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An Assessment of Marcellus Shale Environmental Issues in

West Virginia

By: David M. Flannery Kathy G. Beckett

Jackson Kelly PLLC

Presented at: Marcellus Shale in WV: Emerging Issues

June 21, 2011Morgantown, WV

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Overview of Presentation

• WV Oil and Gas Program• Marcellus Shale activities in WV• Well work permitting • Water

– Zero discharge effluent guideline – Disposal options – TDS– Pit Solids – Water withdrawal– EPA Study

• Air issues • NORM• Legislative initiatives

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WV Oil and Gas Program

• Interstate Oil and Gas Compact Commission – minimum state program guidelines

• STRONGER – State Review of Oil and Gas Environmental Regulation– The 2003 West Virginia review consisted of

two parts. A follow-up review of the progress made since the 1993 Review and a supplemental review.

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Marcellus Shale activities in WV

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6

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Marcellus Shale Wells Drilled in West Virginia

Permitted Drilled

2009 426 125

2010 433 58

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Marcellus Shale Water Tracking in West Virginia

• In 2010, 28 of 58 wells reported: – 156.5 million gallons water withdrawn – 16 million gallons water recovered (10.2%)

• 2 million gallons UIC disposal

• 13 million gallons reuse

• 1 million gallons centralized treatment plant and reuse

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Well Work Permitting

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Well Work Permitting

Permit required from Office of Oil and Gas for all wells*

- bonding

- soil and erosion and sediment control plan

- notice to:

• surface owners

• coal operators

* W. Va. Code '22-6-6

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Water Quality

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Water Pollution Control PermitsAdditional permit required for any stream discharge*:

- applicable to individual or general permits - must meet water quality standards- must meet effluent guidelines

Onshore Oil and Gas Effluent Guideline (40 C.F.R. '435.32)- “no discharge of waste water pollutants” - exception: “stripper oil wells” - Appalachian Producers requested exemption “Marginal gas wells” – no action by USEPA - Are Marcellus Shale wells covered by effluent guidelines? See September 1976 Development Document

* W. Va. Code '22-6-7

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Water Disposal*

- Prohibition against on-site stream discharge

- UIC – “best option”

- Recycling

- POTW option heavily restricted; none authorized at this time

* Office of Oil and Gas, Industry Guidance, January 8, 2010

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Land Application General Permit

General Water Pollution Control Permit (GP-1-WV-88) – “land application permit”

- no discharge to streams

- pit liquids treated / land applied

- pit solids disposed on site

July 30, 2010 Office of Oil and Gas memorandum “land application of any return fluids from completion activities in the Marcellus Shale formation is prohibited”

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Drilling Pit Reclamation*

Requirements:

1. Pit liners remain intact

2. Pit contents must be solidified with approved materials

3. A liner must be placed over the top of pit

* Office of Oil and Gas, Memorandum, March 23, 2010

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Total Dissolved Solids

- Existing water quality criteria • chloride• sulfate

- On-going water quality concerns are causing some to call for TDS criteria of 500 mg/l • WV Legislature rejection of TDS criteria • ORSANCO?

- Issues • 500 mg/l is a non-enforceable drinking water criteria • no stream discharge of Marcellus Shale water • need for additional scientific research

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Water Withdrawal

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Water Withdrawal*- W.Va. Code Chapter 22, Article 26

requires after-the-fact reporting

- Office of Oil and Gas now requires prior reporting and approval: • supplemental permit application form

• no withdrawal allowed “at volumes beyond which the waters can sustain”

• Water Withdrawal Guidance Tool * Office of Oil and Gas, Industry Guidance, January 8, 2010

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USEPA Hydraulic Fracturing Study

- February 28, 2011 request to EPA Science Advisory Board

- Initial results: end of 2012 - Additional results: 2014- Scope:

• acquisition of water • chemical additives • fracturing • flow back management (including treatment and disposal)

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Air Issues

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Air Issues - Permitting:

• Minor source permitting (45 CFR 13) - individual compressors, etc.

• Major source permitting (45 CFR 14) - aggregation of activities? - McCarthy Memo (September 22, 2009) - aggregation criteria

1. adjacent property 2. common control 3. single industrial grouping

- Hughes v. DEP (10-3-AQB) – dismissed

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Air Quality Modeling*

* Performed by Alpine Geophysics for the Midwest Ozone Group

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O3 Trends by RegionsRPO Regional Average O3 Design Values

0.04

0.05

0.06

0.07

0.08

0.09

0.1

2000 2002 2004 2006 2008 2010

Ozo

ne C

once

ntra

tion

[ppm

]

CENRAP

MANE-VU

MRPO

VISTAS

Standard

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8-hour Ozone Modeling Results*

