Joshua W. Mermis Friday, June 22, 2012
A “gas rush” is revitalizing the domestic petroleum exploration industry, and the legal ramifications could be felt for decades. Through hydraulic fracturing (fracking), petroleum companies access once cost prohibitive shale gas formations by creating fractures in underground rock formations, thereby facilitating oil or gas production by providing pathways for oil or gas to flow to the well. These pathways are commonly referred to as the “fractures.” The legal consequences of fracking could impact more than half of the Lower 48 states.
Background of Hydraulic Fracturing
The basic technique of fracking is not new. In fact, fracking has been used in wells since the late 1940s. The first commercial fracking job took place in 1949 in Velma, Oklahoma, however, sequestered layers of shale gas were inaccessible until 1985, when pioneers such as Mitchell Energy and Development Corporation combined fracking with a newer technology called directional, or horizontal drilling in the Austin Chalk. Directional drilling gave producers access to the shale gas because it allowed them to turn a downward- plodding drill bit as much as 90 degrees and continue drilling within the layer for thousands of additional feet. The positive results were soon transferred to the Barnett Shale in North Texas. To date, more than one million wells have been fractured.
The “hottest” shale plays are as follows:
- Bakken (Montana, South Dakota and North Dakota)
- Barnett Shale (Texas)
- Eagle Ford (Texas)
- Haynesville (Arkansas, Louisiana, and Texas)
- Marcellus Shale (New York, Ohio, Pennsylvania, and West Virginia)
- Utica (Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia and Virginia)
Confirmed and/or prospective shale plays are also found in Alabama, California, Colorado, Illinois, Indiana, Kansas, Michigan, Mississippi, Missouri, Nebraska, Utah and Wyoming. Shale plays have been confirmed in countries around the world, but the US is the leader in shale gas exploration.
More Money, More Problems
The new application of an old technology made it possible to profitably produce oil and gas from shale formations. Domestic and international companies quickly rushed to capitalize on the large reservoirs of shale gas. But unlike the preceding decades, where new oil and gas exploration had occurred offshore and in deepwater, oil and gas drilling started to occur in areas that were not accustomed to oil and gas activity. Overnight ranchers became millionaires as landmen leased large swaths of property to drill. The media started reporting about enormous domestic supplies of oil and gas that could be profitably produced from shale formations and politicians touted energy independence that could alleviate the country’s demand for foreign reserves. But with the increased attention came increased scrutiny.
Environmental groups have criticized the industry for fracking. The chief concern is that fracking will contamination of drinking water. Movies such as “Gasland” and “Gasland 2” fueled the public’s concerns that the drilling caused polluted water wells and flammable kitchen faucets. Additionally, the industry received criticism for the engineering process that involved high-rate, high-pressure injections of large volumes of water and some chemicals into a well to facilitate the fracking. The EPA and state regulatory bodies have become involved in the discussion and new regulations are likely to follow. In the meantime, some lawsuits have already been filed.
Pending Hydraulic Fracturing Litigation
Plaintiffs have filed approximately forty shale-related lawsuits across the country. These lawsuits include: (1) tort lawsuits; (2) environmental lawsuits; or (3) industry lawsuits. As the shale boom accelerates more suits are anticipated.
1. Tort Lawsuits
Tort lawsuits have been brought by individuals and as class actions. Typically the claimants assert claims for trespass, nuisance, negligence and strict liability. Their complaints involve excessive noise, increased seismic activity, environmental contamination (air, soil and groundwater), diminution in property value, death of livestock/animals, mental anguish and emotional distress. The plaintiffs seek actual damages and, in some instances, injunctive relief. A few parties have even sought the establishment of a medical monitoring fund. The majority of these lawsuits have been filed in Texas, Pennsylvania and Louisiana. The first wave of lawsuits has established new law in the respective jurisdictions as the appellate courts weigh in with published opinions on issues that range from oil and gas lease forfeiture, consequences of forged contracts and contract formation.
