday, it parent company said discussions came "relatively close" with two potential partners but didn't meet the bar of enhancing shareholder value.

"Our future growth prospects--and the fact that we're not capital constrained or up against a schedule of lease expirations--sets a pretty high bar," Chief Executive David F. Smith said in a statement. He added that, while the two offers the company considered were good and serious, "they just weren't good enough."

Seneca's exploration-and-production business already operates a joint venture for some of its Marcellus shale wells with EOG Resources Inc. (EOG)

Late Thursday, National Fuel reported its profit for the period ended June 30 rose 10% to $46.9 million, or 56 cents a share, from $42.6 million, or 51 cents a share, a year earlier. Operating revenue climbed 8.2% to $381 million. Analysts polled by Thomson Reuters had expected earnings of 53 cents a share and revenue of $375 million.

National Fuel also increased its earnings guidance for the year to a range of $3 to $3.10 a share from $2.83 to $2.98.

Click here to read the entire story

Pittsburgh City Council Wants Marcellus Shale Drilling Ban on Ballot

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According to a report by the Pittsburgh Tribune-Review,"Pittsburgh City Council launched a murky legal maneuver today in an attempt to get a Marcellus shale drilling ban onto November ballots.

Council earlier this month passed legislation that would make the ban part of Pittsburgh's Home Rule Charter and was awaiting Mayor Luke Ravenstahl's approval to get a required voter referendum on the ballot. The deadline for submitting referendum paperwork to the Allegheny County Elections Department is today.

But Ravenstahl informed council by letter Monday evening that he would neither sign nor veto the bill, choosing instead to sit on it until the deadline passes.

Councilman Doug Shields said this morning that council would attempt to get the elections department to accept its "interim approval" of the referendum, but admitted he was unsure if the maneuver would succeed.
"I've never been in a situation like this before," Shields said. "What we're going to do is go see elections Director Mark Wolosik and see if we can get it on the ballot. The legal question is, is this valid?"

Controversy Surrounds One Citizen's ANTI-Drilling Billboard

On Thursday, August 4, 2011 0 comments

BRIDGEWATER TWP. - According to an article published on Citizens Voice, A public gathering near a billboard that depicts a pitcher of contaminated water became contentious Wednesday as pro- and anti-Marcellus Shale gas groups clashed.

Craig and Julie Sautner, of Carter Road in Dimock Township, have received threats since the sign was erected earlier this week, Sautner said. The pitcher of water depicted on the sign was drawn from the Sautners's well.

Small groups gathered near the sign Wednesday afternoon, at times turning contentious, with a member of the anti-gas group calling someone in the pro-gas group "greedy."

Sautner said his family has been living with a contaminated well for nearly three years.
"I think that's long enough to wait for clean water," Sautner said. "I've been living this life for three years. It's time to get it fixed."

The state Department of Environmental Protection has held Cabot Oil & Gas Corp. responsible for contaminating water wells in the area.

Sautner told those present the sign put the water issue "back on the front burner where it belongs."
Cabot spokesman George Stark disagreed.

"This billboard represents a falsehood," Stark said at the gathering. "Test results and science show that the water is clean and meets Safe Drinking Water standards.

"We continue to ask for others to prove the water is contaminated when we are able to prove otherwise," he added.

The company has tested the water of all of the plaintiffs embroiled in a lawsuit against Cabot, Stark said.

Sautner also spoke of a waterline former DEP Secretary John Hanger promised in late 2010 would be run from Montrose to the affected homes.

Cabot opposed the waterline proposal, as did Montrose Borough.

Bruce Ferguson of the Catskill Citizens for Safe Energy said the state backed away from the waterline when Cabot voiced opposition to the project.

"The gas companies are more powerful than the state government," Ferguson said.
"The waterline was yanked out from underneath us," Sautner said. "We deserve that waterline. It's time to step up."

DEP and Cabot reached a settlement and the state withdrew the waterline proposal in late 2010. In the settlement, Cabot agreed to pay affected homeowners double the fair market value of their homes and install methane separators.

Sautner said none of the affected homeowners in the lawsuit have taken the offer.
Others at the event expressed support for the Sautners and other affected Carter Road residents.
Craig Stevens, of Silver Lake Township, said the decisions made by some people based on money were negatively impacting others.

"Fix the water or go back home," Stevens said.

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