NGFE Reports: Risky Business
North American regulator pledges to address risks in shale gas development
“Maybe we can teach you more what not to do than what to do,” said Mike Smith, Executive Director of the Interstate Oil & Gas Compact Commission, a 75 year old charter organization of state regulators which represents all oil & gas production in the US and Canada. establishing protocols to have one-stop shopping and provide regulatory certainty, etc.
“It has been a very successful model in establishing that regulatory history which is now 75 years old,” he noted.
In reference to how state regulators in the US are regulating the shale gas industry Mr. Smith’s talk at the Global Shale Gas Summit in Warsaw, Poland centered around the main risk issues for state regulators in the US. He pledged to show how his organization is addressing those and how they’re evolving, in hopes that the Polish shale gas industry could learn from the US example.
“We’ve been learning more and more about it. It’s offered more and more to our gas and now to our oil reserves,” he said.
Mr. Smith explained that the Commission is comprised of 38 states, as well as associate member states. “And we also have international affiliate members,” he explained, “who participate with us but can’t vote. We are the regulators.”
In the US, he said, the states are the ones that have jurisdiction over shale gas; the federal government regulates operations on federal and tribal lands, but everything else is handled by the states.
“We’re on the cutting edge,” said Smith, “as we work with landowners and other interested groups to make sure the regulations are fair and sound.”
In his presentation, Mr. Smith showed images of the shale plays in the US and Canada. “The granddaddy of the shale play is the Barnett,” he said, “where the puzzle is being solved mainly by George Mitchell and his colleagues out of Houston, who showed you can produce shale gas through horizontal drilling.”
Smith continued, “The Barnett is very mature compared to others, and is very close to Ft. Worth and Dallas, so operations are purchasing leases from homeowners, in commercial districts, and near the airport, so you might imagine that a lot of care must be taken from an environmental and regulatory standpoint.”
He noted the overwhelming success shale gas has added to US gas supplies, showing a graph that illustrated shale gas production’s steep increase in contributing to reserves from 2004-2010, especially from operations in the Gulf Coast and into Texas at the Barnett, Fayetteville and Haynesville shales.
Despite the growth, Smith admitted that three major problems need to be solved, the first of which involves water.
“There’s a real problem,” he remarked. “First of all, quantity, quality and how you dispose of it - all unique challenges. While 99.5% of frac fluid may be water and sand, the chemical additives are the second challenge.”
Smith added, “The quality of water has been a real challenge. There are multiple and competing uses for potable water and there’s nearly never enough to go around. It’s needed for agriculture, industry and then you add in oil & gas. It can take 20 million liters for a frac job.”
Smith raised the question of whether the industry could use lesser quality water and noted the studies being done to see if brackish water might be used.
“Lastly, the disposal of that water,” he said. “There’s work being done to re-use frac water. There are two choices – using an underground control well (of which there are few in the East), and so the other possibility is a municipal water treatment facility, which is not designed to handle this kind of water.”
The chemical part of it, which Smith said comprises 0.5% - is also a factor. “How toxic is it, what kind of problems if these compounds escape confinement? If there’s a casing failure, what happens and how deleterious are these for human exposure, what does it mean for your water?”
He continued, “What’s there, how’s it used, will it affect my drinking water? The Environmental Protection Agency requires a data sheet which lists all those chemicals and their percentages. Each operator has its own ‘secret sauce’ which works best in a particular area in which their drilling. So there’s been controversy on that as well as water use.”
“Our organization is working with the EPA to determine what the risks are to the water supply. The public is concerned about these and rightfully so. We’re certainly working diligently to determine how they should be handled,” he said.
Surface disturbance is also a concern in connection with shale gas drilling operations.
“Heavy drill equipment, activities that make a lot of noise, and can emit odor - they’re short term and then we have a much smaller surface when the well is in production. People are concerned as these are happening where people aren’t used to oil & gas activity. It’s a cause for concern to them, especially if they’ve got a farming operation, when the noise is going to abate.”
Smith said that technology is helping the industry, in that one drilling platform with several laterals can localize surface disturbance. “It saves us all money if we can do it faster.”
“Most of these problems are being solved,” he explained, “and rapidly through increases in technology. One of the big challenges that regulators have is that their rules and inspections they have to perform keep up with the technology.”
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