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Tuesday, June 1, 2010

Shale-Gas Producers Obey New Pennsylvania Rules Early

Bloomberg / Business Week

Shale-gas producers told Pennsylvania regulators most of them are already complying with new regulations for protecting aquifers that aren’t scheduled to be adopted until October.

Thirty-five shale-gas producers, members of the Marcellus Shale Coalition, also agreed today to work with the state to develop better tests, record-keeping and drilling procedures to prevent methane gas from contaminating groundwater.

“We want a world-class regulatory environment and a world- class industry environment in Pennsylvania, since we have a huge opportunity in front of us,” Ray Walker, chairman of the coalition and a senior vice president at Fort Worth, Texas-based Range Resources Corp., said today in an interview.

The state Environmental Protect Department called energy companies to Harrisburg today to make sure they understand proposed rules for cementing metal casings around their wells. The meeting came after the state last month ordered Houston- based Cabot Oil & Gas Corp. to cap three wells with defective casings in the northeastern corner of Pennsylvania.

“Cabot is an example of what can go wrong,” John Hanger, the state’s environmental secretary, said in an interview before today’s meeting. “Their drilling led to gas migrating from the drill sites to people’s water.”

Pennsylvania is home to much of the Marcellus Shale, a formation that may hold 262 trillion cubic feet of recoverable natural gas, making it the largest known deposit of the heating and power-plant fuel, according to a U.S. Energy Department estimate. Today’s meeting was intended in part to instruct companies accustomed to drilling in southern states like Texas on how Pennsylvania’s geology differs, Hanger said.

‘Zero-Impact Drilling’

“There’s no such thing as zero-impact drilling,” Hanger said. “We’re in the business of maximizing the benefits, which are considerable, and minimizing the costs.”

Cabot drilled 50 Pennsylvania wells in the Marcellus Shale last year and planned 81 wells this year, according to a March 22 investor presentation by the Houston-based company. The wells without proper casings, located in Dimock Township, caused gas to migrate into groundwater, Hanger said.

Drill bits descending toward gas-bearing shale are surrounded with three concentric rings of metal casings that are cemented in place to protect surrounding aquifers.

Under the new Pennsylvania rules, companies will have to use thicker pipes and stronger cement as they drill wells thousands of feet below ground, said Tom Rathbun, a spokesman for the Environmental Protection Department. Gas producers also will be required to rapidly notify state and local authorities when gas migration occurs, he said.

Cabot Order

The state also ordered Cabot to stop drilling in Dimock Township for a year, provide equipment for removing methane from groundwater at 14 homes near its wells and pay a $240,000 fine.

Cabot has made “significant” progress in complying with the state order, Chief Executive Officer Dan Dinges said in an April 27 statement. The company said it accepted the order without agreeing that it caused the gas migration.

“Cabot is committed to working with Secretary Hanger to ensure we have the best regulations for Pennsylvania,” company spokesman George Stark said after today’s meeting.

Water contamination at Dimock has drawn the attention of environmental groups opposed to drilling and the use of hydraulic fracturing to extract gas from shale formations. Drillers inject a mixture of water, sand and chemicals at high pressure to bust open shale and unlock gas deposits.

The new Pennsylvania rules will require companies to disclose the chemicals they use during fracturing, said Kathryn Klaber, president of the Marcellus Shale Coalition.

Bubbling Water

Victoria Switzer, 57, a retired schoolteacher who lives within 1,300 feet of three Cabot wells in Dimock, said she had so much methane in her well that her water bubbled like Alka- Seltzer. Methane blew an eight-inch concrete slab off the top of neighbor Norma Fiorentino’s well on Dec. 31, 2008, she said.

Along with Fiorentino and other neighbors, Switzer is suing Cabot for negligence.

“We were unwilling participants in a grievously-gone-wrong experiment in rapid industrialization of a pristine natural area,” Switzer said.

“What we’ve done here is put up the drilling rigs before we had the regulations in place. It’s ridiculous.”

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