Sunday, August 19, 2012

Shale Gas Drilling Boom Credited for Reduction of CO2 Emissions to 20 Year Low

According to the U.S. Energy Information Agency (“EIA”), the United States’ energy related carbon dioxide emissions in 2011 were the lowest in 20 years.  One of the primary reasons cited for this decline in CO2 emissions is the increase in natural gas fired power plants.  The EIA’s report states that “[t]he introduction of new, efficient gas-fired capacity and a recent decline in the price of natural gas has helped boost natural gas' share [of electric energy production] from 14 percent in 2000 to 24 percent in 2011.”  Natural gas power generation has the lowest carbon intensity per Btu of the fossil fuels. 

Other reasons were also cited as contributing to the decline of CO2 emissions in 2011, including slowed economic growth and an increase in the use of renewable fossil fuel alternatives.

The increase in natural gas fired power plants can be largely attributed to the fact that shale gas drilling has made natural gas plentiful and cheap.  In fact, an Associated Press article on the EIA’s announcement reported that many scientists didn’t see the sharp drop in CO2 emissions because it happened as a result of market forces rather than government regulatory action. 

Of course, many will use the EIA’s announcement to support arguments for the wholesale abandonment of coal as a source of electrical energy production.  But the EIA report warns that it is difficult to draw long-term conclusions based upon one year of data.  There are also questions as to whether natural gas will remain cheap.  The Associated Press article quoted Jason Hayes, a spokesman for the American Coal Counsel, predicting that it will not.  Mr. Hayes believes that the demise of coal fired power plants has been much exaggerated.  He believes that power companies will continue to build coal fired power plants as pollution control technology advances to meet new EPA standards that will take effect in the coming years.

The recent boom in shale drilling has, without a doubt, dramatically decreased natural gas prices.  As long as those prices remain low and stable, electric power companies will increasingly rely upon natural gas to produce electricity.  Based upon the EIA’s data, this could continue to decrease air pollution.  The question, however, is whether natural gas prices will remain low enough to be an attractive alternative to coal.  The price of natural gas has been historically volatile. Coal remains a relatively cheap and reliable source of electricity production.  Accordingly, it is premature to predict the wholesale abandonment of coal as a source of electric power generation in the future.  The hope from here is that the United States promotes a balanced energy policy, as well as advances in pollution control technology, to produce the cheapest, most reliable, most efficient, and cleanest electricity possible.

Wednesday, August 15, 2012

Chambers Upholds CWA Section 404 Permit

In the ongoing battle over Mountaintop Removal Mining, the coal industry scored a victory Friday in OVEC v. U.S. Army Corps of Engineers, S.D. W. Va. Civil Action No. 3:11-0149.  A link to a copy of the published decision is here:  At issue is whether the Corps of Engineers properly issued a Clean Water Act Section 404 valley fill permit to Highland Mining Company in connection with its Reylas surface mine in Logan County. 
A rich history of Section 404 permitting litigation has blossomed in the Southern District of West Virginia, and on appeal, in the Fourth Circuit.  In Kentuckians for Commonwealth Inc. v. Rivenburgh  317 F.3d 425, 430 (4th Cir. 2003), the Fourth Circuit overturned the Southern District of West Virginia’s judicially-imposed moratorium on valley fill permits.  The Fourth Circuit disagreed with the District Court’s holding that the CWA only permits discharge of fill material that achieves some primary beneficial purpose (such as building a dam) and prohibits discharges that are merely for waste disposal.  In Ohio Valley Environmental Coalition v. Bulen, 429 F.3d 493 (4th Cir. 2005), the Fourth Circuit held that the Southern District of West Virginia was wrong to enjoin the use of Nationwide Permit 21, finding that the Corps of Engineers acted within the bounds of its discretion in issuing NWP21 for use in coal mining. In OVEC v. Aracoma Coal Co., 556 F.3d 177 (4th Cir. 2009), the Fourth Circuit again ruled that the Southern District improperly substituted its discretion for the Corps of Engineers discretion in striking down a number of permits over concerns about conductivity discharging from mine operation.
In the present case, the Southern District appears to have taken to heart the Fourth Circuit’s  instructions to refrain from adding itself as an additional level of review of Section 404 permits.  Highland Mining’s Section 404 permit had been challenged by the Sierra Club and others, who argued that: 1) a mitigation plan submitted by Highland Mining to offset impacts of the fill was inadequate; and  2) that the Corps erroneously concluded that discharges of selenium and conductivity would not cause significant cumulative adverse effects to the watershed. 
The Court properly recognized that its discretion was severely limited by the Aracoma decision. It stated, “in matters involving complex prediction based on special expertise, a reviewing court must be at its most deferential.” Thus, it declined to substited its judgment for the Corps in reviewing the adequacy of Highland’s mitigation plan. With regard to selenium, the Court ruled that a Clean Water Act Section 401 “certification” issued by the State confirming that the project would meet water quality standards was not contested by EPA and, under Corps regulations, was therefore binding on the Corps.
With respect to conductivity, the Court held that the 401 certification was not binding, because EPA had objected to the permit on conductivity-related grounds. The Court went to great lengths to note that it agreed with the Sierra Club experts regarding the correlation among mining, conductivity increases, and bug loss, but ultimately held that, since the Corps, EPA, and Highland met extensively and created comprehensive monitoring and action plans to deal with conductivity should it become a problem, Aracoma dictated that the Court not substitute its judgment for that of the Corps.  Accordingly, the Court declined to enjoin Highland’s use of the Section 404 permit. 
The upshot of this decision should be that environmental groups should no longer have a valid basis to challenge Section 404 permits in District Court when their argument is merely that the Corps made the wrong permitting decision after reviewing all the evidence submitted to it at the time. So long as the Corps has a reasonable basis for making its decisions, court challenges to those decisions should come to an end.

