Some Early Marcellus Completions

As part of my ongoing research into hydraulic fracturing I have been reading about the history of oil and gas exploration and development in Pennsylvania.

Recently, I encountered this interesting tidbit in Douglas Patchen, et al., Oil and Gas Developments in Mid-Eastern States in 1983, AAPG Bulletin, October 1984, 68: 1383-1399:

Upper and Middle Devonian black shale activity picked up at a near furious pace in 1983, with 85 wells reported during the year. These wells are primarily domestic wells, less than 1,500 ft deep, and drilled within 5 mi of the Lake Erie shoreline in Erie County. Most wells produce from the Upper Devonian Huron and Rhinestreet shales, but a few were drilled to and produced from the Middle Devonian Marcellus formation as well. Four new-pool discoveries, including 3 in the Ohio Shale of Erie County and 1 in the Marcellus Formation of Washington County, were reported in 1983. The Washington County discovery, Garrett Hill pool in Buffalo field, was not a large one. The discovery well, Gary Schodorf 1 Anna Johnson, was originally drilled to the Huntersville Chert, but was unresponsive to stimulation. After restimulation in the Marcellus, the well flowed only 15 MCFGD, but was put on line. Two other Marcellus wells drilled in the vicinty provided somewhat larger open flows, but the potential for economical Marcellus production does not appear to be encouraging.

Two questions immediately come to mind: First, are these wells also subject to the recent unconventional well impact fee? As I understand Act 13 of 2012, these and any similar wells may in fact be subject to the impact fee, even though they were drilled nearly 30 years ago.

CHAPTER 23 § 2302.  Unconventional gas well fee. (b)  Components.–The fee adopted under subsection (a), (a.1) or (a.4) is imposed on every producer and shall apply to unconventional gas wells spud in this Commonwealth regardless of when spudding occurred. Unconventional gas wells spud before the fee is imposed shall be considered to be spud in the calendar year prior to the imposition of the fee for purposes of determining the fee under this subsection.

The language above seems quite unambiguous, regardless of when spudding occurred, an impact fee is to be imposed on every producer of unconventional gas wells, which Act 13 defines as wells targeting “a geological shale formation existing below the base of the Elk Sandstone or its geologic equivalent stratigraphic interval where natural gas generally cannot be produced at economic flow rates or in economic volumes except by vertical or horizontal well bores stimulated by hydraulic fracture treatments or by using multilateral well bores or other techniques to expose more of the formation to the well bore.”

Second, in that case, just how many wells have met these criteria over time? Given the many known data quality problems with the Pennsylvania Department of Environmental Protection’s information technology systems, this is a non-trivial question. However, there is ample evidence to suggest that a significant number of previously completed wells meet the definition of an unconventional well stipulated by Act 13. For instance, according to a recent report, more than 275,000 wells have been drilled within the area of the Marcellus formation, though just how many of them penetrated the Marcellus is not known. However, at least 16,894 wells had log curve data sufficient to map the area and thickness of the Marcellus. The number of these wells located in Pennsylvania was not reported, but appears to be significant.

In short, it appears that the wells drilled in 1983 (and presumably others before and after this date) meet the criteria specified by Act 13 and should therefore be liable for the unconventional well impact fee. Moreover, even a cursory inspection of the issue suggests that the number of past wells subject to the fee may potentially number in the thousands.

Hydraulic Fracturing and Marcellus Shale

Yesterday, hydraulic fracturing and Marcellus shale were front page news — both locally and nationally.

The top story in the Centre Daily Times was “Forest Leases Under Fire.” Already, the Commonwealth of Pennsylvania has issued leases to gas companies for nearly half of its 1.5 million acres of state forest. At issue are concerns that current Governor Tom Corbett will over turn a moratorium enacted by outgoing Governor Ed Rendell. According to a study by the Department of Conservation and Natural Resources (DCNR) there remain “zero state forest land acres suitable for gas leasing involving surface disturbance.”

In an interesting twist, the article reported that further development would threaten the sustainability certification of Pennsylvania’s forests. In particular, the Forest Stewardship Council (FSC) has certified that the Commonwealth’s state forest operations are sustainable, based on factors including a 2 percent rate of conversion of forests over any five-year span. However, even without further leasing, several state forests are projected to lose more than 2% of their acreage to conversion by 2020, jeopardizing their certification. Some 35 wood-industry related companies have attained FSC certification for adopting sustainable practices in Pennsylvania, which they use as a selling point for their products. They stand to forfeit their certification if their harvests come from forests deemed to be losing acreage unsustainably. An expansion of drilling in state forests — as Corbett has suggested — would exacerbate the problem.

In another front page story, the New York Times continued its Drilling Down series which examines the risks of natural-gas drilling and efforts to regulate this rapidly growing industry. The latest installment announced “Wastewater Recycling No Cure-All in Gas Process.” Lately, the oil and gas industry has been touting innovations in wastewater recycling. But apparently the rhetoric and reality don’t match up. In Pennsylvania, for example, natural gas companies recycled less than half of the wastewater they produced during the 18 months that ended in December, according to state records.

According to Brent Halldorson, chief operating officer of Aqua-Pure/Fountain Quail Water Management, a drilling wastewater recycling company: “No one wants to admit it, but at some point, even with reuse of this water, you have to confront the disposal question.” He added that the wastewater contains barium, strontium and radioactive elements that need to be removed.

Data posted by the commonwealth on Tuesday, show that operators produced more than 680 million gallons of wastewater in the year and a half that ended in December 2010. Of this amount, well operators reported recycling at least 320 million gallons. At least 260 million gallons of wastewater were sent to plants that discharge their treated waste into rivers. Another 50 million gallons or more of wastewater is unaccounted for, according to state records.