2. Environmental Lawsuits
Environmental organizations and some citizen groups are seeking to enforce environmental laws and regulations in an effort to protect the environment and the public from what the litigants perceive to be negative consequences of fracking. In some instances they are even seeking to restrict the use of hydraulic fracking until it is proven to be environmentally safe. A popular target among these litigants is federal and state regulatory bodies, such as the EPA, and federal statutes, such as the Clean Air Act.
3. Industry Lawsuits
The final category of lawsuits includes those brought by the industry against the government. Claimants have sought to challenge federal, state and local government actions that have impeded the industry’s ability to drill.
Fracking Lawsuits 2.0 – Transportation, Construction, Personal Injury and Beyond
The survey of current fracking lawsuits does not take into account the claims that will spin out of the new shale plays. In fact, the engineering and logistical side of the fracking process – not fracking itself – will lead to many more attendant claims.
- Transportation: The survey of current fracking lawsuits does not take into account the claims that will spin out of the new shale plays. In fact, the engineering and logistical side of the fracking process – not fracking itself – will lead to many more attendant claims.
- Commercial: Lessor involved in mineral disputes will lead to commercial claims. Many lessors will feel they were shorted, or want a better deal as those now positioned to lease their rights sign a more lucrative mineral-rights lease. Company-to-company disputes will also rise as the price of natural gas fluctuates.
- Construction: The contractors and design professionals building the midstream facilities, among others, will lead to construction-defect and delay claims. Many states have recently adopted anti-indemnity statutes that will impact claims that arise during construction of midstream facilities, pipelines and other infrastructure-related construction projects.
- Insurance: Coverage issues will arise as parties file first- and third-party claims for myriad reasons. Issues including comparative indemnity agreements, flow-through indemnity and additional insured endorsements, among others, will need to be analyzed.
- Personal Injury: Additional workers drilling and working the wells will lead to an increase in personal injury and work-place accident claims. Many of the shale plays are located in what have traditionally been considered “plaintiff friendly” venues. A claim in Pennsylvania will have a different value than one located in Webb County, Texas.
- Product Liability: The products and chemicals used to drill and extract the oil and gas will lead to product liability claims involving both personal and property damage. The BP Deep Water Horizon well-blowout in the Gulf of Mexico will not be lost on those involved in domestic oil and gas exploration.
How To Reduce Future Fracking Litigation Risk?
Parties can act now to discourage litigation or better position themselves in the event they are named in a suit.
1. Institute electronic records protocol
The proliferation of email and increased retention and archival capabilities means that emails never die. A potential defendant would be well served with a protocol in place that outlines to its employees what are acceptable electronic communications.
2. Strictly comply with fracking fluid disclosures
For those parties who could be exposed to claims regarding the fluids used during drilling, it is important that they minimize the public’s suspicion that they are withholding information about the fluids. The best way to neutralize that misconception is to strictly comply with the state-mandated disclosure rules where applicable. It may even behoove them to voluntarily disclose the fluids’ contents through the
3. Be prepared for a fire-drill
A party must be ready to quickly assert its position when a claim is brought. The best way to do so is to track current litigation. Following the cases will provide the company a preview as to what claims it may be subject to, and it also allows them to evaluate defenses. It may also enable the company to insulate itself from suit by avoiding certain actions. Along those same lines, knowing the facts, documents, emails, fact witnesses and expert witnesses will work to a party’s advantage. Some industry leaders have proactively retained experts even though they have not been sued.
4. Know your neighbors
Parties should view their neighbors as allies and potential jurors. To that end, it makes sense to open a dialogue about fracking with the regulators on a local, state and federal level. It would also benefit the parties to engage the community and publicize information about the benefits associated with fracking, e.g., jobs, lower energy prices, cleaner energy, energy independence, etc. Certain midstream players have rolled out a public education campaigns aimed at that very goal.
Articles on shale gas and fracking adorn the front pages of the Wall Street Journal and New York Times. 60 Minutes runs stories on shale-gas drilling and the faux pundit Stephen Colbert discusses fracking’s impact on his tongue-and-cheek news show. The promise of profits, domestic jobs and energy independence has the country talking about the gas shale plays that dot the landscape. Fracking and all that it encompasses will serve as the backdrop for a variety of legal issues during the foreseeable future.
