Shale gas means money, plenty of water worries

N.C. leaders ponder new method of extracting gas

jmurawski@newsobserver.comNovember 6, 2011 

  • The gas industry touts the economic benefits of exploration and drilling, and many Pennsylvanians agree. Throughout rural Pennsylvania locals are quick to praise the industry for reviving traditional blue-collar jobs.

    As of this year, Marcellus Shale drilling and related industries employed 214,000 people, according to the Pennsylvania Department of Labor & Industry. Here's a sample of average annual wages in Pennsylvania's gas industry:

    Roustabout: $28,800

    Rotary drill operator: $43,810

    Wellhead pumper: $36,150

    Gas plant operator: $49,970

    Earth driller: $41,730

    Pipefitter, plumber: $55,320

    Derrick operator: $32,600

    Explosives worker, blaster: $46,280

    General and operations manager: $102,320

  • During an emotional debate, spelling choices send a message.

    The polarization over shale gas runs so deep that the two sides have even sparred over the correct spelling of the shorthand for hydraulic fracturing.

    The more common term, "frack" and "fracking," has been adopted by newspapers and the general public. Those in the gas industry prefer the French-looking "frac" and the less intuitive "fracing."

    "The industry invented this word," said geologist John Harper of the Pennsylvania Geological Survey. "They ought to have the last word on how it's spelled."

    John Murawski

  • Pennsylvania's gas boom has brought lawsuits, settlements, investigations and fines over illegal chemical dumping, chemical spills and explosions.

    Pennsylvania regulators insist there is no evidence that hydraulic fracturing has caused chemical contamination of drinking water. Nevertheless, some residents complain of rashes, vomiting and other ailments.

    This year, the Pennsylvania Department of Environmental protection issued its biggest penalty to date against an oil and gas operator. It fined Chesapeake Energy nearly $1.1 million for defective well casings that led to groundwater contamination for 16 families in Bradford County.

    Faulty well casings have caused increased methane levels in some places. While methane is not poisonous, it poses grave dangers because it is highly explosive.

    Industry officials point to studies, such as the Pennsylvania State University study issued last month, that confirms the industry position that many of the supposedly contaminated water sources were tainted with methane for years.

    The Penn State study bills itself as the first "unbiased" look at methane contamination. It challenges a widely-cited Duke University study issued in April that claimed "systemic evidence for methane contamination of drinking water associated with shale-gas extraction."

    Blowouts are also a major concern, caused by a violent rush of high-pressure water and gas from deep within a well. Pennsylvania regulators last year temporarily forced EOG Resources to suspend all drilling after a blowout in Clearfield County caused a 75-foot geyser, spewing at least 35,000 gallons of water and chemicals for 16 hours.

    John Murawski

— To appreciate the promise and betrayal of the nation's natural gas rush, look no further than this rural community in southwestern Pennsylvania where the 957 residents barely outnumber the dairy cows.

Like dozens of farming communities in the state, the countryside here is dotted with drill pads, derricks, compressor stations, truck convoys, earth movers, open-air reservoirs and pipelines that snake along fence lines and carry natural gas to refineries.

A similar transformation could await North Carolina, where an estimated 1,400-square-mile underground natural gas deposit is believed to lie less than a mile under rural Lee County and surrounding regions. Locally, a shale formation stretches from Butner and Creedmoor through Falls Lake and Durham to Sanford and Carthage.

Though only a fraction of the size of the multi-state Marcellus Shale up north, this state's 200 million-year-old shale gas deposit could also turn crossroads into boomtowns and subsistence farmers into millionaires.

But the gas rush in Pennsylvania has brought deep divisions.

The construction, excavations and storage tanks in cornfields and pastures are evidence of ecological destruction to some, economic revival to others. Underlying the acrimony are lawsuits between homeowners and gas companies, local government efforts to restrict drilling, contentious town hall meetings, and persistent complaints of water contamination.

Elected officials from North Carolina recently visited Pennsylvania to learn about its experience with gas exploration in anticipation of welcoming the industry.

Good jobs, bad wells

A big draw is the 200,000-plus jobs - roustabouts, pumpers, drillers, truckers, pipe layers and others - Pennsylvania has gained from the Marcellus Shale gas bonanza, according to state labor data.

But North Carolina could also experience the bitter aftertaste of the shale gas bonanza: reports of funky water, mysterious illnesses, state investigations, moratoriums, hefty fines. As in Pennsylvania, rural homesteads could play host to lucrative wellheads and storage tanks, while less-lucky neighbors are forced to switch to potable water that's trucked in to refill 550-gallon tanks called "water buffaloes" after the family well goes bad and has to be sealed.

"North Carolina, watch your step and look out," said Paul Parker, a retiree who spends his days trying to slow down the shale gas boom. "It turns neighbor against neighbor. A lot of friendships we had out here are lost because of the greed of the dollar."

Opponents are preparing to host public events in the Triangle this week with Pennsylvania farmers bearing horror stories: illegal chemical dumping, defective well shafts and water contamination. They are likely to mention a pair of mishaps from last week: a gas company spilled 16,800 gallons of chemical-laced water; and an overnight explosion at a natural gas pumping station required the evacuation of several dozen homes.

North Carolina is only in the beginning stages of modern energy exploration, conducting a study on the laws and regulations that would be needed to allow a controversial method of gas drilling to take place here. Still, state lawmakers have vowed to overturn Gov. Bev Perdue's veto of an energy jobs bill that would, among other things, start the process toward legalizing drilling and extracting shale gas through a process called "fracking."

"Think about what it delivers: Long-term economic growth and prosperity," said Sen. Bob Rucho, a Republican from Mecklenburg County who spent several days touring drill sites in Pennsylvania with Rep. Mike Hager, a fellow Republican from Cleveland and Rutherford counties. "This is energy independence and economic independence."

