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Getting to the Bottom of NYT’s Latest Story on Leases

Jerry Simmons
Executive Director, National Association of Royalty Owners

 

As the Executive Director of an organization that represents the rights and interests of millions of mineral and royalty owners across this country, you can bet your bacon that I’ve been following closely The New York Times’ ongoing series on natural gas development – and in particular, the stories about leasing, lending and mineral owners in some areas crying foul.

The story posted by NYT reporter Ian Urbina last week fits into this final category. Its basic thesis goes something like this: as shale exploration has continued to ramp-up, land- and mineral owners are increasingly being fooled (or forced) into bad leases – bad because they don’t protect the environment, bad because they don’t protect them in case of an accident; bad because they’re too low on the financial end. I should note here that I actually reached out to Mr. Urbina before he ran this story; none of the information I provided made it into the article. In light of that, I thought I’d take just a few minutes to lay out a few facts, and maybe set straight a few of the things that the Times didn’t quite get right in its story.

For starters, let me say that its clear an awful lot of research went into this piece — Urbina and his crew say they reviewed 110,000 individual leases before putting pen to pad. Yes, critics will point to the fact that more than 100,000 of those leases came from only one county (Tarrant) in one state (Texas), but sorting through them all is still a pretty big project, so at least give them some credit for that. I also appreciate the fact that people like Ron Staments, Jack Richards and Dave McMahon – all friends and/or professional acquaintances of mine – were interviewed for and quoted in the story.

To my eye, the biggest problem with this latest piece is that the Times attempts to manufacture a narrative in which land-owners at every turn are pitted against energy producers. In reality, it’s a partnership – with the lease document representing the statement of terms under which that partnership will be pursued. It’s true that some statements are tilted more toward one party’s interests than the other’s. Should we be surprised by that? Should we be aghast? As was pointed out in the article by Mr. Knapp: “There are bad leases out there, and, as with any industry, there have also been some unscrupulous opportunists.” But is that a basis to shut down an entire industry? Reading the Times’ story, it’s tough not to get the impression that the reporter wouldn’t mind if we did.

As I’ve said many times before, leasing your minerals for development is more of an art than a science. You make the best deal you can with the best information and advice you can find – and if you find out later that your neighbor did better than you, you walk across the lawn, shake his hand, and let him know that lunch next time is on him. Often, in the early days of a play, the discrepancies between lease deals can be significant – a natural function of uncertainty. Higher risks when it comes to the question of commercial viability have to be offset by lower upfront costs.

But as I’ve seen literally thousands of times over the years, as areas are proved up, and resources start flowing, mineral owners find themselves in a much better position to negotiate a better deal — at least for the few who may have been unhappy with the original one. Remember: it often takes years, even decades, for operators to fully tap these reservoirs, and lease and royalty payments often represent only a fraction of the costs they’ll encounter over that time. Used to be drilling a well was a 10-year commitment – now it’s a 40-year one. With the proliferation of electronic media, the incentive to cut-corners on the environment or get away with low-ball lease offers (for very long) is simply no longer there. And even if all of us don’t use Twitter yet, believe me, us mineral owners can be a pretty persuasive bunch.

The article had four bullet-points in the first few paragraphs that I will attempt to address here:

NYT: “Fewer than half the leases require companies to compensate landowners for water contamination after drilling begins. And only about half the documents have language that lawyers suggest should be included to require payment for damages to livestock or crops.”

NYT: “Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.”

NYT: “In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.”

NYT: “Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.”

It is too bad this article did not attempt to emphasize the need for mineral and surface land owners to accept their responsibility and become educated on the process of mineral leasing and mineral/royalty income.  If it had, the Times could have done a real service to the citizens facing decisions on leasing instead of trying to generate fear in a process that could pay off a mortgage; send kids or grandkids to college; keep elderly folks off state assistance; keep the family farm in the family; build new fences, barns, houses; supplement retirement; and on and on.

The point is, of the millions of oil and gas leases in effect the vast majority are held by folks who are very happy with the process and benefit greatly from the income that this partnership produces. Too bad the Times doesn’t consider that much of a story.

The Griswolds Go to Pittsburgh

Sprawling piece on natural gas development in SWPA lands in NYT Sunday Mag; EID sorts through the data that NYT’s Griswold leaves behind

If it’s true that the definition of a good compromise is one in which both sides leave unhappy, it might seem that the 5,700-word piece on Marcellus development in Washington Co., Pa. filed this past weekend in the Sunday magazine of The New York Times comes close to being one heck of a deal.

Writing about the piece on the environmental website Grist – no friend to shale – Sarah Laskow concludes that “anyone who already understands the issue should probably skip it, to avoid getting ticked off.” For what it’s worth, we happen to agree — albeit for different reasons.

On the positive side of the ledger, NYT contributor Eliza Griswold includes about a half-dozen stories from real folks in the Amwell Twp. community whose lives have been made materially better owing to the local development of enormous reserves of clean-burning natural gas from shale. Folks who now can keep their farms, send their kids to college, maybe even retire somewhere someday. Folks who care deeply about the quality and nature of their local environment, and who, despite the hype, have seen no evidence heretofore that Marcellus activity is deleterious to it.

Those are the parts that Grist doesn’t like, preferring instead the ones in which Griswold attempts to paint a picture of natural gas development as scourge to air, water, and land; hoof, hound and equine. But a closer look at the air and water testing data compiled by state regulators and third-party technicians – every bit of it publicly available; very little of it mentioned in this piece — reveals a reality in tiny Amwell Twp. very much at odds with the narrative put forth by the Times.

Below, we take a closer look at some of the claims made in the piece, and see how they stack-up when juxtaposed with the science.

Wrong on the basics

NYT: “’Fracking,’ as it is known, is a process of natural-gas drilling that involves pumping vast quantities of water, sand and chemicals thousands of feet into the earth to crack the deep shale deposits and free bubbles of gas from the ancient, porous rock.”

NYT: “This summer, Gov. Andrew Cuomo of New York moved to lift the state’s yearlong moratorium on fracking against vocal opposition from environmentalists and many local residents. Following a series of hearings this month, New York will decide whether to allow fracking early next year.”

Wrong on Amwell Township

NYT: “Beth Voyles, 54, a horse trainer and dog breeder … signed the lease with Haney in 2008. She told Haney that her 11 /2-year-old boxer, Cummins, had just died. Voyles thought that he was poisoned. She saw the dog drinking repeatedly from a puddle of road runoff, and she thought that the water the gas company used to wet down the roads probably had antifreeze in it.”

NYT: “Voyles … called the Department of Environmental Protection to register yet another complaint about the stench. The D.E.P. sent out a water specialist, John Carson. … Voyles claims that Carson refused to take her complaint.”