50

55

60

65

70

75

80

85

90

Buck

s, P

enn

sylv

ania

Ha

rford

, M

ary

land

Suff

olk

, N

ew

York

West

chest

er,

New

York

Phila

delp

hia

, P

enn

sylv

ania

Fairfie

ld,

Co

nne

ctic

ut

Glo

uce

ster,

Ne

w J

ers

ey

Ha

milt

on

, O

hio

Ha

mp

den

, M

ass

ach

use

tts

Warr

en

, O

hio

Meck

len

burg

, N

ort

h C

aro

lina

Ce

cil,

Mary

lan

d

Monm

ou

th,

Ne

w J

ers

ey

Butle

r, O

hio

Alle

gan,

Mic

hig

an

Hu

dso

n,

Ne

w J

ers

ey

Ne

w H

ave

n,

Co

nne

ctic

ut

County

Ozo

ne

DV

(p

pb

)

2008 DVB (Obs)

2014 DVF (BAU)

2018 DVF (BAU)

* Performed by Alpine Geophysics for the Midwest Ozone Group

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PM2.5 Trends: RegionsRPO Regional Average PM2.5 Annual Design Values

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

PM

2.5

Con

cent

ratio

n ug

/m3]

CENRAP

MANE-VU

MRPO

VISTAS

Standards

c

RPO Regional Average PM2.5 24-Hour Design Values

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

PM

2.5

Con

cent

ratio

n ug

/m3]

CENRAP

MANE-VU

MRPO

VISTAS

Standards

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PM 2.5 (Annual) Modeling Results*

8

10

12

14

16

18

20

Alle

gh

en

y, P

en

nsy

lvan

ia

Ma

dis

on,

Illin

ois

Wayn

e,

Mic

hig

an

Cu

yaho

ga,

Oh

io

Ha

milt

on

, O

hio

Bea

ver,

Pe

nn

sylv

an

ia

Bro

oke

, W

est

Vir

gin

ia

Milw

au

kee

, W

isco

nsi

n

Ne

w C

ast

le,

De

law

are

Co

ok,

Illi

no

is

Sain

t C

lair,

Illin

ois

Cla

rk,

India

na

Ma

rio

n,

Ind

iana

Sco

tt,

Iow

a

County

An

nu

al

PM

2.5

dv

(µ

g/m

^3

)

2008 DVB (Obs)

2014 DVF (BAU)

2018 DVF (BAU)

* Performed by Alpine Geophysics for the Midwest Ozone Group

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PM 2.5 (24-hour) Modeling Results*

20

25

30

35

40

45

50

55

60

County

24-h

r P

M2.5

Desig

n V

alu

e (

µg

/m3)

2008 DVB (Obs)

2014 DVF (BAU)

2018 DVF (BAU)

* Performed by Alpine Geophysics for the Midwest Ozone Group

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Air Quality Modeling Conclusion• The ozone NAAQS can be achieved with no new

controls no later than 2014

• The annual PM NAAQS can be achieved with no new controls no later than 2014 with the possible exception of local controls at the Allegheny PA location

• The 24-hr PM NAAQS can be achieved with no new controls no later than 2014 with the possible exception of local controls at the Allegheny PA and Brooke WV locations

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NORM

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NORM

WVDEP presentation to legislative committee (May 7, 2011) - testing shows “safe levels of radioactivity from drilling the Marcellus Shale” - radiation in WV may be of less concern than PA - testing in PA has shown radiation levels “at or below normal”

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Legislative Initiatives

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WVDEP Proposed Legislation SB 424 (2011)

1. $10,000 fee for horizontal drilling

2. Revised permitting requirements

3. Require a water management plan for horizontal drilling

4. Increased penalty authority

5. New regulation of large impoundments (independent of well work permit)

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WVDEP Proposed Legislation SB 424 (2011) (cont)

6. New BMP requirement (including protection of groundwater and fugitive particulate matter)

7. No water withdrawal beyond what the waters can sustain

8. Enhanced notice requirements 9. Enhanced inspection authority 10. Seismic activity subject to notice to Miss Utility

and to property owners 11. Regulate pooling of gas from horizontal

shallow wells

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Joint Judiciary Proposed LegislationHB 2878 (2011)

1. New well work permit required for horizontal wells

2. New water pollution permit required 3. Permit application must include certification of

Division of Highways4. Enhanced notice to property owners5. 1000 feet buffer from building / water wells 6. 2500 feet buffer from surface (1000 feet from

groundwater) source for horizontal wells 7. Enhanced enforcement authority

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Joint Judiciary Proposed LegislationHB 2878 (2011) (cont)

8. Expanded pre-drilling survey requirement

9. Disclosure of chemicals used in fracturing

10. Double liners for centralized impoundments

11. Water withdrawal plan required

12. Mandates surface use and compensation agreement

13. Appeal to Environmental Quality Board

14. Pre-empts local ordinances but not zoning

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Conclusion

• WV DEP has developed a Marcellus Shale regulatory program based upon its well work permit.

• New legislation will buttress the existing regulatory program and address important issues such as horizontal shallow well pooling.

• Even with new legislation, it is likely that some parties will continue to raise objections to horizontal drilling.

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Contact Information

Kathy G. Beckett

Jackson Kelly PLLC

PO Box 553

Charleston, WV 25322

Telephone: (304) 340-1019

Email: kbeckett@jacksonkelly.com