AJ News

Mauri Rapp Abington Journal Correspondent

Editor’s Note: As the natural gas drilling industry gains a toehold in Northeast Pennsylvania and a multitude of groups debate whether the industry is an economic boom or an ecological bust, various terms and phrases will be bandied about in reference to the process. The Abington Journal presents a list of commonly used phrases in the Marcellus Shale play. The list is by no means exhaustive.

Marcellus Shale is a large unit of black shale located throughout western New York, much of northern and western Pennsylvania and parts of Ohio, Maryland and West Virginia. Named for the Marcellus outcropping in Marcellus, N.Y., the shale is located approximately a mile below the surface and is interblended with limestone. According to the www.Geology.com, natural gas trapped in pores, vertical fractures and organic material have made the Marcellus Shale possibly one of the most abundant sources of this gas in the nation, if not the world.

Hydraulic fracturing, also known as “fracking,” is a method used to create fractures in the black shale, which will allow the natural gas to travel from the shale’s pores up to the natural gas production well. Although the term “hydraulic” suggests that water is used for this process, a mixture of chemicals is also used to help the formation fracture. Herein lies one controversy with this process: although the full list of chemicals used during the fracking process is purportedly supplied to the Department of Environmental Protection, and is listed at www.depweb.state.pa.us, the exact quantities of the solution are not listed. Scientists have also stated that the wastewater produced from the process is radioactive, which they claim poses a danger not only to those with drinking water supplies near the drilling site but also poses a problem with treating the wastewater.

The Fracturing Responsibilities and Awareness of Chemicals Act (“the FRAC Act”) is a bill introduced by U.S. Sen. Bob Casey, D-Scranton. Among other things, the bill will require natural gas drilling companies to disclose not only the chemicals used during the fracking process but also the quantities of these chemicals. This bill will make the oil and gas industry no longer exempt from the federal Safe Drinking Water Act, an exemption which was enacted through the Energy Policy Act of 2005. A similar bill has been introduced to Congress.

Dimock Township is located in Susquehanna County, which recently garnered national attention after Cabot Oil and Gas Corp., a natural gas drilling company operating in the township, reported several spills of their fracking solution. As a result, the PA DEP cited the company and halted its drilling operations. According to the Associated Press, several families in the township have filed a lawsuit against Cabot Oil, claiming that the company has polluted their drinking water with methane and other contaminates.

Robson Well is a natural gas well pad site in Oregon Township, Wayne County, at which the DEP has found several violations, including uncontained release of a petroleum product and a violation of the Commonwealth’s Clean Streams Law, according to a Notice of Violation sent from the DEP to Chesapeake Appalachia LLC., the company which operates the well.

Damascus Citizens is a grassroots organization founded in Damascus Township, Wayne County. According to the organization’s Web site, www.damascuscitizens.org, their main focus is “protecting the Upper Delaware River Basin and beyond from the ravages of deep-shale gas extraction and the threat posed by the natural gas industry.”

Severance Tax is a tax imposed on natural gas drillers when the gas is extracted, or “severed,” from the ground. At least 39 states currently have a tax levied on the extraction of natural resources. Proponents say a severance tax could raise approximately $632 million for the state per year within five years, and that this tax could help municipalities defray costs incurred due to natural gas drilling in their region, i.e. road damage or an increase in the need for municipal services because of temporary workers staying in the municipality. Those against the tax say that it could deter the natural gas industry from drilling in Pennsylvania, thus hurting a budding industry and stopping the creation of necessary jobs. Industry officials also claim that Pennsylvania makes up for the lack of severance tax through a higher corporate income tax. However, opponents counter that many natural gas drilling companies are registered as limited liability companies, which can protect them from corporate taxes. According to a study done in June 2009 by the Pennsylvania Budget and Policy Center, a nonpartisan policy research group, more than 70 percent of the Marcellus Shale wells drilled in the Commonwealth are not subject to corporate income taxes.

Halliburton, most often associated with former Vice President Dick Cheney, the company’s former CEO, is one of the largest and most well-known players in the oil and gas industry. The company is credited with developing the fracking process used during natural gas drilling operations, and has established well projects in Washington and Greene counties in western PA.

Barnett Shale is a formation of shale located in north central Texas that has proved to be one of the largest natural gas plays in the nation. Other similar formations which are associated with the natural gas industry include the Haynesville formation, located in northwest Louisiana and eastern Texas, and the Fayetteville formation in Arkansas.

Working Interest is the operating interest in an oil or gas lease—in other words, the natural gas company. The working interest entitles the owner of the natural gas well to all shares of the natural gas produced by the wells. In exchange, the company generally pays a royalty to the owner of the property.

Estimated Ultimate Recovery (EUR) is, according to www.Investopedia.com, an approximation of the quantity of natural gas that is “potentially recoverable or has already been recovered from a reserve or well.” The EUR helps determine the price per acre and royalties that a company may offer a property owner.

Leases, or leasing, are agreements granting a company the right to enter an individual’s property, conduct tests, determine if natural gas exists and potentially extract that natural gas from the ground. If the company does not explore the property or determines that no marketable source of natural gas exists at the property, the lease expires after a given amount of time. A lease generally offers the property owner an up-front payment, or signing bonus, as well as a percentage of the value of natural gas produced by the site, or a royalty. According to PA law, the minimum royalty is set at 12.5 percent, or one-eighth of the value of the produced natural gas. However, some companies and leasers negotiate a higher percentage.