NYT: “In Amwell Township, your opinion of fracking tends to correspond with how much money you’re making and with how close you live to the gas wells, chemical ponds, pipelines and compressor stations springing up in the area.”

Wrong on disclosure

NYT: “Popular concerns about natural-gas drilling have centered on what chemicals companies are putting into the earth, not least because this list is a proprietary secret.”

NYT: “In 2005, Vice President Dick Cheney spearheaded an amendment to the energy bill, which critics call the Halliburton Loophole. This legislation exempts hydraulic fracturing from the Safe Drinking Water Act and protects companies like Halliburton, of which Cheney was once the C.E.O., from disclosing what chemicals are going into the ground.”

Wrong on the numbers

NYT: “There are more than 4,000 Marcellus wells in Pennsylvania, with projections ranging from 2,500 new wells a year to a total of more than 100,000 over the next few decades.”

NYT: “According to a recent study by Pennsylvania State University, the industry has created 23,000 jobs, including employment for roustabouts, construction workers, helicopter pilots, sign makers, Laundromat workers, electricians, caterers, chambermaids, office workers, water haulers and land surveyors.”

NYT: “Currently, companies operating in Pennsylvania pay no tax to extract gas.”

NYT: “Banks have expressed reluctance to back home mortgages within up to three miles of a well. Whole towns could become brown fields, and home values would drop precipitously.”

Wrong on water management

NYT: “Disposing of the chemical water has meant trucking it to another state or paying local treatment facilities to process it. The facilities, which are not equipped to remove salts, have often sent the frack water back into local rivers.”

NYT: “Thanks to the money [Ray] received from allowing Range Resources to drill, build a compressor station and dig a chemical pond on his land, he has been able to reroof two barns, buy a new hay baler and construct an addition to his house for his 94-year-old mother.”

Wrong on “The Mon”

NYT: “In 2008 … [f]or several months, the Monongahela River, which provides most people in the Pittsburgh area with drinking water, no longer met state and federal standards. Following a request from the State of Pennsylvania, the U.S. Army Corps of Engineers found it would require five times the amount of water in their reservoirs to dilute the river. It took five months to clean it up.”

Sundown for Krugman

Another day, another misrepresentation of natural gas in the New York Times.

As you know, we’ve spent considerable time debunking articles in the New York Times that question the benefits and safety of natural gas production, particularly as it relates to hydraulic fracturing. Unfortunately, the folks at the Times still haven’t gotten the message.

This week, Paul Krugman used one of his weekly columns to extol the future of solar power, but not before baselessly demonizing shale gas development.

Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.

Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.

First and foremost, let’s give Mr. Krugman some credit. He does refer to hydraulic fracturing as an “impressive technology,” which it most certainly is. Unfortunately for Mr. Krugman and his readers, though, it’s all downhill from there.

Regarding the “toxic (and radioactive) wastewater that contaminates drinking water,” Krugman is blatantly misstating the facts or, at best, ignoring a key feature of areas where shale gas production is taking place: naturally occurring radioactive material, or NORM, which can be found on the surface or deep underground.

Claims about radiation have been made before (by, naturally, the New York Times), but both the Pennsylvania Department of Environmental Protection (DEP) and the U.S. Geological Survey have found that this is largely a natural phenomenon, not the result of some nefarious gas industry activity, and any radiation is at or below background levels that are no threat to human health. An examination by a water utility in western Pennsylvania also found no radioactive contaminants in the local water supply.

In fact, earlier this year the New York Department of Environmental Conservation (DEC) made the following conclusion about NORM in its assessment of future hydraulic fracturing in the state: “Based upon currently available information it is anticipated that flowback water would not contain levels of NORM of significance,” adding that this “does not present a risk to workers because the external radiation levels are very low.”

Krugman then asserts, notwithstanding the facts, that there is “reason to suspect” that hydraulic fracturing has contaminated groundwater. The reality, though, is that hydraulic fracturing has been used more than 1.2 million times and there has not been a single confirmed case of groundwater contamination. If Krugman thinks otherwise, then his argument is not only with state regulators from across the country, but also with President Obama’s own administrator of the Environmental Protection Agency, Lisa Jackson, who has testified that she is “not aware of any proven case where the fracking process itself has affected water.”

As for the “major damage” that Krugman cites, this claim is, like all the others in this op-ed, misstating reality. Again, the situation in Pennsylvania is instructive, as companies in that state over the past three years have invested more than $400 million in local and state roads. This type of commitment not only guarantees that impacts are minimized, but also that problems can be fixed with paid-for repairs.

And what does Krugman believe is the best alternative to clean, affordable, and reliable natural gas? Solar power, which is currently far more expensive (and significantly less reliable) than natural gas. Krugman says that its price is declining, but his argument that “we’re just a few years from the point” when electricity from solar becomes cost competitive contradicts well-regarded data from the Energy Information Administration (EIA). The EIA’s levelized cost of electricity generation shows that solar is between $211 and $312 per megawatt hour. Combined cycle natural gas generation, however, is between $62 and $65 per megawatt hour, while conventional coal generation is listed at $95 per megawatt hour.

Krugman argues that the current price disparity is due to fossil fuels not being “priced” correctly, which is another way of lamenting the fact that there is no price on carbon. If we had a carbon tax or cap and trade regime, Krugman believes, “it’s likely that we would already have passed [the] tipping point” of price parity between solar and conventional power sources.

But here’s the kicker: EIA’s data actually incorporates a de facto price on carbon by artificially inflating the costs of GHG-intensive technologies (as a carbon tax or cap and trade regime would do). The assumptions in EIA’s data include this important nugget:

Although currently there is no Federal legislation in place that restricts greenhouse gas (GHG) emissions, regulators and the investment community have continued to push energy companies to invest in technologies that are less GHG-intensive. The trend is captured in the AEO2011 Reference case through a 3-percentage-point increase in the cost of capital when evaluating investments in new coal-fired power plants, new coal-to-liquids (CTL), and coal and biomass-to-liquids (CBTL) plants without carbon capture and storage (CCS).

Natural gas is easily the most affordable electricity option, but even Krugman’s attempt to suggest that solar would be cost competitive with coal if we “priced coal-fired power right” doesn’t come close to representing what objective data shows. And as Robert Bryce points out in his own debunking of Krugman’s op-ed, carbon pricing may not even be the most effective way of reducing emissions:

According to the International Energy Agency, the U.S. is now cutting emissions faster than Europe, even though the EU has instituted an elaborate carbon-reduction scheme. Why is this happening? It’s not due to increased domestic use of wind or solar. Instead, it’s simple economics. Cheap natural gas is displacing higher-carbon coal in the U.S. electricity-generation fleet. That option is not available in Europe, where natural-gas prices are more than two times those of the U.S.

