Board OKs new Water Line in Gas Drilling Area

BusinessWeek

A Pennsylvania state water and sewer project financing agency on Tuesday approved nearly $12 million to extend municipal water service to residents of a small town who are complaining of tainted well water in the midst of heavy Marcellus Shale natural gas drilling.

State environmental regulators view the money approved by the Pennsylvania Infrastructure Investment Authority board as essentially a down payment, saying they plan to sue to recoup the money from Houston-based Cabot Oil & Gas Corp.

The board voted after hearing a lawyer's threat that Cabot will sue to overturn an approval, as well as pleas from Dimock residents who say that for two years, they have been unable to use their brown, methane-tainted and rash-causing well water.

One man from Dimock, a rural community 15 miles south of the New York border in northeastern Pennsylvania, toted a plastic milk jug of brown water -- poured from his tap, he said.

The clash between the state and Cabot over Dimock is Pennsylvania's highest-profile regulatory dispute in the Marcellus Shale since drilling crews, financed by cash from around the world, were lured two years ago by what could become the country's largest natural gas field.

"The only thing that I regret is that it's taken two years for this company, Cabot, to be faced with a solution," John Hanger, secretary of the Department of Environmental Protection, said after the meeting. "You saw today what Cabot does: They bring the lawyers in. They've done that for two years. They are unique in having lawyered up, as opposed to really dealing with the problem. Every other company I've dealt with ... has accepted responsibility and gone through the work of fixing the problem."

The applicant, the Pennsylvania American Water Co., would use the money to connect 14 households, and possibly more, to the water system of Montrose, a town about 6 miles away. Construction is expected to take more than a year, and would be completed after a newly elected governor, Republican Tom Corbett, takes office in January.

Cabot denies that it is responsible for the polluted water wells, saying its wells were properly designed and built to prevent gas from migrating underground and into the water table.

A Houston-based lawyer representing Cabot, Douglas Daniels, asked the board to put off consideration of the application, and said its rushed filing and consideration violates state laws and agency procedures -- assertions rejected by authority staff.

Daniels then said numerous parties, including some local governments, plan to sue over the approval.

"Because Secretary Hanger has made abundantly clear ... that he will seek to use the resources of the commonwealth to force Cabot to pay for this line, Cabot will have no choice to join in those efforts," he said.

The board approved a $11.6 million grant and $172,682 loan.

EDITORIAL: Marcellus Shale Tax a must for Pennsylvania

DelCo Daily Times

For the last couple weeks, the Daily Times Editorial Board has been interviewing candidates for state and local offices. There hasn’t been a lot of happy news coming out of those sessions — particularly those with incumbent state legislators.

Republicans and Democrats alike say Pennsylvania is staring at a fiscal abyss in the next year. With an economy that barely has a heartbeat, it’s being projected that the state is looking at a deficit of anywhere from $3 to $5 billion.

Making the situation worse is the fact that the man who is most likely to become the next governor — Republican Tom Corbett — has flatly ruled out any new tax or tax increase to help fill that gap.

(Corbett this week did propose one revenue producer: Selling the state store system. But that’s an idea that’s been bandied about Harrisburg for decades, always with the same result: An ignominious death.)

There is another source of revenue that most lawmakers deem promising. That is a proposed tax on natural gas extraction in the Marcellus Shale region — a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio. Since late 2008, gas drillers have crowded the area, which they believe could supply the entire country’s natural gas needs for up to two decades.

Almost all of the natural gas produced in the United States is subject to a severance tax, which produces a significant source of revenue for a wide variety of services — as well as dealing with the inevitable environmental problems the extraction process, called fracking, produces.

Pennsylvania is the only state in the nation that does not impose a severance tax of any kind. That, according to the Pennsylvania Budget and Policy Center, has led to a $100 million loss of potential revenues in the last year alone. The commonwealth is giving away, for free, a one-time resource to energy companies that gladly pay for it everywhere else in the nation, the center said in a report issued Thursday.

Now, $100 million is a drop in the state’s money pit. But it’s nothing to be ignored.

How likely is it that the state Legislature will do the right — and fiscally responsible — thing?

It’s not looking good at this point. Harrisburg Democrats, seeing riches, are proposing substantial tax penalties; Republicans, saying they fear a big tax will scare drillers away, want minimal levies. Gov. Ed Rendell, who knows Corbett opposes any extraction tax, has been trying to play the middleman and bring those parties together.

But Thursday, he said that process “clearly is dead” for this year and blamed GOP intransigence. A spokesman for Senate Republicans said they were surprised by his stance, and they are willing to continue talking.

Perhaps it will take the November election to get the process going again. If Corbett wins, as expected, that may spur responsible members of both parties to come to an agreement.

Clearly, the tax is the right thing to do. The prospect of drowning in $5 billion worth of red ink makes it the necessary thing to do, too.

Range Resources plans to add staff, build office complex in Pennsylvania

Fort Worth Star Telegram

 

Range Resources Corp. plans to more than double its regional headquarters staff in the Marcellus Shale natural gas field to about 500 employees "over the next several years" as it moves into a new $30 million office development in southwestern Pennsylvania, the Fort Worth-based company said Monday.

Range, a leading producer in the Marcellus, has 225 employees in its regional office in Canonsburg, Pa., said Ray Walker, senior vice president for Appalachia operations. The new facility will be a quarter-mile away in Canonsburg, 20 miles south of Pittsburgh.

Most of the new jobs "will go to local residents, demonstrating the positive impact that Range is having on the community," Walker said.

Range said it has contracted with Horizon Properties Group of Pennsylvania to develop and lease its new headquarters. Construction is to begin immediately in the Southpointe II development and is expected to be finished by November 2011.