Thursday, August 2, 2012

Court Throws Out EPA's Mining Guidance

In a much-anticipated ruling, U.S. District Judge Reggie B. Walton, ruled that U.S. Environmental Protection Agency exceeded its authority under the Clean Water Act and its very limited participation in Surface Mining Control and Reclamation Act (“SMCRA”) programs.  This yet another ruling in a long and ever growing list of examples of the Obama administration’s EPA exceeding its statutory authority.  Most recently, the D.C. District Court had held that the EPA had improperly usurped the US Army Corps of Engineer’s role in issuing Section 404 (valley fill) permits in NMA v. Jackson, 816 F.Supp.2d 37 (D. D.C. 2011) (Walton, J.) and had illegally used its veto power to revoke a validly-issued Section 404 permit in Mingo-Logan Coal Company, Inc. v. EPA, 2012 WL 975880 (D.D.C. 2012) (Jackson, J.).
In this case, (also styled NMA v. Jackson) the focus is primarily on SMCRA permits and Section 402 pollutant discharge permits (“NPDES permits”).  EPA published a “Final Guidance” relating to the discharge of water with “conductivity” into Appalachian streams.  Conductivity is a measure of the water to conduct an electrical current.  Water becomes conductive as concentrations of dissolved solids, i.e. salts, rise. The Court found that EPA’s Final Guidance – while on its face was discretionary – mandated that state-run SMCRA permitting agencies and state-run NPDES permitting programs incorporate the Final Guidance requirements into all permits.  Thus, each SMCRA permit issue would include the EPA-mandated “Best Management Practices.” Each NPDES permit would be put through a reasonable potential analysis for conductivity, and since EPA’s Final Guidance included a presumption that conductivity causes violations of a state’s narrative water quality standard, every permit would have to be issued with some limit on the discharge of water with conductivity.
Judge Walton found that EPA’s insertion of its own mandatory requirements for the construction of surface mines and for the issuance of NPDES permits improperly overtook the state SMCRA and NPDES permitting regimes.  In other words, the states are charged with issuing SMCRA permits and NPDES permits, and EPA removed the state’s discretion with respect to conductivity.  Accordingly, the Court struck down the Final Guidance as an agency action exceeding statutory authority. Judge Walton acknowledged that his ruling did not address how to strike a balance between “the need to preserve the verdant landscape and natural resources of Appalachia and, on the other hand, the economic role that coal mining play in the region.”
The ruling is considered a victory for the mining industry that has been crippled by EPA’s standards in issuing mining permits.  Opponents of mountaintop removal mining, including those who recently protested and were arrested at Boone County’s Hobet mine, have expressed disappointment with the decision.  However, the decision did not reach the underlying substantive “science” advocated by EPA – that conductivity at extremely low levels impairs streams.  The decision merely held that the manner in which EPA sought to impose its view of the “science” – by mandating state agencies follow EPA’s view of the science wholesale -- was improper.  EPA can still exercise its authority to lodge “specific objections” to NPDES permits that do not have conductivity limits.  While the case represents a major victory for the coal industry, the battle over conductivity and its true effect on Appalachian streams is far from over.

Tuesday, July 24, 2012

Renewed Interest in West Virginia as Site of "World Class" Ethane Cracker Plant

Although West Virginia may have lost out to Pennsylvania in the race to land Shell’s “world class” ethane cracker plant, it appears that interest is growing from several other companies in locating their cracker plants at West Virginia sites.  West Virginia Commerce Secretary Keith Burdette recently announced that the state has signed a non-disclosure agreement with 3 separate companies that are interested in building an ethane cracker plant in West Virginia.  Mr. Burdette reports that the state is in negotiations with another company who is also interested in potential cracker sites located in the state. 

As most may already know, the principal reason cited for West Virginia’s failure to land the Shell cracker plant was a lack of available land.  Apparently, as planning for the Shell project evolved, the amount of land required increased from approximately 250 acres to approximately 500 acres.  The West Virginia site preferred by Shell could not accommodate such requirements because neighboring land was occupied and not available for development of the cracker plant.

A lack of land does not appear to be a problem for the companies who are now expressing interest in potential cracker sites located in West Virginia.  Two of the companies will employ models that will require far less land.  It has been widely reported that Aither Chemicals, a West Virginia based company, is one of the companies that has expressed interest in building a cracker plant in West Virginia.  Aither plans to employ a model which is closer to the 250 acre model.  Apparently, one of the other interested companies employs a similar model.    

The remaining two companies that have expressed interest in building a cracker plant in West Virginia plan to build a “world class” cracker similar to the Shell model and also requiring large amounts of land.  One of those companies is Brazil based Braskem.  The name of the other company with plans of a potential “world class” ethane cracker has not been disclosed.  Given the renewed interest in building an ethane cracker plant of the “world class” variety in West Virginia, one must assume that there are potential sites acceptable to these companies in West Virginia that could provide the large amount of land required to build such an ethane cracker. 

Any renewed interest in building an ethane cracker in West Virginia is good news for the state.  Since the decline of West Virginia operations by chemical manufacturing companies like Union Carbide, Dow, FMC, Bayer, and others, West Virginia has been starving for a new spark to revive its once vibrant chemical manufacturing industries.  The location of an ethane cracker in West Virginia would almost assuredly provide such a spark. 

Thursday, June 28, 2012

Update on Geothermal Energy

As the readers of this blog might recall, I previously posted about the potential of geothermal energy production in West Virginia.  Geothermal energy production has become something of a hot topic in West Virginia on the heels of a 2009 study conducted by Southern Methodist University and commissioned by Google, which suggested that West Virginia might be better positioned than any other state in the eastern United States to produce and export geothermal energy.  The study found that there were "hot spots" in several of West Virginia's eastern counties where the Earth's temperature is much hotter than previously thought.  When combined with West Virginia's proximity to densely populated areas where electricity demand is very high and the development of new drilling technologies that could reach the depths necessary for exploitation of geothermal energy, this phenomenon has made the potential development of geothermal power generation in the West Virginia an appealing proposition.