Krugman ends by saying hydraulic fracturing “is not a dream come true,” which is a subjective assessment but one that should nonetheless be scrutinized. Just take a stroll through Pennsylvania and you’ll see that responsible natural gas production in the Marcellus Shale is revitalizing local economies and creating jobs at an incredible pace. Development of the Barnett Shale in Texas has created over 100,000 jobs. And thanks to the affordability of natural gas, residents in the Northeast are enjoying lower monthly utility bills — a testament to hydraulic fracturing and the shale revolution it has helped create.

For those who make a living bashing the benefits of natural gas, hydraulic fracturing is indeed far from a dream come true, as it makes their job of claiming natural gas is too dirty and too expensive that much harder. But for the hundreds of thousands, even millions, of people who are reaping countless benefits, shale gas development has indeed been an enormous blessing.

Prior to submitting his column for publication, perhaps Mr. Krugman should have consulted his fellow New York Times columnist David Brooks.

Leases and Lending Go Together

John F. Spall
Attorney-at-Law

I have been in private practice as a real estate attorney in Northeastern Pennsylvania for more years that I’d like to admit. My firm has offices in both Pike and Lackawanna Counties. I also operated a real estate business for a number of years and serve as a Director of The Dime Bank, which is headquartered in Wayne County. I have also served as local counsel to one of the major oil and gas companies operating in our area. I offer you all this in the way of background for what I’m about to say – that Ian Urbina’s article in the New York Times this past week was seriously flawed. I reached out to him when I heard he was doing a story on this subject. Unfortunately, his deadline had already passed by the time I got his reply. I wish we had been able to talk, because he got so much so wrong.

Let’s start with the obvious. Who are these banks outside of Ithaca who aren’t lending to landowners with leases? I don’t know of any lenders who are refusing mortgages in those areas of Pennsylvania where natural gas development is taking place. Perhaps there are some for narrow reasons of special interest but all the banks I deal with, including the one where I serve as a Director, are more than pleased to write a mortgage on a property with the additional collateral a gas lease provides.

My experience is that gas lease bonus payment enabled a lot of our customers to resolve mortgage issues and pay off many of them. What’s not to like about that? Also, I am very puzzled about why some many of the sources cited in Mr. Urbina’s article are from the Ithaca, New York area. Ithaca is hardly representative of the lending environment in those parts of the Marcellus Shale gas region where I’ve done business. It tends to be one of those areas where you find enterprises whose motives are far removed from the mainstream business world where most operate – institutions such as the “Alternatives Federal Credit Union,” which apparently gets at least some of its capital from government grants issued through the Community Development Financial Institutions (CDFI) Fund. That Fund prides itself on providing “loans, investments, financial services and technical assistance to underserved populations and communities” and examples like the ShoreBank, which failed spectacularly. These types of institutions are obviously motivated by factors having little to do with financial risk or the management of it. They often make their decisions on non-financial factors and why Mr. Urbina would use them as examples is beyond me.

Lenders with whom I have been associated do have to evaluate financial risk, however, and that’s why they typically require assignments of gas lease revenues to themselves as a way of improving collateral. A review of mortgages on file in any of our counties here in Northeastern Pennsylvania will reveal many associated with properties having gas leases and, in virtually, all those cases there are corollary assignments of leases to the lenders.

I have drafted such assignment forms. These assignments permit the lender to reduce risk. Title insurance companies typically except the gas leases from their insurance policies. This means lenders, when they review the title insurance policy, are immediately informed of the existence of a gas lease. This is why they require the assignments – to substitute for the lack of insurance on that aspect of the property value. By taking an assignment they essentially self-insure.

All of this, of course, is slightly different than the normal mortgage procedure but it’s not complicated. There is, to be sure, a learning curve for both landowners and lenders but that curve is not particularly steep and my experience suggests we’re well beyond the point in our area where any bank or other lender is hesitant to issue mortgages. It’s just the opposite in fact. Lenders see the value in the additional collateral and recognize the potential future income opportunities a gas lease offers both landowner and lender. Royalty income is what I hear some of my clients refer as “mail money” – pleasant surprises that come each month in the mail and provide the receiver with extra financial security.

Let me add also that, from my experience in representing an oil and gas company and reviewing and assisting with the recording of hundreds of gas leases in Northeastern Pennsylvania, I have not seen what Mr. Urbina alleges – gas companies not bothering to secure the approvals of lenders prior to recording of lease documents. The companies have the strongest possible incentive to secure those approvals – they risk losing all unvested lease rights in the event of a foreclosure because the mortgage takes precedent over the lease.

That’s the rule in Pennsylvania, anyway. Perhaps, Mr. Urbina knows of some arcane rules in New York or elsewhere that work differently. It certainly wouldn’t be the first time they did things differently there to their great disadvantage, but I doubt it. No gas company I know of is going to skirt the rules to get a lease recorded that can be stricken in a foreclosure at the loss of hundreds of thousands of dollars. It would be bizarre behavior and I notice Urbina doesn’t say it actually occurs. He simply speculates it might.

Are the rules followed to the nth degree every single instance? Probably not, but that’s true of every legal instrument. The rules are voluminous and complying with all of them is a bit like completing a tax return – no one can be said to get everything correct 100% of the time. Nonetheless, the vast majority of the time the rules ARE followed and as completely as possible, especially among the community and regional banks that serve those areas of Northeastern Pennsylvania where the bulk of the gas leasing has been taking place over the last 3-4 years. If there are technical issues, they are extremely limited in number and not impacting the market. As the Farmer Mac representative told Urbina, they do not represent a significant risk. That’s the long and short of it.

Reflecting on the Urbina piece and considering the obvious incentives that both gas companies and lenders have to do things correctly, the lack of impacts on the market and the fact mortgages are being routinely issued for properties with gas leases, I have to wonder what the article was all about. Is there something I am missing? Is there a party who is damaged here? Does anyone care what some “alternative lender” operating on the fringe of the Marcellus Shale region thinks about the impacts of gas leasing on mortgages? Frankly, I am at a loss to understand what motivated this piece of writing.

Lenders’ Bagels?

EID Statement on (Latest) Joint Effort by NYT/Environmental Working Group Aimed at Attacking Natural Gas

WASHINGTON — Coming on the heels of another rebuke this past weekend from the public editor of The New York Times — the second such admonishment issued by the paper’s ombudsman in just the past two weeks — Times reporter Ian Urbina today filed the latest installment in his ongoing and increasingly controversial series attacking natural gas, this time borrowing research from the anti-shale Environmental Working Group (EWG) and a well-known opponent of oil and natural gas in an attempt to blame hydraulic fracturing for contributing to the contamination of a single water well nearly 30 years ago in West Virginia.