Joshua W. Mermis is a partner at Johnson, Trent, West & Taylor in Houston, Texas, where he primarily practices in construction and energy litigation. He received his B.A. from the University of Kansas and J.D. from the University of Texas School of Law. This article previously appeared in the Spring/Summer 2012 issue of USLAW magazine.
Posted on February 11, 2012
…[It] was public research dollars, over the course of thirty years, that helped develop the technologies to extract all this natural gas out of shale rock – reminding us that Government support is critical in helping businesses get new energy ideas off the ground.
– Barack Obama’s 2012 State of the Union Address
On Thursday, Energy Secretary Dr. Steven Chu visited the National Energy Technology Laboratory in South Park, PA:
Chu said the Department of Energy’s experiments between 1978 and 1992 helped develop the widespread practice of horizontal drilling and fracturing that made capturing natural gas from rock formations such as shale cost-effective enough that private industry could take over. (Source.)
This is some pretty serious revisionist history, and it’s all directed at justifying continued “investment” in
green clean energy research*.
Nicolas Loris is an energy and environmental policy analyst at The Heritage Foundation. Mr. Loris gets it right:
Well before the government invested in natural gas technologies, it was the private sector that established and developed hydraulic fracturing (or “fracking”), a process by which producers inject a fluid, composed of 99 percent water, and sand into wells to free oil and gas trapped in rock formations.
Its roots go as far back as the 1860s. In the 1940s, Stanolind Oil and Gas Corp. began studying and testing the method, with a patent issued in 1949 and a license granted to Halliburton to frack on two commercial wells.
Government involvement came years later. The Department of Energy partly funded data accumulation, microseismic mapping, the first horizontal well, and tax credits to extract unconventional gas. But who was in the driver’s seat? George Mitchell, who invested millions of his own money in research and development for fracking and horizontal drilling.
The geologist for Mitchell’s company, Jim Henry, first identified Barnett shale as a possibility for more energy. Mitchell spent between $7 million and $8 million of his own money trying to extract shale gas successfully and eventually made it economically viable. He is behind the shale gas revolution, not the government.
Truth be known, DoE has never taken the lead in oil and gas research. The majors (“Big Oil”) historically had their own research labs and were loathe to share their proprietary research with the government or each other. The major service companies like Halliburton and Schlumberger also wanted to develop their own patents and protect their commerciality.
Much of the research that mattered was conducted by the Gas Research Institute, an industry consortium that spent private funds. The revenue base was a small fee on gas transported by the major interstate pipelines. DoE cooperated with GRI, and may have provided funding at some level. For two or three years in the early ’90s, I served as one of 2-3 dozen industry advisors, providing GRI with industry feedback for their research planning. There were always a couple of DoE staffers present at our meetings.
Some of the GRI-backed research was private, some at research universities, and some at national labs like Sandia and Lawrence Livermore. But it was privately directed and privately funded.
I remember from those days Mitchell Energy’s keen interest in unlocking the gas in the Barnett Shale. Mitchell has most of Wise County, TX under lease, and the Barnett was widespread. I thought at the time that Mitchell was particularly good at milking the Feds when it came to funding its research. Mitchell’s strategy was the exception, not the rule.
As ex-Mitchell VP Dan Steward recalls, Mitchell did drill the first horizontal shale well with DoE backing.
Money wasn’t given directly, but like on the horizontal well, Mitchell paid the cost of a vertical well, and government paid the rest. If the horizontal well cost $1.5 million, but the vertical was 800k, the DOE contributed the difference between the two. I don’t know exact numbers. But there was a contribution of money toward that well. …
Mitchell got the slickwater frack from UPR [Union Pacific Resources]. They developed it.
