Marcellus Shale Developments

December 8, 2009
Client Alert Newsletter December 2009

Pennsylvania is in the midst of a land rush, the likes of which have not been seen in the Commonwealth since the coal barons of the 1800s amassed huge mineral rights. Gas exploration and production companies are busily signing leases to drill and extract gas from the Marcellus Shale formation, the heart of which extends from southwest to north central Pennsylvania (as well as extending into West Virginia and New York). Natural gas is being extracted from a formation a mile beneath the ground surface which is so tight that it requires a technology called "hydraulic fracturing" or "fracing" to make the collection of the gas cost effective. Fracing requires the injection of "frac fluids" into the Marcellus Shale at high pressures to prop open voids which allow the gas to flow. These fluids are stored in above ground ponds prior to their use and recovered, along with formation fluids, after the fracing occurs. The use of this technology, and the public scrutiny it has brought, makes the industry susceptible to lawsuits and government regulation.

Upon recovery, the frac fluids contain formation waters which contain elevated chlorides and other total dissolved solids ("TDS"). There are also reports of radionuclides being present in the recovered fluids which, combined with TDS issues, make the treatment of recovered fluids at conventional wastewater treatment plants difficult. Landowners have filed lawsuits claiming that their drinking water has been fouled by the fluids and methane produced by the gas recovery. The Pennsylvania Department of Environmental Protection ("PADEP") has issued notices of violation ("NOVs") for the release of frac fluids at drill sites. Senator Casey has introduced a bill entitled the Fracturing Responsibility and Awareness of Chemicals ("FRAC") Act which would in essence repeal certain exemptions for frac fluids contained in the Pennsylvania Safe Drinking Water Act. Certain permits have been challenged by members of the environmental community based on alleged ecological impacts resulting from the construction of gas transmission pipelines, which connect the wells to a distribution source.

The speed at which the Marcellus Shale exploration is advancing in Pennsylvania will undoubtedly continue to create environmental hurdles for the companies involved in natural gas production and transmission. So far, the industry is facing these challenges head on in a manner necessary to satisfy Pennsylvanians that their new found riches will not leave permanent scars on the landscape reminiscent of Pennsylvania’s coal mining legacy.