Notably, the EWG press release today announcing the results of its year-long, Park Foundation-funded “investigation” of the same exact well was sent two hours before the Times posted its story online – suggesting either that a mistake was made in coordinating the release with the Times, or that EWG wanted to ensure the role it played in influencing the story was properly acknowledged. Either way, the piece itself relies on poor, and at times conflicting, records and accounts to arrive at what appears to be the Times’ firm conclusion that fracturing technology “in fact” caused contamination. The reporter also draws heavily on an after-action report of the “WV-17” well from the mid-1980s written by EPA contractor Carla Greathouse, a long-time opponent of the oil and natural gas industry and a source Urbina has used previously in this series without ever mentioning her prior work and reports targeting the industry.

Lee Fuller, executive director of Energy In Depth and an engineer with more than 30 years’ experience in the industry, issued the following statement:

“We’re talking about a technology that’s been deployed more than 1.2 million times in more than 25 states over the course of more than 60 years. I think it says an awful lot about fracturing’s record of safety that the best these guys could come up with after studying the issue for an entire year is a single, disputed case from 30 years ago that state regulators at the time believe had nothing to do with fracturing. Three decades later, the technology today is better than it’s ever been, the regulations are broader and more stringent, and the imperative of getting this right, so that we can take full advantage of the historic opportunities made possible by shale, has never been more apparent. Despite the Times’ best efforts, this story does not prove that hydraulic fracturing had anything to do with the contamination of a water well 30 years ago.”

Both the EWG paper and the Times story focus on a well drilled in Jackson Co., W.V. in 1982, using old reproductions of completion reports accessed from microfiche to argue that fracturing must have contaminated the well since records indicate it was properly cased and drilled to depths below the water table. But according to a letter sent in 1987 by West Virginia’s Department of Energy specifically referencing the WV-17 well, the actual cause of any alleged issue may have been related to something entirely different.

According to Ted Streit, then the state’s deputy director of inspection and enforcement, neither regulators nor industry had known back then that a formation commonly fractured for its oil and natural gas resources – the Pittsburg sandstone – actually contained potable water resources in some parts of Jackson County. From Mr. Streit’s letter:

I would like to point out that WV Code 22B-1-20 requires an operator to cement a string of casing 20 feet below all fresh water zones. At the time the permit was issued concerning this well, the Division [of Oil and Gas] had no knowledge that the Pittsburg sand was a fresh water source. This is because in certain areas oil and gas is produced from the Pittsburg. With this case however, the division discovered the problem and took the following steps to remedy the situation: 1) We had a geologist map the Pittsburg sand in the Roane and Jackson country area so that our permits group and enforcement group knew where that sand could be found. 2) We required every well drilled in the area to have casing cemented up over the Pittsburg sand.

According to Greg Wrightstone, a geologist with decades of experience completing wells in West Virginia: “My hunch is that the operator had an idea about trying a completion in the Pittsburgh sand. We saw small shows out of it from time to time back then. They may have drilled through it, fractured it, got nothing back, and then just gave up on it and drilled down to do a standard Berea/shale completion. If that was the case and a neighbor was using the Pittsburg sandstone as a water zone, then of course there could be elements of the fracturing fluid in it because that was the zone being fractured.”

EID is currently working with producers in the state to acquire and analyze whatever records might still be available relevant to this issue nearly 30 years after the WV-17 well was drilled.

Although characterizing the WV-17 well as a “clear case of drinking water contamination from fracking” in a quote provided to the Times, EWG lawyer Dusty Horwitt adopts a more measured tone in his actual paper, admitting in one section (page 8) that “it is unclear” how fluids could have accessed the well. In another section (page 13), EWG concedes that the West Virginia-based laboratory commissioned to investigate WV-17 “did not conclude that hydraulic fracturing caused the contamination …” And in its press release, EWG admits that “it is possible that another stage of the drilling process [and not hydraulic fracturing] caused the problem.”

Finally, the Times story pulls extensively from a 1987 report written by well-known oil and gas opponent Carla Greathouse, whom Urbina actually credits with giving this story its start. But according to comments published by the American Petroleum Institute (API) contemporaneous with that report, Ms. Greathouse’s work suffered from a “lack of thoroughness” owing to the contractor’s failure “to find or disclose a substantial number of the administrative and enforcement actions by the state agencies.” API also said at the time that it wasn’t able “to find a single case where EPA’s contractor contacted the operator involved to determine their side of the story.”

According to Ms. Greathouse, one of the goals of her 1987 report was to convince EPA to start regulating things such as drill cuttings, pipe scale and produced water as “hazardous wastes,” with an eye on preventing them from being disposed of in a manner consistent with industrial waste rules under the Resource Conservation and Recovery Act (RCRA). After reviewing the Greathouse report, EPA arrived at precisely the opposite conclusion, issuing a report to Congress in 1988 stating that “regulation as hazardous wastes under Subtitle C was not warranted and that these wastes could be controlled under other federal and state regulatory programs.” Ms. Greathouse later told CBS News that the decision was “a very difficult pill to swallow.”

Dem. Colo. Gov. on NYT Shale Gas Series: “Full of Misinformation, All Hyperbole, No Science”

FLASHBACK: Fmr. Dem. Pa. Gov. Ed Rendell on the NYT claims: If the goal of your report about natural gas drilling was to gratuitously frighten Pennsylvanians, then congratulations on a job well done. If it was to deliver an evenhanded examination of the critical balance that must be achieved between job creation, energy independence and environmental protection in regions with large natural gas deposits, then it was a mighty swing and a miss. … [Fmr. PADEP sec. John Hanger and I] strongly disagree that there is lax regulation and oversight of gas drilling there. (New York Times, 3/5/11)

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Interns Behaving Badly

Interns Behaving Badly

And reporters too? NYT public editor takes aim once again at questionable reporting at center of natural gas attack series

The New York Times formally established the position of public editor in 2003 in direct response to the fall-out associated with the Jayson Blair scandal. Since then, the office – which serves as the Times’ version of “an internal affairs division,” according to past public editor Clark Hoyt – has commented on and occasionally criticized the paper’s reporting on everything from Israel and Palestine to John McCain and Eliot Spitzer.