If there was a government program that was significant, it was the Section 29 production tax credit, which I blogged about back in 2010. Steward has this to say about the importance of the credit, but also the advantageous gas sales contract that Mitchell enjoyed:
Mitchell was selling his gas dollar and a quarter over the spot price. We would never have been able to do what we did in the Barnett without that. Mitchell had the money to invest in R&D. And he had the vision. He had people in the company saying this is bulls**t, this is wasting our money, you’re using our retirement money on something that’s no good. They’d say, “Dan, if Barnett is the best thing we have, then we don’t have s**t.” …
We had a gas contract with a natural gas pipeline that gave us a higher price. We had a basket of prices and gases and with the different categories we could keep our gas price. So you could say that those pricing scenarios, and the tight gas tax credit, created the possibility for shale gas.
Yes, the government played a role by providing the tax credit. DoE research, and support of private research, was significant but not central to the story.
Horizontal drilling and hydraulic fracturing are private sector successes.
In any case, there is no analogy in oil and gas to the kind of support that is being lavished upon alternative fuels and “green energy”. Where is the gas analog of a Solyndra, or a Fisker? They don’t exist. Government support for gas did not come in the form of $535 million loan guarantees. That kind of silly money is begging to be wasted.
But as the good Dr. Chu reminds it, there are more failures to come.
Energy Secretary Steven Chu again warned Friday that more recipients of Energy Department green technology loan guarantees will likely collapse even as he touted the strength of the program overall.
* Factoid from President Obama’s 2012 SOTU address:
References to “Green Jobs” or “Green Energy”: 0
References to “Clean” Energy: 10
This change in terminology presumably reflects the Administration’s begrudging embrace of the promise of natural gas.
Cross-posted at RedState.com.
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Shale gas enhancing energy supply, security
Whether you call it revolution or evolution, one thing is clear: Shale natural gas is producing jobs and economic benefits across the nation.
This week, shale gas was the focus of a major conference in Houston involving industry representatives, government officials and academics who gathered to discuss the technologies and future of this increasingly important source of energy.
For most of the nation, the contributions of shale gas may seem like a revolution. Shale gas has created thousands of new jobs, meant millions of dollars in new government revenues and enhanced energy security for America.
Of course, those of us who work in and around the energy industry understand that shale gas has been more of an evolution than a revolution.
The technologies used to develop these natural gas supplies aren’t new. Our industry began directional drilling in the 1920s, leading to substantial use of horizontal drilling in recent decades. And we have used the process of hydraulic fracturing since the 1940s. In that time, the industry has safely drilled more than a million wells.
The transformative impact of shale gas is challenging us all to think in new ways.
Not long ago many worried about a natural gas supply shortage in the U.S. But as President Obama recently stated, a “century’s worth … [lies] in the shale beneath our feet.” A decade ago gas from shale accounted for less than 2 percent of U.S. natural gas production. Today it is nearly 30 percent and growing.
As our nation considers this potential, we are reminded of the importance of reliable, affordable energy to our economy – especially during challenging economic times. Affordable supplies of natural gas – driven by the increase in shale production – have helped reinvigorate the domestic petrochemical industry, which relies on gas as a feedstock to make plastics and the other building blocks of modern manufacturing. These supplies are strengthening America’s steel industry, which is building new mills and hiring workers to support shale gas drilling. And areas where production of shale oil or natural gas is occurring are experiencing economic growth, job creation, and increased tax revenue.
For instance, in North Dakota, unconventional oil and gas production in the Bakken Shale has provided enormous economic benefits, with close to $5 billion in direct economic activity in 2009. In Texas, a study of the Barnett Shale formation near Fort Worth estimates it is now responsible for $11 billion in annual economic output and more than 100,000 jobs for the North Texas region. And in Pennsylvania, state labor statistics show 214,000 Marcellus Shale-related jobs at the beginning of 2011. Penn State researchers meanwhile calculate that Marcellus drilling could add nearly $10 billion in value to the Pennsylvania economy this year.
We also must not forget that hydraulic fracturing helps our nation reach our shared goals for responsible environmental stewardship. Natural gas produces about 50 percent fewer greenhouse gas emissions than coal when used to produce electricity for consumers and businesses, and significantly reduces other emissions such as mercury, sulfur and nitrogen oxide. It also uses a small fraction of the water used in coal, nuclear and solar power generation processes to produce a barrel of oil equivalent energy.
