States Move to Tap Into Shale Deposit; Environmentalists Balk

New York looks to allow drilling for fuel; other Marcellus states debate pros and cons

The shale fuel meant to heat up factories and homes is energizing debate from New York down to West Virginia, the states sitting over the massive Marcellus Shale.

New York state regulators Friday posted online a report it prepared for Gov. Andrew Cuomo the previous week that opened the way for drilling in the Marcellus shale. The Natural Resources Defense Council is among those arguing that the New York’s Department of Environmental Conversation (DEC) has not gone far enough in distancing drilling activity from water sources.

The DEC recommended that hydraulic fracturing, also known as fracking, be permitted in areas more than 500 feet away from aquifers that supply drinking water to New York City; its report also puts wildlife conservation areas off limits to drilling. The recommendations, if accepted by Cuomo, open up vast tracts of lands in upper New York state that sit atop the Marcellus Shale.

Meanwhile, Pennsylvania’s Marcellus Shale Advisory Commission is scheduled to vote this Friday on recommendations about the development of the energy source in the pro-development state. A grab-bag of issues is under consideration, including an impact fee on drillers and whether to keep drilling sites 1,000 feet away from aquifers, which is twice the distance recommended by New York’s DEC.

Lawmakers in West Virginia held hearings Monday on how shale development might bring the state thousands of construction jobs related to storage of ethane, a byproduct of shale drilling. Some 100 environmental activists rallied outside the state capitol to protest the potential for pollution of air and water they say would follow if drilling were allowed. New Jersey’s legislature passed an outright ban on fracking, though the state does not have an abundance of shale deposits anyway.

A recent report by the Department of Energy’s Energy Information Agency sifts through recent data showing natural gas production is at an all time high, and singles out the Haynesville and Marcellus shales for the biggest gains; the Marcellus shale a large part of which is in Pennsylvania and New York, but only Pennsylvania has profited from the shale deposit while New York has enforced a moratorium on drilling over environmental concerns.

While gas production declined in important drilling areas such as Alaska and offshore Gulf of Mexico sites, gas withdrawals in April nevertheless exceeded record production in March and hit an all-time high since EIA began tracking this data in 1980. Significantly boosting the figures were the 2.1% increase in the states where the Marcellus shale is located and a 2% increase in Louisiana—site of the Haynesville shale. Production in Louisiana reached twice the level recorded two years ago, and the growth in the states including the Marcellus was 26.6% higher in the same time period.

Seeking to capitalize on the Marcellus shale’s growth potential, Exxon last month acquired two energy exploration companies seeking gas reserves in the Marcellus. The $1.7 billion deal for closely held Phillips Resources and TWP Inc. followed the energy giant’s acquisition last year of XTO Energy for $34.9 billion.

Besides Exxon, companies active in the Marcellus Shale include Range Resources (RRC), North Coast Energy, Chesapeake Energy (CHK), Equitable Production Co., Cabot Oil & Gas Corp., Southwestern Energy Production Co. and Atlas Energy Resources. Because of New York’s ban on drilling, nearly all of the investment has been on the Pennsylvania side of the border.

 

Companies like Drill-Quip (DRQ) and Natural Gas Services Group (NGS) that make the equipment for hydraulic fracturing also benefit from any increases in drilling activity.

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