MDN, along with about 200 other people, attended a meeting titled “Marcellus Shale in Our Community: What’s in it for All of Us” on Friday evening March 4th at the West Middle School auditorium in Binghamton, NY. The audience was, for the most part, composed of landowners and those generally in favor of drilling in the Marcellus Shale in New York. The meeting was sponsored by the Joint Landowners Coalition of New York (JLCNY).
Scott Kurkoski, attorney for the JLCNY, was the moderator and master of ceremonies for the evening, introducing a panel of four experts who presented and answered questions from the audience.
First up was John Holko, president of Lenape Resources, Inc., an oil and gas drilling company headquartered in Alexander, NY, between Buffalo and Rochester. Lenape specializes in drilling in the Appalachian region for oil and gas, which includes the Marcellus Shale. Among Holko’s slides and points:
- Some 36 percent of New York State’s total energy consumption today is natural gas. Point: Wouldn’t it be great if we could tap a local and abundant source of that energy? It would mean lower energy prices for New Yorkers.
- The first horizontal well was drilled in 1929. The first horizontally drilled shale well was in 1988. This is not a new technology.
- More than half of the active rigs in the U.S. today are drilling non-vertical (i.e. horizontal) wells for oil and gas.
- The thing that is “new” about drilling in the Marcellus and other shale plays is the amount of water used to fracture and “stimulate” the well. In traditional vertical drilling, less than 80,000 gallons of water is used to drill a well. With horizontal shale wells, the amount of water is 3-4 million gallons. Each stage in fracturing a well requires between 50,000 and 500,000 gallons of water, and there are typically between 4 and 14 stages when drilling in the Marcellus.
- But compared with other uses, like agriculture and recreational uses, the total volume of water that would be used for drilling gas wells is far smaller, addressing the concern voiced by many that “too much water” would be needed for large-scale drilling in New York.
- Holko briefly reviewed the chemicals used in hydraulic fracturing, noting that today fewer chemicals are used, and information is publicly available for the chemicals that are used.
Richard Nyahay, a geologist and manager of geology for New York State with energy company Gastem, also addressed the group. Among the points he emphasized is that the Marcellus Shale is the most organic of the shale layers, with a total organic content (TOC) rate between 3 and 16 percent. It is this characteristic of the Marcellus that makes it so attractive to drillers. It means that the Marcellus is one of, if not the highest natural gas producing shale that can be drilled. Nyahay’s slide included illustrations of “conventional” gas pools versus “unconventional” gas trapped in shale layers.
Michael Joy ended the formal presentation portion of the evening. He is a practicing attorney with Lipman, Biltekoff & Joy, LLP. He’s also an adjunct professor of oil and gas law at SUNY Buffalo, teaching in the only oil and gas law program in New York State. Additionally, he holds a Ph.D. in geology. Among Joy’s points:
- There is a perception you can have either economic benefits, or environmental safety, but not both. That’s a false perception.
- Drilling in the Marcellus will deliver real jobs and money for the economy. Joy quoted the numbers from Pennsylvania where drilling in the Marcellus has been happening since 2009: In 2010, PA created 29,000 new jobs directly as a result of Marcellus Shale drilling activities. PA is on track to create another 44,000 jobs in 2011 from drilling activity. In 2009, PA realized a $3.9 billion boost to their economy from drilling. In 2010, they saw an $8 billion boost. In 2009, some $389 million flowed into state and local tax coffers from drilling in PA. In 2010, that number was $785 million.
- New York State already has a tax on oil and gas wells. In New York it’s not called a “severance” tax as it is in other states—here it’s called an ad valorem tax. It is, in essence, a property tax—and 100 percent of it stays in the local community.
- Joy went through an example of what drilling one well in the Town of Maine, NY (Broome County), would mean to that area. Over the course of one year, nearly $500,000 in tax revenues to the school and town would come from a single well with “average” output. The point? Drilling in the Marcellus could conceivably reduce the local property tax burden on citizens—conceivably to nothing! At a minimum tax revenue from gas wells will drastically lower the local property tax burden.
- As for regulating drilling in New York, Joy teaches oil and gas law and in his experience, New York has the most advanced and sophisticated (and regulated) laws on the books of any state in the country, when it comes to drilling for oil and gas.
- Joy also corrected some common misconceptions: Horizontal drilling, as it has been for years, is still legal and still happens in New York—today. Hydraulic fracturing, which has been and still is legal in New York is going on—today. What is not currently allowed until new regulations are in place is using high volumes of water in hydraulic fracturing. Energy companies are allowed under current regulations to drill wells (vertical or horizontal, fractured or not) if they use less than 80,000 gallons of water. In fact there are three active Marcellus Shale wells in New York now—but they’re vertical wells—not horizontal. If an energy company needs more than 80,000 gallons of water for drilling a well, the operation is not approved until new regulations are in place.
Tomorrow: Part II of MDN’s coverage, which covers the interesting question and answer session that followed the prepared presentations.