To ensure economic and environmental benefits continue, the people of the natural gas industry understand that we must remain firm in our commitment to properly manage the risks involved in drilling operations. That means meeting the highest standards of well design and well integrity. It means training our personnel and contractors to ensure adherence to established operating procedures. It means safely and efficiently handling the water and additives used to fracture wells. And it means working with state regulators to ensure protection of water and air quality.
The United States’ shale gas resources are an extraordinary energy endowment for our country, and our industry knows how to produce these resources safely and responsibly. We must keep these facts in mind as the public and policymakers discuss energy policies – and what increased access and technology mean for the energy industry.
With a commitment to operations integrity, wise development of our shale gas can provide new supplies of affordable, reliable energy in a safe, secure and environmentally responsible manner. And the rise of this resource comes at a time when our country – and the world – clearly needs the economic and environmental benefits that natural gas stands ready to deliver.
Mark W. Albers is a senior vice president at Exxon Mobil Corporation.
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A remarkable thing happened in Silicon Valley during the past decade. Venture capitalists and entrepreneurs set their sights on clean energy as the Next Big Thing. They audaciously hoped to reinvent energy by harnessing the incredible innovation that had transformed information technology and biotechnology.
Some of the best venture capitalists in the business, including my friends Bill Joy and Vinod Khosla, detached from their computing roots and focused on energy startups. The result was a staggering surge of capital into clean-energy technologies. Worldwide, from 2006 to 2010, about $535 billion in venture capital, private equity and initial public offerings as well as mergers and acquisitions flowed into 4,236 clean-tech businesses, according to a recent analysis by GlobalData.
Venture-capital investing is inherently high-risk, so it shouldn’t surprise or bother anyone that many of these startups failed — some rather spectacularly. Solyndra LLC, the solar- cell company, for example, went bankrupt even after receiving a $535 million in loan guarantees from the U.S. Energy Department. But similar failures happened during the dot-com bubble. Remember pets.com and its infamous sock-puppet TV ads?
What is worrying is that almost a decade of energy investing hasn’t produced any home runs — no green-energy equivalents of eBay, Amazon, Google or Facebook. The modest, incremental advances we have seen don’t perceptibly move the needle on the energy problem.
That’s not to say there aren’t good companies that swear they are just about to produce their miracle; in fact, my own company has spawned a startup — called TerraPower — that has developed a pretty amazing set of advanced technologies for nuclear energy. Let’s hope a few of us turn out to be right.
One Real Breakthrough
In the meantime, however, a real revolution has happened in traditional energy — one that poses a serious challenge to companies and investors betting on alternative energy. This breakthrough is arguably one of the greatest advances in energy production since the 1960s. And it came not from a Silicon Valley company, or from MIT or Stanford, but from the son of a Greek goatherd who immigrated to the U.S.
George Mitchell was born in Galveston, Texas, went to Texas A&M University and, in 1946, founded an oil-drilling and real- estate business. The company did well, and in the 1980s, Mitchell decided to take on a major technical challenge: He would try to coax gas out of a portion of the Barnett shale, which lies deep under Fort Worth and 15 counties in north- central Texas.
People told Mitchell he was wasting his money; you can’t squeeze blood from a stone, and you can’t squeeze oil or gas out of shale, which is essentially fossilized mud. Huge amounts of natural gas have formed in layers of shale, but it’s trapped within the rock and doesn’t flow toward a borehole.
The same is true of vast gas deposits that are stuck in coal beds too deep to mine, and gas that saturates spongelike sandstones and other semiporous rocks. Pulling out this “tight gas,” as drillers call it, is like trying to suck a thick milkshake through a thin cocktail straw or to breathe through a pillow.
But Mitchell was stubborn. He and his roughnecks doggedly tinkered with a variety of long-known techniques that had never been used in combination. One of these was horizontal drilling, which originated in the 19th century, was adapted for oil production by the Soviets in the 1930s and was perfected by oil drillers in the 1980s.