It was amidst the optimism created by the above-referenced developments that West Virginia held its first geothermal energy conference last month in Flatwoods to discuss the benefits and challenges that might accompany geothermal energy production within its borders.  The conference was well attended, and the speakers and attendees alike seemed to be both excited and optimistic about the potential of geothermal energy in West Virginia.  But while there are clearly benefits to exploring the possibility of wide scale commercial production of electric power from geothermal energy in West Virginia, this blogger left the conference with no doubt that there will be significant challenges to developing this resource; that exploration of what it will take to do so is clearly in its infant stages; and that actual commercial production of geothermal energy is likely to be in the distant future, if at all.

The speakers at the geothermal energy conference espoused many benefits to producing electricity from geothermal resources.  First, it is generally recognized that geothermal resources have a smaller environmental impact than fossil fuels.  Although a large amount of water would be necessary to operate an Engineered or Enhanced Geothermal System, which is the type of geothermal system that would be required in West Virginia, such water could be run though a closed-loop system to be injected into and then pumped out of the geothermal reservoir (see illustration below).  Accordingly, the water could be recycled, resulting in less water usage that traditional power plants. 

Additionally, a geothermal power plant requires less land usage than a traditional power plant, resulting in a smaller "footprint." 

Moreover, scientists estimate that currently available geothermal resources could supply the world's energy needs for several thousand years.  And geothermal energy is also more or less renewable.  Once a geothermal reservoir is depleted, it will be naturally recharged after about 3.5 times the depletion time.  Accordingly, the potential that geothermal energy carries to quench our ever-growing thirst for energy is quite vast.

Despite its potential benefits, geothermal energy production is not without its drawbacks.  Geothermal energy production would face some of the same criticisms that natural gas production from the Marcellus Shale now faces, particularly given that the drilling processes for both types of energy production is similar.  There would exist the potential for seismic activity to occur as a result of geothermal energy drilling. Environmentalists would no doubt claim that drinking water sources could be contaminated.  Access roads would have to be built to the well sites, increasing traffic and requiring large-scale earth moving. 

Perhaps the most significant drawbacks to geothermal energy production at this time is that it is not yet competitive in low gradient areas like West Virginia, and the research into such production in West Virginia is in its infancy. It appears that development of the technology to drill to the depths required to access geothermal resources in West Virginia still has some hurdles to clear.  There are also still unknowns regarding the engineering of geothermal power plants.  The actual temperatures of the resource in West Virginia and the performance and flow-rate of geothermal wells here are currently only estimates and largely unknown.  Even depths believed to be the depths to which one would have to drill to reach this resource are only estimates.  Geothermal energy in this region would also be less efficient than traditional power sources.  One expert at the geothermal energy conference estimated that, in light of these risks, it would require a $700 million government investment to merely demonstrate the technology and spur investment from the private sector.  Given the current budgetary woes our federal government is currently facing, such an investment seems unlikely in the near future. 

Although geothermal technology is currently being utilized to heat some homes and government buildings in West Virginia with geothermal heat pumps, it appears that wide scale commercial production of geothermal power will occur in the distant future, if at all.

Monday, May 28, 2012

Military Veterans Valuable to Oil and Gas Firms

In my last post to this blog one week ago, I said that I would try to provide an update by the end of last week regarding what I learned at West Virginia's first geothermal energy conference on May 22, 2012 in Flatwoods, West Virginia.  I must report today, however, that such plans hit a few road bumps along the way.  Paraphrasing Robert Burns, the best laid plans of mice and men often go awry.  First, I was traveling most of last week for depositions.  Second, the three-day holiday weekend just plain made me lazy.  Third, I felt compelled to honor the military veterans who protect this great country of ours with a Memorial Day post about veterans in the oil and gas industry.  Accordingly, you will have to await my next post to learn more about the role that geothermal energy could play in solving America's energy puzzle, and instead wind down your Memorial Day reading about the opportunities that exist for our military veterans in the oil and gas industry.

Efforts of American corporations to target and hire military veterans  have steadily increased and gained national media attention over the last several years.  It seems that the oil and gas industry has not been immune to this trend.  According to the American Oil and Gas Reporter ("Reporter"), the leadership qualities, work ethic, and team goal-oriented focus exhibited by many veterans make them invaluable in many positions in the oil and gas fields.  An article appearing in the on-line version of the Reporter provides a nice road map for oil and gas firms to follow in developing a strategic plan to successfully target and hire the best and brightest veterans. 

There are also resources available for veterans who are actively seeking out employment in the oil and gas industry.  An organization called Veterans to Energy has launched a job search website dedicated exclusively to helping U.S. military veterans find careers in the oil and natural gas industry.  The site was developed by the American Petroleum Institute, a trade organization representing all aspects of the American oil and natural gas industry.  Veterans to Energy boasts an impressive list of participating companies, including such oil and gas industry "heavy hitters" as BP, Shell, Marathon, ExxonMobil, Chevron, and Conoco Phillips.  In addition to job listings, the site contains a page that allows veterans to match the skills they obtained during the course of their military service to possible careers in the oil and gas industry based upon their military occupation/classification. 

So the next time you see one of our military veterans, please thank them, buy them dinner, or, if you have such power, give them a well-paying job in the oil and gas industry!  Since I cannot do the latter, I will just use this space to express my appreciation for our men and women in uniform, especially my brother-in-law Robert Thompson, who is a proud veteran of the Second Iraq War.  Happy Memorial Day!

Monday, May 21, 2012

Could Geothermal Energy Provide Another Piece to Solve America's Energy Puzzle?

West Virginia’s first geothermal energy conference will be held tomorrow in Flatwoods, West Virginia.  The conference is sponsored by Marshall University’s Center for Business and Economic Research and Center for Environmental, Geotechnical and Applied Sciences, the West Virginia Division of Energy, and the West Virginia Geological and Economic Survey.  The aim of the conference is to explore the potential of geothermal energy as a sustainable source of energy, the geologic characteristics of geothermal energy, the economics of commercial electricity production from geothermal energy, the practical considerations of drilling for geothermal energy, and the engineering concepts involved in harnessing geothermal energy for commercial use. 