Canonsburg has become a hotbed for dozens of energy companies operating in the Marcellus, a geological formation thousands of feet beneath large chunks of Pennsylvania, New York, West Virginia and Ohio.

The initial phase of Range's project calls for construction of a five-story, 180,000-square-foot Class A office building on 13 acres. The facility is to include a 225-seat auditorium, cafe and outdoor event plaza.

The second phase calls for a building expansion of up to 100,000 square feet.

Walker said Range has authorized Horizon to develop the project for designation under the Leadership in Energy and Environmental Design, or LEED, program, certified by the U.S. Green Building Council.

"Our plans call for a state-of-the-art 'green' facility, designed to accommodate what is anticipated to be dramatic growth in our office staff, while incorporating the latest in energy-efficient technologies to help us minimize our environmental impact," he said. The building will feature reflective roof material, energy-conserving glass, recycled waste material and advanced energy-management systems.

Kyle Poulson and Jack Huff of Huff Partners in Fort Worth represented Range in the selection of Horizon Properties for the project and in contract negotiations.

Range is producing the equivalent of about 160 million cubic feet of natural gas per day in the Marcellus, "which is ahead of its midyear target," company spokesman Matt Pitzarella said Monday.

Range said in late July that it plans an additional $210 million in capital expenditures in the Marcellus this year.

With the spending boost, the company said it expects to double its net production from the equivalent of 200 million to 210 million cubic feet of gas per day by year's end to 400 million to 420 million cubic feet by the end of 2011.

NEPA Schools Preparing Students for Gas-Drilling Jobs

Times-Tribune

With the boom in Marcellus Shale natural gas development throughout the region, area educational institutions are growing to keep up with work force demands.

New training, certification and degree programs are being created at local schools to ensure local job skills are tailored to white- and blue-collared job needs related to the natural gas drilling industry.

Already, Lackawanna College and Johnson College in Scranton, Keystone College in LaPlume and the Pennsylvania College of Technology in Williamsport represent the growing trend of educational institutions offering course work and the hands-on training needed to become employable in one of Pennsylvania's growing industries.

And, college administrators agree the reason for the trend is simple: There's a demand for it by both the industry and potential workers who want the training and the jobs that come with it.

An industry-financed study conducted by Penn State's department of energy and mineral engineering, which offers an undergraduate degree in natural gas engineering, expected Marcellus Shale natural gas extraction efforts to create more than 200,000 jobs in the state and have an overall $18 billion economic impact by this year.

"Marcellus Shale is going to be big business," said Christopher Kucharski, Lackawanna College spokesman. "Problem is there is just nobody trained to handle the positions they want filled."

It appears a change is under way.

Larry Milliken, director of Lackawanna College's energy program and a natural gas instructor, just finished guiding the first class of 18 students through its first year of study to earn an associate degree in natural gas technology.

Based at the college's New Milford campus in the center of the action near gas fields in Susquehanna County, the program is preparing students for well tender jobs - a position that requires monitoring and maintaining natural gas wells during their lengthy production phase.

There is generally one well tender employed for every 20 to 40 natural gas wells, Mr. Milliken said, and the entry-level annual salary is $36,000. Sixteen students have paid internships with natural gas drilling companies this summer in western Pennsylvania, he added.

"The industry has been very supportive of wanting to get (our students) on board," he said. The college also is hiring three additional instructors this year to accommodate the increase in students who have enrolled in the natural gas technology degree program for the 2010-11 school year.

At Lackawanna College's new campus in Hawley, college administrators recently announced a new certificate course for fall centered on training accounting assistants, accounting clerks and administrative assistants specifically for the oil and gas industry.

Tracy Brundage, managing director of work force development at Pennsylvania College of Technology, said administrators decided to take the leap into offering natural gas drilling-related courses this year. The decision followed an in-house study that determined growing employment opportunities because of the prevalence of natural gas development under way in the region.

"The jobs are going to be around for a long time," Ms. Brundage said. "We're just getting started … to get our arms around what is happening … and how we need to respond."

Pennsylvania College of Technology has just begun offering training and certification classes in welding specialized for the industry's infrastructure and commercial driver's license classes, and has tweaked some of its academic majors - including diesel and electrical technology - to include natural gas drilling-related coursework.

So far, about 350 students have enrolled in the non-degree programs.

The college plans to expand its offerings, perhaps to include training for natural gas well operators and emergency response technicians, Ms. Brundage said.

Keystone College, known for its focus on the liberal arts, is also jumping on board.

Robert Cook, Ph.D., the college's environmental resource management program coordinator, said the college will be offering a handful of new courses early next year that include mapping underground natural resources tied specifically to natural gas.

The environmental resource management degree, a four-year Bachelor of Science, has had its "highest level of interest this year" in part because of the Marcellus Shale boom and an expectation that jobs will be available for graduates, Dr. Cook said. The degree, which includes environmental law courses, can also prepare a would-be environmental regulator, he added.

"It's clear energy is going to be an important subject for decades," said Dr. Cook, a professional geologist. "It's thrilling to see our discipline become an important skill set."

Keystone is also hiring a new instructor to teach undergraduate courses within a new natural gas and petroleum resource curriculum that is now under development.

Marie Allison, director of continuing education at Johnson College, said the college will be offering its first class in pipe welding next week tailored to techniques needed by the natural gas industry. The college also will offer a class for advanced welders to prepare for certification in a specific style of welding demanded by the industry.

The college's welding program had been defunct since 2001, because of declining enrollment, but the multitude of pipes and fittings that will be laid by the industry in the coming years yields greater demand for skilled welders, she said.

"They need welders," Ms. Allison said. "We want to give someone the fundamentals and give them the opportunity to find a job."

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.”