Cracking the Rock
A second idea was to inject fluid into the rock to fracture it into lots of pieces, thus allowing the gas and oil inside to flow more easily. In 1865, Colonel Edward Roberts, a Civil War veteran, demonstrated (and patented) the use of explosive nitroglycerin for this purpose — which worked amazingly well, but was quite dangerous. By the 1940s, engineers had developed a gentler approach that uses high-pressure water and chemicals rather than explosions to break up the rock. It became a standard practice for some oil, gas and water wells.
A third technique that Mitchell tried was adding sand to the water to help prop open the cracks that formed in the rock. Together these approaches, collectively called hydraulic fracturing, or “fracking,” allowed drillers to inexpensively recover gas from the tight Barnett shale. Mitchell earned nothing for developing the technology, but his company went on to make a lot of money on gas leases.
A great many others in the energy industry have done the same, as the arrival of fracking unlocked enormous deposits of shale gas, tight gas and coal-bed methane across the U.S. and in other countries as well. Mitchell’s miracle has more than doubled the known reserves of natural gas.
The new resources are so vast that they would last for a century at current rates of gas consumption. And this cheap form of energy isn’t under the control of a foreign dictator, stuck in the Arctic or submerged miles below the sea — it lies in the farmlands of New York, Pennsylvania and Texas.
The location turns out to be something of a mixed blessing; yes, these places are secure and politically stable, but they are also home to not-in-my-backyard activists who claim fracking threatens to pollute groundwater, in some cases to the point where flames will spew from people’s shower heads.
Industry experts says that is unlikely because the gas- containing rock typically lies 2 miles or more underground, in strata that are geologically isolated from groundwater. However, any form of natural-gas production can produce some environmental issues because it must be piped to the surface, and gas sometimes leaks into groundwater through breaks in the pipe, or through abandoned wells.
Another problem is that the water pumped underground for fracking gets contaminated in the process, and much of that waste comes back up and must be stored. As for the rare flaming faucet, it’s hard to tell whether fracking is to blame, because the same regions where this technique is most profitable tend to have shallower, natural deposits of gas that can contaminate groundwater without any help from industry.
Energy vs. Environment
So far, scientific evidence has not clearly linked the fracking procedure itself to groundwater contamination. But if there is anything we learned from the BP oil spill in the Gulf of Mexico last year, it is that any technology that produces energy in large quantities poses some environmental risk. So as a society, we face an interesting question: Would we rather depend for our energy on distant suppliers in the Mideast and elsewhere? Or is it better to produce the energy ourselves and accept the risk of creating some messes in our backyards?
Before answering that, it’s important that we understand a few other important caveats to Mitchell’s gas miracle: First, natural gas is not as useful as oil. Although some cars and buses run on natural gas, their range is limited because, even in its compressed form, natural gas doesn’t have the energy density of gasoline or diesel fuel. Also, you can’t use natural gas very efficiently for boats or airplanes. So until researchers come up with a cheaper gas-to-liquid conversion process, we will still need oil for some things.
A more serious problem is that both collecting and burning natural gas produce carbon dioxide, the main culprit in global warming. Gas producers never miss a chance to point out that burning gas emits less CO2 than burning coal does. But detailed research (including some of my own) shows that, in practice, switching from coal-fired electricity plants to gas-fired ones would have almost no effect on global warming. In fact, some scientists who have tried to do a full accounting of the emissions due to gas produced by fracking have concluded that it actually ends up putting more CO2 into the atmosphere than coal does.
What’s more, cheap gas just reinforces our use of carbon- based energy. New technologies are always risky and — as George Mitchell found — they almost never work perfectly from the start. So investors need an incentive to take that risk. Getting an alternative-energy technology off the ground is much easier if the price of conventional energy is high, either because it is taxed or because the fuel is genuinely scarce.
A carbon tax could provide this price incentive, but with the world teetering on the edge of financial ruin, the political appetite for new taxes has evaporated.
Not so long ago, many people believed that the cost of oil and gas would rise indefinitely, thus supporting the market for alternatives. Mitchell’s miracle has changed that calculus, much to the chagrin of the Silicon Valley venture capitalists who caught the green-energy bug.