As the name implies, geothermal energy is energy stored within the earth.  The energy is generated primarily by radioactive decay at Earth’s core, which is then conducted to surrounding cooler rocks.  Some of the rocks melt, creating magma convection, which in turn heats rock and water in Earth’s crust.  This phenomenon is responsible for creating hot springs and geysers.  When harnessed, it can also be used to produce heat and energy for commercial use, including electrical power generation.    

Geothermal energy is currently being utilized in the United States for commercial power generation, but most of this activity is taking place near tectonic plate boundaries where hotter temperatures can be found closer to the earth’s surface.  Geothermal energy is also being utilized for residential heating with geothermal heat pumps that can utilize cooler temperatures closer to the surface to provide adequate residential heating.  One West Virginia company, Comfor Tech, which happens to be making a presentation at the geothermal energy conference, sells and installs geothermal heat pumps.

While it might be easier to produce geothermal energy near tectonic plate boundaries and from hot springs, energy can also be produced by drilling down into hot aquifers located deep within the Earth.  Like natural gas production, geothermal energy production can be enhanced by hydraulic fracturing.  The rock is fractured and then water is injected into the fractures to flow through the rock to be heated.  Of course, geothermal wells would have to be drilled to depths much greater than oil and gas wells.

A study commissioned a few years ago by Google’s non-profit arm and conducted by Southern Methodist University suggested West Virginia may be better suited than any other state in the eastern third of the country to exploit geothermal energy.  Researchers found that areas below Tucker, Randolph, Pocahontas, and Greenbrier counties are particularly suited for geothermal energy production due to elevated temperatures under the Earth’s surface.  The following map from the SMU study is reproduced to illustrate the temperatures of West Virginia’s subsurface at various depths. 

Geothermal energy has several attributes that could make it a critical piece to solving America’s energy puzzle by providing a sustainable energy source that is more environmentally friendly than fossil fuels.  While the production of geothermal energy does release greenhouse gases that are trapped within the earth, such emissions are said to be much lower than those emitted when burning fossil fuels.  Geothermal energy is also considered a sustainable energy source that could supply the world’s energy needs for thousands of years.   

Geothermal energy also carries with it several potential drawbacks that could reduce its viability as a source of commercial energy.  Chief among those drawbacks is cost.  Geothermal energy would cost more to produce than fossil fuels, principally because of the large capital investment required to build a geothermal power plant.  Some believe that geothermal energy may only be viable if subsidized by the government. 

Geothermal energy production would also not be without legal and environmental concerns.  First, there will no doubt be an issue regarding ownership of the right to extract the geothermal energy stored deep below the Earth’s surface.  Does the owner of the surface rights own the geothermal energy rights due to the fact that such rights have not been carved out of his deed?  Is there an argument that the owner of other subsurface rights owns them?  If so, then are such rights owned by the owner of the oil and gas rights or the owner of the coal or other mineral rights?  Similar ownership issues were faced in the not-so-distant past when coal-bed methane was first produced in West Virginia.  The property ownership issues arising from geothermal energy production would likely be worked out in the courts. 

Because drilling for geothermal energy in West Virginia would likely utilize similar technologies to drilling for natural gas, including hydraulic fracturing, it would likely also face similar environmental criticisms and legal challenges.  Geothermal energy production could release noxious gases and chemicals.  It could also potentially produce seismic activity similar to earthquakes.  Water usage for hydraulic fracturing would likely be raised as a concern.  Many of the same issues concerning damage to local transportation and other infrastructure currently existing with oil and gas production would also exist with geothermal energy production.  Additionally, subsidence has been experienced in conjunction with geothermal energy production in other countries.  Although these risks seem to be considered manageable, these issues will no doubt spawn an abundance of litigation and legal wrangling in today’s litigious society. 

I will be attending tomorrow’s conference and hope to provide an update post by week’s end. 

Monday, May 14, 2012

West Virginia May Get a Cracker Plant After All

As everyone who has a television, a radio, or a newspaper subscription likely knows, West Virginia was recently disappointed by Shell's decision to locate its multi-billion dollar cracker plant not in West Virginia, but just across the border in Pennsylvania.  The dreams of many State officials and workers of a revitalization of the State's chemical manufacturing industry were crushed by Shell's announcement that it would not locate its facility here. While it is still recovering from the sting of being left at the altar by Shell, West Virginia may land a cracker after all, and it may locate right here in the Kanawha Valley.

The Charleston Gazette has reported that Aither Chemicals, a South Charleston, West Virginia company, has plans to build a $300 million ethane cracker on a site currently owned by Bayer CropScience in Institute, West Virginia.  The cracker plant is expected to employ 200 people and gross $500 million in annual sales.  The Gazette reports that the cracker would be built in stages.  Full production would not commence until 2014.  It would utilize a new, proprietary cracking process instead of traditional steam cracking.  This should make environmentalists happy, as it is expected to use 80% less energy and produce 60% less carbon dioxide.  The company was recently informed that it is a finalist in the Shale Gas Innovation Contest that seeks to honor new, innovative, and emerging technologies in the natural gas industry. 

The Gazette has reported that Aither actually prepared a press release announcing the investment and distributed it to State officials in March, but didn't go ahead with the announcement due to a need to work out some details with its partners.  One of those partners is rumored to be Mark West Energy Partners, a growing company engaged in gathering, transporting, storing, fractionation, and marketing of Natural Gas Liquids (NGLs), among other activities.  Mark West would supply the ethane to be used in the cracker. 

This author can't help but to wonder whether one of the "partners" with whom details must be worked out is the State of West Virginia.  The West Virginia legislature recently passed a bill to give rather lucrative tax incentives to any company that would commit at least a $2 billion investment in a cracker plant in West Virginia.  That bill obviously targeted Shell.  Although Aither's investment will fall far short of the $2 billion dollar investment required by the cracker investment bill, Aither will ask for a similar tax deal from the State.  The view from here is that, if such negotiations are taking place, the State should compromise where it can in order to secure this large investment in "green chemistry" that would potentially employ hundreds of West Virginians and place West Virginia at the forefront of innovation in the natural gas industry.

