Joseph Schaeffer, Pitt Law '12, attended the Hot Shale Plays conference co-hosted by the Rocky Mountain Mineral Law Foundation and Energy and Mineral Law Foundation in Pittsburgh, Pennsylvania. He writes about the Pittsburgh City Council's ban on Marcellus Shale drilling...
Pittsburgh recently played host to a RMMLF and EMLF co-sponsored special institute titled "Development Issues in the Major Shale Plays," but nicknamed "Hot Shale Plays." The short title was rife with irony and double-meaning, a fact I hope was not lost on the other attendees. Marcellus Shale is hot in the sense of being one of the fastest growing energy sources in America. It's hot in the sense of spurring new business. And it's certainly hot in the sense of spurring opposition to that new business. What Marcellus Shale drilling is not, however, is aesthetically pleasing: a fact that is at least partly to blame for the controversy surrounding this energy source. In fact, Pittsburgh City Council passed a ban on natural-gas production within city limits on November 16, 2010, meaning that the Hot Shale Plays conference had the distinction of being held in the first American City to ban the practice!
In a letter to municipal officials, City Council President Darlene M. Harris urged a ban on hydro-fracturing natural gas drilling ("fracing") because the "Commonwealth's lax regulatory environment and preemptions of our local laws have placed the oil and gas industry's corporate interests above the rights of citizens." This is tough talk. In her letter, Harris accuses Pennsylvania's Department of Environmental Protection of catering to industry against the interests of Pennsylvania citizens. In passing the fracing ban on November 16, 2010, the Pittsburgh City Council appears to have agreed with her.
The Pittsburgh City Council's concern is interesting for several reasons. Allegheny County, where Pittsburgh is located, is one of the least developed parts of the Marcellus Shale basin. According to DEP data (current through November 2010), only two permits were issued in Allegheny County since January 2010, and only one of those sites has come online. In contrast, Bradford County in Northeastern Pennsylvania saw 758 permits issued during that same period, and 355 of those permitted wells have come online. The fact is that most Pittsburgh residents have likely never even seen a Marcellus pad, as the well sites are called. In the two years that I have lived in Pittsburgh, I have only ever seen one Marcellus pad, and it was on the outskirts of the city.
This lack of development is at least partly attributable to Pittsburgh's urban environment. Marcellus shale operations are land-intensive. A single pad sits on 3-5 acres, and operators must construct or improve roads to reach the site. While it is true that recent advances in drill technology have allowed operators to drill horizontally up to approx. 10,000 feet in length, the amount of land required for the well pad makes drilling within city limits difficult. In addition to physical constraints, well operators often see site selection in city limits restricted by zoning requirements.
If Allegheny County is home to so few Marcellus sites and urban development limits future development, why is Pittsburgh's City Council so concerned? Much can be attributed to the film "Gasland," a 2010 documentary by a Pennsylvania resident. "Gasland's" director, John Fox, travels across the country documenting hazardous environmental conditions supposedly attributable to hydraulic fracturing. He places particular emphasis on water quality issues that he suggests are attributable to natural gas leakage and the chemicals comprising part of the frac mix. In several particularly memorable scenes, Fox shows homeowners lighting their tap water on fire.
Since "Gasland's" release, Marcellus Shale operators have worked hard to stress their commitment to the environment. Range Resources, Pennsylvania's largest operator, operates a site for the public that emphasizes its commitment to safety. The Pennsylvania-based Marcellus Shale Coalition goes even further, linking to an article debunking "Gasland" on its front page. Industry frustration with "Gasland" is evident, with multiple speakers mentioning the film by name and arguing against its conclusions. A common refrain during the conference was that hydraulic fracturing has never been shown to have caused water quality issues. Industry representatives argued that the chemical mixtures used in the fracing process consist almost entirely of non-harmful materials. Furthermore, the water table lies at approximately 600 feet, and most fracing occurs at 6,000 feet, making contamination unlikely. When the speakers hypothesized causation, they most often cited faulty wells or water treatment systems, not hydraulic fracturing.
Science aside, Pittsburgh's hydraulic fracturing ban suggests that operators are losing the public relations battle. This is a shame. Marcellus Shale has huge potential as both an energy and revenue source. As of 2008, shale gas accounts for 10% of total US gas production, and this figure is estimated to rise to 25% of total US gas production by 2035. The Marcellus Shale deposit has the potential to be a particularly important source. The next three largest shale deposits - the Barnett, Fayetteville, and Haynesville plays - could fit within the Marcellus play with room to spare. Shale gas can meet a large portion of America's needs, and Pennsylvania, as a shale gas producer, can benefit from lower energy prices.
Marcellus Shale also has major financial benefits for the Pennsylvania citizens and government. Landowners in fee (or oil and gas rights holders) have received $1000-2000 per acre signing bonuses, in addition to royalties that Pennsylvania law sets at a 1/8 floor. Pennsylvanians also benefit as employees of Marcellus Shale operators. It is estimated that Marcellus Shale directly or indirectly employed 98,000 people and had a cumulative annual economic impact of USD 14 billion in 2010. By 2020, this is estimated to rise to 176,000 jobs and a USD 265 billion cumulative annual impact.
Marcellus Shale development has significant revenue potential for state and local governments, as well. It is estimated that by 2020, Marcellus Shale will contribute USD 15 billion in state and local tax revenue. For a city that was considering 10 percent across the board budget cuts as recently as September 2010, tax revenue from Shale development would be a welcome addition to city coffers. Granted, possible financial benefits should not lead municipal officials to ignore environmental concerns. Nevertheless, a blanket prohibition of hydraulic fracturing within Pittsburgh city limits seems excessive in light of the relative youth of hydraulic fracturing technology, the failure of opponents to prove adverse environmental effects, and the possible financial benefits resulting from shale operations. Hydraulic fracturing is a new technology; it was first used in the Barnett shale field in Texas in 1991. In the Marcellus field, drilling commenced in 2004, and the first horizontal well was drilled in 2006. Given the technology's youth, in addition to the relatively small number of Marcellus wells in Allegheny County, the Pittsburgh City Council's outright ban seems premature. If the Pittsburgh City Council had concerns about the environmental impacts of hydraulic fracturing, they should have imposed a moratorium similar to that imposed by the New York State legislature. This would have prevented drilling operations within city limits for a specified period of time, giving industry and environmentalists an opportunity to argue for or against the merits of hydraulic fracturing with the benefit of additional data and research. This is far more reasonable than an outright ban. A moratorium permits both sides to reargue the relative merits (or not) of hydraulic fracturing within city limits, whereas Pittsburgh's City Council has placed the burden of overturning the ban entirely on industry. Where hydraulic fracturing has yet to be directly linked to environmental problems, and particularly given the possible financial benefits of revenues from Marcellus Shale development, Pittsburgh City Council's ban seems shortsighted and excessive.