State and federal statutory and regulatory treatment of hydraulic fracturing.

AuthorReser, Rebecca Jo

Legal Writing Contest. International Association of Defense Counsel Committee members prepare newsletters on a monthly basis that contain a wide range of practical and helpful material. This section of the Defense Counsel Journal is dedicated to highlighting interesting topics covered in recent newsletters so that other readers can benefit from committee specific articles

The following articles originally appeared as a four-part series in the September-December 2012 Environmental and Energy Law Committee Newsletters.

Introduction to Hydraulic Fracturing Natural Gas Exploration (September 2012)

  1. What is Hydraulic Fracturing?

    HYDRAULIC FRACTURING was first used more than 100 years ago in 1903, but the first commercial fracturing treatment was performed in 1949. During the next forty years George Mitchell and other geologists developed use of the hydraulic fracture in North Texas. By 1988, it had been applied more than one million times. Now, fracturing is used not only to stimulate production in old wells, but to jump start the production process in unconventional formations and in unfavorable locations. Operators now fracture about 35,000 wells each year.

    Improvements in two technologies have made production of oil and gas from shale formations feasible: hydraulic fracturing and horizontal drilling.

    Hydraulic fracturing is a formation stimulation practice that creates additional permeability in a producing formation, allowing natural gas to flow more readily to a well bore. Hydraulic fracturing involves pumping of fracturing fluid into formation:

    * At predetermined rate and pressure;

    * To generate fractures or cracks in target formation; and

    * Fluid includes proppant to hold cracks open.

  2. Why Hydraulic Fracturing for Natural Gas is Important?

    Natural gas provides 220/0 of U.S. energy demands. Natural Gas is affordable at one fourth the cost of oil. Natural Gas production is clean compared to Oil or Coal (or will be if the new EPA air pollution regulations go into effect).

    Natural Gas is plentiful as unconventional sources have dramatically increased U.S. reserves. It is estimated that the US has more than 1,744 trillion cubic feet (tcf) of technically recoverable Natural Gas, a 120 year supply. (Energy Information Administration -EIA estimate). Shale gas will grow from 16% of U.S. production in 2009 to 47% by 2035. (EIA estimate)

    Technological improvements have begun to reverse over three decades of declining U.S. crude production. Increases in U.S. crude production through at least 2020, primarily due to new on-shore production, are projected by the EIA. U.S. Natural Gas production is increasing dramatically. In 2009, the U.S. surpassed Russia to become the world's largest natural gas producer.

    Benefits from hydraulic fracturing in unconventional shale plays include:

    * Energy security-reduced imports of foreign oil.

    * A 2009 Barnett Shale Economic Impact Report estimated that the shale play contributed $11 billion to the local economy and supported over 111,000 permanent jobs in the region in 2008.

    * Revenue to governments. The State of Texas received approximately $275 million in severance revenue in 2009 from Barnet Shale activities.

    Eagle Ford Shale contributed $25 billion in economic output to the region in 2011 according to a University of Texas at San Antonio's Center for Community and Business Research Study. (1)

    * Shale development activity paid $3.1 billion in worker salaries and benefits, provided $12.6 billion in gross regional product, added $358 million in state revenue and spurred triple-digit sales tax revenue increases in some local counties.

    * Leasing of lands also helps struggling farmers, land owners by providing bonus payments and royalties.

  3. Location of Shale Gas Fields and the Infrastructure of Shale Gas Production

    1. Texas

    * Barnett Shale--North Texas (since 1981)

    * Eagle Ford Shale--South Texas

    * Haynesville Shale--East Texas and Louisiana

    The Barnett Shale became the first proving ground for extracting natural gas from shale using a unique method of high pressure water fracture and sand. Combined with technological enhancements in horizontal drilling, the counties in the Barnett Shale went from 6,200 wells in 2005 to more than 15,000 today. Many more wells will be drilled in years to come in every region of the state. Out of a necessity created by the blinding speed of production, industry operators have continually refined practices and techniques to consolidate production sites, handle voluminous waste products, reduce fracture times, and move the natural gas to market.

    All of this has to be performed in urban environments neither familiar with nor accustomed to oil and gas production sites less than 3-400 feet from parks, homes and churches. While activity was at an all-time high in the Barnett, the Haynesville shale came on line. Thereafter, the Marcellus and various other shale plays developed. Most recently, the Eagle Ford Shale in South Texas is proving to be a key focus of production activities due to the presence of oil in addition to natural gas.