Friday, May 4, 2012

Tom Myers' Study on Potential Drinking Water Contamination from Hydraulic Fracturing Should be Viewed with a Skeptical Eye

A May 2, 2012 article in the Charleston Gazette reported that a study commissioned by two environmental groups, and authored by Reno Nevada researcher Tom Myers, concluded that chemicals injected into the ground during the hydraulic fracturing of natural gas wells could migrate into aquifers used as sources of drinking water after 10 years or less.  Scientists and oil and gas industry officials have previously argued that the thick and impermeable nature of the shale formations being fractured, as well as the various layers of rock above the shale, would prevent the migration of these chemicals into aquifers located thousands of feet above.  But the study referenced in the Gazette article apparently suggests that hydraulic fracturing could exacerbate exiting cracks and allow vertical migration of the fracturing fluids into the aquifers.  The study and its conclusions are based upon computer modeling. 

Not surprisingly, proponents of hydraulic fracturing have challenged the methodology of Mr. Myers’ research and the results it produced.  Reportedly, several scientists have called Myers’ approach unsophisticated.  They have also asserted that the study relies on several assumptions that do not accurately reflect what is known about the geology of the Marcellus Shale formation.  Terry Engelder, a purported pro-fracturing geologist from Penn State University, was quoted in the Gazette article wondering aloud whether Mr. Myers really understands anything about what the shale formation looks like. He is critical of Mr. Myers’ use of modeling rather than observations and asserts that hydraulic fracturing wouldn’t be needed to free natural gas from the Marcellus Shale if the migration of fracturing fluids through the shale and other rock formations were as easy as suggested by Mr. Myers. 

I have not had the opportunity read Mr. Myers’ study beyond the information discussed in the Gazette article.  I am also not trained as a geologist, hydrologist, engineer, or the like.  Therefore, I am unable to offer any type of technical critique of the methodology or results of Mr. Myers’ study based upon my own personal knowledge.  I can, however, offer some cautionary thoughts based upon my experience as a practicing litigator.  In most instances where the resolution of some particular issue will have a substantial impact upon the pecuniary, political, personal, or emotional interests of particular groups, those groups and their supporters will typically take rather extreme positions on the issue that are supportive of their interests.  Those positions may often have, or at least appear to have, some validity.  But the actual, hardcore truth typically lies somewhere in the middle.  Accordingly, before forming any conclusions about the dangers of drinking water contamination posed by hydraulic fracturing based solely upon the Myers study, one should take a moment to consider its source. 

The study was bought and paid for by the Park Foundation and the Catskill Mountain Keepers, both environmental organizations that have openly opposed drilling in New York’s portion of the Marcellus Shale (;
Additionally, Mr. Myers’ “Statement of Qualifications” in his curriculum vitae (“CV”) proudly touts that he is experienced “as a watchdog of government agencies and different industries.”  His listed client base includes mostly environmental and conservation groups like Natural Resource Defense Council, Great Basin Resource Watch, Greater Yellowstone Coalition, Great Basin Water Network, Defenders of Wildlife, Centers for Biological Diversity, McCloud Watershed Council, and Catskill Mountain Keepers.  His CV also reveals that he consults for law firms, which no doubt means that that he earns a substantial amount of money based upon his ability to testify/advocate as an “expert witness” in environmental lawsuits.  It often enhances an expert witness’ ability to get work if he or she routinely and sometimes blindly takes the position of one side of a particular issue or the other.  As West Virginia Supreme Court Justice Menis Ketchum recently pointed out in a multi-million dollar soil contamination case: “Retained expert witnesses are like eggs. You can buy them by the dozen - they are just more expensive.”

Finally, Ken Ward Jr. authored the Gazette article, which was conclusorily and sensationally entitled Drilling Chemicals Could Move Quickly to Aquifers, Study Says.  Mr. Ward is notorious for writing “exposé” type pieces that are highly critical of companies in the energy, natural resources, and extractive industries.  One of his projects is a blog entitled “Coal Tattoo” that is extremely critical of the coal industry.

Once again, it is not the intent of this blog post to take a definitive position on the technical accuracy or credibility of Mr. Myers’ study.  Likewise, it is not the intent of this post to take a position on whether or not hydraulic fracturing poses risks to the environment or the public.  Rather, the intent of this blog post is to point out that one should consider the source of the Myers study and the potential ulterior motives of its author, funders, and promoters before affording it too much weight.  As I wrote above, the truth can often be found somewhere in the middle of the positions taken by groups who have a pecuniary, personal, political, or emotional interest in a contentious issue.  It wouldn’t be surprising to this author if this is the case in regard to many issues surrounding hydraulic fracturing. 

Friday, April 27, 2012

Would Jed Clampett Prosper in 2030 America?

I have decided that today’s post will be less serious and more fun that my previous posts to this blog. I realize that I may still bore some of you to tears, but such is the natural effect of enduring three years of law school and nearly five years as a practicing lawyer.  We’re not a very exciting bunch, folks!  Nevertheless, what follows is my futile attempt to entertain my readers a little while also posing a serious question:

From the category of art imitating life, I was on my way into work yesterday morning when I heard on the radio that Forbes had released its annual list of the fifteen wealthiest fictional characters.  This peaked my curiosity, so when I arrived at work I went to to find the story, which can be accessed via the following hyperlinks: (Print Article) or (Character Bios).  One thing that struck me about the Fictional Fifteen was that four of the characters who made the list for 2012 have some connection to the energy and/or mining and/or natural resources and/or extractive industries.  Flintheart Goldheart, Scrooge McDuck’s arch nemesis in Disney cartoons, made his fortune in the cut-throat diamond mining industry and comes in at #2 on the list.  Carlisle Cullen, the patriarchal vampire in Twilight and #3 on the list, made his fortune in, well, being alive a really long time.  But his wealth is primarily attributed to the savvy investments made during his 371 years on earth.  The 2011 version of the “Fictional Fifteen” reveals that among Mr. Cullen’s primary investments are oil, steel, and gold (  Appearing at #13 on the 2012 list is C. Montgomery Burns, owner of the nuclear power plant on the Simpsons who once blocked the sun in Springfield to increase electricity consumption (Let’s all take a moment to be thankful that Mr. Burns isn’t the CEO of AEP!). 

