Citizens Advisory Committee – MSC Regulatory Update July 15, 2011
Chesapeake Overview • Second-largest producer of U.S. natural gas • Most active driller in U.S. • #1 driller in U.S. for last 20 years; ~11,000 • #1 driller in the world of horizontal wells over the past 20 years; ~4,000 • #1 producer of shale gas in the world; ~1.7 bcf/day average ins 2010 • High quality U.S. asset base • #1 in Marcellus Shale; ~1,730,000 net acres • #1 in Haynesville/Bossier Shale; ~530,000/205,000 net acres • #2 in Barnett Shale; ~220,000 net acres • Approximately 11,000 Employees – over 1,500 now based in Pennsylvania
Marcellus Shale Coalition Overview • Founded in 2008, the Marcellus Shale Coalition (MSC) is an organization committed to the responsible development of natural gas from the Marcellus Shale geological formation and the enhancement of the region’s economy that can be realized by this clean-burning energy source. • The members of the coalition work with our partners across the region to address issues with regulators, local, county, state and federal government officials and communities about all aspects of producing clean-burning, job-creating natural gas from the Marcellus Shale.
MSC Guiding Principles • We, the members of the Marcellus Shale Coalition, embrace and operate by the following guiding principles: • We provide the safest possible workplace for our employees, with our contractors, and in the communities in which we operate; • We implement state-of-the-art environmental protection across our operations; • We continuously improve our practices and seek transparency in our operations; • We strive to attract and retain a talented and engaged local workforce; • We are committed to being responsible members of the communities in which we work; • We encourage spirited public dialogue and fact-based education about responsible shale gas development; and • We conduct our business in a manner that will provide sustainable and broad-based economic and energy-security benefits for all. • We recognize that to succeed in business, we not only embrace these principles, we live by them each and every day. This will be our legacy.
Clean, Affordable, Abundant, American • The cleanest fossil fuel • No SO2, no mercury, neglible particulates, 80% less NOx than coal • Carbon light • 50% less CO2 than coal, 30% less than oil • Large transportation potential • Over 8 million NG vehicles worldwide, only 150,00 in US • Huge electric generation potential • Excellent “partner” fuel as renewable sources grow • Abundant domestic supply • Affordable • Versatile • Commercial, residential, industrial, transportation, electrical generation • Economic workforce development • Revenue stream
Pennsylvania Regulatory Framework • PA Department of Environmental Protection • Primacy for O&G regulations • Waste disposal • Erosion & sediment control • Stream encroachments • Air quality • Water withdrawals • STRONGER review of PA regulations • Susquehanna River Basin Commission • Water withdrawals and consumptive uses • Delaware River Basin Commission • Water withdrawals, wastewater discharges, draft regulatory package • Federal (OSHA, USEPA, USFWS, USACE) • Stream crossings and potential wetland impacts • Safety • UIC • PennDOT, DCNR, PGC, PFBC, PHMC, local, etc.
Natural Gas Production Process: Five Basic Steps
Site Selection/Preparation Many factors go into selecting a drilling site: • Geology • Topography • Proximity to wetlands, sensitive wildlife habitat or significant archeological sites • Access roads • Pipelines and utilities • Proximity to schools and homes • Available water sources • Months in the planning stage Horizontal Drilling v. Vertical Drilling Reduces Land Impacts and Consolidates Development
Site Selection/Preparation • Site construction • Typically 4 to 6 weeks • Typical pad site • 300 x 400 feet • ~ 2.5 acre pad • E&S Controls installed • Zero discharge sites • Containment mechanisms • put into place • Pre-drill water testing Then drilling rig moves onto location.
Environmental Permitting • ESCGP- 1: Erosion & Sediment Control General Permit • GP-7/Joint Permit: Access road crossing a stream or wetland • GP-5; GP-8: Temporary crossings for water lines • GP-4: Intake structures • SRBC water withdrawal approvals • Highway occupancy permits • Driveway permits • PNDI coordination • Wetlands surveys • Pre-drilling surveys – private well construction • Permitting for fresh water impoundments • Permitting for wastewater impoundments/pits – CHK doesn’t utilize • Submerged land license agreement
Drilling the Well • Typically takes 28 days to drill a horizontal Marcellus well • Plan for 6 wells per pad – exploratory, phased development • Casing/spacing requirements • Coal development areas • Drilling permit • Landowner notifications • Setback requirements
Well Completion – Hydraulic Fracturing • Typically takes seven days to complete a well • 12-14 stages in a typical 5,000 foot lateral • Water management plan/SRBC consumptive use approval • Preparedness, Prevention & Contingency Plans • Fluid management – produced water and cuttings • Hydraulic fracturing fluid • Reporting – PADEP & SRBC • http://www.fracfocus.org
Producing the Gas • Requires pipeline • Entirely separate permitting process • USACE/PADEP – coordination with resource agencies • Pipeline safety – PUC • Compressor stations – air permitting • Production reports to PADEP • Anticipate 30-60 year life span, conservatively • Continue to produce water
Site Reclamation Two Phases • Once all wells on location are put into production, pad site is reduced in size by about half. • Rock surface is removed from reclaimed area and topsoil is returned and re-vegetated. • Small quiet, ongoing footprint. • Site is completely reclaimed when well is no longer productive.
Industry Standards Best Management Practices
Best Management Practices • Pre-drill testing • Containment measures • Recycling • Well construction standards • E&S controls • Stream crossings • Transportation safety • Condensate management • Invasive species avoidance • Water intakes • Revegetation • Wetland banking
Guidance Documents/Training • PADEP • SRBC • PennDOT • MSC • American Petroleum Institute • Groundwater Protection Council • Interstate Oil & Gas Compact Commission • State Independent Oil & Gas Associations
Pennsylvania Regulatory Framework • PADEP • Primacy for O&G regulations • Waste disposal • Erosion & sediment control • Stream encroachments • Air quality • Water withdrawals • STRONGER review of PA regulations • SRBC • Water withdrawals and consumptive uses • DRBC • Water withdrawals, wastewater discharges, draft regulatory package • USEPA • Underground injection control • USACE • Stream crossings and potential wetland impacts • PennDOT, DCNR, PGC, PFBC, USFWS, PHMC, OSHA, local, etc. • Challenges • Regulatory environment • DRBC • Interactions between agencies • Interactions within agencies • Dynamic regulatory framework • Misinformation • Public perceptions • Mother Nature!
Opportunities • Energy Education • Natural Gas Vehicles • Community Involvement • Economic Development • Energy Independence