Legislators return to Raleigh this week, but indicate they will not take up Perdue's veto during the brief session.

'People ... vibrated'

Parker, a retired engineering firm manager who owns 7 acres, dismisses the financial temptations as "blood money." He has refused to sell his underground gas rights to an industry he deplores, which means the gas companies can't drill under his land. He figures he has passed up as much as $100,000 in signing bonuses and royalties. He curses a 10-acre drill site that's monitored by security guards on the property of his neighbors, Bill and Sheila Black.

Just a few hundred yards up the road, it's a different story. The Blacks expect to reap more than $1 million a year in gas royalties when the eight wells on their farm begin producing.

Retirees in their 70s who brought up five children on their 129 acres, they say the gas industry has brought back economic good times, saved family farms, paid college tuitions and assured comfortable retirements.

"A lot of these dairy farms we have here were running almost two years in arrears in paying their bills," Bill Black says, pointing out his neighbors to the left and right. "Now I could show you new tractors, new storage sheds. The struggling farmer now holds his head up high. Not a one of them has had an issue with contaminated water."

Pennsylvania became a focal point for the gas wars when the state threw open the gates to the gas industry, becoming a living laboratory for drilling in one of the world's biggest natural gas deposits. Some geologists have estimated the Marcellus Shale, which covers more than 30,000 square miles, could supply a quarter of the nation's natural gas for a half-century.

"This industry is not without its risks, but it also represents a tremendous economic opportunity for the state," said Kevin Sunday, spokesman for the Pennsylvania Department of Environmental Protection. "When you examine the level of activity ..., you're looking at a very small percentage of incidents."

In North Carolina, the amount of natural gas trapped in the Cumnock Formation is a mere estimate. A more exact assessment from the U.S. Geological Survey might not be out until next year.

Nevertheless, independent gas companies have already signed 70-some leases in Lee County, representing more than 9,000 acres, public records show.

Land leases in North Carolina have gone for several dollars an acre, even less than the early leases in Pennsylvania around 2005. Pennsylvania leases that started out at about $5 per acre surged to nearly $6,000 an acre at the peak of the boom and have since leveled out at about $2,500 per acre. For a 100-acre farm, the signing bonus can come to $250,000 over several years.

But the big money comes from royalties representing at least 12.5 percent of the value of the gas pulled out of the ground from wells that can produce for several years or several decades.

Black estimates that farmers in his area stand to make between $40,000 and $90,000 a month in royalties.

"Can you see the reaction?" Black said. "People literally vibrated."

Water problems feared

Shale gas is extracted using two technologies not currently allowed in North Carolina: horizontal drilling and hydraulic fracturing.

Drilling can penetrate more than a mile deep and then bore sideways up to a mile away from the shaft, allowing for drilling under residential developments.

The fracturing, or "fracking," refers to high-pressure water, mixed with sand and chemicals, that is used to split the fissures of the shale rock.

The Marcellus Shale Coalition, an industry group, characterizes the additives as benign: "playground sand" mixed with the same kinds of household products found under the kitchen sink. Accidental spills have caused fish kills and made headlines since 2008, when drilling took off.

Parker has emerged as one of the most vocal critics of the gas industry. It's a matter of choice for Parker, but in many cases the critics don't own the mineral rights to their properties, so the royalty checks are being cashed by a former property owner who lives down the road or out of state.

Some opponents had signed leases but the deals went awry after the wells didn't produce as expected, leaving access roads and well pads but little income to show for it. In several documented cases, the lease owners alleged water contamination and the gas companies agreed to buy them out, forcing the owners to move.

Parker knows that keeping his 7 acres off-limits to drilling is largely a symbolic protest. Natural gas is being sucked out from hundreds of acres surrounding his property, regardless of his stubbornness.

Seated in an armchair in his living room, Parker can't contain his outrage at what he sees as greed and human weakness. He leans forward to make a point, shaking a finger here, waving an arm there.

"Doing business with the gas company is like doing business with the devil - Quote me!" he says.

"The whole thing is madness," Parker goes on, recounting the history of the gas boom as seen from his front porch. "They were running around here like a Texas gunfight. They couldn't sign enough leases."

He recites a common litany of allegations - noise, pollution, denials and cover-ups. His main fear is that the chemicals pumped underground with several million gallons of water will seep out eventually, long after the company has moved on.

The Blacks, on the other hand, present a portrait in trust and confidence. They describe a responsible energy company and a good corporate neighbor that supports local little leagues and 4-H fairs.

Sheila Black, a retired nurse with a ready smile, suggests watching a computer slideshow of the construction work on their property.

Bill Black, who has a master's degree in education, acknowledges some concern about water quality, but says drilling for natural gas is much less invasive than the alternative: mining for coal by blowing up mountain tops and risking miners' lives and polluting the atmosphere.

When talk turns to the critics of gas drilling and fracturing, Bill Black shares a theory commonly held by drilling advocates.

"The anti-people likely had (used) contaminated water for years," he said. "Now they see someone with deep pockets."

The Blacks took hundreds of photographs to chronicle the work that hummed around the clock on the 10-acre work site. They took pictures of men climbing the derrick, men grilling chicken, celebrating a co-worker's 50th birthday, operating heavy equipment, and a spread of drill bits laid out on the ground.

It took the crews two years to clear the land, drill eight wells, remove the sludge.

The hydraulic fracturing began only last week and is expected to continue for several weeks. Then Range Resources will cap the wellheads until the company can extend pipelines to the Blacks' farm to harvest the natural gas.

"Those guys are good at what they do," Sheila Black said. "We just enjoyed going out every day and seeing it."

Murawski: 919-829-8932

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