Marcellus Shale Region-by-Region Regulations Update

Environmental risks and regulatory concerns are significant considerations for oil & gas companies operating in the Marcellus & Utica play.

In this interview, Gary Slagel, Senior Advisor, Environmental Affairs at Consol Energy, joins Oil & Gas IQ to give an update on recent government regulations affecting shale drilling, and some effective means to comply with these. He also discusses best management practices that companies can incorporate in future plays.

Oil & Gas IQ: First of all, could you give us an update on any recent government regulations affecting shale?

Gary Slagel: Sure, a lot of activity in the Appalachian shale play , both from a legislative as well as a regulatory standpoint starting with Pennsylvania which is basically the heart of the Marcellus Shale and the origin of the interest here in the Appalachian basin.

We still have legislation working in the books, being debated by the legislature, that addresses primarily an impact fee on shale gas development in Pennsylvania, but it also contains a number of other provisions including setbacks for distances from dwellings, water wells, streams, wetlands, things like that. Also New bonding requirements, water supply, data gathering requirements as well as water supply replacement obligations, new reclamation standards.

So basically an enhancement of what the existing law and regulations are in the Commonwealth of Pennsylvania.

More recent things that have been promulgated have been some rules over the past, primarily in 2011, that also went towards things like enhanced casing and cementing standards for shale gas wells, and some new regulations that were particularly aimed at discharges in to surface water streams from treatment plants that were processing flowback from Marcellus Shale operations. It is continually evolving - there is a lot on the docket in Pennsylvania, both from overall legislative standards as well as regulatory standards.

West Virginia, the same thing, a lot of legislative activity. Recently in December the Governor signed a bill that the special committee had worked on to basically implement new horizontal well standards aimed at Marcellus Shale development in West Virginia and it contains many of the same things I just mentioned for Pennsylvania, specifically dealing with things like water withdrawals and water management, setbacks, permit applications, notices to property owners.

So it is awhole list of enhancements to specifically address Marcellus Shale horizontal gas well development in West Virginia. Ohio -- the other Appalachian basin State, I guess if you want to call it that, with the interest in the Utica Shale has their legislation in place through Senate Bill 165 that was enacted a couple of years ago, but they are continually looking at new regulatory additions to further supplement what the legislation called for. Right now we are talking about things dealing with general permits for air and water,
impacts associated with Marcellus Shale development.

Additionally, I believe that DNR is working hard right now on developing some new standards for casing and cementing for horizontal shale gas wells and there are some other things that the industry has been calling for that are in the works. So that pretty well sums it up for the three Appalachian basin shale spaces.

OGIQ: Where are the latest developments in State requirements for horizontal drilling?

Gary Slagel: Well, specifically the legislation I mentioned in West Virginia was aimed directly at horizontal drilling. All the legislation previously mentioned is trying to pick up on what they view as the latest and greatest pertaining to casing and cementing. There are issues relating to pipeline safety now because of the increasing gathering lines associated with horizontal shale gas development.

Water studies -- there is a lot of work being done to investigate what if any impacts shale gas development may have on freshwater as well as deeper ground water zones. As you are probably aware, the Federal Government, EPA in particular is looking at things associated with hydro-fracking impacts on freshwater zones. Of course the industry is very heavily engaged in making sure that those kinds of issues are addressed in a scientific way and not in an emotional way. So a lot of the effort that goes in to dealing with the states, whether it is the regulatory agencies or the legislatures, it is all based on making sure that the best science prevails in virtually all these cases.

OGIQ: Based on your experience, what are some best management practices developed in other shale plays that would be worthy of adopting in future plays?

Gary Slagel: There has been a lot of work done on developing BMPs here in Pennsylvania, and those have really raised the bar as it relates to expectations that we are placing on operators. Those would certainly be applicable towards expansion or should be expanded in to West Virginia as well as Ohio, so that we can say that from a uniform standpoint the operators in the Appalachian shale basin are basically complying with comparable standards.

Some of this BMPs deal with things like source water withdrawals, beneficial reuse of drill cuttings, full pad site containments, so that many of these pads now contain liners underneath the limestone that is used as the travel surface on the pad in addition to containment berms or proper grading so that all flow from the site enters into erosion and sediment control ponds.

Post-construction, stormwater management, we are looking at well integrity requirements, BMPs for that as well as pre-drill testing, drilling and well construction BMPs, cementing BMPs. So what the industry has done through collection of experts, primarily through Marcellus Shale coalition committees, as well as some through the Pennsylvania Independent Oil and Gas Association, at least in Pennsylvania, has been heavily engaged in trying to take the next step in terms of enhancements over the standards that are coming out of these regulatory agencies, so that we not only comply with those standards that the states are promulgating but can say that, in addition, we believe that the additional steps operators should adhere to.

And also we are hoping that we see one hundred percent compliance within the operating community as it relates to implementing these BMPs.

They of course are across the board applicable in West Virginia or should be applicable in West Virginia as well as Ohio, because the issues are basically the same as it relates to virtually all components of Marcellus Shale well development in all three of those States.

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