(Nathan Myhrvold, the former chief strategist and chief technology officer at Microsoft Corp. and the founder and chief executive officer of Intellectual Ventures, is a Bloomberg View columnist. The opinions expressed are his own.)
–Editors: Mary Duenwald, David Henry.
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Thirty years ago oilman George Mitchell started an American energy revolution when his company took old techniques and applied them in innovative ways to shale gas fields in north Texas.
Hydraulic fracturing and horizontal drilling were not exactly new, but the combination unlocked tremendous reserves of natural gas in the Barnett Shale and, eventually, similar formations across the U.S. Shale names like the Marcellus, Bakken, Haynesville, Utica and Woodford are now synonymous with game-changing gas reserves.
Some so-called experts feared that we might have to import liquefied natural gas from international producers only a decade ago, but now the American supply is estimated at 100 years or more.
Europe is finally taking notice. The continent has begun exploring its own shale formations in the hopes that some measure of energy independence might be gained.
The goal is not freedom from Middle East and Latin American state-run oil entities, but rather Russian suppliers. European economic and clean-air interests might be linking up about shale even as U.S. regulators are giving the practice a harder look here.
The evidence is cropping up almost everywhere. Halliburton fractured Poland‘s first shale play well last year, while ExxonMobil is exploring concessions in Germany, joining nations such as Spain and the Netherlands in a search for vast stores of natural gas.
U.S. diplomatic channels are willing to help. The State Department formed the Global Shale Gas Initiative last year, “to help countries seeking to utilize their unconventional natural gas resources to identify and develop them safely and economically,” according to the department’s website.
The Global Shale Gas Initiative so far selected countries with some known presence of gas-bearing shale within their borders, market potential and “geopolitical synergies.” The GSGI partnerships include China, India, Jordan and Poland, where reserves are announced at approximately 1.4 trillion cubic meters.
New coal power is difficult to build on due to stringent environmental politics. Some nations, such as Germany, are either running away from or increasingly wary about nuclear power in the wake of the Japanese tsunami disaster.
Eastern European nations, with still fresh memories of Russian domination, want an option to the oil and gas giant perched near their borders. Some, like France, are opposed to hydraulic fracturing although its energy situation is more settled than other neighbors.
But many nations are willing and eager to consider unconventional drilling options, although opinion is divided on whether the European shales have sufficient permeability to recover massive oil and gas. They look across the pond and see potential oceans of energy independence where little existed before the U.S. shale plays shot up.
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August 3, 2011
Located along the Louisiana-Mississippi border, the Tuscaloosa Shale is stratigraphically equivalent to the Eagle Ford Shale in South Texas, which is producing oil, liquids and natural gas. Situated in 200- to 400-foot-thick formations, the Tuscaloosa Shale ranges from depths of 11,000 to 14,000 feet below the surface.
During the company’s first quarter announcements, Devon revealed that it had quietly bought 250,000 acres of leasehold from individuals in the Tuscaloosa Shale oil play in Louisiana. Paying $180 an acre, Devon serves as the operator of the effort.
With first drilling starting in May 2011, Devon has completed its first well into the source rock, an assessment well drilled vertically to gather information about the formation. The company completed drilling, coring and logging operations on the Lane 64-1 assessment well.
Devon has since spud its second well in the Tuscaloosa Shale; and this one is a horizontal well. The Beech 68-1H is updip from the first well, and Devon plans to obtain additional core and log data before drilling the lateral and completing the well as its first horizontal in the Tuscaloosa Shale.
“We will have to find out through drilling, but we think there’s some potential there because of the history of producing oil there,” Chip Minty, media relations manager for Devon told PennEnergy.
An innovator in shale development, Devon first became active in the Barnett Shale in Central Texas in 2001, when the company bought Mitchell Energy & Development Corp. 10 years ago. Devon was one of the first firms to employ horizontal drilling and hydraulic fracturing to extract hydrocarbons trapped in the tight formations.
Over the last year, Devon has also purchased acreage in the Utica Shale in Ohio and Michigan, as well as the Niobrara Shale play.