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Getting to the Bottom of NYT’s Latest Story on Leases

Wednesday, December 7th, 2011
Jerry Simmons
Executive Director, National Association of Royalty Owners

 

As the Executive Director of an organization that represents the rights and interests of millions of mineral and royalty owners across this country, you can bet your bacon that I’ve been following closely The New York Times’ ongoing series on natural gas development – and in particular, the stories about leasing, lending and mineral owners in some areas crying foul.

The story posted by NYT reporter Ian Urbina last week fits into this final category. Its basic thesis goes something like this: as shale exploration has continued to ramp-up, land- and mineral owners are increasingly being fooled (or forced) into bad leases – bad because they don’t protect the environment, bad because they don’t protect them in case of an accident; bad because they’re too low on the financial end. I should note here that I actually reached out to Mr. Urbina before he ran this story; none of the information I provided made it into the article. In light of that, I thought I’d take just a few minutes to lay out a few facts, and maybe set straight a few of the things that the Times didn’t quite get right in its story.

For starters, let me say that its clear an awful lot of research went into this piece — Urbina and his crew say they reviewed 110,000 individual leases before putting pen to pad. Yes, critics will point to the fact that more than 100,000 of those leases came from only one county (Tarrant) in one state (Texas), but sorting through them all is still a pretty big project, so at least give them some credit for that. I also appreciate the fact that people like Ron Staments, Jack Richards and Dave McMahon – all friends and/or professional acquaintances of mine – were interviewed for and quoted in the story.

To my eye, the biggest problem with this latest piece is that the Times attempts to manufacture a narrative in which land-owners at every turn are pitted against energy producers. In reality, it’s a partnership – with the lease document representing the statement of terms under which that partnership will be pursued. It’s true that some statements are tilted more toward one party’s interests than the other’s. Should we be surprised by that? Should we be aghast? As was pointed out in the article by Mr. Knapp: “There are bad leases out there, and, as with any industry, there have also been some unscrupulous opportunists.” But is that a basis to shut down an entire industry? Reading the Times’ story, it’s tough not to get the impression that the reporter wouldn’t mind if we did.

As I’ve said many times before, leasing your minerals for development is more of an art than a science. You make the best deal you can with the best information and advice you can find – and if you find out later that your neighbor did better than you, you walk across the lawn, shake his hand, and let him know that lunch next time is on him. Often, in the early days of a play, the discrepancies between lease deals can be significant – a natural function of uncertainty. Higher risks when it comes to the question of commercial viability have to be offset by lower upfront costs.

But as I’ve seen literally thousands of times over the years, as areas are proved up, and resources start flowing, mineral owners find themselves in a much better position to negotiate a better deal — at least for the few who may have been unhappy with the original one. Remember: it often takes years, even decades, for operators to fully tap these reservoirs, and lease and royalty payments often represent only a fraction of the costs they’ll encounter over that time. Used to be drilling a well was a 10-year commitment – now it’s a 40-year one. With the proliferation of electronic media, the incentive to cut-corners on the environment or get away with low-ball lease offers (for very long) is simply no longer there. And even if all of us don’t use Twitter yet, believe me, us mineral owners can be a pretty persuasive bunch.

The article had four bullet-points in the first few paragraphs that I will attempt to address here:

NYT: “Fewer than half the leases require companies to compensate landowners for water contamination after drilling begins. And only about half the documents have language that lawyers suggest should be included to require payment for damages to livestock or crops.”

NYT: “Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.”

NYT: “In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.”

NYT: “Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.”

It is too bad this article did not attempt to emphasize the need for mineral and surface land owners to accept their responsibility and become educated on the process of mineral leasing and mineral/royalty income.  If it had, the Times could have done a real service to the citizens facing decisions on leasing instead of trying to generate fear in a process that could pay off a mortgage; send kids or grandkids to college; keep elderly folks off state assistance; keep the family farm in the family; build new fences, barns, houses; supplement retirement; and on and on.

The point is, of the millions of oil and gas leases in effect the vast majority are held by folks who are very happy with the process and benefit greatly from the income that this partnership produces. Too bad the Times doesn’t consider that much of a story.

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The Griswolds Go to Pittsburgh

Tuesday, November 22nd, 2011

Sprawling piece on natural gas development in SWPA lands in NYT Sunday Mag; EID sorts through the data that NYT’s Griswold leaves behind

If it’s true that the definition of a good compromise is one in which both sides leave unhappy, it might seem that the 5,700-word piece on Marcellus development in Washington Co., Pa. filed this past weekend in the Sunday magazine of The New York Times comes close to being one heck of a deal.

Writing about the piece on the environmental website Grist – no friend to shale – Sarah Laskow concludes that “anyone who already understands the issue should probably skip it, to avoid getting ticked off.” For what it’s worth, we happen to agree — albeit for different reasons.

On the positive side of the ledger, NYT contributor Eliza Griswold includes about a half-dozen stories from real folks in the Amwell Twp. community whose lives have been made materially better owing to the local development of enormous reserves of clean-burning natural gas from shale. Folks who now can keep their farms, send their kids to college, maybe even retire somewhere someday. Folks who care deeply about the quality and nature of their local environment, and who, despite the hype, have seen no evidence heretofore that Marcellus activity is deleterious to it.

Those are the parts that Grist doesn’t like, preferring instead the ones in which Griswold attempts to paint a picture of natural gas development as scourge to air, water, and land; hoof, hound and equine. But a closer look at the air and water testing data compiled by state regulators and third-party technicians – every bit of it publicly available; very little of it mentioned in this piece — reveals a reality in tiny Amwell Twp. very much at odds with the narrative put forth by the Times.

Below, we take a closer look at some of the claims made in the piece, and see how they stack-up when juxtaposed with the science.

Wrong on the basics

NYT: “’Fracking,’ as it is known, is a process of natural-gas drilling that involves pumping vast quantities of water, sand and chemicals thousands of feet into the earth to crack the deep shale deposits and free bubbles of gas from the ancient, porous rock.”

NYT: “This summer, Gov. Andrew Cuomo of New York moved to lift the state’s yearlong moratorium on fracking against vocal opposition from environmentalists and many local residents. Following a series of hearings this month, New York will decide whether to allow fracking early next year.”

Wrong on Amwell Township

NYT: “Beth Voyles, 54, a horse trainer and dog breeder … signed the lease with Haney in 2008. She told Haney that her 11 /2-year-old boxer, Cummins, had just died. Voyles thought that he was poisoned. She saw the dog drinking repeatedly from a puddle of road runoff, and she thought that the water the gas company used to wet down the roads probably had antifreeze in it.”

NYT: “Voyles … called the Department of Environmental Protection to register yet another complaint about the stench. The D.E.P. sent out a water specialist, John Carson. … Voyles claims that Carson refused to take her complaint.”