Jed Clampett, who is the wealthiest energy tycoon on the 2012 list at #4, is synonymous with “Big Oil.”  We all know the story from the Ballad of Jed Clampett:

Come and listen to a story 'bout a man named Jed
Poor mountaineer barely kept his family fed
Then one day he was shooting for some food,
And up through the ground come a bubbling crude
(Oil that is, black gold, Texas tea)

After Mr. Clampett struck oil on his property in the Ozark Mountains while hunting in the early 1960s, the OK Oil Company paid him a fortune to acquire drilling rights on his property.  He subsequently moved to Beverly Hills and has amassed a fortune of $9.8 Billion according to Forbes, primarily from his oil company, Clampett Oil.  Mr. Clampett might have been higher on the 2012 Fictional Fifteen had it not been for a disaster, reported by Forbes, in which one of his oil tankers accidentally spilled 20,000 barrels of crude oil into the Gulf of Alaska.  This mishap no doubt made his fictional lawyer Ben Matlock ridiculously wealthy, but it surely also negatively affected the price of Clampett Oil stock. 

On a more serious note, Forbes’ Fictional Fifteen begs an increasingly important question in the energy industry.  Would Jed Clampett prosper in the America of, say, 2030?  Remember that The Beverly Hillbillies was set in the 1960s, in the middle of Big Oil's rise to the top and at a time when it really had no challengers and everyone was driving a gas-guzzling car.  Although the oil and gas industry seems to be flourishing at the moment, particularly with drilling in the Marcellus and other shale formations, there is no doubt that America’s energy policy has become decidedly “pro-green” and “anti-fossil fuels.”  New restrictive regulations are seemingly being promulgated every day, which many would say negatively affect the coal, oil, and gas industries.  Huge investments and immense effort have been put into finding alternative, renewable sources of energy that are perceived to be cleaner technologies than fossil fuels.  (Coincidentally, Forbes reports that Thurston Howell of Gilligan fame, who according to Forbes makes his money from developing green technologies such as bicycle-powered washing machines and coconut cell phones, increased his company’s profits by 7%, but dropped off the list of this year’s Fantastic Fifteen, due to bank fraud, after making the 2011 list at #9.). 

It seems that a war is currently being waged over what technologies will power America into its future.  Will it be Mr. Burns’ nuclear power? Will it be Mr. Howell’s green technologies?  Or will it be Mr. Clampett’s “Big Oil”?  Only time will tell what the future holds for the coal, oil, and gas industries, but this author’s opinion is that there is no reason why America cannot develop a balanced energy policy that utilizes both domestic sources of energy like coal, oil, and clean-burning natural gas along with renewable and green sources of energy to achieve both energy independence and a cleaner environment.    

The full list of Forbes’ Fictional Fifteen is reproduced below with the character’s net worth, primary sources of revenue, and the fictional work from which they were created:

Character                            Net Worth              Primary Revenue Source          Fictional Work

1. Smaug                                 $62B                   Marauding                           “The Hobbit”

2.  Flintheart Glomgold          $51.9B                 Mining, Theft                      “Scrooge McDuck”

3.  Carlisle Cullen                    $36.3B               Investments                         “Twilight”

4.  Jed Clampett                      $9.8B                  Oil and Gas                         “Beverly Hillbillies”

5.  Tony Stark                         $9.3B                  Defense                               “Ironman”

6.  Richie Rich                       $8.9B                  Conglomerates                    “Ritchie Rich”

7.  Charles Foster Kane           $8.3B                  Media                                  “Citizen Kane”

8.  Bruce Wayne                     $6.9B                  Defense                               “Batman”

9.  Forrest Gump                     $5.7B                  Apple Inc.                           “Forrest Gump”

10.  Mr. Monopoly                  $2.5B                 Real Estate                           “Monopoly”

11. Lisbeth                               $2.4B                Computer Hacking               “Girl With   Salander                                                                                                          Dragon Tattoo”

12.  Tywin Lannister               $2.1B                  Inheritance                          “Game of Thrones”

13.  C. Montgomery Burns      $1.3B                   Energy                                 “Simpsons”

14.  Robert Crawley               $1.1B                  Inheritance/                           “Downton Abbey”

15.  Jo Bennett                        $1.0B                  Electronics/                          “The Office”

Saturday, April 21, 2012

Federal Government Gets into the Business of Regulating "Fracked" Natural Gas Wells with New Source Performance Standards

As I am sure most people with an interest in the oil and gas industry already know, on April 17, 2012 the United States Environmental Protection Agency (“EPA”) issued the final version of its Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants.  The new regulations are the result of a review performed pursuant to Section 111(b) of the Clean Air Act, which requires the EPA to review its new source performance standards every eight years.  The regulations mark the entry of the EPA into the arena of regulating natural gas fracking operations, an industry currently primarily regulated by the states.  The regulations will no doubt increase criticisms from critics in energy-producing states who have already argued that President Obama’s energy policy as implemented by the EPA is killing coal industry jobs by implementing new, tougher regulations on emissions from coal-fired power plants. 

The new regulations have been finalized by the EPA and sent for publication in the Federal Register (the Federal Register can be accessed at  They will become effective sixty (60) days after their publication.  The new regulations apply to fracking operations at nearly all stages of production and transportation.  They will regulate emissions of volatile organic compounds (“VOC”) from gas wells, centrifugal compressors, reciprocating compressors, pneumatic controllers, storage vessels, and leaking components at onshore natural gas processing plants.  They will also regulate sulfur dioxide (S02) emissions from onshore natural gas processing plants.  In addition, the regulations take aim at the emission of so-called greenhouse gases during well completion, such as methane and carbon dioxide.