    Repeating the early history of the Barnett, undeveloped farm and ranch country is now seeing the location of pad sites and production infrastructure at a rapid pace. Industry has been able to unlock vast reserves in numerous parts of Texas in a very short period of time. But the speed, velocity, and density of this production have proven to be the greatest challenges in finding an effective but proper balance of regulation of shale drilling activities.

    Regulatory bodies range from the Texas Railroad Commission to TCEQ, EPA, TxDot, municipalities and counties. All these governmental entities are feeling the weight of keeping up with an industry that moves rapidly across vast areas. Regulations and enforcement are slow to evolve in any sector. Awareness and familiarity with the good and bad typically takes years to develop, but government has not had that luxury with shale gas production. It's like sailing with your boat on fire.

    The typical Barnett Shale well is drilled approximately 8,000 feet vertical and curves to create more than 5,000 feet of horizontal reach. The well is cased in various lengths of steel and concrete. It is common to see "pad sites" having more than 10 wells drilled from a 4-5 acre site.

    Once drilled, the shale must be fractured by a mixture of high pressure fresh water, sand, and chemicals to enhance and control various aspects of the fracture. To fracture a well, a large assemblage of equipment and staged water must be placed on site. Massive pumps working in a series push the water down-hole with such force that targeted areas of the shale rock are fractured, releasing the gas.

    Barnett Shale wells use 4-5 million gallons of fresh water per well and Eagle Ford wells use close to 13 million gallons each. Before the gas begins to flow, large volumes of the injected water mixture as well as produced water from the formation must be captured at the surface to be transported for disposal. The large volumes of fluid contain heavy concentrations of salt, chemicals, and hydrocarbons. These volumes of water products are either hauled away in tankers to disposal facilities or in a growing trend are transported by pipeline for disposal. The common method for disposing of the liquid waste is injection wells drilled to the Ellenberger saltwater formation. Trucks hauling waste from the pad sites visit these disposal sites 24 hours a day.

    Once the well begins to flow, the pad site may include tanks for capturing additional liquids or condensates flowing to the surface and/or lift compressors or dehydrators. The gas is transported through a dense network of gathering lines to larger transmission lines. These transmission lines require very large compressor facilities to add push or pull to the flow of the line.

    The Eagle Ford shale formation in South Texas is one of the few shale sites that produces crude oil in addition to natural gas, causing it to have explosive investment and growth.

    1. Nationally and Internationally

    The other major United States shale formation is the Marcellus Shale, found in Northeast Pennsylvania, New York, and W. Virginia. There are also comparatively minor shale gas formations in Oklahoma, New Mexico, Colorado, Utah, Wyoming, Montana, North Dakota, Illinois, Indiana, Arkansas, Kansas, and Nebraska Internationally, shale formations are distributed widely across the globe. Hydraulic fracturing has become a contentious environmental and health issue with France banning the practice and a moratorium in place in New South Wales (Australia), Quebec (Canada), and some of the states of the United States.

  4. Overview of Shale Gas Exploration/Production Technology

    Hydraulic fracturing enables the production of natural gas and oil from rock formations deep below the earth's surface (generally 5,000-20,000 feet or 1,5006,100 m). Horizontal wells provide greater exposure to the producing formation (reservoir). Without hydraulic fracturing, there is no feasible removal of gas from shale formations.

    Hydraulic fracturing employs the pressure of a fluid as the source of energy to propagate a fracture in the rock layer. The fracturing is done from a wellbore drilled into reservoir rock formations, in order to increase the extraction rates and ultimate recovery of oil and natural gas.

    The fracture width is typically maintained after the injection by introducing a "proppant" into the injected fluid. Proppant is a material, such as grains of sand, ceramic, or other particulates that prevent the fractures from closing when the injection is stopped.

    While hydraulic fracturing can be performed in a vertical well, it is generally performed via horizontal drilling whereby the terminal drill hole is completed as a "lateral" that extends parallel with the rock layer containing the substance to be extracted. Laterals extend 1,500 to 5,000 feet in the Barnett Shale basin.

    In contrast, a vertical well only...

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