NYT: “In Amwell Township, your opinion of fracking tends to correspond with how much money you’re making and with how close you live to the gas wells, chemical ponds, pipelines and compressor stations springing up in the area.”

Wrong on disclosure

NYT: “Popular concerns about natural-gas drilling have centered on what chemicals companies are putting into the earth, not least because this list is a proprietary secret.”

NYT: “In 2005, Vice President Dick Cheney spearheaded an amendment to the energy bill, which critics call the Halliburton Loophole. This legislation exempts hydraulic fracturing from the Safe Drinking Water Act and protects companies like Halliburton, of which Cheney was once the C.E.O., from disclosing what chemicals are going into the ground.”

Wrong on the numbers

NYT: “There are more than 4,000 Marcellus wells in Pennsylvania, with projections ranging from 2,500 new wells a year to a total of more than 100,000 over the next few decades.”

NYT: “According to a recent study by Pennsylvania State University, the industry has created 23,000 jobs, including employment for roustabouts, construction workers, helicopter pilots, sign makers, Laundromat workers, electricians, caterers, chambermaids, office workers, water haulers and land surveyors.”

NYT: “Currently, companies operating in Pennsylvania pay no tax to extract gas.”

NYT: “Banks have expressed reluctance to back home mortgages within up to three miles of a well. Whole towns could become brown fields, and home values would drop precipitously.”

Wrong on water management

NYT: “Disposing of the chemical water has meant trucking it to another state or paying local treatment facilities to process it. The facilities, which are not equipped to remove salts, have often sent the frack water back into local rivers.”

NYT: “Thanks to the money [Ray] received from allowing Range Resources to drill, build a compressor station and dig a chemical pond on his land, he has been able to reroof two barns, buy a new hay baler and construct an addition to his house for his 94-year-old mother.”

Wrong on “The Mon”

NYT: “In 2008 … [f]or several months, the Monongahela River, which provides most people in the Pittsburgh area with drinking water, no longer met state and federal standards. Following a request from the State of Pennsylvania, the U.S. Army Corps of Engineers found it would require five times the amount of water in their reservoirs to dilute the river. It took five months to clean it up.”

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Sundown for Krugman

Friday, November 11th, 2011

Another day, another misrepresentation of natural gas in the New York Times.

As you know, we’ve spent considerable time debunking articles in the New York Times that question the benefits and safety of natural gas production, particularly as it relates to hydraulic fracturing. Unfortunately, the folks at the Times still haven’t gotten the message.

This week, Paul Krugman used one of his weekly columns to extol the future of solar power, but not before baselessly demonizing shale gas development.

Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.

Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.

First and foremost, let’s give Mr. Krugman some credit. He does refer to hydraulic fracturing as an “impressive technology,” which it most certainly is. Unfortunately for Mr. Krugman and his readers, though, it’s all downhill from there.

Regarding the “toxic (and radioactive) wastewater that contaminates drinking water,” Krugman is blatantly misstating the facts or, at best, ignoring a key feature of areas where shale gas production is taking place: naturally occurring radioactive material, or NORM, which can be found on the surface or deep underground.

Claims about radiation have been made before (by, naturally, the New York Times), but both the Pennsylvania Department of Environmental Protection (DEP) and the U.S. Geological Survey have found that this is largely a natural phenomenon, not the result of some nefarious gas industry activity, and any radiation is at or below background levels that are no threat to human health. An examination by a water utility in western Pennsylvania also found no radioactive contaminants in the local water supply.

In fact, earlier this year the New York Department of Environmental Conservation (DEC) made the following conclusion about NORM in its assessment of future hydraulic fracturing in the state: “Based upon currently available information it is anticipated that flowback water would not contain levels of NORM of significance,” adding that this “does not present a risk to workers because the external radiation levels are very low.”

Krugman then asserts, notwithstanding the facts, that there is “reason to suspect” that hydraulic fracturing has contaminated groundwater. The reality, though, is that hydraulic fracturing has been used more than 1.2 million times and there has not been a single confirmed case of groundwater contamination. If Krugman thinks otherwise, then his argument is not only with state regulators from across the country, but also with President Obama’s own administrator of the Environmental Protection Agency, Lisa Jackson, who has testified that she is “not aware of any proven case where the fracking process itself has affected water.”

As for the “major damage” that Krugman cites, this claim is, like all the others in this op-ed, misstating reality. Again, the situation in Pennsylvania is instructive, as companies in that state over the past three years have invested more than $400 million in local and state roads. This type of commitment not only guarantees that impacts are minimized, but also that problems can be fixed with paid-for repairs.

And what does Krugman believe is the best alternative to clean, affordable, and reliable natural gas? Solar power, which is currently far more expensive (and significantly less reliable) than natural gas. Krugman says that its price is declining, but his argument that “we’re just a few years from the point” when electricity from solar becomes cost competitive contradicts well-regarded data from the Energy Information Administration (EIA). The EIA’s levelized cost of electricity generation shows that solar is between $211 and $312 per megawatt hour. Combined cycle natural gas generation, however, is between $62 and $65 per megawatt hour, while conventional coal generation is listed at $95 per megawatt hour.

Krugman argues that the current price disparity is due to fossil fuels not being “priced” correctly, which is another way of lamenting the fact that there is no price on carbon. If we had a carbon tax or cap and trade regime, Krugman believes, “it’s likely that we would already have passed [the] tipping point” of price parity between solar and conventional power sources.

But here’s the kicker: EIA’s data actually incorporates a de facto price on carbon by artificially inflating the costs of GHG-intensive technologies (as a carbon tax or cap and trade regime would do). The assumptions in EIA’s data include this important nugget:

Although currently there is no Federal legislation in place that restricts greenhouse gas (GHG) emissions, regulators and the investment community have continued to push energy companies to invest in technologies that are less GHG-intensive. The trend is captured in the AEO2011 Reference case through a 3-percentage-point increase in the cost of capital when evaluating investments in new coal-fired power plants, new coal-to-liquids (CTL), and coal and biomass-to-liquids (CBTL) plants without carbon capture and storage (CCS).

Natural gas is easily the most affordable electricity option, but even Krugman’s attempt to suggest that solar would be cost competitive with coal if we “priced coal-fired power right” doesn’t come close to representing what objective data shows. And as Robert Bryce points out in his own debunking of Krugman’s op-ed, carbon pricing may not even be the most effective way of reducing emissions:

According to the International Energy Agency, the U.S. is now cutting emissions faster than Europe, even though the EU has instituted an elaborate carbon-reduction scheme. Why is this happening? It’s not due to increased domestic use of wind or solar. Instead, it’s simple economics. Cheap natural gas is displacing higher-carbon coal in the U.S. electricity-generation fleet. That option is not available in Europe, where natural-gas prices are more than two times those of the U.S.