Perhaps the most high profile portion of the new regulations is the requirement for natural gas producers to capture VOCs, methane, carbon dioxide, and other alleged pollutants released during a three to ten day period during well completion called flowback.  Most of these substances are currently vented into the atmosphere or burned off during a process called flaring.  When the new regulations go into effect, companies will not be permitted to vent the VOCs and gases released during flowback, but rather will have to capture them with “green completion” a/k/a “reduced emission completion” (“REC”) technologies or burn them off by flaring.  Beginning in 2015, companies will also have to abandon flaring and implement only REC technologies to capture the VOCs and gases.  The positive aspect that REC technologies offer to natural gas producers is that the captured methane can be separated from the other components released during flowback and sold on the market.  The EPA has argued that profits from selling the captured methane that ordinarily would have been lost into the atmosphere will save the industry money and reduce the cost of compliance. 

The final version of the new regulations was arrived at after a comment period during which the EPA received thousands of comments on the proposed regulations.  The oil and natural gas industry did gain some important concessions during the comment period.  First, the original version of the proposed regulations would have immediately implemented REC-only capturing of the VOCs and gases released during flowback, whereas the final version of the regulations postpone the full implementation of the regulations and will allow flaring until 2015.  Additionally, the original proposed regulations would have applied to all hydraulically fractured natural gas wells, regardless of whether they were new or old.  The final version of the regulations applies only to wells drilled after the regulations take effect. 

The final rule signed by Lisa Jackson of the EPA can be found at  The rule is not official, however, until it is published in the Federal Register, such that the document contained at the above-referenced hyperlink should not be relied upon to ensure compliance.

Tuesday, April 17, 2012

Yes (West) Virginia, There is a Shale Drilling Boom and it Currently Resides in Your Northern Counties

For some time now we have been hearing about a Marcellus Shale drilling boom in West Virginia.  There has been buzz about the tremendous reserve of natural gas thought to be contained in the Marcellus Shale that lies under most of the State.  We have heard buzz about the possibility of attracting an ethane cracker plant and what that might mean for the re-birth of the manufacturing industry in West Virginia.  Additionally, one of the hottest topics of debate during the 2011 regular legislative session was the need for permanent regulations addressing Marcellus Shale drilling in order to provide some certainty and predictability for the industry and protections for surface owners.  This debate continued to rage after a proposed Marcellus bill died in the 2011 regular session when the House of Delegates failed to put it to a vote.  (  A regulatory bill was eventually passed, however, in a special legislative session that occurred in December of 2011( 

Were it not for the debate in the legislature, the intense media coverage, and the various presentations in and around Charleston, however, those of us living in Charleston and points south would hardly notice any real "boom" in Marcellus Shale drilling in West Virginia.  But a recent trip to Morgantown for a couple days of depositions last week convinced me that a Marcellus Shale boom is alive and well in West Virginia and resides primarily in the northern counties. 

The first evidence I encountered of the increased drilling activity and the economic impact it is likely having come when I attempted to book a hotel for two nights in Morgantown, a Wednesday and a Thursday.  My past experience has been that hotel rooms in Morgantown are widely available for week nights such that booking a room on short notice is typically no problem, particularly this time of the year when WVU's football and basketball seasons have ended and before any commencement activities are taking place.  When I foolishly waited until Wednesday morning to book my room, however, I quickly realized this might no longer be the case.  I called just about every reputable hotel in Morgantown - Fairfield Inn, Spring Hill Suites, Hilton Garden Inn, Waterfront Place, Holiday Inn, Hotel Morgan, and others - and none of them had any rooms available.  The Holiday Inn reservation agent informed me that it had a few rooms available in Fairmont, but admitted that the price would be increased by nearly $30 due to the increased demand (no doubt a hard lesson in economics for me)!  Fortunately, I was finally able to get the last room available at Eurosuites.  In addition to my troubles getting a hotel room, I later overheard several other lawyers involved in the deposition complaining of the same troubles. 

Given that I knew this type of demand for hotel rooms in Morgantown this time of the year to be unusual, I asked the booking agents at several of the hotels what kind of special event was responsible for this sharp increase in demand.  They all confessed that they were aware of no such events.  When I arrived at the Eurosuites on Wednesday night and then the next morning at the Fairfield Inn where the depositions were taking place, it was clear to me why there were no hotel rooms available:  the parking lots contained a considerable number of vehicles emblazoned with the names of oil and gas companies.

Beyond the increase in demand for hotel rooms, the Marcellus Shale boom in the northern counties was evident by the visible drilling-related activities taking place.  Beginning from around the Jane Lew exit on Interstate 79 I started to see a large number of oil and gas vehicles traveling the interstate.  There were countless sand trucks, pumper trucks, water trucks, wastewater trucks, trucks hauling excavation equipment, trucks hauling drilling equipment, and passenger vehicles bearing the names of several oil and gas exploration, drilling, construction, and consulting companies.  Additionally, when I stopped for lunch in Fairmont on my way home Friday afternoon, I observed a constant stream of oil and gas vehicles pass by.  Interestingly, one of the larger vehicles carrying an oversized load had a State Police escort.

Finally, the Marcellus Shale boom was evident in the construction activities I witnessed in the hills along the interstate north of Jane Lew.  There were several areas where pipeline contractors were digging trenches for the construction and placement of natural gas pipelines.  There were also several areas where it was evident that pipelines had been freshly constructed and covered over. 

There is no doubt that substantial drilling activities are taking place in northern West Virginia.  Based upon my experience last week, it is further evident that the increase in drilling activities is likely leading to considerable positive economic impacts.  Hopefully, it is just a matter of time before the boom and its apparent economic impacts make their way south!