Krugman ends by saying hydraulic fracturing “is not a dream come true,” which is a subjective assessment but one that should nonetheless be scrutinized. Just take a stroll through Pennsylvania and you’ll see that responsible natural gas production in the Marcellus Shale is revitalizing local economies and creating jobs at an incredible pace. Development of the Barnett Shale in Texas has created over 100,000 jobs. And thanks to the affordability of natural gas, residents in the Northeast are enjoying lower monthly utility bills — a testament to hydraulic fracturing and the shale revolution it has helped create.

For those who make a living bashing the benefits of natural gas, hydraulic fracturing is indeed far from a dream come true, as it makes their job of claiming natural gas is too dirty and too expensive that much harder. But for the hundreds of thousands, even millions, of people who are reaping countless benefits, shale gas development has indeed been an enormous blessing.

Prior to submitting his column for publication, perhaps Mr. Krugman should have consulted his fellow New York Times columnist David Brooks.

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Leases and Lending Go Together

Friday, October 28th, 2011

John F. Spall
Attorney-at-Law

I have been in private practice as a real estate attorney in Northeastern Pennsylvania for more years that I’d like to admit. My firm has offices in both Pike and Lackawanna Counties. I also operated a real estate business for a number of years and serve as a Director of The Dime Bank, which is headquartered in Wayne County. I have also served as local counsel to one of the major oil and gas companies operating in our area. I offer you all this in the way of background for what I’m about to say – that Ian Urbina’s article in the New York Times this past week was seriously flawed. I reached out to him when I heard he was doing a story on this subject. Unfortunately, his deadline had already passed by the time I got his reply. I wish we had been able to talk, because he got so much so wrong.

Let’s start with the obvious. Who are these banks outside of Ithaca who aren’t lending to landowners with leases? I don’t know of any lenders who are refusing mortgages in those areas of Pennsylvania where natural gas development is taking place. Perhaps there are some for narrow reasons of special interest but all the banks I deal with, including the one where I serve as a Director, are more than pleased to write a mortgage on a property with the additional collateral a gas lease provides.

My experience is that gas lease bonus payment enabled a lot of our customers to resolve mortgage issues and pay off many of them. What’s not to like about that? Also, I am very puzzled about why some many of the sources cited in Mr. Urbina’s article are from the Ithaca, New York area. Ithaca is hardly representative of the lending environment in those parts of the Marcellus Shale gas region where I’ve done business. It tends to be one of those areas where you find enterprises whose motives are far removed from the mainstream business world where most operate – institutions such as the “Alternatives Federal Credit Union,” which apparently gets at least some of its capital from government grants issued through the Community Development Financial Institutions (CDFI) Fund. That Fund prides itself on providing “loans, investments, financial services and technical assistance to underserved populations and communities” and examples like the ShoreBank, which failed spectacularly. These types of institutions are obviously motivated by factors having little to do with financial risk or the management of it. They often make their decisions on non-financial factors and why Mr. Urbina would use them as examples is beyond me.

Lenders with whom I have been associated do have to evaluate financial risk, however, and that’s why they typically require assignments of gas lease revenues to themselves as a way of improving collateral. A review of mortgages on file in any of our counties here in Northeastern Pennsylvania will reveal many associated with properties having gas leases and, in virtually, all those cases there are corollary assignments of leases to the lenders.

I have drafted such assignment forms. These assignments permit the lender to reduce risk. Title insurance companies typically except the gas leases from their insurance policies. This means lenders, when they review the title insurance policy, are immediately informed of the existence of a gas lease. This is why they require the assignments – to substitute for the lack of insurance on that aspect of the property value. By taking an assignment they essentially self-insure.

All of this, of course, is slightly different than the normal mortgage procedure but it’s not complicated. There is, to be sure, a learning curve for both landowners and lenders but that curve is not particularly steep and my experience suggests we’re well beyond the point in our area where any bank or other lender is hesitant to issue mortgages. It’s just the opposite in fact. Lenders see the value in the additional collateral and recognize the potential future income opportunities a gas lease offers both landowner and lender. Royalty income is what I hear some of my clients refer as “mail money” – pleasant surprises that come each month in the mail and provide the receiver with extra financial security.

Let me add also that, from my experience in representing an oil and gas company and reviewing and assisting with the recording of hundreds of gas leases in Northeastern Pennsylvania, I have not seen what Mr. Urbina alleges – gas companies not bothering to secure the approvals of lenders prior to recording of lease documents. The companies have the strongest possible incentive to secure those approvals – they risk losing all unvested lease rights in the event of a foreclosure because the mortgage takes precedent over the lease.

That’s the rule in Pennsylvania, anyway. Perhaps, Mr. Urbina knows of some arcane rules in New York or elsewhere that work differently. It certainly wouldn’t be the first time they did things differently there to their great disadvantage, but I doubt it. No gas company I know of is going to skirt the rules to get a lease recorded that can be stricken in a foreclosure at the loss of hundreds of thousands of dollars. It would be bizarre behavior and I notice Urbina doesn’t say it actually occurs. He simply speculates it might.

Are the rules followed to the nth degree every single instance? Probably not, but that’s true of every legal instrument. The rules are voluminous and complying with all of them is a bit like completing a tax return – no one can be said to get everything correct 100% of the time. Nonetheless, the vast majority of the time the rules ARE followed and as completely as possible, especially among the community and regional banks that serve those areas of Northeastern Pennsylvania where the bulk of the gas leasing has been taking place over the last 3-4 years. If there are technical issues, they are extremely limited in number and not impacting the market. As the Farmer Mac representative told Urbina, they do not represent a significant risk. That’s the long and short of it.

Reflecting on the Urbina piece and considering the obvious incentives that both gas companies and lenders have to do things correctly, the lack of impacts on the market and the fact mortgages are being routinely issued for properties with gas leases, I have to wonder what the article was all about. Is there something I am missing? Is there a party who is damaged here? Does anyone care what some “alternative lender” operating on the fringe of the Marcellus Shale region thinks about the impacts of gas leasing on mortgages? Frankly, I am at a loss to understand what motivated this piece of writing.

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Lenders’ Bagels?

Friday, October 21st, 2011

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EID Statement on (Latest) Joint Effort by NYT/Environmental Working Group Aimed at Attacking Natural Gas

Wednesday, August 3rd, 2011

WASHINGTON — Coming on the heels of another rebuke this past weekend from the public editor of The New York Times — the second such admonishment issued by the paper’s ombudsman in just the past two weeks — Times reporter Ian Urbina today filed the latest installment in his ongoing and increasingly controversial series attacking natural gas, this time borrowing research from the anti-shale Environmental Working Group (EWG) and a well-known opponent of oil and natural gas in an attempt to blame hydraulic fracturing for contributing to the contamination of a single water well nearly 30 years ago in West Virginia.

Notably, the EWG press release today announcing the results of its year-long, Park Foundation-funded “investigation” of the same exact well was sent two hours before the Times posted its story online – suggesting either that a mistake was made in coordinating the release with the Times, or that EWG wanted to ensure the role it played in influencing the story was properly acknowledged. Either way, the piece itself relies on poor, and at times conflicting, records and accounts to arrive at what appears to be the Times’ firm conclusion that fracturing technology “in fact” caused contamination. The reporter also draws heavily on an after-action report of the “WV-17” well from the mid-1980s written by EPA contractor Carla Greathouse, a long-time opponent of the oil and natural gas industry and a source Urbina has used previously in this series without ever mentioning her prior work and reports targeting the industry.

Lee Fuller, executive director of Energy In Depth and an engineer with more than 30 years’ experience in the industry, issued the following statement:

“We’re talking about a technology that’s been deployed more than 1.2 million times in more than 25 states over the course of more than 60 years. I think it says an awful lot about fracturing’s record of safety that the best these guys could come up with after studying the issue for an entire year is a single, disputed case from 30 years ago that state regulators at the time believe had nothing to do with fracturing. Three decades later, the technology today is better than it’s ever been, the regulations are broader and more stringent, and the imperative of getting this right, so that we can take full advantage of the historic opportunities made possible by shale, has never been more apparent. Despite the Times’ best efforts, this story does not prove that hydraulic fracturing had anything to do with the contamination of a water well 30 years ago.”

Both the EWG paper and the Times story focus on a well drilled in Jackson Co., W.V. in 1982, using old reproductions of completion reports accessed from microfiche to argue that fracturing must have contaminated the well since records indicate it was properly cased and drilled to depths below the water table. But according to a letter sent in 1987 by West Virginia’s Department of Energy specifically referencing the WV-17 well, the actual cause of any alleged issue may have been related to something entirely different.

According to Ted Streit, then the state’s deputy director of inspection and enforcement, neither regulators nor industry had known back then that a formation commonly fractured for its oil and natural gas resources – the Pittsburg sandstone – actually contained potable water resources in some parts of Jackson County. From Mr. Streit’s letter:

I would like to point out that WV Code 22B-1-20 requires an operator to cement a string of casing 20 feet below all fresh water zones. At the time the permit was issued concerning this well, the Division [of Oil and Gas] had no knowledge that the Pittsburg sand was a fresh water source. This is because in certain areas oil and gas is produced from the Pittsburg. With this case however, the division discovered the problem and took the following steps to remedy the situation: 1) We had a geologist map the Pittsburg sand in the Roane and Jackson country area so that our permits group and enforcement group knew where that sand could be found. 2) We required every well drilled in the area to have casing cemented up over the Pittsburg sand.

According to Greg Wrightstone, a geologist with decades of experience completing wells in West Virginia: “My hunch is that the operator had an idea about trying a completion in the Pittsburgh sand. We saw small shows out of it from time to time back then. They may have drilled through it, fractured it, got nothing back, and then just gave up on it and drilled down to do a standard Berea/shale completion. If that was the case and a neighbor was using the Pittsburg sandstone as a water zone, then of course there could be elements of the fracturing fluid in it because that was the zone being fractured.”

EID is currently working with producers in the state to acquire and analyze whatever records might still be available relevant to this issue nearly 30 years after the WV-17 well was drilled.

Although characterizing the WV-17 well as a “clear case of drinking water contamination from fracking” in a quote provided to the Times, EWG lawyer Dusty Horwitt adopts a more measured tone in his actual paper, admitting in one section (page 8) that “it is unclear” how fluids could have accessed the well. In another section (page 13), EWG concedes that the West Virginia-based laboratory commissioned to investigate WV-17 “did not conclude that hydraulic fracturing caused the contamination …” And in its press release, EWG admits that “it is possible that another stage of the drilling process [and not hydraulic fracturing] caused the problem.”

Finally, the Times story pulls extensively from a 1987 report written by well-known oil and gas opponent Carla Greathouse, whom Urbina actually credits with giving this story its start. But according to comments published by the American Petroleum Institute (API) contemporaneous with that report, Ms. Greathouse’s work suffered from a “lack of thoroughness” owing to the contractor’s failure “to find or disclose a substantial number of the administrative and enforcement actions by the state agencies.” API also said at the time that it wasn’t able “to find a single case where EPA’s contractor contacted the operator involved to determine their side of the story.”

According to Ms. Greathouse, one of the goals of her 1987 report was to convince EPA to start regulating things such as drill cuttings, pipe scale and produced water as “hazardous wastes,” with an eye on preventing them from being disposed of in a manner consistent with industrial waste rules under the Resource Conservation and Recovery Act (RCRA). After reviewing the Greathouse report, EPA arrived at precisely the opposite conclusion, issuing a report to Congress in 1988 stating that “regulation as hazardous wastes under Subtitle C was not warranted and that these wastes could be controlled under other federal and state regulatory programs.” Ms. Greathouse later told CBS News that the decision was “a very difficult pill to swallow.”

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Dem. Colo. Gov. on NYT Shale Gas Series: “Full of Misinformation, All Hyperbole, No Science”

Wednesday, August 3rd, 2011

FLASHBACK: Fmr. Dem. Pa. Gov. Ed Rendell on the NYT claims: If the goal of your report about natural gas drilling was to gratuitously frighten Pennsylvanians, then congratulations on a job well done. If it was to deliver an evenhanded examination of the critical balance that must be achieved between job creation, energy independence and environmental protection in regions with large natural gas deposits, then it was a mighty swing and a miss. … [Fmr. PADEP sec. John Hanger and I] strongly disagree that there is lax regulation and oversight of gas drilling there. (New York Times, 3/5/11) (more…)

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Interns Behaving Badly

Monday, August 1st, 2011

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Interns Behaving Badly

Monday, August 1st, 2011

And reporters too? NYT public editor takes aim once again at questionable reporting at center of natural gas attack series

The New York Times formally established the position of public editor in 2003 in direct response to the fall-out associated with the Jayson Blair scandal. Since then, the office – which serves as the Times’ version of “an internal affairs division,” according to past public editor Clark Hoyt – has commented on and occasionally criticized the paper’s reporting on everything from Israel and Palestine to John McCain and Eliot Spitzer. (more…)

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