Friday, April 13, 2012

Small Spill of Drilling Mud Leads to Prompt Response by EQT

The Dominion Post, a newspaper out of Morgantown, West Virginia, reported this morning that Equitrans, a subsidiary of Pittsburgh, Pennsylvania based EQT (formerly Equitable Gas Company), spilled approximately 500 gallons of drilling mud into Garrison Fork Creek in Greene County, Pennsylvania between noon and 1 p.m. Wednesday.  While Garrison Fork does not cross into West Virginia, it is a headwater tributary of Dunkard Creek, which meanders back and forth between the West Virginia and Pennsylvania borders.  The spill had nothing to do with the actual drilling of a natural gas well.  Rather, the spill occurred as the result of an "inadvertent return" of drilling mud while drilling for a pipeline underneath the creek. While it is reportedly unknown what caused the inadvertent return, they sometimes occur when the drilling mud bubbles up through a natural fissure in the ground.   

The spill apparently occurred in the course of horizontal directional drilling for an interstate pipeline that will run between Pennsylvania and West Virginia.  According to the Dominion Post article, this particular kind of drilling is expensive, but is more environmentally safe than other forms of drilling.  The process apparently causes no environmental issues 99% of the time.  The purpose of the drilling mud in the process is to keep the drilling hole lubricated and to contain the drill cuttings.  The mud contains small amounts of bentonite clay, which is reportedly also used as an alternative medicine to treat gas and constipation, as well as a colon cleanser.  It appears that the spill was minor and does not pose a significant risk. 

According to the Dominion Post, Equitrans immediately stopped drilling, notified the Pennsylvania Department of Environmental Protection ("DEP"), and began cleaning up and containing the spill.  This incident appears to be an example of an oil and gas company using a relatively environmentally safe, even though more expensive, process and taking immediate action to clean up and contain a rare accidental spill.  Accidents will inevitably happen in drilling for and transporting natural gas, just as they do in any industry.  But the public should be comforted in knowing that, at least in this case, the company was using an environmentally safer process at the expense of additional profits, and took prompt action to remediate the effects of an unexpected accident.

Monday, April 9, 2012

When It Rains, Litigation Pours: Oil and Gas Firms and Their Contractors at Risk for Future Flooding Lawsuits in Connection with Well Pad Construction and Preparation

A fellow West Virginia lawyer representing a coal operator in flood litigation ongoing in southern West Virginia once quipped to me that as long as coal was mined in West Virginia and God kept making it rain, he would never be unemployed.  With the recent boom in oil and gas exploration of the Marcellus Shale formation in West Virginia, lawyers representing the oil and gas industry may be able to make a similar claim.

Anyone who has lived in West Virginia for any period of time knows all too well that the State has a love-hate relationship with energy production.  On the one hand, most West Virginians appreciate that the energy industry, primarily coal mining, creates a large number of well-paying jobs in rural parts of the State where decent jobs are a commodity as precious as gold.  On the other hand, some believe that energy production damages land and property, negatively alters the topography of the State, and has adverse health consequences for residents.  Many of these alleged negative consequences have been litigated in the courts, including a series of recent lawsuits arising from several instances of widespread flooding in southern West Virginia.

Perhaps one of the largest flooding events in recent state history occurred in July of 2001 when floodwaters swept through my home county of McDowell, as well as several other southern West Virginia counties.  Radar estimates of between four and six inches of rain were recorded over parts of a six county area on July 8, 2001.  A report commissioned by the West Virginia Division of forestry ( cites a rain gage in Mullens, West Virginia that recorded 5.7 inches of rain that day.  Two subsequent rain events of July 26th and July 29th further increased the flooding.  When all was said and done, the 2001 flood was catastrophic, causing hundreds of millions of dollars in damage and spawning a massive lawsuit primarily targeting large landowners and the timbering and coal industries.  Despite the three unusually large rain events, the lawsuits argued that the activities of the coal and timber industries altered the topography of several watersheds in such a way that they were no longer able to properly drain run-off from the storms. 

Several large-scale flooding events have occurred since the July 2001 floods, which have spawned similar lawsuits.  The most recent large-scale flooding event to result in litigation occurred in Mingo County in May of 2009.  Meteorological data collected by one of the Defendants in the Mingo County litigation allegedly revealed that over seven inches of rain had fallen in parts of Mingo County the week of the May 2009 floods, with over four and one-half inches falling from late in the night on May 8 to the early morning hours of May 9.  (  Nevertheless, hundreds of Plaintiffs filed lawsuits claiming that the floods were caused by alterations in the topography primarily in connection with highway construction (with incidental coal removal) and coal mining.  While the coal mining/highway construction Defendants were the primary targets, one gas company was named as a Defendant in connection with several traditional gas wells. The Mingo County litigation is still ongoing.

Construction and preparation of Marcellus Shale drill pads, which typically contain multiple well heads, involves large scale excavation and forest clearing.  First, an area of up to several acres must be cleared, leveled, and graded for the actual well pad.  Access roads and pipeline rights-of-way must also be cleared, leveled, and graded.  Massive wastewater impoundments must also be excavated.  Additionally, the production and marketing of natural gas and Natural Gas Liquids (NGLs) involves the construction of other ancillary facilities in the mountains, such as compressor stations, that will often involve the same types of activities.  When (not if) a large rain event causes flooding in a West Virginia watershed where oil and gas exploration of the Marcellus Shale is on-going, these activities are almost sure to make primary, deep pocket targets of the involved oil and gas firms, engineering and geological consulting firms, construction contractors, pipeline contractors, and any others who have any involvement in the design, preparation, construction, or reclamation of Marcellus Shale drilling sites in the affected watersheds.  Accordingly, these firms would be well advised to strictly adhere to their duties under state, local, and federal permits, particularly those involving the control or discharge of wastewater or storm water run-off.  It may also behoove these firms to work together to implement a “good neighbor” policy designed to quickly respond to complaints and offer, within reason, prompt assistance to remedy the concerns of nearby landowners.